Spillovers from public entrepreneurship: a case study
| DOI | https://doi.org/10.1108/JEPP-03-2016-0010 |
| Date | 10 April 2017 |
| Published date | 10 April 2017 |
| Pages | 72-91 |
| Author | Caleb Fuller,Dylan DelliSanti |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Spillovers from public
entrepreneurship: a case study
Caleb Fuller and Dylan DelliSanti
Department of Economics, George Mason University, Fairfax, Virginia, USA
Abstract
Purpose –Existing scholarship indicates that more research is needed to explore beneficial spillovers
from publicentrepreneurship. The purposeof this paper is to fill the gapin that literature by examininga case
of public entrepreneurship by a corporation. While political engagement by private firms frequently reduces
to rent-seeking, this paper explores an instance in which public entrepreneurship by a private firm lead to
beneficial spillovers –specifically, positive externalities resulting from the engagement of Cummins Engine
Company with city government in Columbus, Indiana. In the case study, these spillovers consist of improved
infrastructure,altered norms, and the reintroductionof economic calculation.
Design/methodology/approach –This case study uses publications in popular outlets, newspapers, and
historical documents to understand the relationship between Cummins Engine Company and its local government.
Findings –Contrary to the presumption that public engagement by private firms necessarily reduces to
rent-seeking, the activities of the Cummins Engine Company lead to beneficial public spillovers by way of
improved infrastructure and norms, as well as by restoring a degree of economic calculation to the production
of public buildings in Columbus, Indiana.
Originality/value –The authors illustrate the precise mechanisms that generate the potential spillovers
from public entrepreneurship that Klein et al. (2010) explore theoretically.
Keywords Political economy, Public entrepreneurship, Public-private entrepreneurship
Paper type Case study
Mediocrity is expensive ( J. Irwin Miller)[1].
Beginning with the first isolated settlements, [humans] have shown a genius for cooperation.
That genius flourishes today within the voluntary groups that are at work within every community
( J. Irwin Miller)[2].
1. Introduction
In the twentieth century, policymakers discovered public-private partnerships as a useful
alternative to purely public provision of infrastructure and community assets. From capital
improvements at JFK Airport in New York City to the construction of the Presidio Parkway
in San Francisco, policymakers have continually turned to public-private partnerships in
order to make up for the short-comings of public production (The National Council
for Public-Private Partnerships, 2012). Long before “public-private partnerships”entered
the popular lexicon and became a hallmark of public policy, however, Cummins
Engine Company and Columbus, Indiana would embark on one of the first –and longest
lasting –partnerships between private and public[3]. As a result of entrepreneurial initiative
by Cummins CEO, J. Irwin Miller, the architecture of Columbus, Indiana would become
recognized around the world, setting the stage for the city to prosper while many other Rust
Belt cities declined. This small city story has big implications for how private action can
lead to public spillovers.
Our paper employs the concept of public entrepreneurship to analyze the unique
public-private partnership in Columbus, Indiana. Broadlyspeaking, entrepreneurship consists of
employing judgments about investment opportunities in an uncertain environment, disrupting
Journal of Entrepreneurship and
Public Policy
Vol. 6 No. 1, 2017
pp. 72-91
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-03-2016-0010
Received 20 March 2016
Revised 30 September 2016
7 October 2016
Accepted 8 October 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
The authors would like to thank Richard Wagner, Jennifer Dirmeyer, David Lucas, Joshua Hall, and
two anonymous referees for their helpful comments on earlier drafts of this paper. Any remaining
errors are our own.
72
JEPP
6,1
current ways of doing things through innovation, or being alert to seize profitable opportunities
(Klein et al., 2010). The first conception corresponds largely to that advanced by Knight,
the second concept is most associated with Schumpeter, and the final articulation is usually
associated with Kirzner (Klein et al., 2010). Our analysis contains elements of all three
approaches to entrepreneurship.
Generally, public entrepreneurship is contrasted with private. Baumol (1996), for
instance, identifies the potential for public entrepreneurship to be “unproductive,”often in
the form of rent-seeking, whereby entrepreneurial individuals seek to co-opt the political
system to transfer rents to themselves. In contrast, private entrepreneurs –in their pursuit
of profit –are assumed to be productive due to their ability to engage in economic
calculation. Not all public or political entrepreneurship, however, is unproductive.
This paper contributes to the literature on public entrepreneurship by exploring one
instance of productive, public entrepreneurship.
Klein et al. (2010) identify four distinct categories of potentially productive, public
entrepreneurship, which they believe merit additional attention: alteration to the rules of the
game, creation of new public organizations, innovative management of public resources,and
spillovers from private actions to the public domain. Whileall four categories are instructive
of the ways that public entrepreneurship can be productive, this paper concentrates on the
fourth case. Klein et al. (2010) recognize that entrepreneurship –privately undertaken in
the pursuit of private interests –may have beneficial spillover effects on the public domain.
Parker (2005) likewise concurs with this latter point, arguing that the specifics of positive
externalities from entrepreneurship are under-explored: what are they, how are they
generated, and who generates them?
By investigating the case of Cummins Engine Company and its relationship to the
municipal government of Columbus, Indiana, this paper provides one set of answers to those
questions. This case study illustrates ways that private entrepreneurs –when in search of
profits –can provide infrastructure and influence community norms, two areas which Klein
et al. (2010) argue remain under-explored. The case also illustrates an additional, potential
benefit of public entrepreneurship: the reestablishment of economic calculation.
These specific, beneficial effects are contingent on the particular means that public
entrepreneurs select to achieve their goals. By exploring the Columbus case, we illustrate
what those actions are, and how they lead to the public spillovers which Klein et al. (2010)
argues are theoretically possible. While generalizing from a single case can be fraught with
error, this study points toward useful avenues for future explorations of the institutional
requirements necessary for interaction between public and private to be productive.
Section 2 fleshes out the theory of how entrepreneurship may yield public spillovers as
described by Klein et al. (2010). Section 3 offers a case study of Cummins Engine Company
and its relationship with the community of Columbus, Indiana. Section 4 considers
alternative explanations for the Cummins-Columbus partnership as well as empirical
evidence illustrating the positive effects of the partnership. Finally, Section 5 concludes with
several implications of this case, as well as suggestions for future research avenues.
2. Public entrepreneurship
Following Klein et al. (2010), this paper conceives of the “public”part of “public
entrepreneurship”as innovation or deployment of resources in such a way as to benefit
specifically public interests. As such, these entrepreneurs may be either public or private
actors, but the result of their behavior is to serve some public interest. Specifically, this
paper presents a case study of one of Klein et al.’s (2010) categories of public
entrepreneurship, which they call “spillovers from private actions into the public domain.”
They write about this category that, “Private entrepreneurs pursuing private objectives
may seek to create and clarify public interests, infrastructure, institutions, norms, and
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