Business Case Study and Critique

Business Case Study and Critique: Your Choice of Entrepreneur

Table of Contents of Main Written Body

Opening Summary                                                                          p. 1

Opportunities and Threats Encountered                                     p. 4

Type of Business Model Used by Richard Branson                 p. 5

Business History

            Personal Characteristics of Richard Branson                p. 6

            Business Characteristics of Richard Branson               p. 7

Entrepreneurial Character or Approach                                     

            Approach of Richard Branson                                          p. 9

            Effect of Approach to Company                                        p. 12

Understanding Entrepreneurship Theories

            Different Theories in Entrepreneurship                          p. 14

            Justification of Application of Theories                           p. 15

Table of Contents of Paper

Table of Contents of Main Written Body                                                  p. 1

Table of Contents of Paper                                                                                    p. 2

Rationale of the Paper                                                                                p. 2

Opening Summary                                                                                      p. 3

Opportunities and Threats                                                                         p. 4

Business Model Used by the Entrepreneur                                            p. 5

Business History

            Personal Characteristics of Richard Branson                            p. 6

            Business Characteristics of Richard Branson                           p. 7

Entrepreneurial Character or Approach                                                  p. 9

Understanding Entrepreneurship Theories                                            p. 14

References                                                                                                   p. 17

Supporting Material                                                                                                 p. 18

Rationale of the Paper

            The contents of this paper include the business case study of the Virgin Group

of Companies, which are being managed and owned by Richard Branson. Richard

Branson is one of the most famous international entrepreneurs who have established an

effective and prestigious company.

            This paper discusses the opportunities and threats to the Virgin Group of

Companies. Due to the success of the entrepreneurship and skills of Richard Branson,

this paper will assess and evaluate his personal and business characteristics and

approaches that determine the success of his company. These were chosen as the

contents of the paper because it is relevant to assess and learn the techniques of

Richard Branson in relation to business and marketing strategies and employee

management. This information can be applied in future endeavors and business

ventures.

            Moreover, because there is a wide variety of concepts and theories in

entrepreneurship, it is essential to know if these can be applied in real life situations.

Due to this, the strategies of Richard Branson and the Virgin Group of Companies will

be assessed based on the theories of entrepreneurship.

Opening Summary

            Richard Branson is considered one of the most successful entrepreneurs in the

United Kingdom, and one of the most successful businessman around the world.

Because the concepts of entrepreneurship are essential in starting a business, it would

be best if we will be able to assess the skills and the strategies being used by Richard

Branson in his popular and prestigious company, the Virgin Group of Companies.

Richard Branson made a difference in the entrepreneurial industry for he was able to

establish and was successful in establishing the brand image and identity of Virgin

Company to the various segments in the market. He was successful in making his

consumers and target market realize that a variety of products and services are

associated with the brand “Virgin”, which makes the company triumphant in building its

brand loyalty among its consumers. Moreover, he was able to manage the whole

company, including international offices and a wide variety of products and services,

with the dedication and alongside his successful and dedicated employees and

partners. Several opportunities can be recognized, for the company was able to

effectively and efficiently recognize the need of consumers, were able to fill this gap,

and was amazingly victorious over it. Branson and his employees took advantage of

their business strategies and skills, and were able to provide innovative services and

products to the different market segments in the industry.

Opportunities and Threats

Opportunities

The utilization and maximization of the Internet

Mergers, strategic alliances and joint ventures with other companies

New international markets

Implementation of new information systems

New market segments, which offers better profits

Establishment of brand image and identity

Brand loyalty of consumers

Success in use of advertisements and other forms of media

Threats

Changing tastes and preferences of customers

Competitors have new, innovative product or service

Increase in taxation

Access of competitors to channels of distribution

Terrorism, outbreaks, biological warfare, and hijacks (airline threats)

Failure of one group due to inadequacy of quality materials in construction (Virgin

Trains)

Business Model

            The business model used by Richard Branson is the Focus Strategy or Model,

which is designed to address a “focused” segment of the marketplace, product form or

cost management process and is usually employed when it is not appropriate to attempt

an ‘across the board’ application of cost leadership or differentiation (2006). Moreover,

this model or strategy is based on the concept of serving a particular target in such an

exceptional manner, that others cannot compete, and this usually means addressing a

substantially smaller market segment than others in the industry, but because of

minimal competition, profit margins can be very high (2006).

            The success of the Virgin Group Company involves the application of this model

or strategy because the company was able to establish a variety of subgroups that cater

to a variety of needs of every consumer. The Virgin Group was able to establish Virgin

Atlantic Airways, Virgin Records, Virgin Express, Virgin Cola, Virgin Vodka, and many

others, and all of these subgroups are in response to the aim of the company for

addressing and targeting specific groups in the market. Branson was just clever,

responsible, brave enough to risk, and venture into these different kinds of businesses,

which were accompanied by the excellent service and brand quality being offered by the

Virgin Group. The application of this model is part of the company’s success, wherein

the company was able to target specific subgroups in the market.

Business History

Personal and Business Characteristics

            Richard Branson was never interested in becoming a businessman or an

entrepreneur, but despite his intentions, at 56, he has become one of the most

successful and eccentric billionaires of the 20th century, being behind one of the most

recognizable brands in history and sitting on an estimated fortune of $3.2 billion (2006).

Sir Richard Branson was born in July 18, 1950 in Shamley Green, Surrey, an English

entrepreneur, best known for his Virgin brand, which encompasses a variety of business

organizations (2006). He was educated at Stowe School, he went to business at 16,

published ‘Student’ magazine, and at the age of 20, he was the subject of a television

documentary. Having founded Virgin as a mail order record company, he later opened

his first store in London’s Oxford Street, and in 1972, the Virgin Records music label

was formed (2004).

            The parents of Richard were and  who showered his childhood with love and

encouragement. His father was a lawyer who had to set aside his passion for

archeology at the request of Richard’s grandfather to follow in the family footsteps, while

his mother was an stewardess who originally pretended to be a man in order to become

a pilot instructor, and together, his parents were able to impart in him a sense of hard

work and the need to be financially successful (2006). At the age of 15, he was sent to a

boarding school and found success on the field rather than in the classroom, as he did

extremely well in a wide range of athletics, which made him famous in school. However,

he had a hard time struggling with his academics because he suffered from dyslexia,

which was considered a relatively undiagnosed problem during his time. Because of

this, he was unable to read, write or spell, and be beaten for it. Moreover, Richard was

sent to a different school, but was initially expelled for his nocturnal visits with the

daughter of the headmaster. Nevertheless, because of the fake suicide note of the

headmaster’s daughter, Richard got the expulsion overturned, and from this, he was

able to set up Student Magazine at the age of 16. He opened the Student Advisory

Center a year later, a charity to help young people, and at the first issue of his

magazine, the headmaster of his school wrote to him saying, “Congratulations,

Branson. I predict you will either go to prison or become a millionaire” (2006).

            After his successful launch of his Student Magazine, he turned his attention to

music, and the name “Virginwas chosen because a female friend involved in setting

down the initial record shop commented that there were no virgins left amongst them,

and so the Virgin Airlines was born. Virgin Airlines was very much a Richard Branson

style company offering reasonable prices on transatlantic flights, and once again, he

spotted a gap in the market and filled it impressively. Sir Richard Branson was the

reserve pilot for the Virgin Atlantic Global Flyer, and is considered to be one of Britain’s

best know entrepreneurs who combines his enthusiasm for running the Virgin group of

companies with his love for high-risk, high-adventure world record-breaking attempts

(2006). In the year 1972, Virgin had signed Mike Oldfield as their first artist, who sold 5

million copies, and because of this, Virgin Music had made a name for itself, later

signing household names such as the Sex Pistols, Culture Club, The Rolling Stones,

Phil Collins, Genesis, and Janet Jackson (2006).

            Aside from the success of Virgin Music, in 1984, Richard Branson formed Virgin

Atlantic Airways, and in the last two decades has grown into Britain’s second largest

carrier. In his aim to promote the Virgin Atlantic, Richard Branson became involved in a

number of high-publicity record-breaking attempts throughout the 1980s and 1990s,

such as crossing the Atlantic Ocean on a boat - Virgin Atlantic Challenger II, and

crossing the Pacific from Japan to Canada on a balloon, breaking all existing records,

as he was able to circumnavigate the entire world. The Virgin Atlantic was said to be

profitable even in its first year, as it has featured its three classes of service, namely,

Economy, Premium Economy, and Upper Class, which include free in-flight drinks and

meals, often including ice cream, and seat back personal TVs, which was pioneered by

Virgin (2006). Passengers of the Upper Class can request complimentary limousine

service to and from the airport and have access to the airline’s Clubhouse Lounge at

London’s Heathrow Airport, where massage and grooming services can be availed

(2006). However, to keep his airline company running, Branson sold the Virgin Music

label to EMI in 1992, which is a more conservatively minded company, and previously

cancelled the contract of the Pistols ( 2006).

            Moreover, Richard Branson has successfully launched more businesses,

including the launch of Virgin Mobile in 1999, the Virgin Blue in Australia in 2000, and

later failed in a 2000 bid to handle the National Lottery. In 1997, he took risks in entering

a railway business, with promises of new high-tech tilting trains and enhanced levels of

services. However, Virgin Trains soon ran into problems with the aging rolling stock and

crumbling infrastructure it had inherited. In addition, Branson has also developed a

Virgin Cola brand and a Virgin Vodka brand. Recently, on September 25, 2004, he

announced the signing of a deal under which a new space tourism company, the Virgin

Galactic, will license the technology behind SpaceShipOne to take paying passengers

into suborbital space, and this will be made available to public by late 2007 with tickets

priced at $200,000 (2006).

Entrepreneurial Characteristics and Approach

            It has been reported that Richard Branson has been tagged as a

‘transformational leader’ by management lexicon, with his maverick strategies and his

stress on the Virgin Group as an organization driven on informality and information, one

that is bottom heavy rather than strangled by top-level management (2006).

            According to Richard Branson, his success was not planned, for it just

happened, though he has his ten secrets to his success:

You have to challenge the big ones.

Keep it casual.

Haggle: everything is negotiable.

Have fun working.

Do the right things for the brand.

Smile for the cameras!

Do not lead “sheep”, herd “cats”.

Move like a bullet.

Size does matter.

Be a common, regular person

(2006)

            Moreover, his entrepreneurial success and approach is related to his style of

leadership. Branson believes that his leadership style has its origins in his upbringing,

where his parents taught him to stand on his own two feet, including learning valuable

lessons, which helped built his character, endurance and leadership qualities. He also

believes that he learned his leadership style through trial and error, since founding his

first company when he was still 16 years old. His leadership approach includes skills

and personality of caring about people, liking people, and bringing about the best in

them, which he reinforces with all his CEOs and top managers. Moreover, he places

particular attention on time management skills, and making quality time with his family

and vacation. He also influences this philosophy even further by using his business

skills and those of his employees and managers to discuss social issues around the

world. He also emphasized the development of delegation skills, where strong

personality is needed to build a business from scratch. Skills in delegation means that

being a leader, one has to be good at helping people run individual businesses, and

willing to step back (2005).

            Furthermore, Branson believes that employee motivation and recognition is also

important, and this was explained by stating that, “If a flower is watered, it flourishes. If

not, it shrivels up and dies” (2005). From this, it can be seen that Branson gives due

importance to his employees and treats them fairly. He even strongly believes that if an

employee is not excelling in one area of the company, he or she should be given the

opportunity to do well in a different Virgin Group job, and firing them is seldom an option

(2005). In addition, he also emphasized that interaction between employees and

managers is fundamental, and that motivational strategies extend to innovative ideas,

for the key to encouraging innovation within the Virgin ranks is to listen to any ideas and

to offer feedback (2005). This also involves the rendering respect and building trust with

one another, which will be helpful in maintaining effective and efficient communication

and interaction among the employees of the Virgin Company. Branson believes that to

develop a level of trust with his top managers, he must set the direction and then step

back to let them navigate (2005). This shows that Branson is giving his employees the

freedom to do what they want, but under his supervision and guidance. This freedom

builds trust among his top managers and employees, and motivates them to perform

better in terms of their work performance.

            With the success of Richard Branson’s philosophy and approach in his

company, using effective leadership, giving motivation, employing effective

communication, interaction, job redesign, building trust and respect, it is very evident

that the company has been performing well in the various industries that it manages.

Based on the performance of Branson’s Virgin Atlantic Airways, it has added new

destinations on its flights, having original flights from London Heathrow and London

Gatwick, to the United States, the Caribbean, Africa, the Middle East, Asia and

Australia. This year Virgin Atlantic Airways added new destinations and services, which

includes:

London Heathrow to Dubai

London Gatwick to Montego Bay

Manchester to St. Lucia

By 2007, Virgin Atlantic Airways will be adding new destinations and services to

the following areas:

London Heathrow to Chicago (Beginning April 23, 2007)

London Heathrow to Nairobi (Beginning June 1, 2007)

Glasgow to Orlando (Beginning June 23, 2007/Seasonal)

London Gatwick to Mauritius (Beginning November 2007)

( 2006)    

In relation to the values and philosophy of Richard Branson, such as his desire for

innovation and motivation of his employees, he was able to conceptualize and introduce

a new product, which is the Virgin Mobile. Virgin Mobile Ltd is a mobile phone service

provider operating in the United Kingdom, Australia, Canada, South Africa, the United

States, and France, which offers prepaid pay as you go service ( 2006). The

introduction of this new product and service just goes to show that the leadership,

motivation, and ideas of Richard Branson are essential in his management of the Virgin

Group of Companies.

            It can be seen that with the leadership style and approach of Richard Branson

that he employs the combination of a variety of leadership styles. Some of the styles he

may apply are the Authoritative or Charismatic Leadership Style, the Affiliative

Leadership Style, and the Democratic Leadership Style. The Authoritative style is the

most effective in driving up every aspect of climate; for the leader is a visionary that

motivates people by making clear to them how their work fits into a larger vision; the

Affiliative style involves building team harmony, increasing morale, improving

communication, or repairing broken trust, where praise is used freely; and the

Democratic style is the ideal leadership style, where the leader spends time getting his

employees ideas and builds trust, respect and commitment (2000). The combination of

these leadership styles is important for these styles enable Richard Branson to motivate

his employees and provide them the driving force in working in his company. Moreover,

his leadership style influences his decisions in building trust and respect within the

company, and facilitates effective and efficient communication and interaction with one

another.

Justification of the Entrepreneurship Theories

            Theories of entrepreneurship includes the theories of , and these theories

become the basis for the justification of the actions and strategies of Richard Branson

and his Virgin Company. The Knightian entrepreneurship involves the rash of self-

confidence in one’s abilities to forecast the future. The Hayekian entrepreneurship

involves the coordination and dissemination by entrepreneurs of the knowledge held by

different market participants of new factual events, which have occurred and which are

not yet fully appreciated by all market participants in the flow market for goods. The

Schumpeterian entrepreneurship suggests the innovation of new products, new

techniques of production, opening of new markets, opening of new sources of supply,

improvement of management techniques, and the improvement of distribution methods.

The Misesian entrepreneurship states that since all market participants face uncertainty,

all action involves entrepreneurship, and all market participants are to some extent

entrepreneurs. The Kirznerian entrepreneurship is the theory wherein the entrepreneur

buys factors in the present at a relatively low price, and turns them into finished goods,

which he sells later at a relatively high price, thereby creating entrepreneurial profits.

The Shacklian entrepreneurship is the theory wherein the entrepreneur creates in his

mind inspired multiple visions of alternative futures, from which he chooses the best and

most likely to be achieved, and then acts to implement that chosen direction, and the

Lachmannian entrepreneurship, brings the capital markets closer toward equilibrium,

and this assists the general economy including the flow market for goods to move

toward equilibrium (2005).

            I believe that Richard Branson was able to apply the different theories of

entrepreneurship, for it is evident from his personal and business characteristics that he

is able to apply and implement an effective leadership style, to organize his company,

and to perceive risks as an opportunity for him and for his company to continually grow

and profit. In accordance to the different theories of entrepreneurship, Richard Branson

was able to adapt everything, and used them in his advantage in addressing his target

market. Most importantly, he used the theories as a guide in his decision-making and in

conceptualizing, producing, innovating, and introducing new products and services to

his target market. However, problems can also be encountered due to the size and the

variety of cultures, and corporate diversification present in the company. With this,

Richard Branson is considered to be a ‘habitual entrepreneur’ for the Virgin Company is

a single company with subsidiaries as divisions, which are controlled by the center or

the holding company, and each subsidiary is often a venture created or acquired by an

entrepreneur or entrepreneurial team (1998). In addition, each subsidiary or subgroup

may have been created for different motives, and have no pre-planned connection with

other companies or venture within the larger group, and this is being exhibited by the

Virgin Group of Companies, for the common factor of the whole company is Richard

Branson himself, the driving entrepreneur (1998). From this, it can be deduced that the

theory being employed and applied by Richard Branson in the Virgin Group of

Companies is the Schumpeterian theory of entrepreneurship, which suggests the

innovation of new products, new techniques of production, opening of new markets,

opening of new sources of supply, improvement of management techniques, and the

improvement of distribution methods (2005). This can be seen in the approach of

Richard Branson of venturing into a variety of businesses, including music, airlines,

trains, beverages, and cellular phones. This shows that Richard Branson aims at

targeting different market segments and consumers, and with this, profit will surely be

gained. From the previous discussion, it has been mentioned that Richard Branson

exhibits good leadership skills and employee management in his company, as he is

able to provide and implement freedom and efficiency of his employees at the same

time. With this, it can be deduced that Richard Branson is able to incorporate the

theories of entrepreneurship and combine it with effective and efficient leadership

strategies. In line with this, the effectiveness of his approach motivates his employees

and allows them to foster a pleasant working atmosphere through effective and efficient

communication and interaction with one another.

Supporting Material

1998, ‘Entrepreneurial Processes of Business Cluster Formation and Growth by ‘Habitual’ Entrepreneurs’,

Entrepreneurship:

Entrepreneurial Processes of Business Cluster Formation and Growth by 'Habitual' Entrepreneurs.

 in 1986 set us a challenge. "To really learn about entrepreneurship, let's study habitual entrepreneurs",

which he defined as "someone who has had experience in multiple business startups, and simultaneously

is involved in at least two businesses" (1986,)(1) In taking up this challenge, most research on habitual

entrepreneurs has been exploratory, in which the construction of "groups" and "typologies" has played a

central role. Earlier studies concentrated particularly on genetic comparisons between novice and habitual

entrepreneurs (1993;  1991;  1993). These have been supplemented by refining definitions of sub-types

of habitual entrepreneurs, such as portfolio and serial entrepreneurs,(2) and by comparing characteristics

these sub-types (1998a, b). These have included rural/urban dimensions, and sources of finance ( 1995,

1997). In these studies there has been a focus on group differences, group characteristics, qualities and

predictors. Statistical differences between groups or types have provided the primary empirical evidence

for debate within the broader context of entrepreneurship theory and practice.(3)

A weakness of these approaches, however, is an absence of research on entrepreneurial processes on

the creation or establishment(4) of multiple ventures by habitual entrepreneurs. Habitual entrepreneurs

may be a "type," characterized by the fact that they found more than one business, but the creation of

multiple businesses by an entrepreneur is also a process. The implication of the term "habitual

entrepreneur" is that this is a continuing entrepreneurial process in which the entrepreneur is constantly

identifying and evaluating new opportunities and creatively accessing resources to put ideas into practice

and make them succeed. Over time a significant 'portfolio' of surviving ventures (acquired or founded) can

be built up.

This, however, is not necessarily the only possible strategy or process to explain the creation of multiple

ventures. There is a parallel management literature that examines multiple ventures and their

management in terms of routine corporate managerial strategies. In this focus, 'routine' processes of

diversification lead to the acquisition or creation of new subsidiaries. As the number of subsidiaries grows,

corporate groups of companies are formed under the control of a holding company. The processes in

which subsidiaries are formed, added to the group, and managed are not viewed as entrepreneurial, but

as ways of maximizing managerial efficiency.  (1993), for example, presents a textbook account of how

diversification can be managed and structured by setting up subsidiaries and boards of directors, and why

such structures can be more efficient in addressing cost factors, taxation, and personnel issues, and can

offer clearer control of diverging businesses. He states "separating two ventures clearly makes each exist

on its own merits. This helps solve one of the main problems of multiple venture organisations, the

unwarranted mixing of assets, personnel, expenses and attention between one or more businesses"

(1998,). How far is it possible to reconcile these contrasting views of multiple venturing, one that explains

multiple venture creation in terms of the entrepreneurial creativity of habitual entrepreneurs and the other

that sees most new multiple ventures as routine corporate management practice?

In resolving this issue, there is a fundamental unit of analysis problem (1990;  1993, , 1996a, , 1998;

1999). The problem arises from focusing on the venture or firm rather than the entrepreneur as the

primary unit of analysis when discussing entrepreneurial processes and performance. This is betrayed in

previous studies of habitual entrepreneurs discussed earlier. For example, when  (1993,) state that a

question arises "whether experienced entrepreneurs create businesses which have a better performance

than ventures created by novice entrepreneurs," it is the individual businesses that are the focus of

performance, not the entrepreneur. Similarly, in  (1993), it is not the performance of novice and habitual

entrepreneurs that is really being compared. It is the latest new venture of the habitual entrepreneur that

is being compared to the only venture of the novice. In effect, the latest new venture of the habitual is

compared without reference to the overall performance of the habitual entrepreneur's total cluster of

businesses owned, or to how the motivations and start-up processes of the surveyed venture fit in with his

or her wider entrepreneurial strategies. The "snap shot" approach of just comparing the latest (habitual)

and the new venture (the novice) is thus incomplete, and can lead to premature evaluation of the relative

contribution of these types of entrepreneur to economic development

The unit of analysis problem is also important when looking at the managerial explanations of corporate

diversification just discussed. In this body of literature, the "group" is treated as a de facto single

company, with its subsidiaries as divisions controlled by the center (usually a holding company). Each

subsidiary, however, is often a venture created or acquired by an entrepreneur or entrepreneurial team -

the product of a habitual entrepreneur at work. Each 'subsidiary' may have been created for different

motives, and have had no pre-planned connection with other companies or ventures within the "group." In

essence, the group is often not really a de facto single company at all, but a historic outcome of messy

and complex entrepreneurial processes. Richard Branson, for example, controls and partially owns over

200 subsidiaries in the Virgin "group," but the Virgin group is in reality highly fragmented. The only thing

all the companies appear to have in common is Richard Branson himself, the driving entrepreneur

( 1997).

Starting and managing multiple ventures can thus be perceived as an indicator, though a difficult and

complex one, of "entrepreneurial performance," which is conceptually quite different from the performance

of "the firm" (1996). Entrepreneurial performance is not concerned with competitive management

practices designed to achieve high growth for a firm. It is rather a process of extracting value from a

diversity of business opportunities, some of which can be small as well as large. Such entrepreneurial

diversification is an ideal mechanism for exploiting complex specialized market niches and regionally

segmented markets so typical of the small firm's sector ( 1989). Within this concept of "entrepreneurial

performance," the unit of analysis can be switched from the growth of the firm, to the growth of clusters or

groups of firms all centered around the entrepreneurial initiative of a single entrepreneur or

entrepreneurial team (1999).

The process of multiple founding thus outlined is a much more positive process than that implied by other

researchers, who have speculated that the processes of additional business formation may be linked to

survivalist motives and routine diversification rather than innovative entrepreneurship ( 1987;  1993;

1993). Faced with adversity, an owner manager can either "pull in the horns" and concentrate on

preserving the core, or he/she can try and diversify out of trouble. It is empirically open which route is

more likely to be chosen. It is also an empirical issue how far entrepreneurs who have a history of

success are more likely to grow positively through diversification. There is some evidence that

entrepreneurs of high-growth firms are often linked to a high rate of multiple ownership ( 1987; 1999).(5)

AIMS AND OBJECTIVES

This study aims to shed light on the nature of portfolio entrepreneurship and the entrepreneurial

processes of multiple venture creation. Four research questions are addressed:

1) Is the creation and acquisition of multiple ventures predominantly an entrepreneurial process (arising

from the creative identification and exploitation of new market opportunities), or is it rather chiefly a

management process enhancing efficiencies through adopting established procedures to manage routine

diversification?

2) If it is mainly driven by entrepreneurial processes, what are these processes?

3) If it is mainly driven by entrepreneurial processes, how are they driven by habitual entrepreneurs?

4) Is there any evidence that previous entrepreneurial experience or a preference for multiple venturing

enhances the business success or performance of the controlling entrepreneurs?

METHODOLOGY

Two approaches could have been used to explore the stated research questions. The first would have

been a longitudinal study of habitual entrepreneurs, involving close monitoring over a period of several

years. This may well prove to be the most effective long-term approach to explore the nature of

entrepreneurial processes involved in multiple venture creation, but could not be adopted with the

available resources. Instead, a cross-sectional qualitative approach was employed, centered around case

studies of Scottish Enterprise's 1995 national sample of successful entrepreneurs, known as Scottish

Local Heroes (1997;  1999). Scottish Enterprise's sample was selected as the focus for the following

reasons:

* It contains many (if not most) of Scotland's new high-growth small businesses, which are of special

policy interest.

* The Local Hero companies in the 1995 database were associated with a high rate of multiple

directorships (50% of named local heroes held more than one directorship, and 71% of all the companies

had at least one director who was a multiple director).

* The database was also well developed, with many core details of the companies and their directors

already known.

* With full contact details available from Scottish Enterprise, the Scottish Local Heroes were easily

accessible.

There were, however, several potential limitations and disadvantages associated with using the Local

Heroes database as a sample to form generalizations on wider processes of portfolio formation in the

general business population. The leading limitations are as follows:

* The local heroes were selected for policy, not research purposes, and were compiled by referrals from a

wide number of sources in the enterprise and business networks. They are essentially a "biased" sample,

which needs careful interpretation when generalizing findings to the wider population of entrepreneurs.(6)

* One area needing special attention in interpreting findings is the fact that Scottish Enterprise and other

branches of the support network in Scotland have sometimes been heavily involved in facilitating the

start-up and growth of businesses. In a few cases, Scottish Enterprise nominated its own directors and

helped to engineer management buyouts.

Data Gathering

The selection of the case studies involved some pre-analysis of the Local Heroes database. First, it was

important to know how many businesses each director had either founded or been associated with. There

are no national UK databases to easily link directors or owners to sole trading businesses or partnerships,

but this is not the case for limited companies. All company directors in the UK have to formally register

their new company by law and provide full details of other directorships held. These data are publicly

available for Scotland through Companies House in Edinburgh and Glasgow. Our first step was to

procure a definitive list of all directorships held by each director associated with each Local Heroes

company. The list was then sent to Dun and Bradstreet, which provided us with a listing of the actual

company names associated with the additional directorships.

After this updating process, 91 local heroes listed in the 1995 database had two or more directorships, an

increase of 15 from the 76 reported in the 1996 study ( 1996a; 1999). This is about 60% of the stock of

active companies. For the purposes of choosing a sample with a clear incidence of multiple directorships,

companies where the local hero had three or more directorships were selected. Forty-five local heroes

met this selection criterion. These entrepreneurs were engaged in a variety of regions and industries

within Scotland. A random sample of 23 local heroes was taken from this list.

The interviews were carried out during the spring and summer of 1997. Before each interview a

preliminary business genealogy was chartered for each entrepreneur, using data obtained from the

national data sets (Companies House and Dun and Bradstreet). At the beginning of each interview, these

data from official sources were hidden from the respondents, who were asked to provide a history of their

business activities. The identity was noted of businesses not covered by the official records (i.e., non-

incorporated sole traders and partnerships, businesses registered abroad). Establishing a business

history proved, in some cases, to be a difficult process; some entrepreneurs found it very difficult to

provide a logical chronological account of their business history, particularly those from non-corporate

backgrounds. Having established a self-reported genealogy, the official data were then revealed to the

respondent, who was then confronted with the identity of any additional businesses that they owned and

had unwittingly or deliberately omitted. The interviews then moved on to probe core issues of how and

why each business was started, resourced, and managed.

Interviews were taped, transcribed, and analysed with the aid of QSR NUD.IST(7) Business genealogies

were also constructed to facilitate analysis.

Problems of Analysing Business Life Histories

The interviews were a form of 'life history', in which the entrepreneurs were asked to recall motives and

circumstances surrounding their creation and development of previous businesses. The problems

associated with this kind of qualitative technique have been long debated in the social sciences,

particularly in social anthropology ( 1991;  1997). There is some agreement that it is virtually impossible to

develop an 'uncontaminated' interview technique that will produce a "true" objective account of an

interviewee's life history, and that this is a false goal. First, history, is often socially constructed (1962)

and often tells us more about the present than the past. Though written with wider historical analysis in

mind, this principle also applies to the life history of interviewees ( 1997). The goals of the entrepreneur,

his or her life experiences, and the context in which the interview is given and conducted can have a

significant effect on what and how things are reported. Thus an entrepreneur can have many different

motives for how the business history is reported in his or her life history narrative (1988). The interview

may provide opportunities for the entrepreneur to rationalize success or failure (a charter of existing

activities); to provide a forum to reinforce self-esteem; and as an indirect means to access further support.

The entrepreneur can try to deliberately deceive or, more usually and just as distorting, can self deceive.

His or her willingness to divulge sensitive information may vary greatly according to recent personal

experiences. One surveyed entrepreneur, for example, presented an account of his business activities

that was at some variance with the picture presented by other independent sources of information. I

learned later he was just about to see the receiver.

Second, the interview itself involves social interaction between interviewer and interviewee, and can

never be a truly objective process. The rapport established can make a considerable difference in the

richness and quality of the data collected. The researcher always imposes his or her values to some

extent on the interviewee (by its very nature a focused interview requires selection of questions by the

interviewer to suit the research agenda) ( 1981). There is inevitably some academic as well as cultural

ethnocentrism in the interview process. In our case studies, there was a constant danger of trying to elicit

entrepreneurial explanations to account for the formation of new ventures by the entrepreneur.

Third, life histories can be criticized in that they cannot stand alone as data. External corroborating

evidence must also be used (1997). In this study the interview accounts of the business histories were

cross checked against (a) data from Companies House, as explained earlier; and (b) data already

gathered in the Local Heroes database. These sources, however, could only partially corroborate the data

collected, but were sufficient to at least alert the interviewer to contradictions and omissions.

The usefulness of life history data can be considerable if the properties of the technique are fully

recognized in analysis and interpretation. Analysis should allow for context and subtleties of

interpretation, and not just rely on the arbitrary separation or comparison of factors. For example,

understanding the process of owning multiple ventures by habitual entrepreneurs requires some analysis

of motives. In a non-integrated approach, various motives could be identified, listed, and extracted from

the interview transcripts. These motives can be organized into formal typologies. Further, the relationship

between motives and subsequent individual business performance can be explored. This in itself would

provide some useful insights, but could also give a misleading and over-deterministic picture, as little

would be known of the holistic strategic and managerial contexts in which the motives form a part. Nor

could much confidence be placed on the validity of the identified measures. In the analysis of life histories

it is thus preferable to focus on topics and themes in a broader situational context rather than on specific

properties or variables. To achieve insights into broader situational contexts, analysis needs to be based

on an extended account of the whole case, not just on selected episodes (1967;  1997).

A problem of presentation arises from the need for a more detailed analysis of contextual issues. The

number of extended studies that can be analyzed in depth is limited in a journal article for reasons of

space. By only concentrating on a small number, however, there is a danger of underestimating the

diversity of the wider sample of cases, and of over-weighting factors that emerge from the cases selected

for more detailed analysis. This problem has been addressed by dividing the analysis into two sections.

The first explores a broad range of issues and comparisons that summarize trends found over all 23 case

studies. The second part selects three extended case studies for a more detailed contextual analysis.

RESULTS

Generic Trends

The 23 case studies revealed a rich diversity of founders, ventures created and established, and

entrepreneurial and management strategies. There were many differences between entrepreneurs in the

kinds of ventures started, and in the strategies, motivations, and management practices adopted. Such

differences would lend themselves to clearer typologies were it not for the considerable heterogeneity of

individual entrepreneurs in creating new ventures over time. It was thus only possible to categorize

generically on very broad criteria. Broad typologies are summarised below in terms of three basic cross-

cutting dimensions - contrasting types of entrepreneur, the kinds of venture owned, and the diversity of

strategies adopted.

Dimension 1: The Entrepreneur

(i) Multiple venture founders from corporate backgrounds were encountered in several cases. They

tended to be more deliberate in their formation of business clusters. Moreover, they used more formal

management practices in assimilating and managing their new ventures, for example, in forming a holding

company, in hiring corporate managing directors to manage their subsidiaries, and in having formal share

allocations. Nevertheless, they were not short of entrepreneurial opportunism. Many business

opportunities for related diversifications arose through serendipity rather than formal searches for new

markets. From a methodological perspective, one interesting difference was that they tended to be much

more systematic and precise in their account of their business and life history during the case study

interviews.

(ii) Multiple venture owners from financial and consultancy backgrounds tended to start their careers as

management consultants or financial advisors to new firms being founded by high-technology engineers

with limited managerial experience. In their consultancy role, they would often be part of the team forced

on the inexperienced founders by venture capital financiers as one of the conditions for gaining access to

finance. Once the assisted firm started to grow, the consultants tended to get interested and 'sucked in.'

They would buy out the shares of other directors (often one of the original inexperienced founders) or of

the venture capital company, and eventually take over as the dominant owners and managers. Several of

the habitual entrepreneurs interviewed had built up their portfolios in this way, as "predatory" consultants.

(iii) Multiple venture founders from non-corporate backgrounds (mostly associated with traditional family

businesses,(8) where ownership was exclusively confined to the members of one family) were especially

creative in reacting to new opportunities, but often lacked the resources or capability to take full

advantage. It is typical of this group that they were difficult to interview, drifting off the point easily, and not

being clear in the chronological sequence of their businesses; nor could they clearly attribute specific

outcomes to strategies just discussed. This lack of clear vision is reflected in the apparently disparate way

their cluster of businesses evolved. The most complex business genealogies and life histories belonged

to this group. There was also a tendency to brag about wheeling and dealing, clever manipulations, and

successes. The inability to delegate beyond family members was an important limitation in determining

the number of ventures effectively owned and trading.

The unit of analysis issue is particularly interesting in the case of habitual entrepreneurs who have

established a business cluster of family-owned businesses. At one extreme, there is no doubt where the

unit of analysis lies. It is the habitual entrepreneur whose drive has led to the establishment ownership of

several businesses. The entrepreneur retains total ownership and control, but delegates management to

recruited family members. In one of our cases, a metal manufacturing group of businesses, none of the

sons was given any share of ownership in the firms they managed for their father. At the other extreme is

where the original founder of the "family business" has delegated ownership and control to members of

his/her family, and where each family member has some independent freedom to create or establish new

businesses, either on his/her own, or in collaboration with other family members. In this type of case,

there may be a complex federation of overlapping business clusters, which can be analyzed not just from

the viewpoint of each family entrepreneur, but also from the perspective of the total family as a group.

Where to pitch the unit of analysis can become a problem.

(iv) Non-entrepreneurial habitual founders were co-owners of several businesses, but their success was

because they had attached themselves to a partner who was the true driving entrepreneur. One

respondent owned three businesses. One was very successful, manufacturing equipment for chemical

storage. It had grown to a turnover of over [pounds]2million in less than five years, and his photograph

and history featured prominently as a role model in Scottish Enterprise's published directory of Scottish

Local Heroes. Two other businesses he had founded, however, were struggling for survival, had a low

turnover, and were in quite different sectors (carpet fitting; shoe shop). Further research established that

the successful business was the inspiration of his partner, who was a habitual entrepreneur who

independently owned seven other successful ventures and had a long history of innovative business

dealings. In another similar case, the local hero had bought out from his partner a cluster of three

businesses providing services to monitor and assess environmental pollution in the water industry. The

partner had been the driving entrepreneur, and since he had left, the three businesses had declined

markedly. The three companies were in the process of being merged into one at the time of the interview.

Dimension 2: Ventures Founded

i) Related diversifications: This was by far the most common form of new venture, arising from

opportunities in existing core businesses. Some were enforced when the company internationalized. For

example, a high-technology company set up branches in the USA and New Zealand with local partners,

requiting the creation of separate companies. Most, however, were the results of positive

entrepreneurialism. For example, a pate manufacturer from the Borders Region of Scotland diversified

into a new business based on picnic hampers and delicatessen food, which drew on the products and

distribution networks of the core business.

ii) New types of mainstream venture: A complete change of direction was rare, and more often associated

with the transition from immature to mature businessman. (One respondent having left the Royal Air

Force, started a helicopter charter business, but then after a series of small business investments moved

into high-technology phone manufacture.)

iii) Pilot businesses: "Suck it and see" experimental businesses were regularly encountered, where new

diversifications would be piloted before any serious resources were put into the new business. For

example, one entrepreneur who owned a successful landfill site on his farm, had become bored with its

management, and decided to modestly invest in the founding of high-technology software companies. His

first was a problematic and difficult operation that never took off, but his second is now a thriving

businesses. Some pilot businesses also display long-term strategic planning by the entrepreneur. A family

entrepreneur who owns a chain of beef processing businesses founded a non-trading beef exporting

business, in readiness for a quick expansion if and when the current restrictions on British beef exports

are lifted.

iv) Hobbies: A number of successful business owners owned hobby businesses (that is businesses

acquired for entertainment or interest rather than profit). One person was a director and part owner of a

Flying Club, for example. Another was a founding director of a local football pools firm. Another founded a

local Business Club.

v) Phantom businesses were non-trading ventures that were established by a number of entrepreneurs.

Some were ventures that were intended to trade, were formally registered, yet never got off the ground,

and/or were never formally closed. Most, however, were formed for various tactical purposes. For

example, one entrepreneur founded a non-trading company to prevent the business name being used by

a competitor. Another entrepreneur acquired a non-trading debt-collecting company, which he used to

pressure creditors in his core trading business.

vi) Financial management businesses: Three entrepreneurs reported they owned businesses that had

been set up to creatively manage the funds flowing from other businesses in their groups. In one case,

the entrepreneur was concerned to find out we knew of the existence of his financial management.

Entrepreneurs were, on the whole, reluctant to divulge detailed information surrounding the operations of

their financial management.

vii) Buyouts,mergers,acquisitions: Some of the habitual entrepreneurs started their first firm from an

entrepreneurial management buyout, a process encouraged in the 1980s by Scottish Enterprise when

large firms downsized their operations. Some entrepreneurial buy-outs proved very profitable for their

founding entrepreneurs, particularly when profitable companies were carefully selected from within larger

unprofitable groups. Where the entrepreneur started his entrepreneurial career in this way, additional

businesses tended to be established as related diversifications. The number of acquisitions was

surprisingly low, and no mergers were encountered in the sample.

viii) Holding companies: Only three were encountered. All were set up by entrepreneurs from corporate

backgrounds.

Dimension 3: Strategies

i) Competitive efficiency: Apart from the holding companies, which were deliberately and classically

founded to increase managerial control over the group, there were few examples found where the

entrepreneur started a company by following orthodox management principles. Many new ventures did

appear to some respondents to have resulted in some operational advantage, but where this occurred, it

was usually viewed as a bonus, not as a primary motive for starting the venture. For example, one

entrepreneur had split his company into three autonomous divisions to exploit three markets. The move

was motivated by the realization that physically locating one company in Edinburgh would greatly

increase the market demand for his products. In splitting up the company, efficiencies also occurred,

particularly in downsizing and tax management. These efficiencies, however, were not the reason for the

restructuring.

ii) Serendipity: Entrepreneurial opportunism can appear to be an unplanned and serendipitous process. In

one of the cases, the entrepreneur took advantage of a government scheme in the 1980s that gave

generous tax concessions to high rate taxpayers who invest in small enterprises. He invested in a small

dairy farm for a five-year period. He spotted that the farm was undervalued at the end of the period, and

bought out all the shares. He then put a farm manager in charge while he arranged its sale at the true

market value. The farmer proved incompetent (in his estimation). Further, the owner decided to replace

the manager and personally manage the business. The entrepreneur now owns and manages a thriving

dairy, but never intended to do so. Most researchers can find examples of unintended start-ups. In the

interviews several instances were identified of entrepreneurs coming across new unexpected

opportunities and trying them out.

iii) Strategic accommodation of serendipity: Although small business owners are not normally inclined to

formally plan their future, they can have a high degree of strategic awareness ( 1985). Most of the

surveyed entrepreneurs did not plan the next business to be added to their cluster. They tended to view

themselves as strategically motivated and capable to follow up appealing opportunities if and when they

arise. Entrepreneurs proactively motivated by expansion especially welcomed new opportunities and

were confident that they would naturally occur from the business process without having to artificially go

out and seek them. Some entrepreneurs had even been held back by former strategic preconceptions.

They had always been aware of opportunities, but consciously rejected them in favor of concentrating on

one core business. Furthermore, they had strategically rejected diversification. They later, however,

changed their minds.

iv) Strategic management of adversity: The tendency for most entrepreneurs when faced with recession

or financial difficulties was to 'pull in the horns,' and to reduce or eliminate the formation of new ventures.

One entrepreneur who appeared from the records to own five businesses. Was found, in reality, to own

and manage only one trading business, a plastic foam manufacturing business. Three other directorships

were non-paid positions in local start-up businesses where he provided a mentoring service for the local

business club. The fourth was a phantom transport business that never got going. Further research

established that the core business had over-traded at an early stage, and chronic dept repayments had

prevented him from experimenting in any other diversification. This example, and there were other similar

ones, illustrates that an absence of business cluster formation by an entrepreneur is often a symptom of

underlying financial problems that threaten the survival of the business. Some entrepreneurs, however,

did try to diversify out of trouble or out of "a rut", as predicted by the literature ( 1993; 1993). Where

diversification through new venture creation was a survival strategy, this tended to be much more formally

planned than the serendipitous processes associated with expansion and success. For example, a family

business entrepreneur based on beef companies, had to plan strategically to combat the BSE crisis. This

entrepreneur and his family carefully planned, calculated, and moved into the now profitable beef

incineration business as a measure to reverse decline.

Extended Case Studies

Three dimensions have been distinguished in the analysis so far. These are the types of entrepreneur,

the kinds of ventures owned, and the nature and diversity of strategies adopted to start or acquire each

venture. These are dimensions that cross cut. Different entrepreneurs can start, acquire or establish more

than one kind of venture over time, and establish each venture motivated by different strategies. How

these three dimensions interact in different contexts is illustrated in three extended case studies. The first

focuses on an entrepreneur from a corporate background, and his discovery of the advantages of

entrepreneurial multiple venture creation. The second illustrates the complex entrepreneurial processes

that underpin the evolution of a family-owned and managed group of businesses. The third examines how

the opportunity of taking over ownership of firms he was assisting was too much for a management

consultant.

Extended Case 1: Duir - Related Diversification in Corporate Advertising

Jim Duir is one of the most successful habitual entrepreneurs in the sample. It took him a long time to

discover the advantages of diversifying through creating new ventures. Having left the advertising giants

Saatchi and Saatchi in 1985, he had built up, by 1992, a thriving advertising agency in Edinburgh, with an

annual turnover of [pounds]19 million. He achieved this mainly by concentrating on "blue chip" clients. In

1993 he abandoned growth of the single company, and embarked on a series of related diversifications

under the umbrella of a holding company, Lindsey Ltd. (see Genealogy 1). From the core advertising

business Duir established several businesses: North Ltd. (direct marketing); Blackfoot Ltd. (design);

Caledonian Agency (specialized advertising); and Mag Ltd. (news media). Most of this related

diversification has taken place in the last four years.

Duir grew his core business with classic business orthodoxy "absolutely textbook stuff', by focusing tightly

on being an advertising agency at a time when most competitors were generalists, (for example,

marketing, design, public relations, etc.). Opportunities came his way, but he rejected them for a long

time.

We noticed that clients who appreciated what we did said that there was a growing area in direct

marketing - 'would you like our direct marketing business?' And I said, rather pompously and naively, no

we don't do that, we are focused on advertising. One day I found that a very large contract we were

offered was given to our main rivals who had a direct marketing link and we could have had that business.

So I thought well this business of specializing is all very well but we are losing out on a growth area -

direct marketing - so we could have started that at least two years earlier, and we should have.

Diversifying into new areas and companies has given Duir new freedom from previous restrictions of

client loyalty:

There were a lot of people we would meet who wanted to do business with us but, for instance, we

worked for the Royal Bank so we therefore cannot work for other banks but we know people in other

banks and they think highly of us. So we suddenly can sell them other things now. So, for instance, Duir

Advertising works for the Royal Bank, North Ltd. works for the Bank of Scotland. Another thing is the

banks - and most clients - don't mind giving you business. In those disciplines of direct marketing design,

clients aren't worried about conflicts but with an advertising agency they are worried. So as well as

broadening our income base it broadened our potential client base.

Growth through diversification in the larger company is usually associated with acquisition and merger

strategies rather than entrepreneurial opportunism. Duir rejected this strategy:

"They are all start-ups. We don't believe in buying - I would not buy - I wouldn't say never but we don't

believe in buying, we believe in setting up because in setting up you get the right person and you can

apply our own disciplines easier. If you buy a company you don't actually know what their standards are,

what their values are."

This reinforces Duir's awareness that it is vital in the business he is in to maintain disciplined quality

standards and to pay close attention to customer needs. His diversifications start with a strategic wish to

start operating in a new market area, but the start-up of the new business does not take place until the

right market opportunity and the right managing director is found to delegate to and run it. This can be an

opportunistic process:

The Glasgow Agency was opportunistic - we were looking to get into Glasgow, we were looking for the

right person, and then the right person popped up because he was made redundant, so it all carries back

to people.

Under this model of diversified growth, there is no theoretical limit to expansion, as long as capable

managing directors can be found and motivated to run the new businesses. He relies on opportunity in

both finding the right market and the right person, but he is nevertheless now strategically attuned to

accommodating new ventures whenever the opportunity presents itself. His corporate background has

also given him the experience to efficiently run his portfolio of companies as a group.

Although these diversifications are the core of Duir's cluster of companies, he is also a director and partial

owner (25% of ordinary voting shares) of United FC Pools, a subsidiary of the Glasgow United Football

Club. This, he confessed, was more of a hobby than a business venture, and related to his love of

football.

During the interview, he was articulate and logical, and provided precise details and plausible motives for

each stage of his business life history. As a well-educated person used to talking at a familiar level with

senior corporate clients, he was also used to expressing himself in plausible business English. This may

have made the information divulged appear more accurate and the process of business formation more

logical than it actually was.

Extended Case 2: Ralph Laing and Family

In diversifying into new markets and in growing his cluster, Duir displayed some significant opportunism,

but opportunism that was controlled and underpinned by clear strategic principles on how diversification is

instigated and managed. Similar disciplined approaches were observed in other clusters formed by

owners from corporate backgrounds. In marked contrast, entrepreneurs who owned family business

clusters, exhibited different motives and complex strategies. This case study illustrates the complex

evolution of a family business cluster in which a father and son were both habitual entrepreneurs with

overlapping ownership of businesses.

In the Laing family businesses, active business partners were Jock Laing, his son Ralph, and his

daughter Sarah. Jock Laing's wife Elizabeth played no official part in managing any of the family

businesses. The interview was with Ralph Laing, Jock's 35-year-old son, and co-founder of the family's

largest and most profitable business, Semtech Roofing Ltd. This business was cited in Scottish

Enterprise's database of high growth Scottish businesses (1995, 1997).

The business genealogy of the family businesses reproduced in Genealogy 2 is complex. Ralph's father

originally built up four shops selling electrical goods in the 1950s and 1960s. While running the shops, he

also purchased a farm and moved the family residence there. The farm was first run as a farm, but

became a base for a separate horse import/export business (invisible on the UK company records, being

a partnership). The horse business eventually was given over to the daughter, Sarah, to manage and

develop (though the father and Ralph, her brother, still retained their share of ownership and informal

managerial influence). In the 10 years since running this business, Sarah has made no attempt to

diversify into additional businesses. This is in keeping with evidence that female business owners tend to

be much less likely to start or acquire additional businesses than their male counterparts ( 1994; 1996).

Meanwhile Jock Laing became disillusioned with retailing, "packaging for Sony," with depressingly low

margins. He looked around for a high-margin product, and found one in a roofing system developed by an

innovative firm in England. With his son, Ralph, he set up the Semtech roofing business in Scotland under

license in 1986, and sold the shops. This became the core business, but underwent a change of name in

1993 (there were manipulations here to pre-empt possible claims under guarantees given in the earlier

company). One "phantom" company, Doxyperm Ltd., was registered to legally protect a brand name.

Two other companies, Lowsec Ltd. (home improvements) and Semtech Flooring Ltd. were related

diversifications set up by the son, Ralph. He recently founded a non-related business Heather Valuers

Ltd., a land development company. Ralph had originally set up his own company on leaving the university

with an electronics degree (Laing Electronics Ltd.). That company specialized in fitting electronic timing

systems for show jumping events, but the market for this dried up in the late 1980s, and he closed the

business down (just stopped trading). He helped found the core family business soon afterwards.

This case illustrates that family businesses can be (and often are) "clusters," not single businesses. They

often evolve into quite complex clusters, because opportunism from several family members can

contribute to the cluster formation process. In the Laing case there were two habitual entrepreneurs in the

family. Jock founded four shops, acquired a farm, founded a horse import/export business, and co-

founded the core business, Semtech Roofing. Ralph, the son, founded an electronic timing business, a

property business, and a related diversification from the roofing business. The only trading business that

was co-founded was Semtech roofing, but co-ownership was spread across all family members. The

exact demarcation of ownership and shares was informal and impossible to unravel in one interview, but it

was made clear that all family members had a stake. Management, however, was demarcated on a day-

to-day basis, with all active family business managers having their specialized operations and business

responsibilities. This reinforces the general points made earlier, that the unit of analysis can be difficult to

untangle in a complex family business context. Focus on one habitual entrepreneur alone, out of context,

could be misleading, as the Laing case illustrates.

The reluctance to transfer ownership and control to outsiders, and the limitations of managerial talent

available are common themes in the family business literature ( 1993). This appears to be an especially

important factor for the growth and management of business clusters by a habitual family entrepreneur. In

the Laing case, the son, Ralph, like his father, had tried to diversify into several new businesses, but

unlike his father, had not been too successful. The businesses had got going, but had run out of energy.

While his father had him and his sister to delegate management to, he had no one. The business had

"run out of cousins." The informality of the senior management practices and control within the family, and

the complex way money was managed between the businesses, made it extremely difficult to delegate

any responsibilities to outsiders.

In contrast to Duir, Laing's account was intricate, with frequent deviations from chronology and side

tracking into issues with little connection to previous points. The businesses had appeared to have

evolved with just one long-term strategy, that of providing a long-term good living for each family member.

The core businesses had achieved this, but they had not satisfied the respondent's creative spirit. He had

continued to try new lines as opportunities and whims presented themselves, but he had run out of steam

in developing them. The life history was a kind of family charter rationalizing its success and highlighting

the social relationships between the family members. Considerable pride also emerged in the way

wheeling and dealing had averted risk from clients, competitors, the banks, and the tax man. The

evolutionary and inconsistent way the interviewee narrated the story gave an impression of drifting

motivations in the venture formation process. Closer analysis, however, showed that underpinning all the

ventures was a shrewd calculating entrepreneurialism, mostly driven by the interviewee's father, who had

founded the original business. He had managed to develop the businesses while taking full advantages of

regional grants, tax concessions, and legal loopholes. This case study illustrates that entrepreneurship is

not just a process of starting businesses, but of creatively extracting full advantage from existing

resources.

Extended Case Study 3: - Paul Hedley: From Advisor to Dominant Owner

Paul Hedley joined a management consultancy partnership in the mid 1970s after receiving an

engineering degree at Heriot Watt and a management degree at Glasgow. He quit after one year and

founded Melville Associates, a management consultancy. As a management consultant there was always

a temptation to become involved more deeply in the businesses he helped. This happened in three high-

technology companies he was brought in to advise. In 1986, he was brought in by a venture capital

company to advise the founders of A.L. Applications Ltd. In 1990, moreover, he bought out the shares in

A.L. Applications Ltd. owned by the venture capital company, and now owns 50% of A.L. Applications. He

was commissioned in 1983 to conduct some consultancy for another high-technology company, Central

Glen Ltd., specializing in innovative mapping and surveying software. He became a director soon

afterwards in this company, and in 1991 he acquired 50% of the shares when one partner quit. In 1993,

the founders of another software company, Sonic Systems Ltd., were referred to him by a manager of a

blue chip company for advice. He now is also a full-time director in this company and owns 50% of the

shares. In the meantime, his consultancy business, Melville Associates, though still trading, is mostly a

vehicle for managing income and finance from the other three companies.(10) This case illustrates how

an entrepreneurial non-executive director or adviser can become sucked into business ownership and

cluster development.

SUMMARY AND CONCLUSIONS

Habitual entrepreneurs in earlier studies have been divided into distinct "types," in generic opposition to

"novice" entrepreneurs and further subdivided into "portfolio" and "serial" entrepreneurs. In this study,

further broad categorizations were analyzed across three dimensions: (a) the background and nature of

the 'habitual' entrepreneur, (b) the nature of ventures started, and (c) the strategies used to create and

manage ventures. For each dimension, it was possible to distinguish some characteristic types (that is

various types of background, ventures started, strategies used and so on). It was also possible to

generally distinguish some generic types linking the three dimensions. For example, habitual

entrepreneurs from corporate backgrounds tended to be more methodical and used more orthodox

management techniques in managing new venture creation and managing the assimilation of new

ventures into their clusters than entrepreneurs from non-corporate backgrounds. However, any generic

typology must be treated with caution, as variation between the three dimensions can be discordant. Each

type of entrepreneur is not invariably linked with a distinct type of venture or strategy. For example, a

habitual entrepreneur from a corporate background is not always going to create a holding company, or

pursue systematically a program of diversification.

For a typology to be useful for theory construction or for the formulation of policy, each generic type of

entrepreneur must be clearly associated with a distinctive mode of entrepreneurial behavior that

distinguishes him/her from other types. The results of the case studies do not unambiguously support

such clear links. The observed processes of cluster formation, particularly the diversity often exhibited by

the same entrepreneur over time in the motivations and strategies for starting each different new venture

in his/her cluster, makes it difficult to demonstrate any homogenous association of "type" with

entrepreneurial behavior. The research, therefore, suggests that future approaches based on the

construction or analysis of generic typologies of habitual entrepreneurs need to be carefully interpreted.

A principle aim of the study was to establish whether the process of multiple business ownership is

generally an entrepreneurial one. The evidence strongly supports this view. Apart from three holding

companies, there was no evidence in the case studies of an entrepreneur establishing a new venture

following orthodox strategic management principles. The entrepreneurial advantage usually came first as

the driving motivation and consideration. The consideration of managerial issues followed later. Even

when the new company founded was a tactical "phantom/ghost" non-trading company, entrepreneurial

added value was invariably involved in its creation and implementation. This supports the contention that

in the small/medium firm sector at least, diversification into new ventures usually (though, of course, not

always) is part of a dynamic and fluid entrepreneurial chum (, 1996a), rather than a survivalist or routine

managerial strategy (1993).

Entrepreneurial strategies adopted by habitual entrepreneurs were variable and diverse in building up

business clusters. In the main, though, entrepreneurial diversifications tended to predominate, usually

related or arising from the nature and experience of current businesses. Serendipity played a role in this

process, with few entrepreneurs having predicted far in advance where the next additional business

would come from. Many entrepreneurs were alert for new opportunities, and ready to act when they

came, but nevertheless did not rigidly plan in advance which particular business they wanted to move

into. Only when entrepreneurs were in financial difficulties and wanted to diversify out of trouble did

proactive searching for new businesses start. Habitual entrepreneurs were also adept at trying to extract

value from throughout their operations, and some phantom companies were set up to exploit tactical

advantages (for example, to protect brand names).

The management of an existing cluster and the assimilation of the new venture, however, tended to be

more variable in its management style and practices. Entrepreneurs from corporate backgrounds were

more adept at using corporate management practice to increase efficiency, particularly in the area of

managing delegation. Several entrepreneurs specifically stated that they had drawn heavily from previous

corporate experience in managing their complex cluster of businesses.

The clusters identified in the case studies were complex and often involved partnerships between

different owners (either family members, or with corporate partners). The more successful and richer

clusters were associated with a single entrepreneur whose vision and drive created the cluster. The

partnerships were often necessary to manage each business while the driving entrepreneur turned his or

her mind to a new project. Although some delegated managers tried to create additional businesses

of their own independently, these were invariably small and unsuccessful compared to that of the driving

entrepreneur. This may be related to the fact that if they were successful, they would presumably have

soon developed an independent cluster of their own. A habitual entrepreneur is thus as closely associated

with his or her cluster of businesses as a single firm owner is with his own. Through common ownership

of a cluster of businesses, he or she can operate like a corporate group, yet still retain the advantages

and control of the small-scale owner manager. This makes it possible for some habitual entrepreneurs to

dominate businesses far beyond the size expected in the small business sector (for example, as in the

case of Richard Branson and the Virgin group).

One key finding to emerge from the research has been that there is a great deal of linkage between

habitual entrepreneurs and their social and business networks. Each entrepreneur has his/her cluster of

businesses, but complex overlaps are possible, with some habitual entrepreneurs having minority share

holdings in partnership with other, often quite different partners in different businesses in the cluster. For

example, three of our sample of 23 cases independently were partners in different businesses.

Entrepreneur A was in partnership with B in Phonetec Ltd., B and C were partners in Cairntec Ltd., and A

and C were partners in AI Ltd. All three owned or partially owned other businesses that had no connection

with each other.

The ability of habitual entrepreneurs to operate in both small and large firm sectors means that it is

necessary to re-examine current theories of small firm growth and performance. In particular there should

be a parallel focus on "entrepreneurial" performance, in which aggregate value is assessed over all

businesses started by the entrepreneur, not just of any single existing firm under study. Comparing the

latest firm started by a habitual entrepreneur with that started by a novice entrepreneur, as earlier studies

did ( 1993;  1993) can be potentially misleading without taking a more holistic view of how growth in

capital assets and employment is achieved over all business activities.

It is empirically open and unresolved how far aggregate value (i.e. the sum of all employment, sales

turnover, and capital assets) in the cluster of firms created by habitual entrepreneurs outperforms that of

the single firm entrepreneur. Though some mono-enterprises do grow substantially, this is usually

associated with the entrepreneur(s) discovering substantial new under-exploited demand ( 1989). Such

opportunities, however, are relatively uncommon, and small businesses are faced with a diversity of

smaller scale opportunities as market structures become more segmented and competitive (1989). In this

kind of market environment, is the expansion of business sales and employment by the entrepreneur

more likely to be achieved through establishing several smaller firms or through trying to grow a single

one to a very large size? There is also a question of competence. Is a small business entrepreneur likely

to be more skilled and comfortable managing several small businesses rather than one larger one? If so,

then we need to reassess the importance and role of experience, knowledge, and accumulated financial

and social resources, which appeared in earlier studies to theoretically confer considerable advantages to

the habitual entrepreneur, but in practice delivered less than expected (1993). These issues are

unresolved, and more research is needed to explore these questions. There is a potentially rich and

unexploited research agenda that becomes possible through recognizing the implications of multiple

venturing.

From a methodological point of view this study has vindicated  (1998a, b) when they pointed out the need

for further in-depth qualitative research into entrepreneurial processes. The careful use of life histories

and checking accounts of business formation against official records has proved a useful approach, which

can complement and inform future quantitative studies of habitual entrepreneurs. One area for future

improvement is obtaining reliable performance data across a cluster of companies. It is difficult to obtain

reliable performance data, even when only a single company is involved. It is extremely difficult to obtain

even rudimentary performance figures from a single firm ( 1987). Unless reliable performance data can be

obtained, it will be difficult to compare aggregate growth in employment and sales over a cluster of

businesses generated by habitual entrepreneurs, to those generated by mono-entrepreneurs or

corporately managed company clusters. There is clearly a need for more intensive longitudinal studies

with enough time for researchers to build up confidence and trust with habitual entrepreneurs.

From a practitioner perspective, the results suggest that habitual entrepreneurs create businesses in

different ways and in different circumstances from novice entrepreneurs. There may be a case for

evolving separate support for these two groups ( 1997;  1998a). Habitual entrepreneurs also tend to grow

employment and turnover through several often moderate companies, and their true impact to the local

economy can be easily overlooked. The search for "winners" to target resources (Storey, 1994) could be

broadened to include habitual entrepreneurs as well as more visible creators of high-growth ventures. The

policy implications of research on habitual entrepreneurs are at an early stage of development.

Nevertheless, enough is now known to suggest that  was right in recognizing their importance to the

research and policy field of entrepreneurship.

1. The literature usually distinguishes between two sub-types of habitual entrepreneurs. (1997) define a

"serial entrepreneur" as founders who "have sold/closed their original business but at a later date have

inherited, established and/or purchased another business," while a "portfolio founder" is one who retains

the original business, but at a later date has inherited, established, or purchased another business."

These types of habitual entrepreneurs are contrasted to "novice" entrepreneurs, who have newly

inherited, established or purchased just a single business. The use of the term "entrepreneur," however,

already pre-assumes some entrepreneurial behavior in the establishment of a venture, which can be

methodologically unsatisfactory in some contexts. For this reason the use of the phrase "founder" may be

more neutral.  (1996 a, b; 1998; 1999) have used "multiple business owner" as a neutral alternative. The

definitions also do not cover the long-established owner of a single business.

2. See note 1.

3.  (1997), for example, contains a substantial discussion of the policy implications arising from the

differences between novice and habitual entrepreneurs.

4. The tenn "establishment" includes the inheritance and purchase of a business, or the establishment of

a new business through merging.

5. , (1987) demonstrated that 80% of the directors of fast-growth companies (i.e. those which had more

than 50 employees within five years of incorporation) owned other businesses, compared with a figure of

only 30% of directors of other companies. In quoting these results, Storey was later to conclude that

"portfolio owners are therefore of key importance" (1994, ). Scott and Rosa (1999) similarly observed a

high incidence of multiple business ownership amongst directors of high-growth firms in Scotland, with

nearly three quarters of high-growth companies having at least one multiple director on the board.

6. The Scottish Enterprise Local Heroes database (Scottish Enterprise 1995, 1997) contains information

on entrepreneurs who have founded new companies or firms of high-growth potential. These were

brought to the attention of Scottish Enterprise project co-ordinators "from the bottom up," by referrals from

the local enterprise network and the business community. All are entrepreneurs who have displayed

successful and high-growth business activity through their entrepreneurial talent over the last 10 years.

The precise criteria for inclusion in this specially selected data set were:

I) a green field start-up or 'phoenix' management buy-out

II) between 1 and 10 years old

III) goods or services traded out with the local area

IV) evidence of growth or growth potential

V) particular interest if started by women or young people.

By 1995 there were 209 local heroies in the Scottish Enterprise database. The Local Heroes database is

selected by practitioners for non-academic purposes and does not claim to be a random sample of

businesses in Scotland. However, it does contain a significant proportion of Scotland's recent high-growth

small companies. As such it is of considerable interest.

7. NUD.IST stands for Non-Numerical Unstructured Data, Indexing, Searching and Theorising: QSR:

Melbourne. Australia.

8. The definition of a family business is contentious and complex ( 1998,e). Many of the issues surround

how broad the definition should be in terms of degrees of ownership, mostly measured by percentage of

shares owned. The degree of rigor adopted, however, should reflect the degree of rigor required by the

problem in hand. ln this paper there is no requirement to differentiate rigidly different types of "family

business." A family business for working purposes is this simply one where the ownership of the business

is shared by more than one closely related person and where the respondent identified himself and the

businesses discussed as a "family business." The advantages of adopting a definition based on self-

identity has been discussed in other entrepreneurial contexts (1989), and have been found useful in other

social science contexts ( 1970).

9. In the genealogies a rectangle is a limited company; circle is a sole trader of partnership. The company

appearing in the 1995 "Local Heroes" database is a rectangle of riple lines. "Phantom" or companies that

never traded are represented by dashed lines.

10. As a partnership its accounts are less visible, as there is no legal requirement for partnerships to

present formal publicly available accounts.