![The Insightful Leader Logo](/_img/Insightful_Leader_Newsletter_Logo_Purple.jpg)
Kylie Hwang has heard all sorts of anecdotes from people who blossomed into successful entrepreneurs after their release from prison. Most often, they became small-business owners operating mom-and-pop shops like construction companies, bakeries, or catering businesses.
But while some shared that entrepreneurship was a natural fit for their lifestyle or personality, others gave the Kellogg researcher a very different reason why they set off on their own.
They couldn’t find any other employment.
“The stigma of a criminal record or incarceration is so pervasive in the United States,” says Hwang, an assistant professor of management and organizations at the Kellogg School.
This week, we highlight a recent study—the first of its kind—that looks explicitly at the relationship between incarceration and entrepreneurship. Plus: Why do the majority of acquisitions fail?
Finding opportunities after prison
Entrepreneurship would seem one of the few ways for people facing high levels of labor-market discrimination to build a rewarding career in the U.S.
But Hwang and her coauthor, Damon Phillips of the Wharton School at University of Pennsylvania, wanted to learn more. To what extent was labor-market discrimination responsible for pushing individuals with a history of incarceration into entrepreneurship—and, for those who did start their own business, was it a good option?
In their new study, the researchers find that formerly incarcerated individuals are 40 percent more likely than peers with no history of incarceration to pursue entrepreneurship. And, generally speaking, the decision serves them well: these entrepreneurs earn higher incomes, and are less likely to experience recidivism, than those who go to work for companies.
But the researchers also find that, in areas with less labor-market discrimination against people with a criminal record (due to ban-the-box legislation), entrepreneurship is significantly less popular—especially among Black individuals.
“It shows us that one of the main reasons why formerly incarcerated individuals were going into entrepreneurship was really the lack of employment opportunities,” says Hwang. For that reason, she argues, policies should focus on improving employment options as well as encouraging entrepreneurship for this group.
You can read more about Hwang’s study in Kellogg Insight.
Whoops!
Why do the majority of acquisitions fail? Harry Kraemer, a clinical professor at Kellogg and the former CEO of Baxter International, has some thoughts on this particular topic. Seven thoughts, in fact.
1. Companies don’t take the time to figure out what they’re really really good at.
2. Companies don’t really understand the economics of what the target is worth.
3. Companies get emotional.
4. Companies become convinced that the acquisition is “very strategic” without understanding if the acquisition makes economic sense.
5. Companies allow bankers to decide what the acquisition target is worth rather than determining the value themselves.
6. Companies fail to take into account differences in culture and people dynamics.
7. Companies fail to quickly integrate the acquisition and leave too much uncertainty.
Kraemer shared these in a recent talk at the marketing firm Strategex. That talk was recorded and is available to watch on Youtube.
“How beneficial could it be? It could bring the number of observations needed down by 50 percent.”
— Achal Bassamboo in Kellogg Insight on a new technique that allows decision-makers to significantly reduce the number of consumers needed for A/B testing.