What is the optimal number of skills and amount of knowledge for an entrepreneur? COL researchers tried to open the ‘black box of experience’ a little bit further.
The important question stirring our research on entrepreneurship is why some people are becoming an entrepreneur and others don’t, and why engaging in business seems to work out for some, and not so much for others. While researching this issue, experience seems to be an important factor. Several theories abound; it could, e.g., be possible that someone is influenced by their environment, or economic situation. Edward Lazear’s jack-of-all-trades theory is based on something else: namely the fact that the more diverse experiences someone acquires during paid employment, the greater the chance they will become an entrepreneur themselves. ‘Diversified experience’ is here considered as experiences in as many as possible fields of knowledge and skills. The jack-of-all-trades theory further assumes that an entrepreneurs’ success is determined by their weakest characteristic.
In regard of this COL research, Anne Spanjer and Arjen van de Witteloostuijn find themselves occupied with the relationship between the diversity in experience and performances of an entrepreneur. This research likes to add to the knowledge about experience, and research the preconditions of the jack-of-all-trades theory. In order to do so, they take the way people learn into account. As people can’t keep developing and maintaining an endless number of skills, they are bound to a maximal amount. A human simply has its cognitive boundaries in the end.
Is ‘the more, the better’ always true?
For the first time in this field of research, this study tries to find out what the ideal number of skills would be. So not the straight incremental line of ‘the more, the better’, but the question about the upper limit of performance benefitting skills. The researchers use an American data set by the US Bureau of Labor Statistics, with data from the National Longitudinal Survey of Youth ranging between 1979 and 2010, in order to reach their objective.
During this period, the bureau tracked 9964 persons in their career. Among them 1304 became entrepreneur at some point. Their performances are measured in dollars, based on gross annual salary. What makes this research special is, among other things, the way experiences are measured. Earlier studies on the jack-of-all-trades theory made use of the skills entrepreneurs currently have, skills they had at the start of their career, or the work fields or industries in which they were previously employed. Now the development over an extended period of time is taken into account.
According to this data Spanjer and Van de Witteloostuijn concluded that the ideal number of diverse skills an entrepreneur should have would be about 23. In case someone has a greater number of skills, it might have a negative effect on their performance as entrepreneur. Though, in this regard is important to mention that this applies only when there is no depreciation of experiences. In other words: the optimal number is correct if experiences wouldn’t ‘age’, something research does seem to point out though; recent experiences are more important in obtaining success than older experiences.