Public Capabilities and Public Entrepreneurship

Abstract: This presentation summarizes, synthesizes, and extends a recent stream of research on the nature and development of entrepreneurial capabilities in public and nonprofit enterprises, and the relationship between entrepreneurship and the public sector more generally (Klein, 2010, 2011; Klein, Mahoney, McGahan, and Pitelis, 2010, 2012, 2013; Foss and Klein, 2010, 2012; Klein, McGahan, and Rezaie, 2012). Public organizations are relatively understudied in the strategy and entrepreneurship literatures. But public organizations. But public organizations can be characterized as stocks of human and non-human resources, including routines and capabilities; they can acquire and/or develop excess capacity in these resources; and they may grow and diversify in predictable (Penrosean) patterns. As they try to create and capture value, public organizations can act entrepreneurially by creating or leveraging bundles of capabilities, which may then shape subsequent entrepreneurial action. Such processes can involve complex interactions among public and private actors. For example, public organizations often partner with private firms to produce existing products, create new products, and establish new markets which, in turn, generate new capabilities for both public and private actors. Yet such coevolutionary processes are not guaranteed to create value, and capabilities acquired in the pursuit of public interests may, over time, enable activities that damage those same interests. This presentation shows how a capabilities approach helps explain the nature and evolution of public organizations and applies this approach to a series of cases on the entrepreneurial growth and diversification of public organizations, the private provision of public goods, and related issues.