Risk is a concept that permeates the business world, often evoking a mix of fear and excitement among entrepreneurs. Dr. Matthew Rutherford, the Johnny D. Pope Chair in Entrepreneurship at Oklahoma State University, recognized the ambiguity surrounding the term “risk” and sought to bring clarity to the discussion. Teaming up with three Spears School of Business Ph.D. alumni, Dr. Rutherford embarked on a research project to define and categorize risks in entrepreneurship.
Their collaborative effort resulted in a paper titled “What Is Risk, Exactly? Reviewing Construct Heterogeneity Across Business Fields and Implications for Entrepreneurship Research,” published in the prestigious Journal of Management. This paper not only provides a framework for researchers but also offers valuable insights for entrepreneurs looking to understand and manage risks effectively.
Dr. Jorge Arteaga-Fonseca, one of the lead authors of the study, delved into the topic during his Ph.D. studies at OSU. Coming from a finance background where risks are more clearly defined, Arteaga-Fonseca was intrigued by the lack of consensus on risk definitions in entrepreneurship. Working closely with Dr. Rutherford, he conducted a thorough review of existing literature to identify different types of risks that are often overlooked in entrepreneurship research.
The researchers classified risks into various categories, including individual, firm, and environmental risks. Drawing on a typology developed by risk management expert Dr. Georges Dionne, they identified pure, operational, liquidity, default, and market risks. Through their analysis of 275 entrepreneurship articles across top journals, the team uncovered gaps in research, particularly in the realm of financial risks.
Financial risks, such as default risk and liquidity risk, play a crucial role in entrepreneurship but have received limited attention in academic literature. Dr. Rutherford emphasized the importance of addressing these financial risks, given their significant impact on the success and sustainability of entrepreneurial ventures. By focusing on managing specific risks, entrepreneurs can make informed decisions and mitigate potential challenges.
One of the key findings of the study was the miscommunication between different business disciplines regarding the definition and interpretation of risks. Arteaga-Fonseca highlighted the need for clear communication and alignment of risk definitions across fields to avoid misunderstandings. The distinction between risk and uncertainty was also emphasized, with risk being measurable and manageable, while uncertainty remains inherent in the entrepreneurial journey.
As the field of entrepreneurship research continues to evolve, Dr. Rutherford and his colleagues are committed to navigating the complexities of risk management. They acknowledge the challenges and opportunities that come with exploring uncharted territories in research. By addressing the gaps in existing literature and fostering interdisciplinary collaboration, they aim to enhance our understanding of risk in entrepreneurship and empower entrepreneurs to make informed decisions.
In conclusion, the study sheds light on the multifaceted nature of risk in entrepreneurship and underscores the importance of clear definitions and effective risk management strategies. By bridging the gap between theory and practice, Dr. Rutherford and his team are paving the way for a more nuanced understanding of risk in the entrepreneurial landscape.
