The Ouroboros 2: What IS arts entrepreneurship anyway?

I was honored to be invited to deliver the keynote remarks at the UW-Madison Bolz Center’s Arts Business Research Symposium March 13-14, 2014.  I previewed those remarks here and am posting the full text serially over the next several days. The talk was originally titled “Not about the Benjamins: Arts Entrepreneurship Research, Practice, and Education.” Here’s it’s just called “The Ouroboros.”

That business practices can support the arts is at the foundation of arts entrepreneurship as a practice, as a field of inquiry, and even as a subject to teach at universities.  So I’m going to talk about what arts entrepreneurship IS, why arts organizations form, and what I observe to be the landscape of arts entrepreneurship in research, practice, and pedagogy.

What IS arts entrepreneurship anyway?  I posit in the introductory article to Artivate, the only research journal in the field, published out of the Pave Program in Arts Entrepreneurship at ASU, that Arts Entrepreneurship exists on a continuum from the individual artist adopting entrepreneurial habits of mind in their practice at one end to new venture creation in the creative industries at the other.

AE continuum

The former is the “Self Employment in the Arts” model employed in educational settings or conferences (like the “Self-employment in the Arts” conference that comes out of Amy Rogers program at North Central Illinois) the goal of which is to teach individual artists to manage their own careers.  It’s also the concept behind some artist-serving arts incubators.  The other end of the continuum is the creative industries entrepreneurship model where artists and arts organizations form firms in order to……well, to do what exactly?

In the literature of entrepreneurship, there are several complementary or even contradictory theories about the relationship between the means to and ends of entrepreneurial action, understood in this context to be new venture creation.  Shane and Ventkataram would argue that entrepreneurial opportunity involves the discovery of new means and end relationships.  That is probably true in the arts.  That concept, however, is an expansion of one developed by Austrian School economist Ira Kirzner who, along with his neoclassical brethren believe that profit maximization is the only reason to undertake entrepreneurial activity.  For Kirzner and his buddies, the only viable reason – the only viable end – to entrepreneurial activity is the discovery of a new way to profit.

But, let’s be honest, does anyone undertake a new venture in the arts to maximize their financial gain?  My colleague Stephen Preece points out that “In the absence of profits, entrepreneurs in the not-for-profit performing arts are necessarily motivated by self-fulfillment within the execution of an artistic organizational mission.”  While I don’t disagree with Preece, I offer a slightly different perspective.

Slide07We can look at several “theories of the firm” to see why arts ventures form.  Coase’s theory of the firm focuses on firm formation as a way to decrease transaction costs – especially the cost of bringing a product to the market.  Cyert and March took a behavioral approach and asserted that firms form as decision-making structures. Grant asserts that firms form to share tacit knowledge.  There are examples throughout the arts and culture domain of firms that form to minimize transaction costs, make effective decisions, and share knowledge.  For example, Key Brand Entertainment, and its subsidiary Broadway Across America was formed to minimize the transaction costs that would be incurred by an individual producer touring independently; an arts services organization or even an arts incubator forms in order to reduce the transaction costs incurred by its individual members;  a municipal arts agency forms in order to more efficiently and effectively make decisions about who and what to support; any dance, theatre, or opera company forms in order to share tacit knowledge between artist specialists like choreographers, dancers, designers and so on.

Ultimately, however, firm formation itself is only a means to a greater end, and as I’ve already stated, in the arts and culture sector, that end is NOT profit maximization.  People – artists and those who support artists – undertake entrepreneurial activity in the arts and culture sector, both for profit and nonprofit in order to MAKE ART and to make art available to its audience in new and innovative ways.

“Entrepreneurship” or “entrepreneurial behavior” is itself the means and ART is the end. The entrepreneurial behavior generates money that in turn feeds back to the art.  Lets return to our Ouroboros:

Ouroboros with textArt that is innovative must find its market. To be an innovation, according to Mihaly Csikszentmihalyi, the creative product must influence its domain – it must have an impact.  Entrepreneurship then – in the form of new venture creation – is the tool, the means, by which the art and the audience connect.  That new venture generates money that, like the Ouroboros’s tail, feeds the creation of more art.

So, in order to connect the innovation – the creative artistic product — to the money that will feed it, requires knowledge and understanding of entrepreneurial action. What does it take for, at one end, an artist to manage her own career effectively and at the other, start a venture that will generate enough money to keep the circular flow going?  I often tell my students that the “discipline” of entrepreneurship is opportunity recognition and, in the arts, opportunity creation.  When artists and those interested in advancing the arts recognize the opportunities to generate revenue, to create new businesses that support the arts, then we have arts entrepreneurship.

For more on defining arts entrepreneurship, see “Explaining Arts Entrepreneurship” and for a formal expansion of these ideas, see my 2015 article in The Journal of Arts Management Law and Society, “Means and Ends: A Theory Framework for Understanding Entrepreneurship in the US Arts and Culture Sector” -

NEXT: Arts Entrepreneurship as a Field of Practice and Inquiry

About lindaessig

Linda Essig is Dean of the College of Arts & Letters at Cal State LA and principal/owner of Creative Infrastructure LLC. The opinions expressed on creativeinfrastructure are her own and not those of Cal State LA. You can follow her on twitter @LindaInPhoenix.
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