It isn’t all about the money: A fresh look at corporate capitalism

Suntae Kim, winner of a Robert L. Kahn Fellowship for the Scientific Study of Social Issues, is comparing the origins and underlying principles of investor-backed startups with more community-oriented companies.

Suntae Kim, photo courtesy of Suntae Kim

Photo courtesy of Suntae Kim

Back in 2001, it wasn’t unusual for Suntae Kim, then an undergraduate at Seoul National University, to take to the streets of Seoul to protest government policies. Like American students of the 1960s, South Korean students of the time were questioning the status quo and pushing for change. At one street demonstration, Kim was rounded up with other student protestors and sent to jail.

After graduation, Kim did his compulsory military service, and then earned a master’s degree in business administration. Even before that, his outlook had altered. He still believed in many of the same ideals he and his fellow students had pursued, but he no longer felt their protests had been well grounded. Some of the time, he says, “we were just opposing things for the sake of opposition. I was feeling the limitation of knowledge that we had, especially about alternatives to the corporate world.”

Kim wanted to back his beliefs with substance. While evaluating U.S. doctoral programs, he discovered the research of Gerald Davis, a professor of management at the Ross School of Business at the University of Michigan (U-M) who examines alternatives to the shareholder-owned corporations that are the norm in the US and many other countries. “I couldn’t believe someone in the business school was working on something like that—that radical notion!” Kim says. “It was the biggest reason I chose Michigan, and luckily I was admitted and came here.”

For his dissertation, Kim devised an ambitious ethnographic research project that would allow him to dig deeply into the earliest days of two kinds of companies—venture capital-backed startups and so-called triple bottom line businesses, companies that, in addition to seeking economic success, are trying to contribute to a social and environmental bottom line. The work, he says, is “a quest for an answer that I could not find on the streets” in Seoul.

[quote]“In accelerators, the success of a business is defined by return on investment, often realized through selling the business at a high price to a large tech company or investor, mostly in bigger cities like San Francisco,” Kim says. “So after those firms are sold, what’s left in Detroit?”[/quote]

Kim won entrée to two Detroit business incubators, and began following several companies at each from their inception. Over the course of months, he sat in on every company meeting, recording all discussions for later analysis.

Differences were immediately apparent. For example, companies at the more conventional Business Accelerator, as Kim dubbed it, focused on customer validation and investor perceptions. “In the Business Accelerator, the business is carefully designed to fit with the principle of investment—creating maximum return on investment through a service or product that is quickly scalable from one state to 50 states within three to five years,” Kim explains.

By contrast, the Sustainable Incubator discouraged its companies from getting outside money so as not to be indebted to financial interests. “The focus is more on creating a locally embedded organizational entity that can actually populate the community, and that can help Detroiters find ways to make their own living, or lead to the economic revitalization of the neighborhood,” Kim says.

The incubator began by recruiting community members with expertise to be part of the development process. Just creating an identity statement took weeks, and instead of relying on computers, the entrepreneurs used markers and lengths of paper to sketch out their visions. “In the Sustainable Incubator, it’s not just about the content of the business, it’s not just about creating social entrepreneurship, it was about constructing a new approach to creating a business,” Kim explains. “It was almost the opposite of the other.”

Suntae Kim and Bob Kahn. Photo by Patrick Shields/ISR.

Suntae Kim and Bob Kahn, Photo by Patrick Shields/ISR

The breadth of the qualitative research added a year to Kim’s studies, a year that will be fully supported by a Robert L. Kahn Fellowship for the Scientific Study of Social Issues that Kim recently received. “What Kahn did is to shine a light on the organization as an open system,” Kim says. “An organization is not a closed, independent entity, but the people within and around the organization and mutual interactions among them across levels, which I am seeing vividly in these business-creating organizations.” Kim will defend his dissertation in the spring of 2015 and then join Boston College’s Carroll School of Management as an assistant professor.

In the meantime, he’s analyzing the data he’s gathered. Kim expects to learn more about the early-stage entrepreneurial process and to understand how different incubator contexts imprint different ideas about organizing a business in early-stage companies. Eventually, he hopes his research will provide insights helpful to cities such as Detroit.

What he has already learned, Kim says, is that both entrepreneurial approaches have merit. But he thinks cities that are pursuing economic vitality just through traditional business accelerators should think twice. “In accelerators, the success of a business is defined by return on investment, often realized through selling the business at a high price to a large tech company or investor, mostly in bigger cities like San Francisco,” Kim says. “So after those firms are sold, what’s left in Detroit?”

He adds: “The ongoing experiment in the Sustainable Incubator sheds light on things that have been missing in our dominant discourse about business.”

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