Keywords

1 Introduction

Entrepreneurial activities have a positive impact on society (e.g., economic growth, job creation, and sustainable innovation), which has led to a significant increase in interest in entrepreneurship education (Hameed & Irfan, 2019). Central to entrepreneurial success is a specific skill set and mindset that enables entrepreneurs to develop promising business ideas and successfully manage a company while operating in a highly uncertain environment (Bacigalupo et al., 2016). Entrepreneurship education ideally fosters such a mindset in students and provides them with skills that enable them to operate in an entrepreneurial environment (Plumly et al., 2008). Due to these competences associated with entrepreneurs (Bacigalupo et al., 2016), entrepreneurship education at universities often emphasizes active learning of students including innovative teaching formats like gamification (Hyams-Ssekasi & Taheri, 2022) or advanced technologies like simulations (Bhullar & Aggarwal, 2022). However, regardless of how sophisticated these teaching formats are, students are aware that they are in a learning situation and not in a real company where their actions and decisions have actual consequences for the company. This discrepancy raises the question of how real-world entrepreneurial skills can be better taught to students.

In this chapter, we address this problem in analyzing a yet underresearched construct that may promote entrepreneurship education by practical action and entrepreneurial responsibility in a real economic entity: a legally incorporated student-run business (hereafter: SRB). An SRB could be constructed as an experiential learning environment that provides a close link between classroom instruction and real-world economic situations (Reeve et al., 2014). Specifically for entrepreneurship education, an SRB seems to be an excellent complement to more common teaching formats such as case studies or project-based assignments conducted for a real company (Truman et al., 2017). In this context, this chapter aims to address the following research questions:

  1. 1.

    Which are the features of SRBs relevant to entrepreneurship education?

  2. 2.

    Which are the design options for an SRB when created to complement an entrepreneurship curriculum?

  3. 3.

    How was the SRB “Culinary Coffee” constructed to support entrepreneurship education?

In the first part of this chapter, we discuss SRBs as an approach to expose students to a real-world entrepreneurial ecosystem that emphasizes multidisciplinary skills and the opportunity to gain actual entrepreneurial experience already during their studies without excessive start-up effort or risk. Second, we provide an overview of different approaches to organizing an SRB, focusing on the legal form “cooperative.” In this part, we also discuss the advantages and disadvantages of student-run cooperatives compared to other teaching concepts. Third, we present the SRB “Culinary Coffee” as an exploratory case study to supplement entrepreneurship education.

To the best of our knowledge, this work is among the first to systematically analyze features and options for establishing an SRB for entrepreneurship education and is unique in that it includes a discussion of the legal form “cooperative” for SRBs.

2 Current State of Research and Practice on SRBs

2.1 Characteristics of SRBs

An SRB can be characterized as being a nonprofit or for-profit business where students run a set of real business processes. For-profit SRBs considered in this chapter are designed to generate profit margins above cost through the production and sale of products and/or services. The first for-profit SRBs were established at Cornell University in 1894 with the purpose of helping students pay for tuition (Student Agencies Inc., 2022). Historically, these SRBs were established primarily without or only with loose relationship to the academic curriculum at universities (Student-Run Business Association, 2022).

From an educational perspective, SRBs provide a unique opportunity for students to assume responsibility and gain hands-on experience with the operation and management of a legal entity (Daly, 2001). Considering Kolb’s classical theory of experiential learning (Kolb, 1984), an SRB provides concrete experiences, allows for reflective observation, calls for abstract concepts to solve business problems, and offers a sandbox for active experimentation. Studies like (Sherman et al., 2008) suggest that experiential learning seems to be more effective than classroom learning for students to develop entrepreneurial skills. Unlike experience-based approaches that merely simulate business activities, managing an SRB has real consequences, such as capital risk, and provides real business relationships with vendors, suppliers, customers, and financial institutions (Daly, 2001).

An SRB which is integrated into the curriculum of the university’s degree program represents a teaching approach which allows students to engage in real entrepreneurial activities under “safe” conditions. Therefore, a curriculum-integrated SRB can be considered as an experiential teaching approach to entrepreneurship education, which is significantly different from other teaching approaches like the academic approach with theoretical classroom instruction or the vocational approach (Hannon, 2005; Heinonen & Hytti, 2010).

2.2 Comparing SRBs to Other Teaching Formats in Entrepreneurship Education

While there are various formats to teach entrepreneurial skills, in this section we evaluate SRBs in comparison to the widely used formats “classroom teaching” and “case studies.” Classroom teaching is the most commonly used way of academic education. This is why also in entrepreneurship education many programs rely on this format. Here, students get to know the theoretical foundations of managing a business (for instance, accounting, finance, marketing, leadership) as well as theoretical knowledge of the competences needed for being a successful entrepreneur (Bacigalupo et al., 2016). However, we know from learning theory that teaching abstract concepts without application tend to lead to substandard learning outcomes, especially when it comes to applying that abstract knowledge in real-world contexts. Another prevalent way that educators use to teach is through the assignment of case studies. In these assignments, students or teams of students analyze a firm’s key challenges in a given situation. After analysis, the participants of the assignment typically present their ideas and recommendations how the firm should proceed in that situation. Case studies are helpful for students to apply theoretical concepts to simplified business problems. However, they are not able to reflect all the complexity that business decisions typically exhibit, such as the enforceability of a decision. In addition, assignments such as case studies lack the crucial elements of real business consequences and real relationships with other firms on the market (Bilimoria, 1998).

One of the most critical goals of entrepreneurship programs is to give the participants an academically rigorous learning experience that translates into real-world value. Robinson and Haynes point out that “there is a need to develop and test entrepreneurship theories, models, and methods that go beyond an academic interest by being applicable to both the practitioner and the educator” (Robinson & Haynes, 1991). In line with this thought, students should have the possibility as well as the motivation, driven by tangible outcomes, to apply and test their academic knowledge and skill set. It is evident that SRB as a teaching format is better able than traditional formats to test and apply theoretical knowledge (Hannon, 2005).

Traditional formats in entrepreneurship education address specific business topics, such as to focus on specific business functions one by one instead of providing a holistic view. This often means to neglect the intersections of business functions and issues related to them. However, we know that in real-world business these intersections are especially critical (Kirby, 2007). SRBs reflect the importance of interrelationships of skill areas in complex business problems including otherwise hard to teach social and cultural aspects of decision-making in businesses. By adopting an interdisciplinary perspective due to active participation in an SRB, students are better able to understand the problems that are relevant to managing a real company. Necessary skills areas typically encompass business plan writing, sales, marketing, leadership, technology, organization, strategy, accounting, business methods, and human resource management (Tonelli, 2021; Wierman et al., 2007). In addition, SRBs convey soft skills in negotiations, team building, persuasion, work ethics, leadership, decision-making, risk-taking, and communication (Plumly et al., 2008; Minch & Tabor, 2007; Reeve et al., 2014). SRBs are also typically open for cross-discipline collaboration (Podeschi, 2019) and offer students the opportunity to do their own research (Reeve et al., 2014).

Another driving element in entrepreneurship is to act autonomously and be decisive. This also requires being entitled to make crucial decisions in business contexts. While classroom teaching and case studies offer little degrees of freedom to make real business decisions, in SRB success and failure are possible in real life. The students have to make decisions on short-term daily operations and on long-term strategy. Thereby, they can learn critical skills for future careers hands-on with confidence and share learning in teams. In general, teamwork is the basis of learning in SRB and helps to disseminate existing knowledge between students. Older students can work as mentors for beginners (Truman et al., 2017).

As the final aspect discussed here, it should be noted that entrepreneurship education should convey the concepts of the field of entrepreneurship in a theoretically rigorous manner. While the acquisition and use of experiential knowledge is an important part of entrepreneurial learning (Gibb, 2007), experiential formats like SRBs may not be efficient in providing a basic understanding of the business functions and its theoretical foundations (Kirby, 2007). Thus, there is still the need for providing basic knowledge structures in classroom lectures and applying them in hypothetical case studies.

Summarizing the aforementioned aspects, Table 1 depicts that SRBs allow higher levels of real-world value, a more holistic view and more autonomy than case studies or classroom lectures, but are inferior in teaching theoretical foundations. Also, it appears that none of the single formats performs well in all of the discussed criteria. Consequently, combining formats can lead to a more comprehensive learning experience that takes advantage of complementary strengths. It has to be emphasized that rather than offering only one format exclusively in a program, it seems to be especially fruitful to integrate several of the aforementioned formats in order to address all facets of entrepreneurship. Combining different formats is also valuable in a sense that an SRB’s emphasis is mainly on how to run a company with established business processes but not as helpful for answering the question of how to initially develop a business model.

Table 1 Comparing teaching formats in entrepreneurship education (source: own illustration)
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In conclusion, prior research has shown that it is particularly vital to combine classroom learning with “real-world learning” (Bilimoria, 1998). However, research is inconclusive on the question of whether “real-world learning” must always take place after a theoretical introduction or whether it can also be helpful to switch this order (Gibb, 2007).

2.3 Business Areas of SRBs

After focusing on the merits of SRBs in entrepreneurship education, it is worthwhile to analyze the typical areas of SRBs with regard to their fields of operation. It is remarkable that the range of products and services offered by SRBs is very wide and includes, for example, art cafés, art galleries, bicycle rentals, consulting, food delivery, internet service providers, laundry services, restaurants, retail stores, storage, technology consulting, theaters, and video production (Josiam et al., 2017; Minch & Tabor, 2007; Podeschi, 2019; Robinson et al., 2010; Tonelli, 2021; Truman et al., 2017; Wierman et al., 2007). Based on these examples, SRBs documented in literature generally appear to share the following common characteristics:

  • Services or products that are easy to manufacture are offered, but no products which need a sophisticated manufacturing.

  • Common, not highly innovative or specialized services or products are offered.

  • Business models with low entry barriers to setting up the business are selected (no or little regulatory requirements, not capital intensive, short start-up phase).

  • SRBs focus on personnel-intensive businesses.

  • The documented business models rely on either general easy-to-learn skills or specific skills related to the field of study.

Like other firms, the activities of an SRB can be analyzed using Porter’s classical value chain model, differentiating primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (infrastructure, technological development, human resource management, procurement) (Porter, 1985). Considering these types of activities, an SRB might carry them out autonomously or use the infrastructure of its home university. For example, the financial system of the home university might be used by the SRB and administrative managers of the university may have the ultimate responsibility. In addition, a board might be responsible for compliance with university regulations and policies (Wierman et al., 2007). The more business activities are conducted by the home university, the easier it is to establish the SRB and the less effort is required to keep it running. The disadvantage, however, is that the fewer business functions the SRB has, the less comparable it is to a “real” company.

2.4 Cooperative as a Legal Form for SRBs

To approximate a “real” business closely, an SRB needs to be a legally incorporated entity. Becoming such a juridical person makes the SRB much more independent from its home university providing both benefits like higher decision autonomy but also obligations like payment of corporate taxes and reporting duties to stakeholders. In the process of incorporation, a legal type must be chosen for the SRB. The specifics of each legal type differ in various countries. The legal type determines, for example, the ownership (one or more persons), the constitution of the managing board, the personal liability (limited or unlimited), the taxation (personal tax, corporate tax, tax-exempt), minimum capital necessary, and reporting duties. Most of the companies worldwide, as well as the majority of start-ups, are organized as “limited liability companies” or corporates (Khurana et al., 2020). At first glance, this makes “limited liability companies” also especially suitable for SRBs to mimic a common form of real businesses as closely as possible. However, this legal form can also bring serious disadvantages, considering that the goals of an SRB and a real company are not completely the same. For a typical company, for example, high start-up costs and a limited and inflexible management and participation model are not problematic because there is a fairly stable group of founders and executives. In contrast, in an SRB, it may be beneficial to distribute responsibilities more evenly to achieve a higher level of engagement among participating students.

To address this fundamental requirement, we focus here on the legal-type “cooperative” due to its unique features. The International Cooperative Alliance characterizes cooperatives in the following way (International Cooperative Alliance, 2022): “Cooperatives are people-centered enterprises jointly owned and democratically controlled by and for their members to realize their common economic, social and cultural needs and aspirations. As enterprises based on values and principles, they put fairness and equality first allowing people to create sustainable enterprises that generate long-term jobs and prosperity. Managed by producers, users or workers, cooperatives are run according to the ‘one member, one vote’ rule.” This characterization makes a cooperative an ideal candidate to set up an SRB for entrepreneurial education:

  • A people-centered, democratically controlled cooperative means students involved can actually take on responsibility. In contrast to working for a standard corporation with its hierarchical structure, this should contribute to a higher level of engagement of the students.

  • Common economic, social, and cultural needs of students can be met by creating an appropriate for-profit or nonprofit cooperative. In contrast, students often work in companies besides their studies just for the salary and without pursuing idealistic goals.

  • A cooperative is designed to be long term and self-sustaining, which makes it an attractive legal form for an SRB. In contrast, a common objective in start-up culture is to grow a company as fast as possible to make a profit as soon as possible by selling it to an established big player in the respective market.

However, in comparison to a simple limited liability company, a cooperative has additional obligations which are enforced by law, including the following:

  • The cooperative has to be a member of an auditing association which regularly checks the business and provides reports about the performance and compliance of the cooperation. One effect of this mandatory external audit is that it helps to avoid bankruptcy of cooperatives. However, this mandatory auditing is also an additional cost element.

  • There has to be an annual general meeting to which all members are invited. At this meeting, the members must discharge the executive board as well as regularly elect the supervisory board, which in turn appoints the managing directors.

3 Methodology

After discussing the extant findings on SRBs from literature, this section briefly outlines the methodological approach used to address our research questions and to add to existing knowledge on SRB for entrepreneurship education. Given the complex nature of the problem and the authors’ unique access to information concerning an existing SRB entitled “Culinary Coffee” that integrates in a higher education teaching environment, we decided to utilize this focal SRB for a single-case study. In general, case study research is a suitable methodological approach to generate an in-depth, multifaceted understanding of a topic in its real-life context (Crowe et al., 2011). It is largely qualitative and focusses on analyzing or describing a phenomenon. Different types of case study design have been suggested that tackle different aims (Yin, 2014). Specifically, as the findings in the research area of SRB are scarce, an explorative approach seems appropriate to qualify and extend prior research.

Explorative case study research is an established research design in the social sciences (Merriam, 1988) and focuses on the factors that drive a phenomenon or subject of study (Yin, 2014). We combine this type of case study design with explanatory elements to explain presumed causal links outlined by our literature review. Therefore, our case study may serve as an example to derive insights into challenges and opportunities of SRBs as a construct to facilitate teaching entrepreneurial skills.

4 Exploratory Case “Culinary Coffee”

Considering the potential benefits of an SRB for entrepreneurship education at a higher education institution, two of the authors established “Culinary Coffee” for the Business Administration study program at the Baden-Wuerttemberg Cooperative State University, Heilbronn, in 2016. The following description of this SRB presents a reflection on the design decisions and the curricular integration into the study program.

4.1 Design Decisions for the Construction of the SRB

The first fundamental decision in establishing the SRB was to incorporate it in the legal form of a cooperative: “Culinary Coffee eG” (“eG” meaning “eingetragene Genossenschaft”). To make it easy for enrolled students to join the cooperative, the price for one share was set to only 20 EUR. Guaranteed by law, all members of a cooperative have the same voting rights even if they possess only one single share. In addition to the advantages and disadvantages noted above in Sect. 2.4, the students knowing that their work affects the results of their own company changes the students’ motivation drastically. All projects in the SRB are done in a much more serious and responsible way. For example, discussions about future projects are much closer to real-life discussions in a company because in the end someone of the same group will have to implement the project and will be responsible for its results.

The second fundamental decision was to establish an SRB which covers as many business functions as possible. Therefore, the SRB should not only provide some services but also include the production of tangible goods. In comparison to a service company, such an “industrial” company is typically part of a larger supply chain and needs to address various additional interesting business problems (for instance, supplier selection, raw material procurement, development of new products, logistics for raw materials and finished products, quality management, design, and improvement of the manufacturing process). As mentioned in Sect. 2.3, this meant identifying a product category that was relatively straightforward to manufacture, but also a product category that students, particularly the students with a major in Food Management, could relate to. After evaluating various alternatives, the decision was made to produce roasted coffee and to name the SRB “Culinary Coffee” accordingly. Roasted coffee is a product type fulfilling the typical features of a product offered by an SRB stated above in Sect. 2.3. Figure 1 depicts the resulting value chain with its single-stage production process. Over time, the product portfolio was expanded to include the procurement and sale of merchandise to provide experiential learning opportunities for students with the major in Commerce Management. Due to these design decisions, the overall complexity of the SRB’s operations is kept low, which should make it easier for students to get a holistic overview of the company.

Fig. 1
A framework represents the S R B's overall value chain. The steps in the process include merchandise design and purchase, as well as purchasing, production, and packaging, followed by finished product storage and sales.

Overall value chain of the SRB “Culinary Coffee eG” (source: own illustration)

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Compared to a typical coffee roasting company, this SRB covers most primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (infrastructure, technological development, human resource management, procurement) (see above in Sect. 2.3). However, the following aspects are notably different:

  • Human resource management: all members working for the SRB are volunteering and receive no payments. This means aspects of work contracts, salary, social security, etc. are not directly addressed in the SRB.

  • Infrastructure: due to its affiliation to the university, the SRB is allowed to use space on the university’s grounds for its operation. This means aspects of corporate real estate management are not addressed in the SRB.

The third fundamental decision was to make the SRB permanently available as a construct for entrepreneurship education, but not to grow the business beyond the minimum necessary. Therefore, the SRB does not have the typical business objective to increase profit over time but to provide just enough profit to compensate any unavoidable expenses like, for example, costs for registering trademarks, maintaining an online store, and paying tax consultants and lawyers. Also, there are other coffee roasting companies in the immediate vicinity of the university and the intention of the SRB is not to take away any noticeable market share from them. After several successful years of operating the SRB, we are now optimistic that the sale of roasted coffee in the university environment will continue to generate the minimum required profit and not affect the local coffee roasters’ market in a problematic way.

4.2 Curricular Integration of the SRB

Today, the SRB is available to the students on three levels:

  1. 1.

    Case studies based on real-world problems of the SRB.

  2. 2.

    Elective modules for “entrepreneurship”.

  3. 3.

    Active participation in the cooperative.

These three levels, explained in the following, differ in the number of students reached at the university and the extent to which students can train their entrepreneurial skills.

4.2.1 Level 1: Real-World Case Studies

Having all the data available from an actual company, the SRB, simplifies creating case studies close to reality. Because the SRB is a firm with most business functions, case studies can be created for a wide range of modules in the curriculum. These case studies also do not require much introduction, as the SRB value chain and products are deliberately kept simple. Two examples should illustrate this:

  • Calculating the net present value of an investment project is a basic skill for all business students covered in courses like “Investment and Financing.” The SRB has investment opportunities all the time, e.g., deciding which roasting machine to buy next. For these machines there are actual quotes from vendors available. After these quotes have been anonymized to some degree to avoid disclosure of sensitive, proprietary personal information, these quotes can be shared essentially unchanged with the students tasked with identifying the best investment alternative.

  • The SRB uses Instagram as a marketing channel. In a lecture about “Social Media Marketing,” the assignment is to create Instagram posts with photos, videos, hashtags, etc. matching the business communication and corporate image of the SRB.

Considering the same legal entity, the SRB, from different business perspectives in different modules of the study program, should help students gain a more comprehensive understanding of how a business functions as a whole. These SRB-related assignments reach a high percentage of business students at the university, but entrepreneurial skills training in these standard curriculum modules is limited at this first level.

4.2.2 Level 2: Electives in the Third Study Year

In the third year of their studies, students can choose the elective “Business Foundation and Development” which was introduced in the study program in the accreditation in 2018. Since this elective consists of 100 contact hours and 10 ECTS credits, the content offered is broad and includes, among other topics, the following:

  • Students develop a business idea and create a business plan for a subsidiary of the SRB which would be conceivable. This forces students to inform themselves about the specifics of that industry and to submit a realistic business proposal for that market.

  • The student can choose to introduce a new product for the SRB. Such an innovation project includes a market analysis, designing the product, determining a product price that is acceptable to customers, manufacturing the product, and marketing the new product. Like in real life, sometimes these innovation projects fail, i.e., those groups have to deal with the experience of a “failure.” However, the grade is not directly related to the end result, i.e., whether the project is a financial success or a failure, but to the thoroughness with which the innovation process was carried out.

  • During the elective, there is a workshop with alumni who founded a company after graduation. This workshop is always very well received by the students, probably because the students can easily identify with those graduates who have had a similar education at the university and are often not much older than they are.

In comparison to the case studies on the first level discussed above, only those students choosing this elective are reached. However, these are typically students who are self-motivated to train their entrepreneurial skills.

4.2.3 Level 3: Member of the Cooperative

Becoming a member and working in the cooperative while studying is an option only chosen by highly motivated students. However, these students can gather a lot of experience until they graduate after 3 years. To structure this experience, in the cooperative, “career paths” were defined leading to higher positions with higher responsibilities within the cooperative. Such a “career” might, for example, include the following positions:

  • Freshman in the first year: coffee roasting, shipping.

  • Junior in the second year: quality management, purchasing, accounting.

  • Senior in the third year: supplier management, production management, human resources management, general management.

However, such a career is not automatic: the positions are publicly advertised and the students have to apply for them. Again, the number of students involved is smaller than on the previous level, but the opportunities for these students to gain entrepreneurial skills are comparable to working in a real business and having a steep career in 3 years.

5 Conclusion and Outlook

Using an SRB to teach entrepreneurial skills provides unique features other methods of instruction cannot offer. This chapter presents aspects of designing such a business to supplement entrepreneurship education and integrating it into the curriculum.

The experience of the authors, who have set up and managed a student-run business over the past 6 years, suggests that long-term funding and a product portfolio linked to the university’s curriculum are critical for an SRB itself. Considering the students and their participation, the legal form of a cooperative with the possibility of becoming co-owners without major obstacles is extremely valuable for the motivation.

Future research can build on our exploratory case study in the yet underresearched area of student-led enterprises in Europe, in particular considering the features of a cooperative. From an educational perspective, the general question is the extent to which the experience a student gains working in a student-run business actually impacts his or her business career after graduation.