Machiavellian theory of entrepreneurship

Niccolo Machiavelli  (born 1479) in Italy is an infamous strategist who wrote extensive letters teaching cunning strategies to “princes” that ruled over fiefdoms throughout feudal Europe at the time. 16th century Europe was very divided compared to today, especially in and around Italy, which was composed of a large number of small autonomous and semi-autonomous territories.

Although Machiavelli is often considered as a figure in the history of political science, fiefdoms were ruled by what Baumol describes as entrepreneurs. Thus, Machiavelli’s letters can be thought of as elaborating entrepreneurial strategies to get ahead in feudal times.

Many regard Machiavelli’s strategies as unethical, yet his famous book “The Prince” continues to be cited and read within the business school community and by business and military practitioners. That work, along with Sun Tzu’s Art of War, are considered classic works on strategy, but they also have much to say about entrepreneurship.

If a young prince wants to achieve, he needed to topple another or an older incumbent. The core ideal of the theory is that the ends justify the means, as the end is total power over a territory and its resources. For example, he recommended strategies including the use of killing to eliminate competitors. He viewed this strategy as superior to imprisonment or exile because these alternatives could allow a return to be staged by the competitor and their networks. Axioms credited to Machiavelli include:

  1. It is better to be feared than to be loved
  2. Loyalty must be strong and resistance crushed
  3. The ends justify the means

Perhaps Machiavelli was a realist writing during a time of weak institutions. Today, entrepreneurs often find themselves in trouble with the law when they pursue Machiavellian strategies to usurp incumbent firms. The modern institutional systems that are in place regulate Machiavellian behaviors, act as a barrier to entry. However, these types of barriers may be considered desirable because they prevent what is now understood to be a destructive form of entrepreneurship, in terms of its effects on the society or network.ng incentives for stewards—such controls may actually reduce the stewards’ pro-social behaviors by reducing motivation (Argyris, 1964).

Mechanisms that give stewards greater autonomy and discretion include making the CEO the chairman of the board of directors (Donaldson and Davis, 1991). Other studies have, however, found that boards with non-executive chairmen have higher corporate financial performance (Rechner and Dalton, 1991). Recently, Elon Musk was fired as chairman of Tesla Motors’ board for tweeting that he planned to take the company private, when he did not have such intentions. This punishment was intended to reduce agency problems.

Sources:

Machiavelli, N. (1940). The Prince and Discourses On the First Decade of Titus Livius. New York: The Modern Library.
Baumol, W. J. (1996). Entrepreneurship: Productive, unproductive, and destructive. Journal of business venturing, 11(1), 3-22.921.

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