Entrepreneurial resources And competitive advantage A summary of Brush, Greene, and Hart, 2001 Brush, C.G., Greene, P.G., Hart, M.M. 2001. From initial.

Entrepreneurial resources

And competitive advantage

A summary of Brush, Greene, and Hart, 2001

Brush, C.G., Greene, P.G., Hart, M.M. 2001. From initial idea to unique advantage: The entrepreneurial challenge of constructing a resource base. Academy of Management Executive, 15(1):64-78.

Introduction: From initial idea to unique advantage• Before there is a company, there is an entrepreneur with an idea – the idea may

meet a perceived market opportunity, solve a social problem, or be just a better way of doing things• One of the first challenges is deciding which resources to focus on when building an

initial resource base• Start-ups lack operating history, have no customer base, no reputation for

performance, and often no shared experience (among founding team members)• Every year a majority of start-ups fail or cease operations because of ineffective

management, lack of capital, human failings, or inability to attract and retain talented people• Start-ups need to focus on creating unique capabilities rooted in innovative

combinations of resources

Entrepreneurial resources

• Entrepreneurship is a process of starting up and growing• These processes emphasize importance of money, people,

information, etc. that must be acquired to launch and grow new venture• The entrepreneur is the primary resource, and his/her expectations

about the future drive decisions about strategic direction (and therefore resource accumulation)• Constructing an initial resource base requires that resources be

identified, assembled, and acquired to meet a perceived opportunity before they can be used to execute the strategy

What resources?

• Human• Social• Physical• Financial• Technological• Organizational

Resource attributes: simple versus complex

Simple• Tangible• Discrete• Property-based• Example: financial resources are

quantifiable and tangible

Complex• Intangible• Systemic• Knowledge-based• Example: human resources are

difficult to identify and measure plus largely intangible

Resource attributes: utilitarian vs instrumental

Utilitarian• Applied directly to the

productive process or combined to develop other resources• Examples: machinery, trucks,

office space

Instrumental• Used specifically to provide

access to other resources• Example: financial resources

Jeff Hawkins and Donna Dubinsky

Jeff Hawkins

1992 – Palm Computing• Excellent reputation and tech

knowledge• Patent for handwriting algorithm• No $, management experience,

business plan, management team, or product• Leveraged his knowledge,

reputation, and relationships to get access to human, physical, and financial resources to build Palm

1998 - Handspring• Tech knowledge, management

experience, management team, personal money, deeper understanding of customer needs and suppliers• No business plan, product, or

patents• Launched Handspring without using

outside investors and leveraged shared team experience

Resource development at Palm Computing

Starting resource base

Starting resource base

Resource development at Handspring

Resource pyramid of value creation

Easy to identify and access, given sufficient capital

Combinations of generic resources that enhance firm’s abilities

Capabilities that are crucial to firm’s mission and executed consistently well

Core competencies that contribute to value-creating aspects of competitive advantage

Strategic assets that are valuable, rare, and costly to imitate

How entrepreneurs identify and develop resources1. Assembling – first resources are entrepreneur’s education, experience,

reputation, network contacts, industry knowledge2. Attracting – start-up’s lack of reputation and track record heightens

perception of risk on the part of potential resources providers – entrepreneurs act as if they were trustworthy through business plans or facilities to create an image of success

3. Combining – decisions about how to combine resources directly affects further development of the resource base – entrepreneurs have different beliefs

4. Transforming personal resources into organizational ones – the entrepreneur institutionalizes his/her knowledge, capabilities, and vision to provide for continued growth and greater complexity and value

The entrepreneurial challenge

• A new idea can become a great success story and result in significant wealth creation if a company’s resource position is strategically developed from the time of its initial launch• Entrepreneurs in start-ups must first construct their resource base and

build a foundation from which capabilities can be developed• The resource development pathway is a tool for analyzing the resource

development trajectory based on resource types, dimensions, and applications• The resource pyramid of value creation can show the level of resource

development and create a strategy for extending personal resources to organizational resources and a unique advantage