Abstract: One obstacle that constrains entrepreneurial learning research is the lack of a clear, universally recognized research focus. This article proposes that the core content of entrepreneurial learning lies in how to flexibly utilize three rent-creation mechanisms to obtain economic rents and gain competitive advantages. The application of these rent-creation mechanisms constitutes two major types of activities within economic organizations: "exploration" and "exploitation." "Exploitation" refers to the realization of value from existing resources, while "exploration" pertains to the pursuit and acquisition of potential resources. To address challenges faced by organizations at various levels, it is necessary to have the skill of balancing "exploration" and "exploitation," which should become the focus of entrepreneurial learning research. The entrepreneurial case of Wanxiang Company illustrates the practical value of this skill, as its correct application at the strategic level directly benefits entrepreneurial success.
Keywords: Entrepreneurial learning; Economic rent; Environmental uncertainty
China Classification Number: F270 Document Identification Code: A
1 Overview of Entrepreneurial Learning Research
If we consider Richard Cantillon (1680-1734) as one of the earliest scholars to discuss issues related to entrepreneurship, then entrepreneurial research has a history of about 300 years and has produced abundant results. Based on a review of classical entrepreneurial theories, Mirjam van Praag identified six fundamental questions that most entrepreneurial theories generally address, while contemporary researchers are interested in other questions: ① Are entrepreneurs born or made? Can entrepreneurship (skills) be learned? ② What are the patterns in the process of entrepreneurial activities? ③ Do entrepreneurial organizations exhibit learning phenomena? Regarding these new questions, neither the neoclassical equilibrium theory, psychological theories, nor the Austrian school of economics provide answers.
Through reflection and discussion on these new questions, a new research field - entrepreneurial learning research - has gradually developed. However, "research on learning in entrepreneurial enterprises is still in its infancy." Previous discussions on entrepreneurial learning were mainly scattered across several related research fields (such as small business research, technological innovation research, etc.). Only in the past five years have explicit studies specifically focused on "entrepreneurial learning" begun to emerge. Four entrepreneurial learning theories can summarize the main trends in current entrepreneurial learning research: ① Crossan's 4I entrepreneurial learning model was initially developed to explain the process of organizational learning, but he believed it could also explain entrepreneurial learning; ② Rae's "entrepreneurial capability learning model" attempts to illustrate what elements need to be integrated if entrepreneurs want to enhance their entrepreneurial capabilities, with confidence or self-efficacy being the core element among all factors; ③ Minniti established the first mathematical model explaining entrepreneurial learning, characterizing its path-dependent nature and pointing out the need to prevent the premature occurrence of strategy "lock-in" during learning; ④ Politis's entrepreneurial learning model views entrepreneurial learning purely from the perspective of knowledge, primarily explaining how entrepreneurial knowledge transforms from the career experiences of entrepreneurs.
2 Goals of Organizational-Level Entrepreneurial Learning
Most literature on entrepreneurial learning implicitly assumes that entrepreneurial learning involves learning how to identify "opportunities." Past research often considers "opportunities" and "risks" as key characteristics of entrepreneurship. Focusing on opportunity identification, scholars from the psychology school have conducted extensive research on the cognitive patterns of entrepreneurs. Dutta and Crossan proposed that there are two different perspectives regarding what constitutes an "opportunity": ① The view held by North American empiricist researchers who believe opportunities unconditionally exist in the environment, waiting to be discovered; ② The view upheld by social constructivist researchers, prevalent among European researchers, who argue that entrepreneurial opportunities "emerge" or are activated based on the entrepreneur's perception, interpretation, and understanding of environmental factors. Schumpeter (1934) and Kirzner (1979, 1997) represent these two viewpoints respectively. Therefore, defining the ability to capture opportunities as the content of entrepreneurial learning does not achieve universal recognition.
Some theories regard "entrepreneurial knowledge" as the object of entrepreneurial learning. However, prior to this, researchers were unclear about what constituted "entrepreneurial knowledge." Kirzner (1979) once suggested that entrepreneurial knowledge is "knowledge of where to obtain knowledge," implying that entrepreneurial knowledge is akin to information search techniques. However, recent theories on entrepreneurial firms indicate that entrepreneurial knowledge is a special type of knowledge. Such knowledge cannot be obtained through hiring employees but must be endogenously generated by the entrepreneur. Additionally, this entrepreneurial knowledge possesses the characteristics of rent-creatability, competitiveness, and exclusivity. Unlike the usual discussions on the implicitness and explicitness of knowledge, whether knowledge has entrepreneurial qualities is considered at the level of how new knowledge is generated, whereas the former considerations pertain to how existing knowledge can be effectively transferred. The learning process of entrepreneurial knowledge is essentially the creation of new knowledge, and this learning must be experiential. Many scholars also believe that even though much information and knowledge can be acquired through education, most necessary information for developing opportunities can only be learned through experience. Therefore, many people consider entrepreneurial learning to necessarily be experiential learning. This theoretical explanation is difficult to challenge, but such a description of the focus of entrepreneurial learning offers little benefit to organizational-level learning and practice. Thus, it is necessary to define more appropriately the focus of organizational-level entrepreneurial learning.
The resource-based or knowledge-based view (RBV and KBV) of organizational competitive advantage has become the mainstream organizational theory perspective. Recent corporate theories almost all explain entrepreneurial phenomena from the resource or knowledge perspective. From the resource (or knowledge) angle, enterprise-level entrepreneurial learning involves two main contents: the exploitation of existing resources and the exploration of new resources. That is, how does an enterprise learn to operate in a more entrepreneurial way? Ultimately, it involves learning how to use existing (internally controllable) resources more effectively or explore previously undiscovered new resources more efficiently. This is determined by the purpose of entrepreneurial activities. Knowledge-based corporate theory informs us that whether it is initial entrepreneurship or secondary entrepreneurship, the direct motivation is the pursuit of "economic rent." All corporate goals can be reduced to two: profit and growth. Profit and economic rent are not identical concepts, but they share a close intrinsic connection. If "economic rent" is viewed as the portion of income exceeding the opportunity cost due to resources, then it closely resembles the concept of "profit" in economics (rather than accounting). Just as the driving force behind the emergence of new enterprises is the pursuit of "economic rent," the fundamental impetus for continuous learning and improvement in enterprises is also the pursuit of "economic rent" or "profit." In other words, the economic essence of enterprise entrepreneurial learning is learning how to improve the ability to acquire "economic rent." So, what general methods do organizations use to obtain "economic rent"?
3 Pathways to Achieving the Objectives of Corporate Entrepreneurial Learning
In theory, organizations can obtain "economic rent" through both competitive behavior and cooperative behavior (see Figure 1). Under the competitive paradigm, there are two distinct pathways for companies to create economic rent: resource harvesting and capability building. Under the resource harvesting mechanism, decision-makers collect information to analyze potential resources and gradually develop their ability to judge resource potential. For example, a mutual fund manager strives to select stocks more intelligently than others in the stock market. Thus, the resource harvesting mechanism acquires economic rent by "exploring" previously undiscovered or "undervalued" resources. On the other hand, under the capability-building mechanism, managers design and build appropriate organizational systems to improve productivity, i.e., better "utilizing" existing resources under current conditions.
The deeper distinction between the two mechanisms lies in their representation of the organization's "exploration" and "exploitation" activities. Exploration activities are always associated with searching, changing, adventuring, experimenting, practicing, maneuvering, discovering, or innovating, while exploitative activities are always linked to refinement, selection, production, efficiency, picking, application, and execution. "Exploration" and "exploitation" activities are analogous to the two core activities in Kolb's experiential learning theory—acquiring experience and transferring experience. The superficial difference between the two mechanisms is that the resource-harvesting mechanism influences the generation of economic rent before actual resources are obtained; the capability-building mechanism only affects economic profits after resources are obtained and materialized. The resource-harvesting mechanism impacts the decision-making stage, while the capability-building mechanism impacts the execution and development stages. Some scholars believe that the relationship between the two mechanisms is either mutually reinforcing or mutually exclusive. They argue that knowledge gained from exploratory activities often diverges significantly from the company's existing knowledge base. Therefore, utilizing knowledge gained from exploratory activities will affect the stability of the existing knowledge system. From the perspective of the decision-maker's workload, enhancing any one mechanism requires effort, so from a resource standpoint, there is a certain competitive relationship between the two mechanisms. That is, overemphasizing the enhancement of resource-harvesting capabilities may weaken corresponding investments in capability-building. Results from organizational learning research indicate that companies need to balance exploration and exploitation to ensure long-term survival and optimal long-term performance.
Both the resource-harvesting mechanism and the capability-building mechanism are based on property rights, meaning that companies (organizations) acquire rent (or profit) because they have property rights over the resources under these two mechanisms. However, there is a collaborative rent-creation mechanism that does not need to be based on property rights over resources but rather on idiosyncratic bilateral synergy and collusion.
4 Prerequisites for the Functioning of Three Rent-Creation Mechanisms
The functioning of the three rent-creation mechanisms requires certain conditions. ① The alliance mechanism generally produces effects in most situations, but the stronger the monopoly in each party’s advantageous field, the stronger the necessity to obtain economic rent through alliances. Therefore, stable strategic partnerships (e.g., IBM and Intel) often appear in oligopolistic markets, while companies in more freely competitive markets focus more on short-term cooperation. ② The prerequisite for the resource-harvesting mechanism to function is changes in the supply and demand relationship in the factor market. These changes may result from natural, political, technological, or cultural shifts. For instance, due to the exclusive sales policy of the Beijing Olympic mascots "Fuwa," their value might exceed (or fall below) their market price, and retailers who accurately predict this outcome may profit from it. If there are no changes in the factor market, the resource-harvesting mechanism cannot function. In fact, changes in the factor market always occur over a period of time, so companies will always face such opportunities. ③ The condition for the capability-building mechanism to function is that the utilization of internal resources has not yet reached its optimum, leaving room for improvement. The realization of the capability-building mechanism can rely on improving the effective combination of physical resources or achieving it through the rational use of human resources. Reducing the unit cost of enterprises or increasing the output per unit input are specific manifestations of the capability-building mechanism functioning. Significantly different from resource harvesting, internal capability building within enterprises requires long-term efforts from employees within the organization, so usually, a certain amount of time is needed.
These prerequisite conditions (monopoly, fluctuations in the factor market, time guarantee) change during the development process of an industry. Market evolution theory suggests that when an industry is just starting, a few pioneers open up a new market and earn excess profits. Before a large number of imitators enter the market, the industry continues to be controlled by a few oligopolies. As later entrants participate in industry competition, industry profits gradually decrease. At this point, competing companies are looking for and waiting for new environmental loosening (i.e., changes in factor prices caused by the environment). Companies that first identify and utilize changes in factor prices gain new entrepreneurial opportunities. Market evolution always alternates between tension and relaxation, and relatively stable phases of market evolution provide the necessary time guarantee for internal capability building within enterprises. Industry development influences the prerequisite conditions for the functioning of the three rent-creation mechanisms. The above analysis reveals a principle: under different industrial environments, the efficiency of using different rent-creation mechanisms to obtain economic rent varies. Specifically, in relatively complex and dynamic stages of industry development, decision-makers focusing on enhancing resource-harvesting capabilities will be more cost-effective. In relatively stable environments, enterprises prioritizing internal capability development is the optimal strategy. The strategy of utilizing alliance mechanisms does not require ownership of resource property rights, so the "cost" required is relatively less, making this strategy generally effective. However, in the early stages of industry development or in oligopolistic markets, the efficiency of alliance mechanisms is higher. This conclusion is supported by evidence observable in many enterprises. Therefore, the key task of enterprise entrepreneurial learning is learning how to reasonably utilize the three rent-creation mechanisms under specific environments, especially learning the skills to balance "exploration" (resource harvesting) and "exploitation" (capability building).
5 Achievements and Entrepreneurial Learning of Wanxiang Group
Among China's private enterprises, Wanxiang Group undoubtedly represents a successful example. Wanxiang went through the following process: initially relying on the rent-creation mechanism of resource harvesting (exploration), then shifting to the capability-building rent-creation mechanism (exploitation), and finally returning to emphasize the resource-harvesting rent-creation mechanism again (see Table 1).
From 1979 to 2001, Wanxiang Company made significant adjustments at the strategic level. Early diversification strategies and recent aggressive expansion strategies focused on external "resource harvesting," while a period in the middle emphasized more on internal "capability building." What causes the company to choose corresponding strategies at different time points? Or, what is the underlying rule governing the transition between "exploration" and "exploitation"? The author judges the environment faced by Wanxiang Company from two levels: national policy environment and the industry and market environment the company operates in, and evaluates the degree of environmental uncertainty on a three-level scale (see Table 2).
As shown in Table 2, the overall environmental development process that Wanxiang Company faced historically is: first a "turbulent era" (high environmental uncertainty), followed by a "prosperous era" (relatively stable environment), and finally back to a "turbulent era."
To verify the results obtained from key event analysis, the "expert rating method" proposed by Janis (1989) is used to determine the intensity of the company's "exploitation" activities at different historical time points and the environmental uncertainty it faced at the time (see Figure 2). The specific operations of the expert rating method are as follows: ① Six management doctoral students (not part of this study's researchers) discussed the differences between "exploration" and "exploitation" activities, as well as the actual meaning and external manifestations of environmental uncertainty, believing that it can become a millionaire; ② Each of the six experts was presented with detailed historical data on Wanxiang Company's development. The data sources include interviews with Lu Guanqiu by the second author (October 2003), internal promotional materials of the company, multiple interviews with middle and high-level managers of Wanxiang by the first author (October 2004), website data of Wanxiang Company, media reports on Wanxiang, and apart from arranging events in chronological order, the researchers did not process these data further; ③ The task of the six experts was to independently rate the environment of different years according to the "degree of environmental uncertainty" on a seven-point scale, and secondly, to annually rate the "intensity of internal resource exploitation activities" of the company. It was found that the consistency among expert evaluations for both tasks was very high (the consistency coefficient for Task 1 was 0.92, and for Task 2 was 0.78).
Figure 2 shows an inverse relationship between environmental uncertainty and the intensity of internal resource exploitation activities within the enterprise. Accordingly, it can be inferred that Wanxiang's choice between "exploration" and "exploitation" is determined by environmental uncertainty. As environmental uncertainty gradually decreases (1979-2001), Wanxiang stops adopting widespread exploration actions and instead adopts a strategy of developing product production capacity advantages (utilization strategy); when the degree of environmental certainty gradually increases (2001 to present), the intensity of "exploitation" activities within Wanxiang Company weakens, replaced by active "exploration" strategies externally. Regardless of whether this balancing technique is a conscious and planned action by Wanxiang, the actual effect is that the company effectively resolves the primary contradictions in each period at the strategic level, thereby conducting activities most favorable for acquiring economic rent under different historical environmental conditions. In the author's view, this timely action is equivalent to capturing the so-called "opportunities."
6 Research Conclusions and Limitations
Cope and Watts believe that establishing a highly universal theoretical framework to explain diverse entrepreneurial learning tasks still requires a long journey. However, regardless of how long this journey may be, it is essential to first clarify the core issue of entrepreneurial learning research. Or, what should entrepreneurial learning focus on? This article answers this question at the organizational level, suggesting that the core issue of organizational entrepreneurial learning is learning to appropriately utilize rent-creation mechanisms, or in other words, learning the skill of balancing "exploration" with "exploitation." In fact, Wanxiang Company, which utilized this skill, achieved tremendous success. Many companies' situations support our viewpoint, such as EasyJet, famously known as the "European version of Southwest Airlines."
Additionally, from the above case analysis, it can be seen that enterprises alter their own environment while implementing their actions. External environmental uncertainty is not entirely beyond the control of enterprises. The external market environment is constantly changing, and enterprises need to proactively adjust their resources and capabilities. Enterprises should focus on developing internal capabilities to foster core competitiveness during periods of environmental certainty, and pay more attention to strategic alliances, mergers and acquisitions, and capital operations during periods of environmental turbulence. Only in this way can companies effectively and reasonably utilize the three basic rent-creation mechanisms based on environmental changes.
The empirical data sources relied upon in this article are diverse, and there may be many difficulties in distinguishing information, especially in reviewing conflicting information. Therefore, future research is recommended to adopt more company cases, quasi-experimental methods, or questionnaire surveys to test the core viewpoints mentioned above, exploring and utilizing activities exist at different levels of organizations, and this study is limited to examining the organizational strategic level. Future research is expected to deepen in this area.
Note: Charts, notes, formulas, and other content involved in this article can be read in PDF format for the original text.
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