The Workplace (r)Evolution
The Workplace (r)Evolution
A master thesis on co-‐‑working spaces. What do
entrepreneurs desire from them, and how can
proprietors improve their concepts?
University University of Amsterdam Faculty Amsterdam Business School
Study Business Administration, MSc/MBA Specialization Entrepreneurship & Innovation Student Tom van Rheeden
Student Number 5645077 Professor Dr. G.T. Vinig Date 26-‐‑01-‐‑2015
Statement of originality
This document is written by student Tom van Rheeden, who
declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of Contents 1. Introduction 10 2. Theoretical Framework 14
a Historical background of ICT and labor 15
b Overview of SME sector in EU and the Netherlands 17 c The teleworkers’ dilemma 19
d The co-‐‑working space 21 e Co-‐‑working spaces in Amsterdam 23 f Scientific research on co-‐‑working spaces 24 g The theory of effectuation 29
i The principles of effectuation 32 j Applying effectuation to both freelancers & startups 35 3. Conceptual Model 38 4. Methodology 44 a Research design 44 b Sample 46 c Data collection 48 d Data analysis 49 5. Findings 53
b Productive Work Environment 57 c Community 61 d Physical Work Environment 67 e Hygiene Factors 70 f Cost Considerations 74 g What’s not important? 76 6. Discussion 83
a Discussion of findings 83 b Scientific Implications 87 c Practical Implications 90 d Limitations & Future Research 94 e Conclusions 97 7. References 99 a Academia 100 b Books 103 c Online sources 104 8. Appendices 106
a Appendix A : Interview template 107
b Appendix B : Codebook 110
c Appendix C: Overview of CWS in Amsterdam 113
d Appendix D: Overview of participants interviewed 115
e Appendix E: Emergent Model of Entrepreneurial CWS Evaluation Factors 118
ABSTRACT
Abstract
Co-‐‑working is a rapidly growing phenomenon and provides an office solution for firms and freelancers that can’t afford their own office space. To date, only a single scientific study has been
published on co-‐‑working spaces (CWS). However, these new types of office buildings are fast becoming the default office option for freelancers, micro-‐‑entities and small enterprises. This exploratory study examined how CWS proprietors can improve their co-‐‑
working spaces by researching the factors that co-‐‑workers evaluate in their decision-‐‑making process when deciding on joining a
suitable co-‐‑working space. Thirteen semi-‐‑structured interviews with entrepreneurs of early stage business entities from a variety of occupations and experience levels provided qualitative data that were coded to identify the individual factors that entrepreneurs consider when evaluating a CWS. Five dimensions of factors were shown to influence their opinion. These findings have implications for (i) future researchers by increasing understanding of the needs and wishes of co-‐‑workers, and (ii) for co-‐‑working space proprietors by providing them with an actionable research model that they can use to improve their co-‐‑working spaces.
ACKNOWLEDGEMENTS
Acknowledgements
I feel it’s due to acknowledge the contributions of a few people who have either directly, or indirectly, contributed to this thesis.
First and foremost I’d like to thank my parents. Not only for their continuous support but also for subtly, yet effectively, nudging me to finish my studies, even though during the last half year I was already occupied with work.
Secondly, I’d like to thank both Tsvi and Wietze, as I’ve learned a tremendous amount in their courses during the Entrepreneurship & Innovation master. I especially
appreciated their focus on the practical, hands-‐‑on aspects of business, instead of just training me to become a researcher like the majority of master studies do.
Thirdly, I’d like to thank the people who have been so generous with their time by allowing me to interview them. I’m especially grateful to my good friend Peter Tegelaar, through whose network I was able to interview some
interesting people, who provided a lot of interesting data for
FOREWORD
Foreword
The process of creating and finishing this thesis has been somewhat ‘unorthodox’. Due to my (now regrettable) decision to prematurely focus on my work career before fully finishing my studies I haven’t been able to properly work together with my thesis supervisor, Dr. Tsvi Vinig.
As such, I’m handing in this master thesis sans the usual ‘feedback-‐‑iteration’-‐‑process of first handing in a concept
version and then going through a process of iteration based on my supervisor’s feedback. This may have dented my chances of graduating cum laude, which was still a possibility for me. I take full responsibility for this. But, as Nicholò Machiavelli once proclaimed, one should make mistakes of ambition instead of mistakes of sloth. And mine certainly was one of ambition (...yet perhaps overly so).
I’ve since quit my job at the end of last year in order to fully focus on this thesis and in reflecting back on it, I’m glad I did. Today, I’m unabashed to say that I’m proud of the final
version of this thesis. It’s been a culmination of hard work, thorough research, near endless content analysis, alternating moments of euphoria and despair, and most of all a lot of determination. This thesis is by no means something that I’m just handing in order to receive a sufficient enough grade to get my degree.
Not for a moment have I been bored researching and writing this thesis about co-‐‑working spaces (which is strange for me). As such, I hope that everyone who reads this will feel a
similar kind of excitement about this interesting phenomenon.
Tom van Rheeden, 26-‐‑01-‐‑2015
1. INTRODUCTION
Introduction
The Dutch chamber of commerce, De Kamer van Koophandel, recently announced that the number of self-‐‑employed workers in the Netherlands has risen to 880.000, marking a 100%
increase in size compared to 2009 (Van Weezel, 2015). This rise in the amount of self-‐‑employed workers is not just a Dutch phenomenon, as research by Intuit predicts that up to 40% of the American workforce will be freelancers by 2020 (Intuit, 2010). This lead to an obvious, but interesting question: where do they do their work?
Previous scientific research on teleworkers and freelancers has found that it’s not financially feasible for most freelancers to rent their own office (e.g. Spinuzzi, 2012). Until recently, freelancers therefore faced the dilemma of either working from home or working at public places like a coffee shop or a public library (Spinuzzi, 2012). Both options have significant
disadvantages. Working at home or at public places offers a plethora of distractions and can at the same time be very isolating (Harpez, 2002; Spinuzzi, 2012).
Since the turn of the century, the market started to offer a solution: office spaces for freelancers and micro-‐‑enterprises. It was coined ‘co-‐‑working’. Co-‐‑working is a style of work that involves multiple independent work professionals and firms working together in a shared office environment (Wikipedia, 2014). According to Bernard De Koven, who first coined the term ‘coworking’ in 1999, co-‐‑working provides an
"ʺenvironment [...] to allow coworkers to work together, as equals. But separately – each working on their own projects [...] In this way, people were free to help each other without worrying about
competitive pressures. And the result was productivity, community, and, surprisingly often, deeply shared fun."ʺ (De Koven, 2013).
1999. Since then the phenomenon has grown rapidly. As of 2013 there are currently over 2500 co-‐‑working spaces globally, and this number is almost doubling itself every year (Foertsch, 2013). In Amsterdam alone, more than 15 new co-‐‑working office spaces have opened their doors in the last 5 years (see Appendix C), leaving real estate experts to believe that co-‐‑ working spaces can potentially take up 25% of the total office real estate market in the Netherlands (Beentjes, 2013).
While co-‐‑working spaces were originally intended for freelancers, one recent trend is that more and more startups and small enterprises are making use of co-‐‑working offices as well (Maltby, 2012). The rationale behind this is that a lot of startups start out as micro-‐‑entities and over time evolve into SEs, but have gotten used to the co-‐‑working space and consequently don’t want to move into their own office (Maltby, 2012).
However, as of January 2015 only a single scientific study has been published researching the phenomenon of co-‐‑working spaces. This thesis aims to partially fill this research gap by looking at co-‐‑working spaces through the lens of the
entrepreneur: what do they seek in a co-‐‑working space? What aspects of a co-‐‑working space might persuade or dissuade an entrepreneur to (continue to) co-‐‑work a co-‐‑working office space?
Now that more and more work professionals are starting to make use of co-‐‑working spaces, real estate proprietors want to know how they can best cater to potential co-‐‑workers.
According to one proprietor, early stage, startup business entities form an important market for them, given their understanding of the co-‐‑working philosophy and their preference to start working in co-‐‑working spaces (Nederlof, personal communication, 2014). Therefore the research goal of this thesis is to find out what factors early stage
entrepreneurial firms, whether it’d be freelancers or startup firms, consider when evaluating a co-‐‑working space. This brings us to the research question of this thesis:
RQ: What aspects of a co-‐‑working space factor into the decision-‐‑ making process of early stage entrepreneurs’ evaluation of a co-‐‑ working space?
The structure of this thesis is as follows. I’ll first describe how changes in Information and Communication Technology (ICT) caused an increase in information workers, ultimately leading to this new phenomenon of co-‐‑working spaces. After, I’ll discuss the relevant scientific research that can help us with insights into what factors of a co-‐‑working space will be deemed important by entrepreneurs. This is followed by the methodology section, where I’ll elaborate on the chosen research design. I’ll discuss my research findings in the subsequent section. Following this is the discussion section,
where I’ll discuss my research findings and provide potential avenues for future research.
2. THEORETICAL FRAMEWORK
Theoretical Framework
“ What is occurring now, is in all likelihood, bigger, deeper and more important than the industrial revolution [...] the present movement represents nothing less than the second great divide in human history, comparable in magnitude only with that first break in historic continuity, the shift from barbarism to civilization (Toffler, 1970, in: Van Meel, 2011).”
The first rumblings of a potentially radical societal shift appeared in the late 1960s and early 1970s, when influential business academics and writers such as Peter Drucker, Alvin Toffler and Daniel Bell started arguing that a ‘post industrial society’ was on the rise (Van Meel, 2011). In a post industrial society the world would stop revolving about raw resources and factory work, and instead around knowledge work and information technologies.
Innovations in Information and Communications Technology (ICT) over the following decades have indeed significantly restructured our modern societies, including the relationship between work and employment (Barney, 2004, p. 94). Before the rise of the Internet and mobile technologies, the concepts of human labor and work in the industrial society were organized around security. The typical work arrangement in the welfare state model, that most Western companies
adhered to, revolved around primarily long-‐‑term, full-‐‑time job classifications, to be performed at fixed times – e.g. from 9-‐‑to-‐‑5 on weekdays -‐‑ at a fixed location: the firm'ʹs office (Barney, 2004, p. 95). Workers typically 'ʹmade a career'ʹ inside the firm they started their work career in, primarily migrating
upwards the hierarchical chain inside their firm over the span of their careers.
This trend of long-‐‑term employment started to change when new networking technologies appeared. Most notably the Internet, that has drastically increased the complexity of national and global economies in the last twenty years. This increased complexity created an even bigger need for
companies to continuously innovate, in order to not fall behind in the markets in which they operate. As Chesbrough stated: “In today'ʹs world, where the only constant is change, the task of managing innovation is vital for companies of
every size in every industry” (2003, p. 17).
Castells (1996, p. 67) argued that the rise in networked technologies has enabled information itself to become the product of production processes, as better information about the business environment gives companies a competitive advantage over their competitors. Better information allows firms to continuously re-‐‑adapt and re-‐‑align itself with their business environment, their stakeholders and the changing
their competitors. This need for information has only increased in the eighteen years since the release of Castells’ book, The Rise of the Network Society.
To recapitulate, the technological advancements in ICT created a more complex society that resulted in a bigger need for data by firms. At the same time, the innovations in ICT also brought forth opportunities for firms to become more agile and adaptable. With regards to human labor, the new ICT capabilities allowed companies to restructure the work-‐‑ employment relationship from one revolving around job security to one revolving around the notion of job flexibility (Barney, 2004, pp. 79-‐‑95).
One of the major ways in which companies have adapted to this increased need for organizational flexibility is what Barney (2004) dubbed the 'ʹflexibilization of labor’. For example, the Internet and concurrent mobile technologies
have enabled firms to hire short-‐‑term, remote working employees for specific projects only. Indeed, almost twenty years ago Castells (1996, p. 268) already argued that
traditional, inflexible, long-‐‑term work arrangements were due to become less prominent over time. Later scientific research has also found that there has been a rise in various non-‐‑ standard forms of employment: these new work arrangements are generally more flexible in terms of work hours, geo-‐‑ location, and/or the duration of the arrangement (e.g. Spinuzzi, 2012). Examples of non-‐‑standard work
arrangements are part-‐‑time work (Barney, 2004), remote work, distributed work (Bergiel, Bergiel & Balsmeier, 2008; Paretti, McNair, & Holloway-‐‑Attaway, 2007; Spinuzzi, 2007), nomadic work (Mark & Su, 2010; Su & Mark, 2008) and telework
(Bailey & Kurland, 2002). The underlying thread in all these types of non-‐‑standard work arrangements is that the
relationship between employer and employee has become more flexible and impermanent. Less and less of the
employees in today'ʹs economies are being 'ʹhired for life'ʹ, with firms instead leaning more towards a 'ʹhired when necessary, for as long as they'ʹre necessary’-‐‑mentality.
Overview of the SME sector in EU and the Netherlands
To briefly recapitulate Castells'ʹ (1996) and Barney'ʹs (2004) arguments, ICT innovations have driven a more networked society, where information has become a valuable currency. This has led to an increase in information workers, who can perform their job in a variety of non-‐‑traditional forms of working, for instance remote work from home or even from a different continent. Dutch and European economic research from the last decade underscores these arguments. Research shows that technology has driven an increase in freelancers, micro-‐‑enterprises (MiE) and small enterprises (SE) (EIM, 2009). The rise of these companies can be directly traced back
to the innovations in ICT, which have on the one hand significantly lowered the barriers of starting up one’s own company, and on the other hand pushed a lot of work
professionals from having a career inside a company towards non-‐‑standard forms of employment, like temporary
freelancing jobs or starting up one’s own agency or firm.
Per EU guidelines, Small and Medium Enterprises (SMEs) can be divided into Medium Enterprises, Small Enterprises, Micro Enterprises and freelancers (European Union, 2003): 1
-‐‑ Medium Enterprises are firms that have up to 250
employees. Under European law, medium enterprises are firms that employ less than 250 employees and have a yearly revenue of up to 50 million Euro’s, or an annual balance sheet of equal or below 43 million Euro’s.
1 Because Medium Enterprises are by definition too big to fit into a co-‐‑
working office I'ʹve excluded them from my research focus. This thesis will focus on SEs, MiEs and freelancers only.
-‐‑ SEs are firms that have up to 50 employees. Under European law, small enterprises are firms that employ less than 50 employees and have a yearly net revenue of up to 10 million Euro’s, or an annual balance sheet of equal or below 10 million Euro’s.
-‐‑ MiEs2 -‐‑ also known as micro-‐‑entities -‐‑ are small firms that have between 2 and 10 employees. Under European law, micro enterprises are firms that employ less than 10
employees and have a yearly revenue below 2 million Euro'ʹs, or an annual balance sheet equal or below 2 million Euro'ʹs. -‐‑ Freelancers are single entity enterprises, i.e. uncommitted independent workers who are either self-‐‑employed (e.g. solo-‐‑ entrepreneur) or work on a per project-‐‑basis.
Economic research shows that between 2002 and 2007 the
2 To avoid confusion between Medium Enterprises and Micro Enterprises,
I’ve abbreviated medium enterprises with ‘ME’ and micro enterprises with ‘MiE’
number of SMEs in the European Union has increased by over 2 million, while the number of large enterprises has only grown by 2.000 (EIM, 2009). Recent research commissioned by the EU shows that European SMEs accounts for 99,8% of the total number of businesses in Europe, with a large majority of SMEs being either MiEs or SEs (Ecorys, 2012). In the EU, 92,2% of all enterprises are MiEs, and together they employ 29,6% of Europe’s workforce. SEs comprise 6,5% of all European firms, and employ 20,6% of Europe’s workforce. Taken together, SEs and MiEs employ over half of working Europe and accounts for 39,8% of EU’s gross value added.
Recent Dutch research also shows the prevalence and
importance of SMEs in today’s economy. As of 2012, out of all firms in the Netherlands, 70% are freelancers (in Dutch:
Zelfstandige Zonder Personeel [ZZP]), 25% are MiEs and 4% are SEs (MKB Service Desk, 2013). In absolutes, the Dutch economy consists of around 760.000 freelancers, around
495.000 employees of MiEs and around 56.000 employees of SEs. The entire SME sector in the Netherlands, including medium-‐‑sized enterprises, employs 60% of the Netherlands’ workforce and accounts for 58% of the Netherlands’ Gross National Product (MKB Service Desk, 2013).
The teleworkers’ dilemma
The increase in non-‐‑traditional work arrangements and the resulting rise of freelancers and smaller firms posed a
dilemma for the latter two. While innovations in ICT enabled more professionals to start up their own business entity, most of these startup business entities, especially in the formative phase of their businesses, don'ʹt have the resources to rent their own office. The alternatives, working from home or at public places -‐‑ for instance, the local library -‐‑ are not ideal solutions either.
In the scientific literature working from home is primarily known as teleworking, although the terms remote working and home working are sometimes also used (Van Meel, 2011). While academia hasn'ʹt reached a consensus on a precise definition of the term, it is generally agreed that telework is remote work – meaning work done outside of the firm’s offices -‐‑ involving the use of ICTs (Sullivan, 2003). The origins of teleworking can be traced back to the 1970s, when
American researcher Jack Nilles introduced the notion of 'ʹtelecommuting'ʹ as a possible solution to American workers'ʹ daily time-‐‑consuming and environment polluting commute from and to the office (Van Meel, 2011). Since then
teleworking has become a fixture in modern economies.
Scientific research on teleworking shows that there are both benefits and drawbacks to working from home. The two most researched benefits of telework are increased employee
productivity and greater job satisfaction (Bailey & Kurland,
2002). While all studies on teleworkers'ʹ productivity report an increase in productivity, it'ʹs important to note that nearly all of these studies rely on self-‐‑report data. While it could very well be that teleworkers are actually more productive, we have to take a potential response bias into account as most teleworkers volunteered or requested to work at home and thus might be biased to claim an increase in work output (Bailey & Kurland, 2002). Other benefits that are sometimes mentioned in the scientific literature are reduced costs (e.g. transportation costs to and from the work location),
maintaining a healthy balance between work and family, flexible working hours and increased organizational loyalty (Duxbury, Higgins, & Neufeld, 1998; Bailey & Kurland, 2002; Harpez, 2002).
However, there also appear to be significant disadvantages to teleworking. The biggest drawbacks of working from home seem to be social isolation and the erosion of the traditional
boundaries between home and work life (Spinuzzi, 2012; Harpez, 2002). Teleworkers have also mentioned that working from home or from coffee shops provides more distractions and requires more self-‐‑motivation to stay focused (Spinuzzi, 2012). Research by Michelson, Palm Lindén and Wikström (1998, in: Sullivan, 2003) shows that longer workweeks are another significant disadvantage of working from home. By making use of time-‐‑use surveys, as well as teleworkers'ʹ work diaries, they found that teleworkers work significantly more hours than the traditional forty-‐‑hour workweek. They also argue that the claimed increase in flexibility (e.g. Harpez, 2002) -‐‑ as teleworkers can theoretically decide their own working hours -‐‑ doesn'ʹt hold up in practice, as teleworkers often have to be available during work hours for
communicating with their colleagues and clients. For the teleworkers participating in this study, this resulted in them often working both during the day and at night (Harpez, 2002).
American management guru Thomas Davenport offered his own synopsis on the benefits and disadvantages of
teleworking in an HBR article, by stating that, “knowledge workers work at the office [. . .]. They like flexibility, and they like to work at home occasionally. However, they know that to be constantly out of the office is to be ‘out of the loop’ – unable to share gossip, exchange tacit knowledge, or build social capital” (Davenport, 2005).
The co-‐‑working space
As explained earlier, as a result of innovations in ICT the relative number of startup firms has risen in the last decades, both globally as well as on a European and on a Dutch level. However, given the lack of resources of most startup SEs, MiEs and freelancers, renting an own office often is often too expensive. Yet, working from home or in public spaces like
coffee shops also has it’s own significant disadvantages (e.g. Spinuzzi, 2012). Luckily for them, as is often the case in capitalist economies, their need for a better solution resulted in the supply of a new, innovative solution. A new type of office space: the co-‐‑working space.
Bernard De Koven first coined the term ‘coworking’ in 1999, with which he tried to describe the concept of 'ʹworking together as equals'ʹ (DeKoven, 2013). According to De Koven, co-‐‑working provides an "ʺenvironment [...] to allow coworkers to work together, as equals. But separately – each working on their own projects, pursuing their own, separate business interests. In this way, people were free to help each other without worrying about competitive pressures. And the result was productivity, community, and, surprisingly often, deeply shared fun."ʺ (De Koven, 2013). What he tried to describe, however, was a hierarchy-‐‑devoid team collaboration process and not so much what co-‐‑working
has informally come to mean today: independent business firms sharing an office space (Wikipedia, 2014).
The first co-‐‑working space opened in New York City in 1999, named 42 West 24, and is still operational today (Deskmag). It wasn’t officially promoted as a co-‐‑working space, in this case it was simply a software company that rented out the
remainder of their office space to other companies and individuals.
A Google Trends search for the term 'ʹcoworking'ʹ provides a good snapshot of the increased awareness and interest in co-‐‑ working spaces (See Figure 1). Search queries for co-‐‑working have increased more than twentyfold over the last seven years (Google, 2014). This increased interest in co-‐‑working has resulted in a steep growth of available co-‐‑working spaces. In 2010 the world counted 600 co-‐‑working spaces, according to
Deskmag, the premier online authority on co-‐‑working
(Foertsch, 2010). As of 2013, this number has increased to 2500
Figure 1. A Google Trends search with the query ‘coworking’ shows the increased
popularity of the phenomenon from 2007 through to 2014.
co-‐‑working offices worldwide, providing office space to more than 110.000 professionals (Foertsch, 2013). Compared to 2012, this accounts for an 83% growth of co-‐‑working spaces
globally. To further highlight the significant rise of co-‐‑ working spaces, recent research by Corenet Global EMEA shows that 75% of the European real estate managers perceive flexible working spaces to be the deciding factor for the rise in office requests from firms (Vastgoedmarkt, 2014).
While co-‐‑working spaces were originally intended for solo-‐‑ entrepreneurs, freelancers and micro-‐‑entities, one recent trend is that more and more small enterprises are making use of co-‐‑ working offices as well (Maltby, 2012). The rationale behind this is that a lot of startups start out as solo-‐‑ventures or micro-‐‑ entities and over time evolve into SEs and have gotten used to the co-‐‑working space environment and consequently don’t want to move into their own office (Maltby, 2012).
Co-‐‑working in Amsterdam
Just as in the rest of the western world, Amsterdam has also seen a huge increase in available co-‐‑working spaces, both in number of co-‐‑working spaces as well as the total desks offered (see Appendix C). Amsterdam currently has over fifteen co-‐‑ working spaces, with the vast majority of them becoming
operational in the last five years. The actual number of co-‐‑ working spaces in Amsterdam is likely much bigger however, as a lot of co-‐‑working spaces don’t actively promote
themselves and don’t officially label themselves as such. In my interviews with co-‐‑workers it became apparent that a popular thing in the startup scene in Amsterdam is for one bigger startup to rent a bigger office space (e.g. entire floor in the city center of Amsterdam), and then farm it out to smaller startups, solo-‐‑entrepreneurs and freelancers in their network of friends and acquaintances (personal communication, Halsall, 2015).
Scientific research on co-‐‑working spaces
Given the newness of the phenomenon of co-‐‑working spaces, it’s hardly surprising that scientific research is still in a nascent state. Therefore, no solid definition of the concepts of 'ʹco-‐‑
working'ʹ or of a 'ʹco-‐‑working space'ʹ is available in the scientific literature. Clay Spinuzzi (2012) took the first step towards defining these terms in the lone peer-‐‑reviewed published article on co-‐‑working. In the study, Spinuzzi tentatively defined co-‐‑working as "ʺdistributed, interorganizational,
collaborative knowledge work"ʺ. This sounds very abstract, but it has to be taken into account that formulating a more precise definition is difficult since there are significant conceptual differences between individual co-‐‑working spaces over the world (Spinuzzi, 2012). Because the study by Spinuzzi (2012) presents the single scientifically valid source of information on co-‐‑working, I'ʹll discuss his research in depth below.
In his study, Spinuzzi (2012) tried to understand who co-‐‑ works, why they do so, and how both the inhabitants of co-‐‑ working spaces as well as the real estate managers define co-‐‑ working conceptually. Spinuzzi'ʹs study was a qualitative, 20-‐‑ month long, case study of nine co-‐‑working spaces in Austin,
Texas (U.S.). Spinuzzi'ʹs research data were in-‐‑depth interviews, in which both users (N=17) and owners of co-‐‑ working spaces (N=10) described their experiences. It is important to note here that the generated research data is based on self-‐‑descriptions, rather than observations. Besides these interviews, Spinuzzi also informally observed the three most populated spaces by working at least 6 hours in each space himself.
Co-‐‑working space users gave very heterogeneous descriptions of what co-‐‑working was to them. The descriptions, ranked from most to least mentioned, ranged from:
-‐‑ an 'ʹoffice, space, or workplace'ʹ (15 out of 17 users); -‐‑ 'ʹa social hub'ʹ (9/17);
-‐‑ something 'ʹanalogous to the office'ʹ (7/17); -‐‑ a place to 'ʹbounce ideas off of people'ʹ (6/17); -‐‑ 'ʹcollaboration'ʹ (5/17);
-‐‑ 'ʹheterogeneity'ʹ (3/17);
-‐‑ 'ʹan inexpensive office alternative'ʹ (3/17); -‐‑ 'ʹhomogeneity'ʹ (2/17), and;
-‐‑ 'ʹwork/home separation'ʹ (2/17)
Apart from their varied definitions of co-‐‑working spaces, Spinuzzi (2012) also uncovered a list of desired benefits from the users. These were:
-‐‑ Partnerships with other inhabitants of the co-‐‑working space (14 out of 17 users);
-‐‑ interaction with other co-‐‑workers (10/17);
-‐‑ feedback from other co-‐‑workers (10/17); -‐‑ co-‐‑working colleagues they can trust (10/17);
-‐‑ the ability to learn from co-‐‑working colleagues (8/17); -‐‑ encouragement from co-‐‑working colleagues (4/17), and; -‐‑ client referrals from co-‐‑working colleagues (3/17).
Based off the responses given by the co-‐‑working real estate managers, Spinuzzi devised three definitions of co-‐‑working spaces, (1) The Community Space, (2) The Unoffice, and (3)
The Federated Workspace. The Community Space is a co-‐‑ working spaces that focuses on serving the local communities in which the office resides, with the philosophy that their users should work alongside each other, but not with each other (Spinuzzi, 2012). As one Community Space owner argued, co-‐‑working is short for "ʺcommunity working space [...] Our work space allows you to have dedicated time to concentrate and accomplish tasks"ʺ (Spinuzzi, 2012, pp. 409-‐‑ 410). Both Community Spaces in the study of Spinuzzi also had enforced 'ʹquiet policies'ʹ.
The second type of co-‐‑working space that Spinuzzi defined is The Unoffice. The Unoffice attempts to facilitate interaction between its users by providing aspects of traditional offices that co-‐‑workers miss (Spinuzzi, 2012). Interaction was indeed seen as an essential feature for this type of office space by the owners of The Unoffice co-‐‑working spaces. As one owner stated, "ʺco-‐‑working not only provides a more desirable space
[...] but promotes collaboration, networking and incubator-‐‑like sharing of ideas"ʺ (Spinuzzi, 2012, p. 412).
The third definition provided by Spinuzzi (2012) is The Federated Workspace. This type of co-‐‑working space focuses on building business relationships amongst its users, and to a lesser extent personal relationships as well. For instance, the owners of one of the co-‐‑working spaces that Spinuzzi defined as a Federated Office specifically sought professionals that were seeking leads, business partnerships as well as
friendships (Spinuzzi, 2012, p. 420). The goal of this type of co-‐‑ working space is to actively foster the connections between coworkers, with the idea that these connections can ultimately lead into working relationships in the future. Federated
Workspaces also tend to have a stronger focus on
entrepreneurship than the other types of co-‐‑working spaces Spinuzzi defined.
In his research analysis Spinuzzi (2012) uses fourth generational activity theory (4GAT). 4GAT aims to understand internetworked activities by examining the
interorganizational collaborations in which they contribute. In plain English, 4GAT looks at how people interact within a network by specifically looking at collaborations of actors within this network. By using 4GAT, Spinuzzi developed two sub-‐‑branches of the 'ʹco-‐‑working space'ʹ concept: (1) the Good Neighbours-‐‑configuration and (2) the Good Partners-‐‑
configuration.
In the Good Neighbours-‐‑configuration the focus is not on working together in terms of collaboration, but on working in parallel where each user works on its own project. Like
normal neighbours, users of a co-‐‑working space using this configuration may do totally different, unrelated, work, but do work together as a team (of sorts) to portray a professional work environment, one where each co-‐‑worker can invite
clients for face-‐‑to-‐‑face meetings and give the appearance of working in a professional work environment (Spinuzzi, 2012).
In contrast, the Good-‐‑Partners configuration is less focused on portraying professionalism, and more on collaborating
together to figure out shared work problems (Spinuzzi, 2012). One example of this is when, for instance, a graphic designer, a copywriter and an online marketer collaborate together on a project for a client of one of these workers. As Spinuzzi puts it, the Good Partners-‐‑configuration can be seen as a "ʺnexus of transient work teams composed of specialists"ʺ (p. 430), who have a strong focus on collaboration as well as social
interaction.
To recapitulate, Spinuzzi’s research (2012) indicates that there are multiple, conceptually different configurations of co-‐‑ working spaces. Spinuzzi also researched why the work professionals in his study worked in a co-‐‑working space. He
found a variety of perceived and desired benefits by the co-‐‑ working inhabitants, with the financial aspect of a ‘cheaper office alternative’ being one of the least mentioned benefits. In the context of entrepreneurship and innovation this thesis will look at the specific reasons why co-‐‑workers choose to work at a co-‐‑working space, and in particular which factors play a role in their decision-‐‑making process of evaluating a particular co-‐‑ working space. Given the unique situation of startup
freelancers, MiEs and SEs compared to bigger, established enterprises this is an interesting question for both scientific research on entrepreneurship as well as for the proprietors of co-‐‑working spaces. This brings us to the research question of this thesis:
RQ: What aspects of a co-‐‑working space factor into the decision-‐‑ making process of early stage entrepreneurs’ evaluation of a co-‐‑ working space?
The research question is intentionally worded like this
because I want to exclude the psychological factors that play a role in the co-‐‑workers’ decision-‐‑making process. Consumer psychology is a very interesting subject, however I want to look solely at the factors relating to the co-‐‑working space itself: its community, its users, the cost structure, basic amenities, and so forth. Psychological triggers do play an important part in almost any decision-‐‑making process
(Cialdini, 1993). For instance, it seems likely that the likability of the co-‐‑working space proprietor or third-‐‑party word-‐‑of-‐‑ mouth referrals by friends of the entrepreneur will influence the entrepreneur’s decision. However, studying the influence of these psychological triggers would garner its own thesis. Besides, consumer-‐‑buying psychology has already been studied extensively and therefore I feel that taking this research direction won’t lead to any new insight in the fields of entrepreneurship and innovation.
Besides Spinuzzi’s research, there’s little scientific theory to aid us in answering the research question. However, there’s quite some scientific research on the entrepreneur’s mindset, their needs and their business logic in the act of new venture creation. We can use this research to gain insights into what entrepreneurs are considering when they’re evaluating a co-‐‑ working space. I’ll provide a research analysis of this
literature below. I’ll start off with explaining why most
entrepreneurs’ are likely to use a different cognitive logic than ‘traditional’ businesses. To get insight into the cognitive logic that entrepreneurs apply to making business decisions we can turn to the theory of effectuation (Sarasvathy, 2001a; 2001b).
The Theory of Effectuation
The theory of effectuation posits that entrepreneurs mostly use a different cognitive logic for their business decisions then
businessmen in bigger, established firms (Sarasvathy, 2001a). To understand why entrepreneurs ‘think different’, it’s necessary to first take a step back and look at traditional economical theories on business and entrepreneurship.
The dominant economical theories of the twentieth century, the Neoclassical Equilibrium Theories (NET), state that economic behavior is rational and goal-‐‑driven (Shane, 2000; Sarasvathy, 2001a). These theories have been conceptualized by economic theorists studying markets in a state of
‘equilibrium’. In such a state the current price system of the market conveys all the necessary information to direct the available resources, so that economic actors make decisions based upon complete information (Hayek, 1945). But as Eckhardt and Shane (2003) argue, the current market prices are not useful for making business decision for the future, as they do not contain all the necessary information, because that information (logically) isn’t available yet. For example, the
price system of the current car industry does not provide enough information about how self-‐‑driving cars will influence future demand for normal cars, because we don’t yet know the impact of self-‐‑driving cars on our society. This is only possible after some initial entrepreneurs have started exploring this potentially profitable new economic
combination (Eckhart & Shane, 2003). The exploration of a potential new way to generate revenue in the economy takes place in a state of disequilibrium, and it is the entrepreneur who focuses on finding profitable business ideas that can upset any current market equilibrium (Schumpeter, 1911, in: Knudsen & Swedberg, 2009). Therefore, by way of definition, entrepreneurship cannot be explained by a theory trying to explain markets in a state of equilibrium. As Baumol (2005) argues, nothing structurally changes in an economy in equilibrium and thus entrepreneurial behavior is excluded from Neoclassical Equilibrium Theories. Instead, to explain
entrepreneurial behavior we have to assume a state of disequilibrium (Eckhardt & Shane, 2003).
Sarasvathy (2001a) states that this neoclassical economic thinking is a cognitive logic of causation. Using causal logic, economic actors ‘take a particular effect as given and focus on selecting between different means to create that effect’
(Sarasvathy, 2001a). This way of thinking is in agreement with the Neoclassical Equilibrium Theories, where economic actors make decisions based on relevant information and expected usefulness (Stigler, 1952; Viale, 1992). Using the process of causal logic, entrepreneurs decide their end-‐‑goal in advance and then choose between different strategies to get there (Sarasvathy, 2001a). However, as Sarasvathy states, an explanation for the creation of artifacts as firms and markets requires the notion of effectuation because all the possible end-‐‑goals of a new venture can’t possibly be known yet. This is because markets in a state of disequilibrium don’t provide
the necessary information to conceptualize all the possible ‘effects’ that a new venture can provoke (Sarasvathy, 2001a). In other words, entrepreneurs won’t know where they’ll end up and therefore they’ll focus on what’s available to them at the very moment.
In Sarasvathy’s (2001a) seminal study on experienced and successful entrepreneurs, she found that expert entrepreneurs mostly use a different cognitive decision-‐‑making process than ‘traditional’ causal business logic. Sarasvathy found that when making entrepreneurial business decisions, the majority of the expert entrepreneurs used effectual logic at least 75% of the time when they were solving the problems of the problem set assigned to them in the study. This study ushered in a new movement in the field of entrepreneurial research, and many empirical studies have since shown that effectual logic is the preferred type of cognitive decision-‐‑making logic by
entrepreneurs (e.g., Sarasvathy & Kotha, 2001; Sarasvathy, 2001a; Wiltbank, Read, Dew & Sarasvathy, 2009).
Effectuation is a process where the focus doesn’t lay on reaching a specific end-‐‑goal, but on choosing the right
available means to reach one of multiple satisfactory, but yet unspecified end-‐‑goals (Sarasvathy, 2001a; Dew et al., 2009). The logic behind the theory is that ‘to the extent that we can control the future, we do not need to predict it’ (Sarasvathy, 2001a). Thus, compared to causation, effectual thinking entrepreneurs don’t have a set end-‐‑goal in mind. Because there’s no specific end-‐‑goal, it allows entrepreneurs more flexibility compared to the causal logic process, as it enables them to focus more on taking advantage of arising
contingencies than on focusing on exploiting the currently available market knowledge. Since effectual entrepreneurs believe that the future is unpredictable they, in contrast to causal logic, don’t focus on predictive strategies, instead
opting to control as much of their current environment as they can.
The principles of effectuation
Academic research has uncovered five governing principles of the theory of effectuation:
The bird-‐‑in-‐‑hand (means) principle
The bird-‐‑in-‐‑hand principles states that entrepreneurs should use their existing means as a starting point to envision which possible end-‐‑goals they can accomplish (Sarasvathy, 2001b). The set of available means for an entrepreneur are threefold: their human capital, their knowledge and their network (Sarasvathy 2001a; Sarasvathy 2001b).
Human capital includes the entrepreneur’s values, capabilities and their character. The entrepreneur’s knowledge base is
their experience (in both business and life), education and training. The entrepreneur’s network consists of ‘whom they know’ and ‘who knows them’. Effectual entrepreneurs’ use the bird-‐‑in-‐‑hand principle to ‘start doing’ with the tools they have at their disposal, and use these results to adapt their strategy. Where effectual logic thus focuses on execution, causal logic is more concerned with doing extensive market research and crafting well thought-‐‑out strategies (Sarasvathy, 2001a). Effectual entrepreneurs know that their means and possible end-‐‑goals are constantly changing and they therefore don’t focus on extensive research, as it slows them down and makes them less adaptable.
The affordable loss principle: focus on the downside
The affordable loss principle states that effectual thinking economic actors assess risk based on the possible negative end-‐‑results of new venture creation. Effectual entrepreneurs’ decision to pursue a new venture depends on their estimation
of what they stand to lose and what they are willing to lose (Dew et al., 2009). Effectual logic thus focuses primarily on controlling the possible downside of entrepreneurial behavior instead of aiming for ventures with the highest possible
upside. In contrast, causal thinking managers are taught to target industries and markets with the highest potential return (Sarasvathy, 2001a). This principle is backed up by important empirical research in behavioral economics, regarding mental accounting (Thaler, 1999) and people’s tendencies for
overconfidence and overoptimism (Camerer & Lovallo, 1999).
The strategic partnerships principle: the crazy quilt
The strategic partnerships principles states that effectual entrepreneurs tend to focus on building partnerships, gaining pre-‐‑commitment from stakeholders and creating strategic alliances instead of doing extensive, systematic competitive analysis (Sarasvathy, 2001a & 2001b). As most entrepreneurs aim to create a (somewhat) new market with their startup
doing elaborate competitive analysis does not seem to make sense, as there is no (direct) competition. Causal thinking dictates the undertaking of competitive analysis to try and to predict the future, for instance by using Porter’s five forces model (Porter, 1980). Instead of this, Sarasvathy’s research shows that entrepreneurs tend to focus on cooperative strategies to quickly expand their resources and to reduce uncertainty (Sarasvathy, 2001a, Sarasvathy & Kotha, 2001). Sarasvathy and Dew (2003) argue that the entrepreneur’s cooperative tendency has its foundation in their belief in an unpredictable future. They state that while the future is fundamentally unpredictable, parts of it can be controlled because human behavior is docile -‐‑ meaning that humans are persuadable, teachable, adaptable and manageable. Effectual entrepreneurs form networks by forming effectual pre-‐‑ commitments with others and in this way they leverage human’s docility to control at least part of an unpredictable future.
The leveraging contingencies principle: making lemonade
The leveraging-‐‑contingencies-‐‑principle of effectuation dictates that effectual entrepreneurs view surprises and contingencies as opportunities to potentially profit from. Contrastingly, causation sees surprises as obstacles and distractions from the original strategy and aims to avoid these when possible (Sarasvathy, 2001a; Sarasvathy, 2001b). When entrepreneurs create new ventures that open up new markets or industries there is relatively little preexisting knowledge available, as they are the ones pioneering new economic ways to make profit. Because there is no knowledge to rely on, effectuation states that entrepreneurs shouldn’t aim to predict the
unpredictable future (Sarasvathy, 2001a). Instead, they should focus on exploiting any arising surprises and contingencies. Unexpected things tend to happen when forming a new venture or creating a new market, and effectual entrepreneurs tend to excel at leveraging these contingencies (Sarasvathy,
2001b).
The pilot-‐‑in-‐‑the-‐‑plane principle: control vs. predict
The pilot-‐‑in-‐‑the-‐‑plane principle states that effectual thinking entrepreneurs focus on controlling their environment, instead of trying to predict the future. The theory of effectuation states that entrepreneurs do not believe in predicting the future. Instead, effectual entrepreneurs believe that the future is made by human action and in that way can partly be controlled. The governing logic is: ‘To the extent that we can control the future, we do not need to predict it’ (Sarasvathy, 2001a).
In contrast, the process of causation states that the future can partly be predicted. The causal logic process is: ‘To the extent that we can predict the future, we can control it’ (Sarasvathy, 2001a). The goal of causal entrepreneurs is therefore to aim to predict a part of the future, by way of extensive planning and market research, and then try to capitalize on that.
Applying effectuation to both freelancers and startups
In the previous section I’ve explained the theory of
effectuation, which will be used as a theoretical framework to explain the logic of co-‐‑workers’ decision-‐‑making process of evaluating a co-‐‑working space. The theory of effectuation was developed by studying (expert) entrepreneurs during the act of new venture creation, and as such is focused on explaining entrepreneurial behavior. My thesis, however, looks at both entrepreneurs as well as freelancers. More precisely, this thesis will research early stage entrepreneurs, including freelancers. In the strict sense of the word, it can be argued that freelancers are not entrepreneurs and that effectual logic therefore isn’t applicable for explaining the business logic of freelancers’ evaluation of a co-‐‑working space. However, I argue that both freelancers and startups use effectual logic during the early stages of their business entity’s existence.
As Sarasvathy noted (2001a), effectual logic is especially apt to use in the formative period of businesses. That is, in the act of new venture creation. I argue that this is regardless of whether the business entity is that of a freelancer or a startup. In my opinion, the crucial distinction is not whether we’re dealing with a startup or a freelancer, but which business phase the venture is in. Upon dividing work professionals by the business stage their firm is in, it becomes clear why we can use effectual logic for both freelancers as well as startups. Scott and Bruce (1987) argue that all small businesses go through 5 distinctive growth phases (See Figure 2): Inception, Survival, Growth, Expansion and Maturity.
The theory of effectuation can be used to explain the behavior of both freelancers as well as startup firms during the ‘young’ business stages of small business growth, which are Inception and Survival. The first stage in young business entities’
