Assessing the literature on school reform from an entrepreneurship perspective
| DOI | https://doi.org/10.1108/JEPP-05-2016-0020 |
| Published date | 07 November 2016 |
| Pages | 383-403 |
| Date | 07 November 2016 |
| Author | John Garen |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Assessing the literature on
school reform from an
entrepreneurship perspective
John Garen
Department of Economics, University of Kentucky, Lexington, Kentucky, USA
Abstract
Purpose –Enabling and incentivizing organizations to act based on their local knowledge is an
important aspect of entrepreneurship. The significance of local knowledge in the context of schools is
well recognized, but very little research has been done to investigate how to provide discretion and
incentives to schools to use this knowledge. The purpose of this paper is to build a model to guide this
understanding for policy makers who may wish to foster entrepreneurship for schools and also use it
to critique the literature and provide an alternative approach.
Design/methodology/approach –The paper applies fundamentals of principal-agent theory to the
ownership and governance of schools, the use of teacher incentive pay, and school reform efforts.
Focus is on use of teacher incentives and on school choice initiatives.
Findings –The author found that many public school teachers will have attenuated incentives, but
mandates to increase test score rewards may be counterproductive. Institutional reform via school
choice seems more promising. The author identifies several institutional features that are expected to
induce more entrepreneurial and productive activity by schools. The author discusses and critiques
school reform efforts in this regard, including Tiebout competition, charter schools, voucher programs,
and use of “best practice.”
Originality/value –Reform efforts often lack in addressing critical aspects of institutional
empowerment and incentives, and research in this regard also is mostly absent. The author contends,
however, that dealing and addressing such issues is a key to effective reform.
Keywords Entrepreneurial action, School reform, Use of knowledge
Paper type Research paper
1. Introduction
This paper considers school reform from an entrepreneurship perspective and
examines and critiques much of the research on schools from this viewpoint. An
important aspect of entrepreneurship is the use of local knowledge on the specifics of
time, place, and circumstance, and the importance of decision makers/entrepreneurs
being enabled and incentivized to act on this knowledge. While the significance of local
knowledge in schools is often recognized, there is little focus on how to enable and
incentivize its use. This paper builds a modeling framework to understand the key
parameters that can guide policy makers who wish to foster this aspect of
entrepreneurship in schools. Furthermore, it provides a springboard for critiquin g
much of the school reform literature and suggests an alternative approach to school
reform research.
Journal of Entrepreneurship and
Public Policy
Vol. 5 No. 3, 2016
pp. 383-403
©Emerald Group Publis hing Limited
2045-2101
DOI 10.1108/JEPP-05-2016-0020
Received 23 May 2016
Revised 19 July 2016
Accepted 21 July 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
JEL Classification —J33, I28, L21
For comments and consultation on previous versions, the author thanks John Merrifield,
Dan Sutter, William Hoyt, Lori Taylor, session participants at the Association of Private Enterprise
Education Conference and the Southern Economic Association meetings, workshop participants at
the University of Kentucky, and the anonymous referees. The author also thank the John H. Schnatter
Institute for the Study of Free Enterprise and the Gatton College BB&T Program for support.
383
Assessing the
literature on
school reform
An older generation of education research examined the effects of a variety of school
inputs, e.g., teacher certification, teacher experience, teacher-pupil ratio, and overall
expenditures, on student test scores. While most of these inputs show no consistently
positive effect, this research exemplifies a centralized/non-entrepreneurial approach to
schools and school research. Such studies seem to highlight the presumed importance
of broad, easy-to-quantify inputs which can be controlled by a central authority. Also,
there is perhaps an implicit disregard of the value of local, specific knowledge and
practices that are difficult for outsiders to observe.
A more recent generation of school reform policy and research has taken two
general tracks: one involves use of teacher incentives, which ties pay to student test
scores, and the other is experimentation with more parental choice, such as charter
schools and vouchers. Thus, our discussion focuses on teacher incentive pay and
school governance, where the latter includes school ownership, decision rights,
and competition. As shown below, these tie closely with having the discretion and
incentives to use local knowledge.
The approach of the paper differs greatly from most of the literature on school
policy research. We suggest that rather than focusing on what schools should do,
researchers should consider the question of how schools might be empowered and
incentivized to appropriately act on their knowledge. We develop a model indicating
five parameters that influence this: the school’s stake in maintaining its net revenue, the
link of school revenue to value produced, the importance of public/political symbols,
discretion in decision making, and the political strength of employees/unions. We argue
that the key to any school reform program is altering these parameters, and we critique
much of the literature from this perspective.
The paper is based on several fundamentals in the literature. One fundamental is the
one by Hayek (1945) as extended by Jensen and Meckling (1992). Jensen and Meckling
(1992) stress the importance of combining decision-making power with incentives to
make good decisions and argue that decentralizing both decision making and
incentives is especially critical where “specific”knowledge –akin to Hayek’s
knowledge of particular circumstances –is important. In the context at hand, “specific
knowledge”is knowledge of unique and subtle characteristics of teachers, students,
and schools. Much of this knowledge is held by school administrators, teac hers, and
parents and is hard to quantify and transfer to others. This is in contrast to general
knowledge, such as standardized test scores, which is straightforward to quantify and
transmit. Governance and incentives for use of these types of knowledge in the context
of schools are detailed below.
A second fundamental is the multitask principal-agent model of Holmstrom and
Milgrom (1991), where incentives are established for agents who do many tasks. Too
great an incentive for one task leads to a distortion of effort and a possible reduction in
value. This issue is well recognized regarding education and underlies the problem with
mandates for rewarding test scores. This is modeled and examined carefully below.
Another fundamental from the literature is related to the work of Dixit (1997, 2002) and
Acemoglu et al. (2008),who contrast public and privateorganizations in their provisionof
incentives to employees. Essentially, the payoff function for public sector managers
attenuates managerial incentives, and this attenuation is passed along to employees.
Sincemostschoolsarepublicorganizations,thisanalysisisquitegermane.
The remainder of the paper is organized as follows: Section 2 reviews background
literature regarding the validity of our approach; this literature shows the importance
of local/specific knowledge of non-cognitive outcomes that are difficult to measure and
384
JEPP
5,3
To continue reading
Request your trial