Over thirty years ago, Peter Drucker famously argued for a shift toward an entrepreneurial society, one where “executives in all institutions…make innovation and entrepreneurship a normal, ongoing everyday activity.” As Julian Birkinshaw recently noted, we have come a long way towards realizing Drucker’s vision.
There has been a boom in startups, a huge proliferation in the number of freelancers, and companies are working to unlock their employees creative ideas. But Birkinshaw argues that we still have a long way yet to go. He highlights four obstacles blocking entrepreneurs from taking full advantage of every opportunity. Three of those obstacles are legal related, specifically concerning outdated employment, intellectual property, and governance laws. See below:
Employment law says you are either an employee or a freelancer. But this is an outdated distinction, and it is creating all sorts of problems for companies like Uber and Airbnb, whose drivers and hosts are a bit of both. Some observers have argued that we need a hybrid “third way,” designed for today’s gig economy.
Intellectual property rules were created on the assumption that ownership matters, but today we are more interested in access — to streamed music, to the use of a car, to information that we can use. Some progress has been made here, such as the general public license used in open-source software, but more needs to be done.
On the topic of governance, the original limited liability company was a clever invention, a mechanism to facilitate commercial risk taking by limiting the downside for owners. But today such companies seem to be stifling entrepreneurship; they have become short-term-oriented and unduly conservative. Various alternatives to the limited liability company have been invented over the years (for example, S and B corporations), and further creativity would be welcome to help latent entrepreneurs rather than frustrate them.
At JUX, we believe in entrepreneurship. Anachronistic statutes should not be stifling innovation. We as legal professionals are committed to working with policymakers, businesses, and community leaders to ensure that we have laws in place that empower our information-age business clients.