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ENTREPRENEURSHIP RESEARCH Literature Review Foundational Works – Pre 2000 Andrew Corbett 1 , Lally School of Management & Technology E*ntrepreneurship Faculty Development Workshop Fischback Room, Folsom Library Rensselaer Polytechnic Institute 1 Obviously this is not a complete review of the entrepreneurship literature. Instead this document represents some of the classic works published previous to 2000, and also comes from my perspective as a strategy scholar who focuses on corporate entrepreneurship and psychological constructs. It should serve as a platform for you to begin to investigate in greater depth concepts important to you. Current conversations in entrepreneurship will be covered elsewhere during this workshop.
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ENTREPRENEURSHIP

RESEARCH

Literature ReviewFoundational Works – Pre 2000

Andrew Corbett1, Lally School of Management & Technology

E*ntrepreneurship Faculty Development Workshop

Fischback Room, Folsom Library Rensselaer Polytechnic Institute

June 2, 2008

1 Obviously this is not a complete review of the entrepreneurship literature. Instead this document represents some of the classic works published previous to 2000, and also comes from my perspective as a strategy scholar who focuses on corporate entrepreneurship and psychological constructs. It should serve as a platform for you to begin to investigate in greater depth concepts important to you. Current conversations in entrepreneurship will be covered elsewhere during this workshop.

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Table of Contents

Significant Events in the Evolution of the Entrepreneurship Field...................................4

Definitions of Entrepreneurship......................................................................................6

Topic Areas in the Field of Entrepreneurship..................................................................8

Annotated Entrepreneurship Bibliography....................................................................10

Classic Books..............................................................................................................54

Useful Theories for Entrepreneurship Research.............................................................56

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SIGNIFICANT EVENTS IN THE EVOLUTION OF THE FIELD

PRECURSORS TO THE FIELD OF ENTREPRENEURSHIP

1700s Richard Cantillion: entrepreneurship as the act of selling products at an unpredictable and uncertain price. (economist)

1800s Jean Baptise Say: entrepreneur is a broker taking risk. (economist) 1920s Frank Knight: skill of entrepreneur is in his ability to handle uncertainty. (economist) 1934 Joseph Schumpeter The Theory of Economic Development: disequilibrium through

creative destruction. (economist) 1947 1st entrepreneurship course offered at Harvard Business School 1956 National Council for Small Business Management started after conference at the

University of Colorado. (Name changed to ICSB in 1977) 1958 3-year SBA Small Business Research Program started (98 studies) 1959 Edith Penrose The Theory of the Growth of the Firm: entrepreneurial services,

exploiting opportunities, interstices (economist) 1968 Babson 1st to offer undergraduate major in entrepreneurship

1970s – ENTREPRENEURSHIP EMERGES AS AN ACADEMIC DISCIPLINE

1970 1st entrepreneurship academic conference at Purdue University 1970 Collin and Moore Organization Makers: A behavioral study of independent

entrepreneurs 1972 USC offers 1st MBA major in entrepreneurship 1973 Israel Kirzner Competition and Entrepreneurship: alertness & ent. discovery

(economist) 1974 Entrepreneurship interest group developed as part of BPS division of AOM 1975 American Journal of Small Business begins publication (named ETP in 1988)

1980s – PERSON TO PROCESS RESEARCH

1980 1st “State of the Art” research conference 1981 1st Babson entrepreneurship research conference 1982 “State of the Art” Volume 1: Encyclopedia of Entrepreneurship 1985 Journal of Business Venturing begins publication 1986 “State of the Art” Volume 2: The Art and Science of Entrepreneurship 1987 Entrepreneurship becomes its own division at AOM 1988 Entrepreneurship Theory & Practice begins publication

1990s – IN SEARCH OF A PARADIGM; IN SEARCH OF LEGITIMACY

1992 “State of the Art” Volume 3: The State of the Art in Entrepreneurship Research 1997 “State of the Art” Volume 4: Entrepreneurship 2000 1998 Study commissioned on Doctoral Education in Entrepreneurship 1999 Journal of Small Business Strategy begins publication

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DEFINITIONS OF ENTREPRENEURSHIP

“Entrepreneur” is French and, literally translated, means “between-taker” or “go-between” (Hisrich & Peters, 1998).

Schumpter (1934) Entrepreneurship is seen as new combinations including the doing of new things or the doing of things that are already being done in a new way. New combinations include 1)introduction of new good, 2)new method of production, 3)opening of a new market, 4)new source of supply, 5)new organizations. Entrepreneur disrupts equilibrium.

Penrose (1959) Distinguished between entrepreneurial and managerial services. ESs refer to those contributions to the operations of a firm which relate to the introduction and acceptance on behalf of the firm of new ideas such as new products, locations, significant changes in technology, acquisition of new management personnel, fundamental changes in the administrative organization, raising capital, making of plans for expansion. Managerial services execute entrepreneurial services. Entrepreneurs provides ESs.

Kirzer (1973) The entrepreneur is a decision maker whose entire role arises out of his alertness to unnoticed opportunities; therefore, entrepreneurship is the ability to perceive new opportunities. This recognition and seizing of the opportunity will tend to “correct” the market and bring it back toward equilibrium. “Entrepreneurial Discovery”

Drucker (1985) Entrepreneurship is an act of innovation that involves endowing existing resources with new wealth producing capacity.

Rumelt (1987) Entrepreneurship is the creation of new businesses. New business meaning that they do not exactly duplicate existing businesses but have some element of novelty.

Low & MacMillan (1988) Entrepreneurship is the creation of new enterprise.

Gartner (1988) Entrepreneurship is the creation of organizations, the process by which new organizations come into existence. Entrepreneurship ends when the creation stage of the organization ends.

Stevenson et al. (1989) Entrepreneurship is the pursuit of an opportunity w/o concern for current resources or capabilities.

Amit, Glosten & Muller (1993) Entrepreneurship is the process of extracting profits from new, unique, and valuable combinations of resources in an uncertain and ambiguous environment.

Timmons (1994) Entrepreneurship is creating and building something of value from practically nothing. That is, entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. (textbook)

Venkataraman (1997) Entrepreneurship research seeks to understand how opportunities to bring into existence future goods and services are discovered, created, and exploited, by whom, and with what consequences.

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TOPIC AREAS IN THE FIELD OF ENTREPRENEURSHIP

The Entrepreneur Behaviors Cognition Knowledge and experience Demography Traits Differences from non-entrepreneurs Serial/habitual entrepreneurs Roles of the entrepreneur Skill acquisition Gender/ethnicity issues

Emergence Networks Innovation Opportunity identification Opportunity evaluation Opportunity exploitation Opportunity origins Converting opportunities to commercial

ventures Financing (venture capital) Sources of opportunities New combinations Opportunity seeking

Risk and uncertainty Creativity

Entrepreneurial Strategy New venture creation Internal venturing Entrepreneurial Teams Flexibility, and change Firm growth & stages of growth Modes of venturing Alliances and joint ventures Founding strategy Resource acquisition and creation Strategies as emergent or planned Strategy absence Entrepreneurial culture First mover Organization structure Performance

Economic Development and Impact Entrepreneurial systems Founding rates Incubator organizations Job and wealth creation

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ENTREPRENEURSHIPANNOTATED BIBLIOGRAPHY

Section 1: Getting to Know the Field.......................................................................12

Section 2: The Entrepreneur.....................................................................................18

Section 3: Emergence..............................................................................................23

Section 4: Emergence/Venture Capital.....................................................................27

Section 5: Entrepreneurial Strategy/New Ventures...................................................31

Section 6: Entrepreneurial Strategy/Internal Venturing.............................................39

Section 7: Entrepreneurial Strategy/Alliances & Joint Ventures................................43

Section 8: Entrepreneurial Strategy/Growth.............................................................45

Section 9: Economic Development & Impact...........................................................50

Section 10: Classic Books.........................................................................................54

Section 11: Useful Theories for Entrepreneurship Research........................................56

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Getting to Know the Field of Entrepreneurship

Aldrich, H. E., & Baker, T. 1997. Blinded by the cites? Has there been progress in entrepreneurship research?. In D. L. Sexton & R. W. Smilor (Eds.), Entrepreneurship 2000, 377-400. Chicago: Upstart Publishing.

The authors contend that the answer to the question of entrepreneurship research progress depends upon one’s assumption about the scientific and normative structure of the field. Accordingly, progress is subdivided into, and examined from, three viewpoints: a unitary, normal science view, a multiple paradigm view, and a totally pragmatic view. The authors conclude that not much has changed over the last fifteen years other than a decisive break with journalistic and armchair methods by journals after 1985.

Amit, R., Glosten, L., & Muller, E. 1993. Challenges to theory development in entrepreneurship research. Journal of Management Studies, 30(5): 815-834.

Entrepreneurship research is plagued by fundamental unanswered questions, for which there does not exist a cohesive, explanatory, predictive, or normative theory. The study of entrepreneurship spans a wide range of fields including decision sciences, economics, management, sociology, and psychology. A theory of entrepreneurship is defined as a verifiable and logically coherent formulation of relationships, or underlying principles that either explain entrepreneurship, predict entrepreneurial activity, or provide normative guidance. A study focuses on challenges to theory development by drawing on all of the fields, yet emphasizes the economic and financial theory perspectives. Any unresolved issues that relate to the role of entrepreneurs and to the concept of entrepreneurship are highlighted. The available theoretical literature is classified into several categories, and the purpose and perspective of the theories are delineated.

Baumol, W. J. 1993. Formal entrepreneurship theory in Economics: Existence and bounds. Journal of Business Venturing, 8(3): 197-210.

The reasons for the paucity of formal analyses of the role of the entrepreneur are examined. It is shown that there is room for useful and illuminating analysis of entrepreneurship and several examples of new theoretical work on the subject, leading to concrete results, are provided. Specifically, the subjects examined as illustrations of the theory are the influences that determine the allocation of entrepreneurship and differences in the resulting contribution to production; the role of the entrepreneur in technology transfer and its importance for the economy; and the optimal timing of the introduction to the market of an innovation whose development and improvement is a continuous process.

Bull, I., & Willard, G. E. 1993. Towards a theory of entrepreneurship. Journal of Business Venturing, 8(3): 183-196.

A summary of the current state of the development of theory of entrepreneurship is provided along with a background for five papers presented at a recent Conference on Entrepreneurship Theory. The problems of multiple and conflicting definitions and the exclusion of parallel research on the subject is discussed. The adoption of Schumpeter's definition of an entrepreneur and an economic outcome approach to the study of entrepreneurship is proposed. A tentative theory of entrepreneurship is proposed, and opportunities for further research are suggested.

Bygrave, W. D., & Hofer, C. W. 1991. Theorizing about entrepreneurship. Entrepreneurship Theory & Practice, 16(2): 13-22.

In entrepreneurship research, it may be useful to shift the focus from the characteristics and functions of the entrepreneur and the many definitions of what constitutes an entrepreneur to a focus on the nature and characteristics of the entrepreneurial process. Important characteristics of this process include: 1. the importance of human volition, 2. change occurring at the level of the individual firm, 3. a change of state, 4. discontinuity, 5. entrepreneurship as a holistic, dynamic, and unique process, 6. the role of numerous antecedent variables, and 7. sensitivity to the initial conditions of these variables. These characteristics create a set of parameters and criteria that will have to be met by any ideal model of

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entrepreneurship. Entrepreneurship researchers pursuing mathematical models should abandon the linear, incremental thinking that regression models inculcate, because alternative models can better deal with such entrepreneurial processes as discontinuities and changes of state.

Cheah, H. 1990. Schumpeterian and Austrian entrepreneurship: Unity within duality. Journal of Business Venturing, 5(6): 341-347.

The different ways that J. A. Schumpeter and his Austrian critics conceived of entrepreneurship are examined. The distinction between Schumpeterian and Austrian entrepreneurs identifies the dual nature of entrepreneurship and strengthens the theoretical foundation of the research in this field by linking it more closely to propositions that originate from Schumpeter and these critics. The resulting better perspective leads to a greater appreciation of the significant roles that the 2 modes of entrepreneurship can play in the evolutionary development process. The distinction between Schumpeterian and Austrian entrepreneurs is sufficiently comprehensive to encompass all types of entrepreneurs, whether in small or large businesses or in new or established enterprises. Propositions arising from the analysis provide a useful model of the entrepreneurial process.

Gartner, W. 1985. A conceptual framework for describing the phenomenon of new venture creation. Academy of Management Review, 14 (4): 696-706.

A review of the entrepreneurship literature indicates that differences among entrepreneurs and among their ventures are as great as those between entrepreneurs and nonentrepreneurs and between new firms and established firms. Once this diversity among entrepreneurs and their ventures is recognized, the need to find a way to classify them becomes obvious. An attempt is made to organize the many variables that have been used in previous research in order to describe entrepreneurs and their ventures in a comprehensive framework. A framework is presented that integrates 4 major perspectives in entrepreneurship: 1. characteristics of the individual(s) who start the venture, 2. the organization that is created, 3. the environment around the new venture, and 4. the process by which the new venture is launched. The primary value of this framework is that it provides a systematic means of comparing and contrasting complex ventures and a way to conceptualize variation and complexity.

Gartner, W. B. 1990. What are we talking about when we talk about entrepreneurship? Journal of Business Venturing, 5(1): 15-28.

A study explored the underlying meanings researchers amd practitioners have about entrepreneurship and outlined themes that characterize the major issues and concerns in the debate over entrepreneurship as a field of study. The process utilized to identify the themes took the form of a policy Delphi, constructed as a series of 3 questionnaires. In the first phase, a questionnaire asked for a definition of entrepreneurship from leading academic researchers, business leaders, and politicians. In phase 2, the definitions were sent back to the 44 respondents, with 90 identified attributes. Factor analysis clustered the attributes into 8 factors: the entrepreneur, innovation, organization creation, value creation, profit or nonprofit, growth, uniqueness, and the owner-manager. In the 3rd phase, 41 participants were asked to evaluate the 8 factors. A cluster analysis revealed that 79% of the participants focused on the characteristics of entrepreneurship, looking at what happened in the situation.

Gartner, W. B. 1993. Words lead to deeds: Toward an organizational emergence vocabulary. Journal of Business Venturing, 8(3): 231-240.

The words people use to talk about entrepreneurship influence their ability to think about this phenomenon, and subsequent to these thoughts, direct actions toward research that might be conducted on this topic. Some words are offered to be included in a lexicon on organizational emergence: being, circumstance, emerge, emergence, emergency, emergent evolution, equivocal, found, founder, genesis, and variation. These words are discussed and directions for research on organizational emergence are offered.

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Gartner, W. B., Bird, B. J., & Starr, J. A. 1992. Acting as if: Differentiating entrepreneurial from organizational behavior. Entrepreneurship Theory & Practice, 16(3): 13-32.

Some relationships between the entrepreneuship and organizational behavior disciplines are proposed. It is suggested that thinking of entrepreneurship as the process of "emergence" offers a fruitful metaphor for relating entrepreneurship to other disciplines. An organizational behavior perspective on entrepreneurship would focus on the process of organizational emergence. The usefulness of the emergence metaphor is explored by examining 2 questions that are the focus of much of the research in organizational behavior: 1. What do people in organizations do? 2. Why do they do what they do? The fundamental property of emergence will require entrepreneurship theorists to acquire and appreciate property a broad array of methodologies and theoretical approaches to understanding this phenomenon. Much of the task of generating theory about entrepreneurship will be in understanding both the emerging world and the existing world and in thoughtfully probing how connections between these 2 worlds can be made.

Hofer, C. W., & Bygrave, W. D. 1992. Researching entrepreneurship. Entrepreneurship Theory & Practice, 16(3): 91-100.

There are 9 important aspects of the entrepreneurial process: 1. It is initiated by an act of human volition. 2. It occurs at the level of the individual firm. 3. It involves a change of state. 4. It involves a discontinuity. 5. It is a holistic process. 6. It is a dynamic process. 7. It is unique. 8. It involves numerous antecedent variables. 9. It generates outcomes that are extremely sensitive to the initial conditions of those variables. It is argued that these characteristics have substantial implications not only for theory building, but also for the practice of researching entrepreneurship. More specifically, all aspects of the research process are affected by the unique characteristics of the entrepreneurship process. The traditional methods of the research process will be supplemented by other approaches that in many instances better fit the the unique characteristics of the entrepreneurship process. It is imperative that these methodologies be incorporated into future research.

Kirzner, I. 1997. Entrepreneurial discovery and the competitive market process: An Austrian approach. Journal of Economic Literature, 35(1): 60-85.

The Austrian tradition is represented in modern economics by a very vocal, feisty and dedicated subset of the economics profession. Much of the work of this group of scholars is devoted to the most fundamental problems of microeconomics. The Austrian work, therefore, differs in character and content from a good deal of neoclassical theory which, despite widespread and growing awareness of its limitations, continues to serve as the analytical core of mainstream economics. The outline of one important approach, the entrepreneurial discovery approach, within modern Austrian economics is presented. This approach offers a perspective on microeconomic theory which is not ordinarily well-represented either at the textbook level, or in the journal literature.

Long, W. 1983. The meaning of entrepreneurship. American Journal of Small Business, 8(2): 47-56.

Reviewed are various definitions of entrepreneurship employed by a number of theoretical economists, beginning with Cantillon (circa 1730). Entrepreneurship is frequently defined as involving: 1. uncertainty and risk, 2. complementary managerial competence, and 3. creative opportunism. Modern definitions that exclude any of these 3 fundamental dimensions are basically incomplete. These dimensions suggest definitional boundaries circumscribing the essential qualities of entrepreneurship. The definition serves as a hypothesis that permits research direction and theoretical integration, which in turn, would ultimately strengthen the practice of entrepreneurship. Among others, the definitions of entrepreneurship of Say (circa 1810), Marshall (circa 1890), Schumpeter (circa 1910), and Knight (circa 1920) are examined.

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Low, M. B., & MacMillan, I. C. 1988. Entrepreneurship: Past research and future challenges. Journal of Management, 14(2): 139-161.

Past research on entrepreneurship is reviewed within the context of 6 design dimensions: 1. purpose, 2. theoretical perspective, 3. focus, 4. level of analysis, 5. time frame, and 6. methodology. Researchers should state their purpose clearly and link it to the more fundamental purpose of explaining and facilitating the role of new enterprise in economic progress. Theoretical assumptions also should be outlined and new perspectives explored. The trend from deterministic personality and cultural theories toward more contextual and process-oriented research should be continued as should multilevel studies that provide a broader understanding of entrepreneurial phenomena. Studies that employ wide time frames are important, as well as those that investigate causality more aggressively. These design issues also should help the entrepreneur translate theoretical and empirical research into useful knowledge and effective practice.

MacMillan, I. C., & Katz, J. A. 1992. Idiosyncratic milieus of entrepreneurial research: The need for comprehensive theories. Journal of Business Venturing, 7(1): 1-8.

Idiosyncratic milieus refer to research situations extremely difficult to study because of their obscurity. The need for a cohesive theory of entrepreneurship is brought into sharp focus by the special challengess posed to traditional research by the idiosyncratic milieus involved in entrepreneurship. A model of obscurity is presented and applied in order to show how research on idiosyncratic milieus might proceed. Useful links between entrepreneurship research and other social and natural sciences are identified, as are the theoretical underpinings for studying idiosyncratic milieus. Five lessons may be drawn from better-integrated multimethod fields indicating several needs in entrepreneurial research: 1. the need to have hypotheses waiting to be tested, 2. the need to become comfortable using models and homomorphs, 3. the need to have common measures, 4. the need to build competing theories, and 5. the need to have comprehensiveness.

Rumelt, R. P. 1987. Theory, strategy, and entrepreneurship. In D. J. Teece (Ed.), The Competitive Challenge, 137-158. Cambridge, MA: Ballinger.

Rumelt attempts to determine the motivation for entrepreneurial activity. He specifically ponders why so many risky new businesses are formed when existing firms should have the compelling advantage in new business formation. The locus of entrepreneurship in terms of product-market conditions and organizational context is examined, and a framework for predicting entrepreneurial activity is developed. Rumelt frames his position as a counter-point to existing economic and strategy theory. He defines entrepreneurship as the creation of new businesses that do not exactly duplicate existing businesses and have some degree of novelty. He argues that all rents are not monopoly rents and proposes that entrepreneurial rents are the difference between a venture’s ex post value (or payment stream) and the ex ante cost (or value) of the resources combined to form the venture.

Sandberg, W. R. 1992. Strategic management’s potential contributions to a theory of entrepreneurship. Entrepreneurship Theory & Practice, 16(3): 73-90.

A recent study offers an overview of strategic management and its various schools of thought, followed by a summary of the field of entrepreneurship and its own disagreements over definition and boundaries. It is suggested that strategic management might help resolve such disagreements through its focus on the entrepreneurial work of the organization, which is based on variables that describe the organization's industry, resources, processes, and strategy. The contributions of strategic management to entrepreneurship theory are described, specifically dealing with issues of new business creation, innovation, opportunity seeking, risk assumption, top management teams, and group processes in strategic decisions. Even without total integration, momentum is building for substantially more cross-fertilization between the fields of strategic management and entrepreneurship.

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Stevenson, H., & Gumpert, D. 1985. The heart of entrepreneurship. Harvard Business Review, 63(2): 85-94.

Firms that get bogged down by inertia find it easier and safer to pursue familiar courses of action rather than to experiment with the unknown. However, in a rapidly changing business environment, strategies based on the familiar can jeopardize a firm's survival. Such an environment requires that firms develop a spirit of entrepreneurship that encourages flexibility, creativity, and risk taking. Traditional management stresses risk reduction and effective management of existing resources. Entrepreneurial management emphasizes the identification of new opportunities, how they may be exploited, what resources are needed, and how they may be acquired. Entrepreneurial management approaches new opportunities as both desirable and attainable. To stimulate an entrepreneurial spirit, firms must promote individual creativity to develop new products and services, provide appropriate rewards for successful risk taking, minimize the costs to individuals for failing in the pursuit of new opportunities, and exploit any resource pool.

Stevenson, H., & Jarillo, J. C. 1990. A paradigm of entrepreneurship: Entrepreneurial management. Strategic Management Journal, 11(summer): 17-27.

Corporate entrepreneurship appears to many scholars to be a contradiction in terms. Establishing clear links between the fields of entrepreneurship and corporate management is important because many consider entrepreneurship as just what is outside of mainstream corporate management. Research on entrepreneurship can be grouped in 3 main categories: 1. what happens when entrepreneurs act, 2. why they act, and 3. how they act. It is proposed that entrepreneurship is a process by which individuals - either alone or inside organizations - pursue opportunities without regard to the resources they currently control. Six specific propositions are derived concerning corporate entrepreneurship research. Three elements of the entrepreneurship process are discussed: 1. the detection of the opportunity, 2. the willingness to pursue it, and 3. the belief that it can be successfully exploited.

Van de Ven, A. 1993. The development of an infrastructure for entrepreneurship. Journal of Business Venturing, 8(3): 211-230.

A macro-community perspective of entrepreneurship is taken, and the development of an industrial infrastructure that any entrepreneurial community needs to sustain its members is examined. The infrastructure includes institutional arrangements that legitimate, regulate, and standardize an innovation, resource endowments of basic scientific knowledge, financing mechanisms, and a pool of competent labor, as well as proprietary functions of applied R&D, manufacturing, marketing, and distribution of innovative products or services. The industry system emerges over time through the accretion of numerous actions and events involving many different entrepreneurs who are located in public and private sector organizations. A social system framework for understanding the collective process of entrepreneurship is proposed.

Venkataraman, S. 1997. The distinctive domain of entrepreneurship research. Advances in Entrepreneurship, Firm Emergence and Growth, 3: 119-138.

Venkataraman explores what the field of entrepreneurship research is and what it should be. He questions a number of assumptions about the discipline and specifically asks what distinctive contribution the study of entrepreneurship makes to our broader understanding of the business enterprise. Acknowledging that the main problem of defining the field comes from a lack of a broadly accepted definition of the boundaries of the field, he offers his own. Venkat states that “entrepreneurship as a scholarly field seeks to understand how opportunities to bring into existence ‘future’ goods and services are discovered, created, and exploited, by whom, and with what consequences.” The two issues of greatest importance to scholars should be the source of opportunities and the nexus of these opportunities with individuals. Venkat further articulates his idea for what the performance measurement tool for entrepreneurship should be. He states that we must look beyond the relative performance of firms, which is the tool of strategic management researchers. Entrepreneurship researchers must look at return that exceed this threshold to account for opportunity costs, effort, time, premium for risk taken, premium for

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uncertainty, etc. The two performance benchmarks for entrepreneurship are 1) the absolute level of economic performance that provides for a return for enterprising effort, and 2) the social contributions of the individual’s effort.

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Amit, R., Muller, E. & Cockburn, I. 1995. Opportunity costs and entrepreneurial activity. Journal of Business Venturing, 10(2): 95-106.

A study provides empirical support for the hypothesis that the lower the opportunity costs of individuals, the more likely they are to undertake entrepreneurial activity. This prediction emerged from earlier theoretical work that modeled the decision of individuals to develop new ventures on their own, seek the backing of a venture capitalist, or remain as paid employees. The study finds that paid employees who choose to leave their employment to become entrepreneurs earned, prior to leaving, substantially less on average than those whose employment status did not change and who remained paid employees throughout the survey period. Specifically, the study establishes that the wages of those workers who chose to remain paid employees throughout the survey period were, on average, 12% higher than the wages of those who left their employment to become entrepreneurs.

Baron, R. A. 1998. Cognitive mechanisms in entrepreneurship: Why and when entrepreneurs think differently than other people. Journal of Business Venturing, 13(4): 275-294.

The findings of basic research on human cognition point to the possibility that because entrepreneurs operate in special kinds of situations - ones which overload their information-processing capacities and involve high levels of emotion, uncertainty and time pressure - entrepreneurs may be more susceptible to a number of cognitive errors than are other people. Several of these potential sources of error, ones that have not previously been examined in detail in the entrepreneurship literature, are examined. These include counterfactual thinking, affect infusion, attributional style, the planning fallacy, and self-justification. Specific predictions concerning the potential impact of each of these mechanisms on the thinking of entrepreneurs are proposed. It is suggested that incorporating a cognitive perspective into entrepreneurship research may provide the field with several new conceptual tools and may also foster the development of procedures for assisting entrepreneurs.

Brockhaus, R. H. 1980. Risk taking propensity of entrepreneurs. Academy of Management Journal, 23(3): 509-520.

A recent study defined risk taking propensity as the perceived probability of receiving rewards associated with the success of a proposed situation, that an individual requires before he will subject himself to the consequences associated with failure, the alternative situation furnishing less reward and less severe consequences than the proposed situation. The definition might best describe the situation confronting the potential entrepreneur in the decision to establish a new business venture. Data for the study were objectively obtained using the Kogan-Wallach choice dilemmas questionnaire. Three groups were participants: 1. a group containing individuals who within the 3 months prior to the study ceased working for their employers and owned as well as managed business ventures, 2. a group of managers who had changed organizations, and 3. a group containing managers who had only changed positions within an organization. Results indicated that risk taking propensity may not be a distinguishing characteristic of entrepreneurs. Results also refuted assumptions based on research that had been subjective and noncomparative using established entrepreneurs.

Busenitz, L. W., & Barney, J. B. 1997. Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making. Journal of Business Venturing, 12(1): 9-30.

A study examines differences in the decision-making processes used by entrepreneurs and managers in large organizations. It is hypothesized that entrepreneurs are more susceptible to the use decision-making biases and heuristics than are managers in large organizations. The study examines differences with respect to 2 biases and heuristics: overconfidence (overestimating the probability of being right) and representativeness (the tendency to overgeneralize from a few characteristics or observations). The results from the logistic regression analysis showed strong support for both hypotheses.

Busenitz, L. W., & Lau, C. M. 1996. A cross-cultural cognitive model of new venture creation. Entrepreneurship Theory & Practice, 20(4): 25-39.

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In examining the global landscape, it is clear that some cultures produce many more entrepreneurs than others. This phenomenon is explored with a cognitive perspective, because it is assumed that the way one thinks has a significant impact on the intention to start a new business. Through the development of this cognitive model, it is clarified why some individuals across different cultures tend to be more prolific in starting new ventures than others both inside and outside the home country. In illustrating the model, the Chinese population and their high propensity to start new businesses when they migrate to new countries are discussed. Implications for competitive advantage and other areas of cross-cultural research are made.

Carland, J. W., Hoy, F., & Carland, J. C. 1988. Who is an entrepreneur? Is a question worth asking. American Journal of Small Business, 12(4): 33-40.

This article is a response to Gartner’s (1988) critique of definitions for entrepreneur and small business owner proposed by Carland, Hoy, Boulton, and Carland (1984). The response to Gartner’s critique focuses on two areas. The first areas is whether “Who is an entrepreneur?” should focus on intentions or creation. Carland et al. operationalize their definitions through intentionality (whether in articulated strategies or observed behaviors). Gartner (1988) proposes that organization creation distinguishes entrepreneurship from other activities. The second area of conflict is whether to study the act of entrepreneurship (behavioral school) or the entrepreneur (train school). The authors respond to Gartner’s support for the behavioral school stating it is difficult to isolate what people do from what they are. They also contend that one cannot modify a behavior pattern without first understanding why an individual behaves in a particular manner. Researchers must understand the parts in order to under the whole.

Gartner, W. B. 1988. Who is an entrepreneur? Is the wrong question. American Journal of Small Business, 12(4): 11-32.

Entrepreneurship is the process by which new organizations come into existence. The differentiation between entrepreneurs and nonentrepreneurs is that entrepreneurs create organizations while nonentrepreneurs do not. In trait approaches to the study of entrepreneurship, an entrepreneur is seen as a set of personality traits and characteristics. In behavioral approaches, the entrepreneur is seen as a set of activities involved in organization creations. Attention is focused on research that is based on the trait approach to entrepreneurship, and it is argued that this view alone is insufficient to explain the phenomenon of entrepreneurship. After a presentation of the behavioral approach, the 2 approaches are compared and contrasted. The following suggestions are made: 1. The latter approach will be a more productive perspective for future research in entrepreneurship. 2. Entrepreneurship ends when the creation stage of the organization ends.

Gatewood, E. J., Shaver, K. G., & Gartner, W. B. 1995. A longitudinal study of cognitive factors influencing start-up behaviors and success at venture creation. Journal of Business Venturing, 10(5): 371-391.

A study sought to determine whether certain cognitive factors, such as ways of thinking as measured by attributions for entering into business and a personal efficacy scale, could be used to predict whether potential entrepreneurs would subsequently persist in entrepreneurial activities that resulted in successfully starting a business. Responses from a longitudinal study of 85 preventure clients were analyzed. Results showed that internal/stable explanations for choosing to start a business were related to successfully starting a business for female entrepreneurs, whereas external/stable explanations were related to successfully starting a business for male entrepreneurs. The personal efficacy scale was unrelated to entrepreneurial activity or to successfully starting a business.

Herron, L., & Sapienza, H. J. 1992.The Entrepreneur and the initiation of new venture launch activities. Entrepreneurship Theory & Practice, 17(1): 49-55.

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Much of the previous research attempting to relate traits of the entrepreneur to new venture creation has failed to demonstrate a definitive linkage. This failure should not impugn the importance of the individual as the most cogent unit of analysis in entrepreneurship research and theory. On the contrary, since most new organizations are initiated and created by individuals operating alone or in small teams, it should motivate new ways of modeling and testing the human phenomena involved in venture creation. A structural model of the initiation of new venture creation is presented. The model links psychological and behavioral concepts with those of organization theory to explain the initiation of launch activities for new business enterprises. The model implies that entrepreneurship is possible to those who have the necessary level of aspiration and skills and is not necessarily a phenomenon restricted by birth to certain "entrepreneurial types." It also implies that context is important but is not sufficient to explain entrepreneurship.

Katz, J. A. 1992. A psychosocial cognitive model of employment status choice. Entrepreneurship Theory & Practice, 17(1): 91-102.

A psychosocial cognitive model (PCM) of employment status choice is proposed. The model is psychosocial insofar as it utilizes an individual's psychology in the form of values and decision-making processes, and social insofar as it depends on personal history and social context as factors contributing to the decision process. The PCM offers a possible solution to the 3 problems of traditional approaches. First, it is a model applicable to all vocational decision-makers. Second, this process follows recognized cognitive heuristic processes, improving upon "black box" explanations of the impact of biography on individual choice. Third, where there are opportunity-value mismatches, the model posits alternative construction to occur, accounting for violations of tracking not considered in traditional models. The 2 major advantages of the PCM as an explanatory model are its populism and its robustness.

Kets de Vries, M. 1977. The entrepreneurial personality: A person at the crossroads. Journal of Management Studies, 14: 34-57.

While being highly creative, the entrepreneurial personality is one whose total domination of his enterprise may endanger its future existence by his refusal to plan for who will succeed him. Entrepreneurs generally want to take personal responsibility for decisions, prefers moderately risky decisions, want concrete knowledge to make decisions, and dislike repetition. They are very often anxious and uncomfortable with authority figures. Many tend to be from religious or ethnic minorities, and their childhoods generally contain many distressing experiences. They react by becoming rebellious and nonconforming, acting impulsively, often feeling dissatisfied and rejected, with self esteem becoming depreciated. The entrepreneur totally dominates his enterprise. There is often little planning for who will succeed him, which can hinder the future growth and viability of the enterprise.

Krueger, N., Reilly, M. D., & Carsrud, A. L. 1995. Impact of prior entrepreneurial exposure on perceptions of new venture feasibility and desirability. Entrepreneurship Theory & Practice, 18(1): 5-21.

Entrepreneurship is clearly a process where intentionality is central. Yet, few studies explicitly test theory-driven process models in entrepreneurship. Shapero (1975, 1982) proposed an intentionality-based process model of the entrepreneurial event. Entrepreneurial intentions should derive from feasibility and desirability perceptions plus a propensity to act on opportunities. Prior entrepreneurship-related experiences should influence entrepreneurial intentions indirectly through these perceptions. Path analyses found that feasibility and desirability perceptions and propensity to act each proved significant antecedents of entrepreneurial intentions. Perceived feasibility was significantly associated with the positiveness of that prior exposure. Strong support was found for Shapero's model, arguing for further application of intentions-based process models of entrepreneurial activity.

Manimala, M. J. 1992. Entrepreneurial heuristics: A comparison between high PI (pioneering-innovative) and low PI ventures. Journal of Business Venturing, 7(6): 477-504.

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Entrepreneurial heuristics were identified and rated through the content analysis of 138 published undisguised cases using the case survey method. Through a similar procedure, scores were also generated on the overall innovativeness of the ventures. Data on these 2 variables were collected from an additional sample of 26 entrepreneurs for verification purposes. The final sample of 164 was divided into 3 groups - the top 1/3 called the high pioneering-innovative (PI) group and the bottome 1/3 called the low PI - based on their innovativeness scores. Preferred heuristics of these 2 groups and commonly used heuristics were identified through t-tests. Such heuristics were separately factor analyzed to identify the PI and general entrepreneurial orientations. A regression analysis showed that heuristic orientations could explain 50% of the variance in innovativeness. It was also found that PI orientations could fairly well discriminate between the high PI and low PI groups, with a probability of misclassification of 0.12.

McGrath, R. G., MacMillan, I. C., & Scheinberg, S. 1992. Elitists, risk-takers, and rugged individualists? An exploratory analysis of cultural differences between entrepreneurs and non-entrepreneurs. Journal of Business Venturing, 7(2): 115-135.

A study addresses whether or not individuals who have started their own businesses differ in their fundamental beliefs and values from a contrast sample of people who have not done so. Data from a cross-cultural study of entrepreneurship are used to differentiate the responses. Findings suggest that entrepreneurs have a persistent and characteristic value orientation, irrespective of the values of their base culture. These values appear to be aligned along 4 dimensions first identified by Hofstede (1980). Using these dimensions, a set of hypotheses are derived that posit the following for entrepreneurs: 1. high power distance, 2. high individualism, 3. low uncertainty avoidance, and 4. high masculinity orientations. The findings support the hypotheses.

Palich, L., & Bagby, R. 1995. Using cognitive theory to explain entrepreneurial risk-taking: Challenging conventional wisdom. Journal of Business Venturing, 10(6): 425-438.

A study compared the outcomes of the cognitive processes of entrepreneurs and others. In accord with cognitive theory, the study predicted that entrepreneurs would frame business situations more optimistically than would nonentrepreneurs. After reading the same series of fictitious business scenarios, entrepreneurs in the sample perceived greater strengths than weaknesses, more opportunities than threats, and greater potential for positive performance than nonentrepreneurs. However, entrepreneurs did not differ significantly from nonentrepreneurs on a risk propensity scale. Altogether, these results strongly supported the theory, while calling into question the conventional view of entrepreneurs as risk takers.

Shaver, K. G., & Scott, L. R. 1991. Person, process and choice: The psychology of new venture creation. Entrepreneurship Theory & Practice, 16(2): 23-46. <entrepreneur>

A comprehensive psychological portrait of new venture creation, an operational definition for entrepreneurship, will need to show how an individual's cognitive representations of the world get translated into action. To accomplish this aim, it will be necessary to consider general orienting dispositions, motivational principles, and personal motives. A thorough psychological approach to the study of choices involved in new venture creation must also incorporate both the rational and irrational aspects of decision making. For both methodological and conceptual reasons, a psychological view of new venture creation concentrates on individuals in their situational context. Because the creation of a business venture is a social activity, the processes of social cognition are important. A psychological approach to new venture creation should also focus on the immediate antecedents of choice.

Westhead, P., & Wright, M. 1998. Novice, portfolio, and serial founders: Are they different? Journal of Business Venturing, 13(3): 173-204.

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There is considerable interest in the nature of entrepreneurial individuals and entrepreneurial actions. Drawing upon previous conceptual and empirical evidence, 3 types of founders are identified. The characteristics and performance of independent small firms in the UK owned by novice, portfolio, and serial founders are compared. The implications for future research studying entrepreneurial careers and independent businesses over time are discussed.

Woo, C. Y., Cooper, A. C., & Dunkelberg, W. C. 1991. The development and interpretation of entrepreneurial typologies. Journal of Business Venturing, 6(2): 93-114.

The conceptual frameworks used and specific methods applied in developing entrepreneurial typologies are analyzed. The analysis groups entrepreneurs using 3 categories: 1. goals, 2. goals and background, and 3. goals, background, and management style. The results indicate that different classification criteria result in different groupings. Classification based solely on goal orientation demonstrates the most pronounced differences from the results of the other classifications. The results also show that none of the 3 pairs of groups patterns closely the craftsman-opportunist delineation as described in the literature. While the craftsman-opportunist classification appears to serve as a useful yardstick for measuring the potential behavior and likely success of entrepreneurs, its applicability and scope may have been exaggerated to this point. Without consistency and the careful consideration of the definition of types, the validity of the yardstick remains questionable.

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Aldrich, H. E., & Mueller, S. 1982. The evolution of organization forms: Technology, coordination, and control. Research in Organizational Behavior, 4: 33-87.

The population perspective explains organizational change by focusing on the distribution of resources in environments and the terms on which they are available. Variation within and between organizations provides the occasion for selection criteria to make their presence felt, and retention mechanisms preserve the selected variations. The authors examine changes in environmental selection criteria from the early 19th century until the present, relating changes in these criteria to changes in organizational forms. Forms are defined along three dimensions: technology, coordination, and control. It is shown that systematic change in organization forms has been associated with a number of long-term evolutionary changes in the social, political, and economic environment of the US.

Bird, B. J. 1992. The operation of intentions in time: The emergence of the new venture. Entrepreneurship Theory & Practice, 17(1): 11-20.

A study examines the role of intention in what entrepreneurs do and when they do it. Clearly, the content of behavior is critical to the value-adding process of organizing resources into firms or corporations. Specifically, intention requires the individual's ability and willingness to sustain temporal tension, to stretch between a vision of what could be and current conditions. Thus, temporal tension is associated with the intervals of the venture creation process, which is one element of timing. The other aspect of timing involves controlling, or at least predicting, durations. A model of this aspect is presented. The model has relevance to entrepreneurial goal setting, persistence, and "effectiveness" as judged by outside observers. Temporal brackets, pacing, and market events flow from individual differences, environmental rhythms, and entrepreneurs' cognitions. Entrepreneurs tune in to changes in the environment and form thoughts and behaviors that bracket the time involved in creating an organization and that set a pace for that creation.

Birley, S. 1985. The role of networks in the entrepreneurial process. Journal of Business Venturing, 1(1): 107-118.

Entrepreneurs often depend on building contacts and developing formal and informal networks. A study in St. Joseph County, Indiana -- a county that had suffered severe economic decline -- showed that firms tend to be started by local people using their own informal networks. Since the firm's elements are set during the start-up process, the choice of networks is key in understanding the nature of the subsequent firm. The entrepreneur is likely to recreate the elements of previous employment when using only business contacts and family, but in an efficient network, the system diagnoses needs and provides the necessary information and advice. Therefore, strategies are needed to increase community awareness to formal sources of help. Those in the formal system could exchange information on the various schemes and services they offer, perhaps in the context of a central clearing house. The enterprise office (clearing house) could also monitor new firms and help develop strategies for finding new customers and new markets.

Cooper, A. C. 1985. The role of incubator organizations in the founding of growth-oriented firms. Journal of Business Venturing, 1(1): 75-86.

To examine the role of incubator organizations, 161 new, growth-oriented firms were examined for factors that might be expected to relate incubator organizations to entrepreneurial success. Results imply that the incubator phenomenon plays an important role. Most of the new firms studied began their operations close to the incubator organization both in terms of geography and of the nature of their business. Variations occurred across industries, but the findings have various implications for prospective entrepreneurs in most areas: 1. A growth-oriented technical firm is unlikely to be started in a geographic area in which there are few people with experience in the industry. 2. Regional programs to attract entrepreneurs are unlikely to succeed without the proximity of other businesses of the same nature to act as incubators. 3. Local and regional programs to attract branch facilities of larger corporations are more likely to succeed if they focus on those companies most likely to function as incubators. 4. Universities play less of a direct role in the process than is often assumed.

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Cooper, A. C., Folta, T. B., & Woo, C. Y. 1995. Entrepreneurial information search. Journal of Business Venturing, 10(2): 107-120.

Searching for information is a central task for the entrepreneur. A study considers the influences on information search. In particular, the study hypothesizes that entrepreneurs are boundedly rational in their search behavior, constrained by lack of experience and overconfidence. The study of 1,176 entrepreneurs found mixed support for the hypotheses. Those who had no entrepreneurial experience, on average, sought more, not less information. However, consistent with the hypotheses, those who ventured into fields which were very different and those who were more confident sought less information. Interestingly, the inexperienced entrepreneurs varied their search, depending upon whether they were in familiar or unfamiliar domains. Novice entrepreneurs search less extensively in their fields, a behavior consistent with bounded rationality. In contrast, experienced entrepreneurs seemed to search with about the same intensity, regardless of whether they knew the field.

Dubine, P. & Aldrich, H. 1991. Personal and extended networks are central to the entrepreneurial process. Journal of Business Venturing, 6(5): 305-313.

A set of networking strategies for entrepreneurs is proposed. First, general network concepts are introduced by describing personal networks. Such networks take the role set of individual entrepreneurs as the unit of analysis. Second, the aggregation of personal networks into extended networks is discussed. These networks can be analyzed within, as well as between, firms. Two strategic principles that apply to personal networks are identified: 1. Systematically plan and monitor networking activities. 2. Attempt to increase network diversity. The most effective firms are those in which entrepreneurs pursue these principles in their personal networks, in their firm's internal structuring, and in their firm's relations with other firms.

Feeser, R. H., & Willard, G. E. 1989. Incubators and performance: A comparison of high and low-growth high-tech firms. Journal of Business Venturing, 4(6): 429-441.

An incubator organization is one in which the entrepreneur was employed before leaving to start the new venture. Four hypotheses were tested to determine whether differences exist between high- and low-growth firms along 3 incubator dimensions: 1. the size of the incubator, 2. whether the new firm is closely related to the markets and core technology of the incubator, and 3. whether the incubator was a profit-seeking or nonprofit organization. Questionnaires were mailed to 39 very-high-growth companies identified in Inc. magazine's listing of fastest growing firms and to a matched set of 39 low-growth firms. Some results are: 1. A greater proportion of the founders of high-growth companies compete in markets or technologies that are closely related to those of their incubators than do low-growth firms. 2. A greater proportion of founders of high-growth companies are from large incubators than are founders of low-growth firms. 3. Founders of high-growth firms tended to come from publicly held incubators.

Gaglio, C. M. 1997. Opportunity identification: Review, critique and suggested research directions. Advances in Entrepreneurship, Firm Emergence, and Growth, 3: 139-102.

The purpose of this chapter is to organize and review the literature regarding opportunity creation and identification: what behaviors are necessary and sufficient for theory? Can we identify and measure them? Can we form predictions about how these variables relate and interact such that an entrepreneurial opportunity is discovered or created? Three conceptual frameworks are reviewed: 1) Long and McMullan’s (1984) adaptation of Schumpeter’s creative person; 2) Herron and Sapienza’s (1992) adaptation of March and Simon’s (1958) thinking about the development of innovative programs; 3) Kirner’s (1979; 1985) view of entrepreneurial behavior that depends on entrepreneurial alertness. Additionally, an alternative cognitive conceptual framework of the opportunity identification process is offered. It is argued that this alternative integrates the useful properties of prior frameworks; provides a testable model; and facilitates both empirical and theoretical comparisons between entrepreneurs and other market actors.

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Hansen, E. L. 1995. Entrepreneurial network and new organization growth. Entrepreneurship Theory & Practice, 19(4): 7-19. The emerging literature on entrepreneurial networks suggests that entrepreneurial action sets may be organizational in nature and may be investigated in organizational terms. Three pre-founding entrepreneurial action set variables are linked: 1. size, 2. degree (a measure of inter-connectivity within the entrepreneurial action set), 3. frequency (a measure of how often entrepreneurial action set members interact with each other) to first-year new organization growth. Data were gathered through structured interviews with 44 entrepreneurs and analyzed with multiple regression. The hypotheses were strongly supported by the data.

Kaish, S., & Gilad, B. 1991. Characteristics of opportunities search of entrepreneurs versus executives: Sources, interests, general alertness. Journal of Business Venturing, 6(1): 45-61.

In a study, 3 hypotheses derived from the theory of entrepreneurship developed by Israel Kirzner were tested. These hypotheses concern: 1. differences in the manner in which entrepreneurs and corporate managers expose themselves to information, 2. differences in the sources of information used, and 3. differences in evaluating information cues. The hypotheses that success and experience will erode the above differences between entrepreneurs and corporate managers also were tested. The study sample included 51 founders of companies in New Jersey and 36 executives of a very large financial company. Differences were tested using univariate and multivariate statistical methods. The results showed that the entrepreneurs spent significantly more time searching for information in their off hours and through nonverbal scanning. In addition, they employed different sources than executives and paid special attention to risk cues about new opportunities. The executives tended to focus on the economics of the opportunity. As success and experience increased, the differences became smaller.

Kamm, J. B., & Nurick, A. J. 1993. The stages of team venture formation: A decision-making model. Entrepreneurship Theory & Practice, 17(2): 17-28.

A model of multi-founder organizational formation assumes that organizations emerge in stages, following an a priori sequence of transitions. The idea stage comes first. In it, individuals or groups within the context of their social networks make decisions about the business concept and what is needed to implement it. The 2nd stage consists of implementation decisions, including who will supply resources, what inducements will be used to attract more partners if necessary, and how the team will be kept together. Feedback loops indicate that the process may return to the concept and implementation needs decisions, depending on the choices made at certain critical points.

Katz, J. A. 1993. The dynamics of organizational emergence: A contemporary group formation perspective. Entrepreneurship Theory & Practice, 17(2): 97-101.

Contributions from social pyschology to the study of entrepreneurship, especially the process of organizational emergence, are outlined. The major topics covered are role theory, the minimal group paradigm reported by Tajfel and others, the new plant works of Lawler and others, and recent advances in conceptualizing task group emergence reported by Gersick.

Katz, J., & Gartner, W. B. 1988. Properties of emerging organizations. Academy of Management Review, 13(3): 429-441.

An attempt is made to examine the interaction between entrepreneurship and organization theory in order to generate an understanding of the properties of emerging organizations and to offer avenues for further research. McKelvey's (1980) definition of organizations offers 4 main properties of organizations (including those in the process of creation): 1. intentionality, 2. resources, 3. boundary, and 4. exchange. These properties have both structural and process characteristics and are the minimum needed to identify the existence of an organization. Since the identification of firms using boundary and exchange processes has been considered in much detail, the properties of intention and resources are

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focused upon as alternative means of identifying new organizations. Using these 4 properties as guidelines for identifying and choosing emerging organizations has implications for both methods and theory in organization theory and entrepreneurship. It is noted that this perspective is a micro perspective.

Larson, A. 1992. Network dyads in entrepreneurial settings: A study of governance of exchange relationships. Administrative Science Quarterly, 37(1): 75-104.

Social control in network organizational forms is examined through an inductive field study of a sample of dyadic relationships established by high-growth entrepreneurial firms. The social dimensions of the transactions are central in explaining control and coordination in the exchange structures. A process model of network formation is presented that highlights the importance of reputation, trust, reciprocity, and mutual interdependence. The network form is proposed as an alternative to vertical integration for high-growth entrepreneurial firms. The key goal for resource-poor entrepreneurial organizations is to build network exchange structures with outsiders that are identified as critical resource suppliers, and that can stabilize the new firm as a player in its targeted markets. The findings also contain implications for studying network modes of economic exchange such as research and development partnerships, cooperative marketing agreements and other forms of strategic alliances and joint ventures.

Lumpkin, G. T., & Dess, G. G. 1996. Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1): 135-172.

The nature of the entrepreneurial orientation (EO) construct is clarified, and a contingency framework is proposed for investigating the relationship between EO and firm performance. The dimensions of EO are explored and refined, and the usefulness of viewing a firm's EO as a multidimensional construct is discussed. Drawing on examples from the EO-related contingencies literature, alternative models (moderating effects, mediating effects, independent effects, interaction effects) are suggested for testing the EO-performance relationship.

Romanelli, E. 1991. The evolution of new organizational forms. Annual Review of Sociology, 7: 79-103.

Recent research examines how new forms of social organization arise and become established in the community. Three views of social organization are discussed: the organizational genetics view, the environmental conditioning view and the social systems view.

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Barry, C. B. 1994. New directions in research on venture capital finance. Financial Management, 23(3): 3-15.

Empirical evidence on venture capital is not easy to develop because of the private nature of venture capital firms and their investments. Nevertheless, recent work has tapped into existing databases and led to the development of some new ones, paving the way for further work. Recent findings are examined, particularly models and empirical work about the staging of financing, the use of syndicates, the process of screening investments, and the participation by venture capitalists in initial public offerings (IPO). Much has been learned about the contracting technology that permits venture capitalists to manage their dual roles as agents with respect to their limited partner-investors and as principals with respect to entrepreneurs in their portfolio firms. Although recent work explains what venture capitalists do, it does not show whether those activities in fact create value.

Barry, C. B., Muscarella, C. J., Peavy, J. W., & Vetsuypens, M. R. 1990. The role of venture capital in the creation of public companies. Journal of Financial Economics, 27: 447-471.

An exhaustive set of initial public offerings (IPO) by venture-capital-backed companies between 1978 and 1987 is examined. It is found that venture capitalists specialize their investments in firms to provide intensive monitoring services. Consistent with their monitoring role, the venture capitalists take concentrated equity positions, maintain their investment beyond the IPO, and serve on the boards of their portfolio firms. The quality of their monitoring sevices appears to be recognized by capital markets through lower underpricing for IPOs with better monitoring. Taken as a whole, the empirical evidence shows that venture capitalists, as large blockholders, play an important role in shaping and governing new enterprises.

Bruno, A., & Tyebjee, T. 1985. The entrepreneur’s search for capital. Journal of Business Venturing, 1: 61-74.

Five studies were undertaken to identify and evaluate the factors that impinge upon the entrepreneur's search for venture capital. Results imply the need for: 1. division of ownership among multiple founders in a way that reflects past, present, and future contributions to success, 2. significant previous experience on the part of founders, 3. a management team that is well rounded in technical and management skills, 4. early planning, 5. recognition of the significant cost of outside capital in terms of relinquished equity, 6. recognition of the dramatic effect of outside capital on growth, and 7. realization of the possibilities for raising venture capital besides the venture capital firm. Venture capital can supply a far greater infusion of capital than can other sources, but the management expertise accompanying it is more expensive in terms of the share of equity that must be given up.

Busenitz, L. W. 1996. Research on entrepreneurial alertness. Journal of Small Business Management, 34(4): 35-44.

In taking an economic and behavioral approach, Kaish and Gilad (1991) recently tested Kirzner's (1973) theory of alertness which asserts that entrepreneurs are more alert to new opportunities and use information differently. Because of the lack of generalizable samples and the exploratory nature of the Kaish and Gilad study, the current research replicated and developed some of the scales originally developed by them. Results indicate that little empirical support exists for this theoretical framework, but the measures of entrepreneurial alertness need further development. Empirical and theoretical implications are discussed along with the roles of exploratory and replication research in a vibrant discipline like entrepreneurship.

Busenitz, L. W., Moesel, D. D., Fiet, J. O., & Barney, J. B. 1997. The framing of the perceptions of fairness in the relationship between venture capitalists and new venture teams. Entrepreneurship Theory & Practice, 21(3): 5-21.

A paper investigates how a variety of conditions in place at the time of first-round funding can frame a new venture team's (NVT) perception of the fairness of its relations with its venture capitalists (VC). A

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major finding of the research is that the indiscriminant use of contractual covenants can adversely frame a NVT's perception of how fairly it is treated by its VC, which ultimately could inhibit the former's receptivity to advice.

Cable, D. M., & Shane, S. 1997. A prisoner’s dilemma approach to entrepreneur-venture capitalist relationships. Academy of Management Review, 22(1): 142-176.

New business startups with venture capital backing depend on mutual cooperation between entrepreneurs and venture capitalists, but little is known about what makes these relationships work. A paper considers the implicit similarities between entrepreneur-venture capitalist relationships and the Prisoner's Dilemma framework, using this paradigm to develop a conceptual model of entrepreneurs' and venture capitalists' decisions to cooperate. The model is used to generate a number of testable propositions concerning long-term cooperation between entrepreneurs and venture capitalists. Implications of the model for researchers, entrepreneurs, and venture capitalists are discussed, and the paper concludes by examining implications of the entrepreneur-venture capitalist context for the traditional Prisoner's Dilemma framework.

Chan, Y. 1983. On the positive role of financial intermediation in allocation of venture capital in a market with imperfect information. Journal of Finance, 38(5): 1543-1581.

A theory of financial intermediation is developed that highlights the contribution of intermediaries as informed agents in a market with imperfect information. A venture capital market is considered where the entrepreneurs select the qualities of projects and their perquisite consumptions, about which the investors are imperfectly informed. It is shown that when all investors have positive search costs, the entrepreneurs are induced to offer unacceptable inferior projects. The investors will not enter the venture capital market, but will put their funds in other low-return investments - an undesirable allocation of resources. Attention is focused on the existence of financial intermediation equilibria when the market for intermediation services is competitive. It is shown that: 1. There cannot be a competitive intermediation equilibrium with very high institutional holdings. 2. In other cases, multiple equilibria may exist, but the one with the highest institutional holdings dominates the others in a Pareto sense.

Ehrlich, S. B., De Noble, A. F., Moore, T., & Weaver, R. R. 1994. After the cash arrives: A comparative study of venture capital and private investor involvement in entrepreneurial firms. Journal of Business Venturing, 9(1): 67-82.

Forty-seven venture capital-funded and private investor-funded entrepreneurs were surveyed about the relationship with their primary investors. Activities associated with levels of involvement, reporting and operational controls, and types of expertise sought by the entrepreneur were investigated. The results indicate that there are important distinctions between venture capitalists (VC) and private investors (PI) in terms of the value-added benefits they bring to entrepreneurial firms. While VCs provide higher performance standards for their investments, they also provide more frequent, detailed feedback than PIs when the firm is not achieving these standards. VCs provide assistance in selecting the venture's management team significantly more often than PIs. These findings suggest that a formalized VC approach may be needed by entrepreneurs with a strong technical background and limited managerial experience, while entrepreneurs with strong managerial experience may prefer PIs since they are less likely to alter the makeup of the team that they have assembled.

Fried, V. H., & Hisrich, R. D. 1988. Venture capital research: Past, present, and future. Entrepreneurship Theory & Practice, 13(1): 15-28.

Venture capital research since 1981 is examined. The review is limited to academic literature and covers 16 articles, 18 proceedings papers, and 5 book chapters. The research from 1981-1987 focuses on: 1. the portfolio of venture capital firms, 2. the investment decision, 3. operations, 4. strategy, 5. impact on the entrepreneur, and 6. public policy. The heaviest research emphasis has been on the portfolio and investment decision topics. A descriptive model of the venture capital process is developed to serve as an organizing framework for the research in the field. This research is mainly in the areas of the linkage

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between investor and venture capital firm, the relationship between the venture capital firm and the investee, and the operation of the venture capital firm. Suggestions for further research are made. In the venture capital firm level, they are in the areas of creating a firm, making and managing investments, and funding liquidation. In the investment process, they relate to: 1. search, 2. screening, 3. evaluation, 4. structure, 5. management stage, 6. liquidation, and 7. investee.

Fried, V. H., & Hisrich, R. D. 1994. Towards a model of venture capital investment decision making. Financial Management, 36(3):28-37.

In order to know whether the venture capital market allocates resources properly, it is necessary to understand how venture capitalists make investment decisions. A case study methodology is used to develop a model of the venture capital investment decision-making process. Generic criteria that venture capitalists use are identified. The venture capitalist investment decision-making process is designed to reduce the risk of adverse selection. A 6-stage process model is proposed: 1. origination, 2. venture capital firm-specific screen, 3. generic screen, 4. first-phase evaluation, 5. second-phase evaluation, and 6. closing. Different activities occur in each stage. It is argued that the venture capitalist provides both the supply-side and demand-side benefits to the market.

Gorman, M., & Sahlman, W. A. 1989. What do venture capitalists do? Journal of Business Venturing, 4(4): 231-248.

To explore the relationship between venture capitalists and their portfolio companies, a survey was mailed to 100 venture capitalists in 1984. The results of the study show that the 49 respondents spend about half their time monitoring 9 portfolio investments. Of these, 5 are firms they helped found and on whose board of directors they sit. For the companies on whose boards they serve, the capitalists usually invest 80 hours of on-site time and 30 hours of telephone time per year in direct contact with companies. Venture capitalists assist in fund raising, in strategic analysis, and in management recruiting. In cases of company failure, venture capitalists occasionally dismiss and replace current management. Usually, failures are attributed to problems in senior management; among nonmanagerial causes, product development was cited in half the cases.

MacMillan, I. C., & Siegel, R. M., & Subba Narashimha, P. N. 1987. Criteria distinguishing successful from unsuccessful ventures in the venture screen process. Journal of Business Venturing, 2(2): 123-137.

A study was conducted to determine which criteria are used by venture capitalists to evaluate venture proposals. Using 25 screening criteria and several performance criteria, 67 venture capital firms rated a total of 150 ventures. The groups of criteria included: 1. the venture team, 2. market characteristics, and 3. the product or service. Cluster analysis identified 3 classes of unsuccessful ventures, including a venture where the venture team is strong but the market is lost to competition because of a lack of protection for the product. Cluster analysis also identified 4 classes of successful ventures, such as the high-technology venture with a skilled venture team that has the staying power needed to face competitive attack. Regression analysis revealed 2 criteria as consistent predictors of venture success: 1. degree of competitive threat, and 2. degree of market acceptance of the product.

Megginson, W. C., & Weiss, K. A. 1991. Venture capitalist certification in initial public offerings. Journal of Finance, 46(3): 879-903.

Support is provided for the certification role of venture capitalists in initial public offerings (IPO). Consistent with the certification hypothesis, a comparison of venture capital backed IPOs with a control sample of nonventure capital backed IPOs from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in dramatically lower initial returns and gross spreads. In effect, the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm. In addition, it is shown that venture capitalists are not using the IPO as an opportunity to cash out of their holdings and

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realize a return on investment. Indeed, a majority of venture capitalists do not sell any of their holdings at the offer date.

Sapienza, H. 1992. When do venture capitalists add value? Journal of Business Venturing, 7(1): 9-27.

Venture capitalists functioning as lead investors and the entrepreneur-chief executive officers (CEO) of their portfolio companies responded to surveys concerning the rate of the venture capitalists' involvement in the ventures. A total of 51 matched pairs of lead investor-CEO surveys were returned, and interviews were conducted to clarify information. The findings indicated that the greater the level of innovation pursued by the venture, the more frequent the contact between lead investor and the CEO, the more open the communication, and the less conflict of perspective in the venture capitlist-CEO pair, the greater was value of the involvement. Neither the stage of the venture nor the CEO's experience had a significant impact on value added. The value of venture capitalists' involvement was also strongly correlated with venture performance.

Sapienza, H., & Gupta, A. K. 1994. Impact of agency risk and task uncertainty on venture capitalists CEO interaction. Academy of Management Journal, 37(6): 1618-1632.

A study examines the impact of agency risks and task uncertainty on venture capitalist-chief executive officer (VC-CEO) interaction. Results from 51 VC-CEO dyads indicate that the frequency of interaction depends on the extent of VC-CEO goal congruence, the degree of the CEO's new venture experience, the venture's stage of development, and the degree of technical innovation it is pursuing. However, contrary to conventional expectations, the degree of management ownership had no impact on the frequency of interaction.

Tyebjee, T. T., & Bruno, A. V. 1984. A model of venture capitalists investment activity. Management Science, 30(9): 1051-1066.

A model of deal flow in a venture capital firm, including the stages in the deal consideration, scrutiny, and disposition of venture investment deals, is presented. Venture capital deals are orderly processes of 5 sequential steps: 1. deal origination, 2. deal screening, 3. deal evaluation, 4. deal structuring, and 5. post-investment activities. A questionnaire was administered to 41 venture capitalists who provided data on a total of 90 deals. Factor analysis of questionnaire data determined 5 categories of activity: 1. market attractiveness, 2. product differentiation, 3. managerial capabilities, 4. environmental threat resistance, and 5. cash-out potential. Expected return is determined by market attractiveness and product differentiation. Perceived risk is determined by managerial capabilities and environmental threat resistance. The model, while simplistic, suggests that professional relationships with influential people help in locating capital, that the venture capital community is often smaller than it seems, and that venture capitalists differ in their choices of screening criteria. Marketing factors, product uniqueness, and management team quality are also crucial.

Zacharakis, A. L., & Meyer, G. D. 1998. A lack of insight: Do venture capitalists really understand their own decision process? Journal of Business Venturing, 13(1): 57-76.

The venture capitalist (VC) decision process receives much attention within entrepreneurship literature. The majority of these studies rely on post hoc methodologies to capture the decision process. Post hoc methods assume that VCs can accurately relate their decision processes, but studies from cognitive psychology suggest that people, in particular experts, are poor at introspecting. Introspection typically suffers from rationalization and post hoc recall biases. As such, past research may be misleading. Using social judgment theory and the associated lens model as a framework, a study investigates how well VCs introspect. It appears that VCs do not have strong insight, especially when confronted with information-rich situations such as they face in making an investment decision.

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Aldrich, H. E. & Auster, E. 1986. Even dwarfs start small: Liabilities of age and size and their strategic implications. Research in Organizational Behavior, 8: 165-198.

This paper links the organizational ecology and business strategy literatures by focusing on liabilities of age and size and their strategic implications. The first section discusses external and internal liabilities associated with age and size. The authors argue that the strengths of large, old organizations are often the weaknesses of small, new organizations and vice versa. The second section of the paper considers population-level and organizational-level strategic implications of liabilities of age and size. Loose coupling strategies such as subcontracting, and franchising and emulation strategies such corporate entrepreneurship are examined. At the population level, these strategies create new forms which may improve the viability of whole populations of organizations. At the organizational level these strategies may help larger, older organizations and newer, smaller organizations compensate for their weaknesses.

Aldrich, H. E., & Fiol, M. 1994. Fools rush in? Conditions affecting entrepreneurial strategies in new organizations. Academy of Management Review, 19(4): 645-670.

New organizations are always vulnerable to the liabilities of newness, but such pressures are especially severe when an industry is in its formative years. One set of constraints is focused upon facing entrepreneurs in emerging industries - their relative lack of cognitive and sociopolitical legitimacy. The strategies that founders can pursue are examined, and suggestions are made on how their successful pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping industry and institutional environments.

Boeker, W. 1989. Strategic change: The effects of founding and history. Academy of Management Journal. 32(3): 489-515.

Strategy theorists are interested in the evolution of organizational strategy and the extent to which strategy is amenable to change. A model was tested on 51 semiconductor producers operating in 1984 in the Santa Clara-San Jose area of California. Data were gathered from: 1. personal interviews with top managers, 2. information collected by 3 of the 4 largest market research firms serving the industry, and 3. information from articles in the electronics and business press. Results indicate that conditions at founding, including the extent to which an initial strategy is dominant, the distribution of functional influence is aligned with the dominant strategy, and a firm is owned by its founding managers, help to form the strategy of a firm by building internal consensus around a given approach. Conditions subsequent to founding, including an organization's performance, its age, and the length of the tenure of its founding entrepreneur, also influence the degree to which a founding strategy endures. Managers of organizations must recognize that they operate within constraints, many of which come from the initial establishment of structures, routines, and repertories that become institutionalized over the years.

Bruderl, J., Preisendorfer P., & Ziegler, R. 1992. Survival chances of newly founded business organizations. American Sociological Review, 57: 227-242.

Hypotheses about the survival of newly formed business organizations were examined. The number of employees, amount of capital invested and organizational strategies were the most important factors determining survival.

Brush, C. G., & Chaganti, R. 1996. Cooperative strategies in non-high-tech new ventures: An exploratory study. Entrepreneurship Theory & Practice, 21(2): 37-54.

Cooperative strategies are of growing interest in entrepreneurship. Differences in distinct competencies based on technology suggest that lessons from high-tech companies may not fully apply to non-high-tech companies. This research explores the nature, extent, and approaches to cooperative strategies in non-high-tech new ventures, utilizing quantitative and qualitative methods. Survey data is analyzed to assess usage and characteristics of cooperative strategies. Results show that few companies used cooperative strategies and these were not central to core operations. Field interviews comparing 3 non-high-tech and 3 high-tech new ventures examine motives and approaches to cooperative strategies. For all 6 cases,

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resource constraints motivated usage of cooperative strategies and all had cooperative arrangements with competitors. However, goals and approaches to cooperative strategies differed between non-high-tech and high-tech businesses.

Carter, N. M., Stearns, T. M., Reynolds, P. D., & Miller, B. A. 1994. New venture strategies: Theory development with an empirical basis. Strategic Management Journal, 15: 537-554.

The strategy focus of over 2,500 new ventures across 6 different industries was examined to identify what dimensions coalesce into distinct configurations. The supposition that traditional strategy typologies are inadequate to describe the breadth of differentiation exhibited among new ventures was supported. Factor and cluster analysis revealed 6 generic new venture strategy archetypes that can be distinguished along 2 dimensions: 1. scope of segmentation, and 2. product versus marketing emphasis. The extent to which the archetypes tend to dominate in different industries was found to vary according to the industry's position on the industry supply chain. Strategies with a narrow scope of segmentation tended to prevail in industries near the end of the supply chain, whereas those that adopted a broad approach tended to predominate in industries near the beginning or middle of the supply chain.

Chandler, G. N., & Hanks, S. H. 1994. Market attractiveness, resource-based capabilities, venture strategies, and venture performance. Journal of Business Venturing, 9(4): 331-349

Variables are identified that should be related to venture performance. It is hypothesized that both market attractiveness and resource-based capabilities are directly related to new venture performance. Also, specific resource-based capabilities are hypothesized to be directly related to the competitive strategies selected by a firm. The sample consisted of 155 manufacturing firms. As hypothesized, perceived market attractiveness and the overall abundance of resource-based capabilities were significantly related to venture performance. In 2 of the 3 cases, the evidence suggests that specific resource-based capabilities are related to the firm's stated competitive strategies. Although the relationship between fit and performance is not supported in all cases, the performance of the emerging manufacturing ventures included in the sample appears to be enhanced when resource-based capabilities are supportive of a cost leadership strategy.

Cooper, A. C. 1993. Challenges in predicting new firm performance. Journal of Business Venturing, 8(3): 241-253.

The growing number of research studies examining predictors of new venture performance have, to date, met with mixed success. Analysis is presented of some of the underlying challenges in modeling new firm performance. Environmental uncertainty and the narrow resource base of each firm make it difficult to forecast individual venture performance. The noneconomic goals pursued by some entrepreneurs add to the challenge, as do the possible variations by type of firm and level of performance. Effectiveness of past research has been limited by emphasis upon accessible variables, rather than those really driving performance. These challenges are examined and directions for future research are suggested.

Cooper, A. C., Gimeno-Gascon, F., & Woo, C. 1994. Initial human and financial capital as predictors of new venture performance. Journal of Business Venturing, 9(5): 371-395.

A study develops a predictive model of new venture performance based upon measures of human and financial capital, discernible at the time of start-up. The importance of initial conditions and resources in predicting future behavior and performance is emphasized by both imprinting theory and path-dependence theory. The study utilizes a longitudinal study of 1,053 new ventures, representative of all industry sectors and geographical regions. Using a multinomial logit model, the study achieves strong predictive power as indicated by the close fit between predicted and actual frequencies pertaining to the outcomes of failure, marginal survival, and growth.

Covin, J. G., & Slevin, D. P. 1990. New venture strategic posture, structure, and performance: An industry life cycle analysis. Journal of Business Venturing, 5(2): 123-135.

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The strategic postures, structural forms, and performance levels of new ventures in emerging, growing, and mature industries are analyzed using data obtained from senior executives in 90 new ventures. Discriminant and correlation analyses were used to test 4 hypotheses. The results indicate that strategic posture and organizational structure vary significantly over the industry life cycle. New ventures in emerging industries have the most entrepreneurial strategic postures and the most organic organizational structures. The industry life cycle moderates the strength of the relationship between new venture performance and both strategic posture and organizational structure. The results show that the correlations between a firm's performance and its strategic posture and organicity scores are more significantly positive among new ventures in emerging industries than among new ventures in mature industries.

Dean, T. J., Brown, R. L., & Bamford, C. E. 1998. Differences in large and small firm responses to environmental context: Strategic implications from a comparative analysis of business formation. Strategic Management Journal, 19(8): 709-728.

Despite growing recognition of some strategic advantages held by small firms, little comparative research has been performed on the advantages and disadvantages accruing to firm size. In order to delineate the differential responses of small and large businesses to their environmental context, A comparative analysis was done of the impact of industry structural characteristics on the formation of large and small businesses in a large sample of US manufacturing industries from 1977 to 1987. The results suggest that small businesses possess certain resources that allow them to overcome some barriers which create greater difficulties for their larger counterparts, as well as allow small businesses to exploit certain industry opportunities more readily than larger ones.

Dean, T. J., & Meyer, G. D., & DeCastro, J. 1993. Determinants of new firm formations in manufacturing industries: Industry dynamics, entry barriers, and organizational inertia. Entrepreneurship Theory & Practice, 17(2): 49-60.

The ideas of Austrian economists, industrial organization economists, and organizational theorists are used to build a model of new-firm creation in manufacturing industries. Market dynamics create disequilibrium and profit opportunities for entrepreneurs. Whether available opportunities are exploited by existing firms or through the founding of new firms is dependent on the constraints on each of these types of entrepreneurs. Entry barriers tend to constrain new firms and therefore decrease the relative occurrence of new business formations. Organizational inertia acts as a constraint on existing firms and thereby encourages the creation of new organizations.

Feeser, R. H., & Willard, G. E. 1990. Founding strategy and performance: A comparison of high and low growth high tech firms. Strategic Management Journal, 11(2): 87-98.

Potential explanations for differences in performance levels between high-growth firms and low-growth firms operating in the same industry were sought by comparing the firms' founding strategies. The term founding strategies refers to the characteristics and experiences of the entrepreneurs who establish the firm and to the decisions regarding markets, technologies, and competitive postures to be pursued by the firms. The founding strategies of 39 firms in the computer industry that have grown very rapidly were compared to those of 39 similar firms that have grown much less vigorously. The results indicated systematic differences among high- and low-growth firms. For example, it was found that the initial product-market focus of high-growth firms, compared to that of their low-growth counterparts, tends to be much more stable.

Garvin, D. A. 1983. Spin-offs and the new firm formation process. California Management Review, 35(2): 3-20.

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Spin-off companies are formed when entrepreneurs in an existing industry form a new firm within the same industry. Most studies that have attempted to determine the conditions conducive to the formation of spin-offs have focused on the high technology industry. However, spin-offs have occurred within a wide variety of manufacturing and service industries. A broader view of spin-off formation can be obtained by examining the emerging and mature phases of the industry life cycle. During the emerging phase, individuals within an industry possess information on product demand and technological change that is not readily available to individuals outside the industry. If demand is high, entry barriers are low, and technology is transferable, spin-offs are likely to occur. These conditions are not present during an industry's mature phase, in which product design is established, production volumes are high, and large economies of scale predominate.

Gimeno, J., Folta, T. B., Cooper, A. C., & Woo, C. Y. 1997. Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly, 42(4): 750-783.

A model is developed which explains why some firms survive while other firms with equal economic performance do not. It is argued that organizational survival is not strictly a function of economic performance but also depends on a firm's own threshold of performance. The model is applied to a study of new venture survival, in which the threshold is determined by the entrepreneur's human capital characteristics, such as alternative employment opportunities, psychic income from entrepreneurship, and cost of switching to other occupations. Strong support for the model is found. The findings suggest that firms with low thresholds may choose to continue or survive despite comparatively low performance.

McDougall, P. P., Covin, J. G., Robinson, R. B., Jr., & Herron, L. 1994. The effects of industry growth and strategic breadth on new venture performance and strategy content. Strategic Management Journal, 15(7): 537-554.

A sample of 123 independent new ventures was classified into 4 industry growth/strategic breadth categories. High growth industry environments were found to provide a favorable environment for new ventures to achieve sales growth, but the highest sales growth rates were exhibited by new ventures pursuing broad breadth strategies in high growth industries. One-way ANOVA and contrast tests were also used to identify whether specific strategic variables varied across the 4 industry growth/strategic breadth combinations. New ventures in high growth industries chose to enter on a larger, more aggressive scale and placed more emphasis on new product development than those entering low growth industries. Broad breadth strategy ventures had higher levels of advertising and promotion expenses and placed greater emphasis on the dominance of marketing expertise in their top management team, developing new channels of distribution, and on brand name recognition. Ventures pursuing focus strategies emphasized specialty products and were less cost conscious.

McDougall, P., & Robinson, R. 1990. New venture strategies: An empirical investigation of eight ‘archetypes’ of competitive strategy for new entry. Strategic Management Journal, 11(6): 447-467.

New venture chief executive officers (CEO) from the information processing industry were asked to describe their competitive strategy for entry. Surveys were mailed to 2,552 potential new venture businesses or business units using addresses obtained from Dun and Bradstreet; 269 were returned. Factor and subsequent cluster analysis uncovered 8 different "archetypes," including: 1. aggressive growth via commodity type products to numerous markets with small customer orders, 2. aggressive growth via price-competitive new products to large customers, 3. aggressive growth with narrow, special products priced competitively to a few large buyers, 4. controlled growth with a broad product range to many markets and extensive backward integration, 5. controlled growth via premium-priced products sold directly to consumers, 6. limited growth in small niches offering a superior product and high customer service, 7. average growth via steady development of new channels, brand/name identification, and heavy promotion, and 8. limited growth selling infrequently purchased products to numerous markets with some forward integration.

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McDougall, P. P., Robinson, R. B., Jr., & DeNisi, A. S. 1992. Modeling new venture performance: An analysis of new venture strategy, industry structure, and venture origin. Journal of Business Venturing, 7(4): 267-289.

A study examined the relative role of strategy, industry structure, and origin (independent versus corporate or parental venture) on the profitability and growth of 247 new ventures in 2 segments of the information processing industry: computer-related and communications-related equipment manufacturing. From a theoretical perspective, the study found that variability in new venture performance was better "accounted for" when all 3 factors were included in a statistical model. Overall, these results suggested that new venture strategy and industry structure and their interaction are essential for understanding new venture performance while origin is more important in explaining market share growth than higher profitability. The study uncovered 8 basic strategy patterns across the 247 firms. The results suggest that no one strategy is always the best new venture strategy.

McGee, J. E., Dowling, M. J., & Megginson, W. L. 1995. Cooperative strategy and new venture performance: The role of business strategy and management experience. Strategic Management Journal, 16(7): 565-580.

The results of a study of new ventures which examine the relationships between performance and the experience of a new venture's management team, its choice of competitive strategy, and its use of various cooperative arrangements, are reported. The findings of the moderated regression analysis indicate that cooperative arrangements are most beneficial to those new ventures whose management teams possess the most experience. This study suggests that both the strategic behavior and transaction cost approaches are useful frameworks for analyzing the cooperative behavior of new high-technology ventures. Understanding the costs and benefits of such arrangements will continue to be an important area of research and of interest to practitioners.

McGrath, R. G. 1999. Falling forward: Real options reasoning and entrepreneurial failure. Academy of Management Review, 24(1): 13-30.

Although failure in entrepreneurship is pervasive, theory often reflects an equally pervasive anti-failure bias. Here, real options reasoning is used to develop a more balanced perspective on the role of entrepreneurial failure in wealth creation, which emphasizes managing uncertainty by pursuing high-variance outcomes but investing only if conditions are favorable. This can increase profit potential while containing costs. Propositions that suggest how gains from entrepreneurship may be maximized and losses mitigated are also offered.

Mintzberg, H., & Waters, J. 1982. Tracking strategy in an entrepreneurial firm. Academy of Management Journal, 25(3): 465-499.

To show strategy can be put into operation and to draw conclusions concerning strategy formation in the entrepreneurial firm that grows large and formalizes its structure, the strategies of a retail chain operation were tracked over 60 years of its history. The conclusions focus on contrasting characteristics of planning and entrepreneurship, and patterns of strategic change. The firm, Steinberg Inc., grew from a tiny fruit and vegetable store opened in Montreal, Quebec, in 1917 to a company with sales over $1 billion with such operations as 191 supermarkets, 119 small restaurants, 33 catalog stores, and 32 discount department stores. A paramount theme that emerges from the review of the Steinberg strategy is the presence of waves or cycles in the developmental process. It also shows how the proprietor's knowledge of the business can be effective, since it is concentrated in one individual who is fully in charge of the enterprise. This person must have a strong commitment to the organization, must have the ability to switch from the narrow to the broad perspective, and must have no interference from others.

Mitchell W. 1991. Dual clocks: Entry order influences on incumbent and newcomer market share and survival when specialized assets retain their value. Strategic Management Journal, 12(2): 85-100.

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Entry order analysis frequently shows that early entrants to an industry or technical subfield outperform laggards. However, some studies have found that late entrants prevail. A study tests dual-clock hypotheses of entry order effects on performance, measured both as market share and survival. One entry clock records the entry of all entrants to a new technical subfield of an industry, while a 2nd clock records the entry of industry incumbents. Relative to the appropriate clock, it is predicted that early entrants will outperform laggards, but when entry is measured on only one clock, the estimated influences may be inaccurate. Error will be particularly likely if a study contains a survivor bias. Entry timing trade-offs between market share and survival are found. The study, which finds timing trade-offs between market share and survival, is generalizable to cases in which a plausible set of conditions is found.

Morris, M. H., Avila, R. A., & Allen, J. 1993. Individualism and the modern corporation: Implications for innovation and entrepreneurship. Journal of Management, 19(3): 595-612.

Entrepreneurship can be defined as the process of creating value by bringing together a unique package of resources to exploit an opportunity. The extent to which entrepreneurship in established firms is the result of a more individualistic versus collectivistic culture is explored. Hypotheses are tested in which it is proposed that a curvilinear relationship exists between individualism-collectivism and corporate entrepreneurship. Findings are reported from a survey completed separately by 3 functional area managers in each of 84 industrial firms. The results support the hypotheses, such that entrepreneurship is the highest under conditions of balanced individualism-collectivism, and declines in highly individualistic and more collectivistic environments.

Patterson, W. C. 1993. First-mover advantage: The opportunity curve. Journal of Management Studies, 20(5): 759-777.

A study offers definitional clarification and proposes a theoretical model for addressing issues of first movership. A first mover is an organization which is first to employ a particular strategy within a context of specified scope. The model depicting first-mover dynamics is proposed wherein certain types of strategic barriers activated by the first-mover strategy figure prominently in preserving benefits in time dimension. Strategic barriers conferring singularity are considered to be the most effective preservers of first-mover advantage. The model and corresponding relationship are tested empirically in 6 industries: 1. automobile, 2. chemical, 3. computer, 4. insurance, 5. oil, and 6. retail. Consistent conformance of temporal benefits to the opportunity curve assumptions suggests that it is a highly generalizable function. Evaluation of opportunity curve parameters for the selected industries gives initial support to the view that temporal strategic barriers influence the rate of opportunity dissipation in a competitive context which, in turn, influences the magnitude of first-mover advantage.

Romanelli, E. 1989. Environments and strategies of organization start-up: Effects on early survival. Administrative Science Quarterly, 34(3): 369-387.

The effects of 2 factors - environmental resource and competitive conditions at the time of founding and strategies that an organization uses during its early years to exploit environmental conditions - are explored to find how they influence the likelihood of an organization's surviving its start-up years. The main hypotheses link changes in industry sales and changes in concentration ratios and early organizational strategies to the likelihood of early survival. Minicomputer producers in the US founded between 1957 and 1981 were located from several sources, and 108 firms were identified as established to produce minicomputers. Results show that, for most environmental conditions, specialist and aggressive strategies increase chances for early survival. Generalists do better than specialists when industry sales are increasing, and efficient organizations have higher likelihoods of early survival than aggressive organizations when industry sales are decreasing. It is suggested that founders can overcome hazards of start-up by tailoring strategies to environmental conditions.

Sandberg, W. R. & Hofer, C. W. 1987. Improving new venture performance: The role of strategy, industry structure, and the entrepreneur. Journal of Business Venturing, 2(1): 489-515.

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The traditional academic model of new venture performance argues that success is based solely on the characteristics of the entrepreneur. In contrast to this, another model is presented and tested. The new model claims that success depends not only on the characteristics of the entrepreneur, but also on the structure of the industry entered and the strategy of the venture involved. Nineteen propositions about possible determinants of new venture performance were developed and tested with data from a sample of 17 ventures. Results indicated that new venture performance was influenced by both industry structure and venture strategy, as well as by the characteristics of the entrepreneur. It also was shown that the interaction of industry structure, strategy, and the entrepreneur had a greater impact on new venture performance than any of these variables by themselves.

Schein, E. H. 1983. The role of the founder in creating organizational culture. Organizational Dynamics, 12(1): 13-28.

Organizational culture results from the development of ideas that form a pattern of assumptions. These ideas stem from the business founder and are adopted or expounded upon by the founder's select group of close workers. Organizational culture adopted by new group members is evident in their shared perceptions, thoughts, and feelings towards external and internal business problems. A clear set of assumptions regarding formal business arrangements and internal relationships will prevail indefinitely in the organization, unless changed by a strong force, such as new managers. Through a series of methods acceptable to the group (i.e., teaching, organization philosophy and policies, and physical business limits), the founder embeds organizational culture in the group. Perceptions or solutions not shared by the group do not survive. The greatest problem for a first-generation firm with a strong founder-generated culture is in the transition to following generations with the organizational culture intact.

Schoonhoven, C. B., Eisenhardt, K. M., & Lyman, K. 1990. Speeding products to market: Waiting time to first product introduction in new firms. Administrative Science Quarterly, 35(1): 177-207.

The techniques of event-history analysis were used to examine the speed with which newly founded organizations ship their first products for revenues - an important entrepreneurial event. In a longitudinal study of new ventures in the US semiconductor industry, it was found that substantial technological innovation lengthens development times and reduces the speed with which first products reach the marketplace. Organizations that shipped their first product for revenues significantly faster than other ventures: 1. undertook lower levels of technological innovation, 2. had relatively lower monthly expenditures, 3. had a founding organization structure that included both a manufacturing and a marketing position, 4. had more competitors in the marketplace, and 5. were founded in the US' Silicon Valley region. No significant effects were found for venture capital ownership.

Singh, J. V., Tucker, D. J., & House, R. J. 1986. Organizational legitimacy and the liability of newness. Administrative Quarterly, 31(2): 171-193

The issue of whether external legitimacy or internal coordination processes more prominently underlie the liability of newness -- the higher propensity of younger organizations to die -- in a population of voluntary social service organizations is explored. Event-history analysis is employed to assess retrospective archival data from secondary sources and primary interview data. The findings demonstrate more support for the external legitimacy than for the internal coordination argument. Indicators reveal that forms of external legitimacy all significantly depress organizational death rates, whereas most internal organizational changes are unrelated to death rates. The exception is chief executive change, which decreases death rates, indicating that chief executive turnover may be adaptive. The lack of institutional support experienced by young organizations is one important reason behind the liability of newness in organizations.

Starr, J., & MacMillan, I. C. 1990. Resource cooptation via social contracting: Resource acquisition strategies for new ventures. Strategic Management Journal, 11(summer): 79-92.

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The role of social contracting strategies by independent and corporate entrepreneurs in acquiring the resources for new ventures is examined in 2 case vignettes. Venture managers in both independent start-ups and corporate ventures use social contracting as a means to resource cooptation - an approach to resource acquisition that is especially suited to the constraints of new ventures. In the cases, at least 2 major types of cooptation took place: coopting legitimacy and coopting underutilized goods. Social transactions-oriented venture managers coopt legitimacy by association and endorsement. Four classes of cooptation strategies for taking advantage of underutilized resources include: 1. borrowing strategies, 2. begging strategies, 3. scavenging strategies, and 4. amplifying strategies. There appear to be 4 types of strategies for building social assets: 1. sharing information, 2. solving and receiving help with problems, 3. giving and receiving favors, and 4. creating opportunities for people to show their skills.

Vanderwerf, P., & Mahon, J. F. 1997. Meta-analysis of the impact of research methods on findings of first-mover advantage. Management Science, 43(11): 1510-1519.

A long-standing hypothesis is that firms that enter a market early (first movers) tend have higher performance than their followers (first-mover advantage). Recently, researchers have begun to argue that the statistical tests that support this relationship are limited in their applicability. That is, it is suggested that because of the methods used, these tests show the relationship only for certain subsets of firms, markets, and types of performance. A meta-analysis is performed to determine whether the findings are in fact sensitive to the methods used. It is discovered that tests using market share as their performance measure were sharply and significantly more likely to find a first-mover advantage than tests using other measures (such as profitability or survival). Also significantly more likely to find an advantage are tests that sample from individually selected industries and those that include no measures of the entrants' competitive strength. Conversely, little evidence is found that survivor bias (the exclusion of nonsurviving entrants from the sample) affects a test's findings.

West, G. P., & Meyer, G. D. 1998. To agree or not to agree: Consensus and performance of new ventures. Journal of Business Venturing, 13(5): 395-422.

Top management consensus on issues perceived to be important by the CEOs of technology-based entrepreneurial companies bears no relationship to firm performance. However, in dynamic environments and in earlier life cycle stages, disagreement on strategic issues of lesser importance to the CEO is significantly and negatively related to perceived performance. Entrepreneurship is considered to thrive in a world of ideas; it entails the creation of uncertainty by challenging the status quo with new ideas and alternatives. For new ventures and for corporate entrepreneurship efforts, the implications include the need to manage the ongoing generation of competing ideas, even in earlier stage development.

Willard, G. E., Krueger, D. A., & Feeser, H. 1992. In order to grow, must the founder go? A comparison of performance between founder and non-founder managed high-growth manufacturing firms. Journal of Business Venturing, 7(3): 181-194.

Conventional wisdom and much of the entrepreneurship-small business literature hold that rapidly growing new firms quickly outgrow the founder's managerial capacity. Unless the founder is replaced or supplemented by professional management, performance is predicted to stagnate or decline rapidly. To empirically test this conventional wisdom, a group of founder-managed high-growth firms was compared with a group of similar but professionally managed firms. Overall, no significant differences in performance were found between founder-managed and professionally managed firms in this study. On average, founder-managed firms were somewhat smaller and were growing at a slightly lower rate. Founder-managed firms also showed higher rates of profitability. Employee productivity was virtually identical for both groups of firms. Share price performance of professionally managed firms exceeded that of founder-managed firms by more than was expected, but the difference was not significantly different from zero.

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Barringer, B. R., & Bluedorn, A. C. 1999. The relationship between corporate entrepreneurship and strategic management. Strategic Management Journal, 20(5): 421-444.

The relationship between corporate entrepreneurship intensity and five specific strategic management practices in a sample of 169 US manufacturing firms is examined. The five strategic management practices include: 1. scanning intensity, 2. planning flexibility, 3. planning horizon, 4. locus of planning, and 5. control attributes. A positive relationship exists between corporate entrepreneurship intensity and scanning intensity, planning flexibility, locus of planning, and strategic controls. The fine-grained nature of these results may be of practical use to firms that are trying to become more entrepreneurial and may help researchers better understand the subtleties of the interface between strategic management and corporate entrepreneurship.

Burgelman, R. A. 1983. A process model of internal corporate venturing in the diversified major firm. Administrative Science Quarterly, 28(2): 223-244.

Research was conducted at a diversified, high-technology firm in the US to investigate the process by which major diversified firms transform research and development (R&D) activities into new businesses through internal corporate venturing (ICV). Data were collected from the firm's 6 major ICV projects in progress. Employees were interviewed, documents were studied, and behavioral observations were made. The study identified 4 stages of ICV development: 1. conceptual, 2. pre-venture, 3. entrepreneurial, and 4. organizational. Findings suggest that the impetus of corporate entrepreneurship lies in the autonomous strategic initiatives of individuals at the organization's operational levels. Autonomous initiatives are likely to meet serious difficulties in the diversified major firm. Middle-level managers play a key role in the strategy-making process in the diversified major firm, while corporate management's role in the ICV process seems to be limited to the retroactive rationalization of autonomous strategic initiatives.

Burgelman, R. A. 1984. Designs of corporate entrepreneurship in established firms. California Management Review, 25(2): 33-48.

Corporate entrepreneurship involves extending the company's domain of competence and corresponding opportunity set through internally generated new resource combinations. A new model of strategic behavior in large, established firms is presented that combines the traditional view of induced strategic behavior with the concept of autonomous strategic behavior. This model suggests that corporate entrepreneurship consists of the interlocking strategic activities of managers at multiple corporate levels. A framework for assessing internal entrepreneurial proposals is presented that focuses on a proposal's strategic importance and operational relatedness. Once a proposal is adopted, combinations of administrative and operational linkages are determined, leading to an organization design for structuring the relationship between the new business and the corporation. Nine design alternatives are discussed, along with 3 potential problems that must be overcome prior to implementing any design.

Burgelman, R. A. 1984. Managing the internal corporate venturing process. Sloan Management Review, 25(2): 33-48.

A model of the internal corporate venturing process is presented which describes the simultaneous and sequential managerial activities that guide internal entrepreneurship. The model allows identification of major problems which hamper corporate innovation. Managers need resources to demonstrate the feasibility of a new venture. However, top management may be unwilling to allocate resources until feasibility is ensured. Once a new venture is established, managers may be faced with the dilemma of maximizing the present profitability of the new venture, while building its long-run functional capability. The internal venturing process is also frequently plagued by a corporate strategy which does not include innovation as a strategic objective. Finally, venture managers may not be properly rewarded for risk-taking. Top management must realize that new ventures take substantial time to develop and become profitable.

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Covin, J. G., & Slevin, D. P. 1991. A conceptual model of entrepreneurship as firm behavior. Entrepreneurship Theory & Practice, 16(1): 7-23.

The adoption of a firm-behavior model of entrepreneurship has a number of advantages, including the fact that behaviors, not attributes, are what give meaning to the entrepreneurial process. A proposed model of entrepreneurship as firm behavior shows the antecedents and consequences of an entrepreneurial posture, as well as the variables that moderate the relationship between entrepreneurial posture and firm performance. External variables in the model are: 1. environmental technological sophistication, 2.environmental dynamism, 3. environmental hostility, and 4. industry life cycle stage. Strategic variables include the mission strategy and the firm's business practices and competitive tactics. Internal variables are: 1. top management values and philosophies, 2.organizational resources and competencies, 3. organizational culture, and 4.organizational structure. The level at which a firm performs may also affect its entrepreneurial posture.

Galbraith, J. R. 1982. Designing the innovating organization. Organization Dynamics, 10(3): 5-25.

The innovating organization is one that recognizes and formalizes the roles, processes, rewards, and people practices that naturally lead to innovations. The organization that purposely designs these roles and processes is more likely to generate innovations than is an organization that does not plan for this function. Because innovation is destructive to many established groups, it will be fought. To overcome these obstacles, managers have tried to: 1. create venture groups, 2. hire some entrepreneurs, 3. create ''breakthrough'' funds, or 4. offer special incentives. It is the combination of: 1. idea people, 2. atmospheres in which they can operate, 3. sponsors to supervise them, 4. funds for their ideas, and 5. rewards for their success, that increase the odds in favor of innovation. A consistent combination of all these practices will create an innovating

Garud, R., & Vand de Ven, A. 1992. An empirical evaluation of the internal corporate venturing process. Strategic Management Journal, 13(special): 93-109.

A model of the internal corporate venturing process is developed. The model explores conditions under which entrepreneurs are likely to continue with a course of action despite experiencing negative outcomes. Persisting with a course of action despite associated negative outcomes runs counter to trial-and-error learning behavior. Entrepreneurs are likely to continue with a course of action despite experiencing negative outcomes when the level of ambiguity is high and slack resources are available. In contrast, trial-and-error learning is likely to occur when either the level of ambiguity is low or when slack resources are unavailable. Data collected over a 12-year period during the commercial development of cochlear implants within a large diversified corporation are used to examine the venturing process. The results suggest that trial-and-error learning may be accompanied by an "opening up" of the entrepreneurial process to external sources of influence from corporate sponsors and the environment.

Guth, W. D. 1995. Theory from field research on firm-level entrepreneurship: A normal science overview. Entrepreneurship: Theory & Practice, 19(3): 169-173.

From the perspective of normal science, the contribution to corporate entrepreneurship theory made by several journal articles are highlighted. Suggestions about further research are presented to develop each contribution into empirically refutable theory, with both explanatory and predictive power, or empirically to establish its credibility and range of applicability.

Guth, W. D., & Ginsberg, A. 1990. Guest editor’s introduction: Corporate entrepreneurship. Strategic Management Journal, 11: 5-15.

The topic of corporate entrepreneurship encompasses two types of phenomena and the processes surrounding them: 1) the birth of new businesses within existing organizations, i.e. internal innovation or venturing; and 2) the transformation of organizations through renewal of the key ideas on which they are built, i.e. strategic renewal. Studies of corporate entrepreneurship have tended to focus on internal

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innovation or venturing, but studies of strategic renewal will command increasing attention in corporate entrepreneurship. Authors provide a model outline the domain of corporate entrepreneurship.

Hisrich, R. D., & Peters, M. P. 1986. Establishing a new venture business unit within a firm. Journal of Business Venturing, 1(3): 307-322.

A study was conducted to determine what characteristics are needed to make a business venture unit successful. Data were collected from a mail survey sent to Fortune 1,000 firms and from in-depth interviews with 30 managers of new business venture units. The survey revealed that only 30% of the firms had a new business venture unit and that the average age of a unit was 5.3 years. Companies that tended to have new business venture units included those with primary product lines in chemical and medical products, computers, beauty products, and feminine products. It also was found that the new business units had increased significantly the percentages of sales attributed to products introduced within the previous 3 years. A good environment for a successful unit: 1. encouraged new ideas, 2. allowed mistakes, 3. provided resources, 4. promoted teamwork, and 5. had broad performance goals.

Hornsby, J. S., Naffziger, D. W., Kuratko, D. F., & Montagno, R. V. 1993. An interactive model of the corporate entrepreneurship process. Entrepreneurship Theory & Practice, 17(2): 29-37.

A review of the intrapreneurship and entrepreneurship literature suggests that there may be consistent organizational and individual characteristics that lead to intrapreneurial behavior. To date, there is very little research that attempts to establish a theoretical framework or model that outlines the various components, including individual and organizational characteristics that affect the corporate entrepreneurial process. A model that explains how organizational and individual characteristics interact with a precipitating event to lead to successful intrapreneurship is presented.

Jones, G. R., & Butler, J. E. 1992. Managing internal corporate entrepreneurship: An agency theory perspective. Journal of Management, 18(4): 733-749.

Entrepreneurship is the process by which firms notice opportunities and act, by creatively organizing transactions between factors of production, to create surplus value. Using concepts from information and agency theory, the issue of how agency problems affect the dynamics of internal corporate entrepreneurship and the level of entrepreneurial behavior is examined. The relationship between internal corporate and external entrepreneurship is explored, and the organizational factors that cause agency problems are examined. In addition, solutions to agency problems are suggested that also promote internal corporate entrepreneurship. The theoretical framework discussed helps place entrepreneurship and entrepreneurial behavior within the mainstream of strategic management. It illustrates how entrepreneurship is central to the value-creation process and demonstrates that the main issue facing firms is to manage the entrepreneurship-management link.

Kuratko, D. F., Montagno, R. V., & Hornsby, J. S. 1990. Developing an entrepreneurial assessment instrument for an effective corporate entrepreneurial environment. Strategic Management Journal, 11(summer): 49-58.

The implementation of corporate entrepreneuring or intrapreneurship is becoming an important activity for growth-oriented businesses. However, very little empirical research has been done to measure the effectiveness of an environment or culture for the implementation of intrapreneurial ideas. A study attempted to assess the factor structure of intrapreneurship culture through the development of the intrapreneurship assessment instrument (IAI). The IAI was used to assess the effectiveness of an ongoing intrapreneurship training program in a Fortune 500 company in the Midwest. The data were collected from 111 low- to mid-level managers of the Associated Group, formerly Blue Cross/Blue Shield of Indiana. The results demonstrated support for the existence of an underlying set of environmental factors that must be recognized by organizations introducing intrapreneurial concepts. Three factors were identified: management support for intrapreneurship, organizational structure, and resource availability.

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Russell, R. D. & Russell, C. J. 1992. An examination of the effects of organizational norms, organizational structure, and environmental uncertainty on entrepreneurial strategy. Journal of Management, 18(4): 639-656.

A measure of the innovation management process was designed and examined in its relationship to innovation, as measured by effective entrepreneurial strategy, in combination with measures of organizational structure and environment. Survey responses from 77 strategic business units were analyzed. Innovation norms and environmental uncertainty explained significant variance in entrepreneurial strategy. Correlations between the strategy's success and both organizational structure and environmental uncertainty approach zero when innovation-related norms are partialled out. As a result, innovation-related norms provide both a necessary and sufficient explanation of successful innovation strategies. Specifically, these norms, as an expression of organizational values and beliefs regarding innovation, may provide motivation and direction to pursue entrepreneurial strategy. In addition, the apparent role of innovation-related norms as a motivator may have important implications for research on archetypes of innovative firms.

Shrader, R. C., & Simon, M. 1997. Corporate versus independent new ventures: Resource, strategy, and performance differences. Journal of Business Venturing, 12(1): 47-66.

A study contrasts the resources, strategies, performance, and strategy-performance relationships between 2 types of ventures - corporate ventures (CV) and independent ventures (IV). The results confirm theories that CVs and IVs systematically differ in the resources they emphasize. However, these resources did not always translate into strategy in the manner anticipated. Whereas venture origin did not significantly influence venture performance, it did influence certain strategy-performance relationships.

Stopford, J, & Baden-Fuller, C. 1994. Creating corporate entrepreneurship. Strategic Management Journal, 15(7): 521-526.

The various types of corporate entrepreneurship - individual managers, business renewal and Schumpeterian, or industry, leadership - share 5 bundles of attributes. Each type can exist in one firm, though at different times as the common attributes change their role and relative importance. External and internal triggers for change are examined for a sample of 10 firms in 4 European industries. The data suggest a provocative conclusion: troubled firms in hostile environments can shed past behaviors, adopt policies fostering entrepreneurship and accumulate innovative resource bundles that provide a platform on which industry leadership can be built.

Zahra, S. A. 1996. Governance, ownership, and corporate entrepreneurship: The moderating impact of industry technological opportunities. Academy of Management Journal, 39(6): 1713-1735.

Corporate entrepreneurship is important for organizational survival, profitability, growth, and renewal. Data from 127 Fortune 500 companies show that executive stock ownership and long-term institutional ownership are positively associated with such entrepreneurship. Conversely, short-term institutional ownership is negatively associated with it, as is a high ratio of outside directors on a company's board. Outside directors' stock ownership somewhat mitigates the latter negative association. Outsiders, including stockholders, might lead companies away from internal product development, the traditional route of corporate entrepreneurship. Finally, an industry's technological opportunities moderate the associations observed between corporate governance and ownership variables and corporate entrepreneurship.

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Eisenhardt, K. M., & Schoonhoven, C. B. 1996. Resource-based view of strategic alliance formation: Strategic and social effects in entrepreneurial firms. Organization Science, 7(2): 136-150.

A study combines alternative social and strategic explanations for the alliance formation between companies. It was found that alliances form when firms are in vulnerable strategic positions either because they are competing in emergent or highly competitive industries or because they are attempting pioneering technical strategies. The findings were developed by extending the resource-based view of the firm to alliance formation and then examining the resulting hypotheses using product development alliances.

Harrigan, K. R. 1988. Joint ventures and competitive strategy. Strategic Management Journal, 9(2): 141-158.

A framework is presented for using joint ventures within varying competitive environments, and hypotheses are developed concerning the impact of particular industry traits upon companies' options in pursuing them. Industry examples illustrate the hypotheses. In the framework, demand traits indicate what types of cooperative strategies are needed. Competitor traits indicate how firms will respond to these needs for cooperation. The key environmental traits to consider when formulating cooperatives strategies are: 1. demand uncertainty, 2. customer traits, 3. infrastructure development, 4. production technology, 5. the volatility of competitive behavior, and 6. the nature and extent of linkages between the venture and its owners. Effective joint venture strategies must adapt to the forces exerted by these 6 traits. The form, focus, autonomy, and duration of firms' cooperative strategies will differ from industry to industry because of these traits.

Khanna, T., Gulati, R., & Nohria, N. 1998. The dynamics of learning alliances: Competition, cooperation, and relative scope. Strategic Management Journal, 19(3): 601-610.

It is shown how the tension between cooperation and competition affects the dynamics of learning alliances. Private benefits and common benefits differ in the incentives that they create for investment in learning. The competitive aspects of alliances are most severe when a firm's ratio of private to common benefits is high. A measure is introduced (relative scope) of a firm in an alliance to show that the opportunity set of each firm outside an alliance crucially impacts its behavior within the alliance.

Kogut, B. 1988. Joint ventures: Theoretical and empirical perspectives. Strategic Management Journal, 9(4): 319-332.

The perspectives of transaction costs and strategic behavior are compared in explaining the motivation to joint venture. The transaction cost approach is derived from the theory of transaction costs as developed by Williamson (1975, 1985). Its arguments are driven by cost-minimizing considerations, and joint ventures are analyzed as an efficient solution to the hazards of economic transactions. The strategic behavior perspective stems from theories concerning its influence on the firm's competitive positioning. It places joint ventures in the context of competitive rivalry and collusive agreements to enhance market power. A theory of joint ventures as an instrument of organizational learning is proposed. It views joint ventures as a means by which firms learn or seek to retain their capabilities. The perspectives provide distinct and occasionally overlapping explanations for joint venture behavior. The theories probably will apply differently according to contextual factors and the type of research questions being considered.

Niederkofler, M. 1991. The evolution of strategic alliances: Opportunities for managerial influence. Journal of Business Venturing, 6(4): 237-257.

A study examined the managerial shortcomings in the implementation of cooperative partnerships. The core hypothesis was that a major cause for cooperative failure is managerial, and thus, controllable and avoidable. An analysis of 6 cases yielded a theoretical model that describes the major factors affecting the evolution of strategic alliances. Negotiations must lay the foundation for a cooperative relationship by establishing a viable cooperation strategy on the basis of complementary resources and compatible

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interests. Conscious boundary-spanning must bridge existing organizational incompatibilities, promote the creation and maintenance of trust and goodwill, and deal with conflicts. Partners are subject to the forces of change altering their market positions and resources, which affect their interests in the alliance. Success in strategic alliances is closely associated with the ability to be flexible and adjust the cooperation to these changes, including the timely termination of the relationship.

Oliver, C. 1990. Determinants of interorganizational relationships: Integration and future directions. Academy of Management Review, 15(2): 241-265.

The literature on interorganizational relationships is integrated into 6 generalizable determinants of relationship formation: necessity, asymmetry, reciprocity, efficiency, stability, and legitimacy. Although the determinants may be a separate and sufficient cause of relationship formation, the decision to initiate relations with another organization is commonly based upon multiple contingencies. In order to illustrate the potential generalizability of the contingencies, 6 types of interorganizational relationships are examined - trade associations, voluntary agency federations, joint ventures, joint programs, corporate-financial interlocks, and agency-sponsor linkages. The results suggest that: 1. the critical contingencies of necessity, asymmetry, stability, and legitimacy are shaped mainly by external factors, 2. efficiency contingencies are influenced largely by internal factors and the cost of the relationship itself, and 3. reciprocity contingencies are affected mainly by the relative or comparative properties of the participants and their degrees of congruence with one another.

Ring, P. S., & Van de Ven, H. 1994. Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19(1): 90-118.

The developmental process of cooperative interorganizational relationships (IOR) that entail transaction-specific investments in deals that cannot be fully specified or controlled by the parties in advance of their execution is examined. A process framework is introduced that focuses on formal, legal, and informal social-psychological processes by which organizational parties jointly negotiate, commit to, and execute their relationship in ways that achieve efficient and equitable outcomes and internal solutions to conflicts when they arise. The framework is elaborated with a set of propositions that explain how and why cooperative IORs emerge, evolve, and dissolve. The propositions have academic implications for enriching interorganizational relationships, transaction cost economics, agency theories, and practical implications for managing the relationship journey.

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Hambrick, D. C., & Mason, P. A. 1984. Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2): 195-206.

Theorists in various fields have discussed characteristics of top managers; an attempt is made to synthesize this fragmented literature around a more general ''upper echelons perspective.'' A new emphasis in macro-organizational research on the dominant coalition of the organization, especially its top managers, is proposed. Organizational outcomes, both strategies and effectiveness, are regarded as reflections of the values and cognitive bases of powerful actors in the organization. It is expected that such linkages can, to some extent, be detected empirically. A model of how upper echelon characteristics may become reflected in organizational outcomes is introduced. Literature that has dealt with the upper echelons perspective is reviewed. A foundation and the stimulus for empirical research into the links between managerial backgrounds and organizational outcomes are provided; to accomplish this, some major variables of interest, propositions, and methodological suggestions are identified.

Kamm, J. B., Shuman, J. C., Seeger, J. A., & Nurick, A. J. 1990. Entrepreneurial teams in new venture creation. Entrepreneurship Theory & Practice, 14(4): 7-17.

An entrepreneurial team is defined as 2 or more individuals who jointly establish a business in which they have an equity interest. The objectives of research on entrepreneurial teams should be to: 1. address the gap in the entrepreneurship research field on venture teams, and 2. help prospective and practicing entrepreneurs form and maintain effective teams. To achieve the research objectives, several tasks must be undertaken: 1. defining the dimensions of entrepreneurial teams in order to map the territory, 2. identifying the problems and costs inherent in the formation and maintenance of effective teams, and 3. determining the success factors that compensate for, avoid, or overcome these problems. The most appropriate way to gather the data needed to conduct the research appears to be in-depth standardized interviews with as many members as possible of entrepreneurial teams. Each member should be interviewed individually. The sample must be large enough to encompass a variety of industries and geographic locations.

Katzenbach, J. R. 1997. The myth of the top management team. Harvard Business Review, 75(6): 83-91.

Even in the best of companies, a so-called top team seldom functions as a real team. Real teams must follow a well-defined discipline to achieve their performance potential. And performance is the key issue - not the fostering of "team values" such as empowerment, sensitivity, or involvement. A team effort at the top can be essential to capturing the highest performance results possible - when the conditions are right. Good leadership requires differentiating between team and nonteam opportunities, and then acting accordingly. Three litmus tests must be passed for a team at the top to be effective. First, the team must shape collective work products - these are tangible performance results that the group can achieve working together that surpass what the team members could have achieved working on their own. Second, the leadership role must shift, depending on the task at hand. And third, the team's members must be mutually accountable for the group's results. When there criteria are met, senior executives should come together to achieve real team performance. When the criteria cannot be met, they should rely on the individual leadership skills that they have honed over the years.

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Birley, S., & Westhead, M. 1990. Growth and performance measures between “types” of small firms. Strategic Management Journal, 11(7): 535-557.

The interrelationships in the strategic profile of a sample of small firms are examined. Using cross-sectional analysis, an attempt is made to identify any evidence to support the "stages of growth" theories. Three surrogates for comparative growth are used: number of employees, sales turnover, and profitability. A cluster analysis identifies 8 different "types" of small firms characterized by internal variables of ownership, management, and product structure and by external variables of product-market positioning. An analysis of variance tests finds no significant differences between the clusters with respect to size. The results suggest that firms do change, but not necessarily in a prescribed sequence. The evidence suggests that future research should be focused on developing theories that better describe the heterogeneity of the sector by analyzing the development within clusters of firms rather than seeking generalized overarching theories.

Churchill, N. C., & Lewis, V. 1983. The five stages of small business growth. Harvard Business Review, 61(3): 30-50.

Small businesses share common problems at similar stages of development. A framework for small business growth was developed which delineates 5 stages of development: 1. existence, in which customers are obtained and a product or service is delivered, 2. survival, in which the business becomes a workable entity, 3. success, during which the decision is made to expand or to keep the company stable and profitable, 4. take-off, a time of rapid growth and financial and managerial challenge, and 5. resource maturity, in which the business can engage in detailed operational and stragegic planning. The key factors determining ultimate success or failure are financial, personnel, systems, business resources, the owner's goals, and the owner's operational, managerial, and strategic abilities. The importance of these factors changes at each stage of growth. Knowing the business' stage of development and future plans enables owners, managers, and consultants to better understand problems and anticipate future challenges.

Covin, J. G., Slevin, D. P., & Covin, T. J. 1990. Content and performance of growth-seeking strategies: A comparison of small firms in high and low technology industries. Journal of Business Venturing, 5(6): 391-412.

A study of the business strategies used by small firms that were trying to increase market share in high- and low-technology industries is described. Data were collected from the senior executives of 57 small manufacturing firms with aggressive growth objectives. Results indicate that small, growth-seeking firms in high-tech industries differ from those in low-tech industries in several of the marketing variables commonly associated with share-building strategies (e.g., advertising and price), as well as several strategic variables unrelated to marketing. Compared to those in low-tech industries, growth-seeking firms in high-tech industries: 1. rely more heavily on advertising, 2. place more emphasis on product-related issues as a basis for building market share, 3. rely more heavily on external financing, 4. place more emphasis on customer service and support, and 5. have more entrepreneurial strategic postures.

Eisenhardt, K. M., & Schoonhoven, C. B. 1990. Organizational growth: Linking founding team, strategy, environment and growth among U.S. semiconductor firms, 1978-188. Administrative Science Quarterly, 35(3): 504-529.

Organizational growth in technology-based ventures is examined. Characteristics of the founding top management team, strategy, and environment are related to the sales growth of more than 90 US semiconductor firms that were founded between 1978 and 1985. Results indicate significant main and interaction effects for the founding top management team and market stage on firm growth. In contrast, the technical innovation of firm strategy and marketplace competition were not significant. The founding top management team and market-stage effects were increasingly large over time. Overall, the results indicate that both environmental determinism and strategic choice operate on young firms. The findings also suggest chaos-theory linkages to positive-feedback models and sensitive dependence of organizational growth on founding conditions.

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Fombrun, C. J., & Wally, S. 1989. Structuring small firms for rapid growth. Journal of Business Venturing, 4(2): 107-122.

As small firms capitalize on growth opportunities, surges in demand frequently result in rapid growth in employment. This creates managerial problems that require firms to design collateral systems mobilizing staff attention toward a shared vision and supporting the firm's strategic outlook. A cross-sectional study of 95 small US firms that experienced a surge in growth during the period 1980-1985 indicates that the internal systems designed by these firms to support rapid growth varied systematically by strategic orientation and degree of product diversity. Contrary to expectations, the relationship between strategy and structure failed to show a significant effect on these firms' levels of performance. The data suggest that firms' managements may be responding to the contradictory pulls of: 1. bureaucratization versus decentralization, 2. environment versus strategy, and 3. strategic emphases on quality versus cost versus innovation.

Galbraith, J. 1982. The stages of growth. Journal of Business Strategy, 3(1): 70-79.

A model is presented that is intended to describe the predictable development stages of a new organization. The model is based on the development of high-technology companies. The first stage is called the proof-of-principle stage. Usually, no organization as such exists in this stage. Rather, it consists of a hopeful entrepreneur with an idea about a business and a small group of engineering consultants. The basic task in this stage is to develop proprietary technologies. In the prototype stage, the task is to continue inventing and to begin making the device. By now, 20 to 30 employees are involved. If this stage is successfully completed, the model-shop phase begins. This stage involves production and model testing of a number of models. The task is to make the device well and test it. The 4th stage is the start-up phase, when volume production, big investments, and testing of the overall business idea begin. The natural growth phase follows. Profitability is the task here, and the 2nd-generation product appears. Finally comes strategic maneuvering, in which the task is to achieve dominance of a market niche. Individual new ventures may vary from this sequence, but they are variations on the model.

Gersick, C. 1994. Pacing strategic change: The case of a new venture. Academy of Management Journal, 37(1):9-45.

Mounting evidence shows that organizations are both inertial and adaptable, provoking questions about how shifts occur between inertia and change. Research shows performance crises can trigger reactive change, but proactive revolutions in organizations are poorly understood. In project groups, temporal pacing triggers proactive change. A longitudinal study of a venture capital-backed start-up company explores whether temporal pacing can regulate momentum and change in an organization's strategy, as it does in groups. The findings of the study illustrate how managers use 2 distinct mechanisms, both aimed at modulating the speed and course of a company's development, to handle the tension between persistence and flexibility in their strategies. Two forms of pacing were discovered, one time-based, with reorientations initiated at temporal milestones, the other event-based, with actions initiated when the right event occurred. The 2 pacing types fostered systematically different patterns of momentum and change.

Hambrick D. C. & Crozier, L. M. 1985. Stumblers and stars in the management of rapid growth. Journal of Business Venturing, 1(1): 31-45.

The problems of managing rapid growth were examined using several approaches. Results suggest that the challenges of rapid growth revolve around: 1. the increase in size per se, 2. a sense of infallibility, 3. internal turmoil, and 4. extraordinary resource needs. While each challenge calls for its own solutions, some themes that have proved successful include: 1. a chief executive who is able to envision and anticipate the firm as a larger entity, 2. the early hiring and development of the team needed in the future, 3. constant reinforcement of the original core vision of the firm, 4. gradual introduction of ''big company'' processes to supplement existing approaches, 5. minimization of hierarchy, and 6. giving employees a financial stake in the firm. Many rapid-growth firms fail because of mismanagement. To

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avoid this, they need to anticipate and understand the incredible metamorphosis they are undergoing and manage it consciously without discarding the values and techniques that allowed the growth in the first place.

Hanks, S. H., Watson, C. J., Jansen, E., & Chandler, G. N. 1993. Tightening the life-cycle construct: A taxonomic study of growth stage configurations in high-technology organizations. Entrepreneurship Theory & Practice, 18(2): 5-29.

Much has been written about the organization life cycle, yet there has been remarkably little attention given to the underlying construct of a life-cycle stage. It is proposed that each life-cycle stage consists of a unique configuration of variables related to organization context and structure. Cluster analysis is used to derive a taxonomy of growth stage configurations in a sample of 126 high-technology organizations. The derived configurations suggest a sequence of 4 growth stages: 1. start-up, 2. expansion, 3. maturity, and 4. diversification. As an organization progresses through the stages, structural form goes from simple to functional to divisional, the organization becomes increasingly more formal and specialized, and decision making becomes less centralized.

Jarillo, J. C. 1989. Entrepreneurship and growth: The strategic use of external resources. Journal of Business Venturing, 4(2): 133-147.

A study sought to obtain evidence of the efficiency of the use of external resources to generate growth. The main hypothesis - that entrepreneurial firms use more external resources - was tested by conducting a statistical analysis. The work was performed on the Compustat database, which includes all firms listed on the New York Stock Exchange, most on the American Stock Exchange, and many traded in the over-the-counter market. The results strongly supported the hypothesis. It was found that the fastest growing firms in a very large sample of public companies make more use of external resources than their competitors. Those firms that are at the forefront of using external resources grow, on average, much faster - more than 10% each year - than their competitors over a 10-year period. This finding constitutes more evidence in favor of the efficiency of networking arrangements. Being flexible enough to use external resources allows the entrepreneurial firm to break through the limits to sustainable growth.

Kazanjian, R. K. 1988. The relation of dominant problems to stages of growth in technology-based new ventures. Academy of Management Journal, 31(2): 257-279.

Although technology-based new ventures play an increasingly important role in business, little is known about how traditional management models apply to these types of organizations. In order to help remedy this situation, 2 studies investigated the growth patterns of new ventures. In the first study, in-depth examination of 2 technology-based businesses provided input for the development of a stage-of-growth model applicable to technology-based new ventures. The stages of the model are: 1. conception and development, 2. commercialization, 3. growth, and 4. stability. Findings from the first study suggested that problems played a central role in the growth patterns of new ventures, thus inspiring a 2nd study. Chief executive officers in 105 firms responded to a questionnaire about the problems they encountered in the growth of their firms. Analysis indicated that problems, such as marketing, strategic positioning, and external relationships, varied in significance depending upon the firm's stage of development.

Siegel, R., Siegel, E., & MacMillan, I. C. 1993. Characteristics distinguishing high-growth ventures. Journal of Business Venturing, 8(2): 169-180.

A two-phase study of entrepreneurial companies resulted in the identification of characteristics distinguishing high-growth from low-growth firms. Two pools of companies were examined; the first consisted of young, small companies, whereas the second included relatively more mature, larger companies. Discriminant analysis of the two samples suggests that there are certain hard (i.e., measurable) characteristics that distinguish high- from low-growth companies, and that the importance of these characteristics shifts as companies develop. Industry experience of management is critical for growth in both samples. Strategic focus is a discriminating variable for less mature firms, whereas plans for diversification discriminate for more mature firms. Leanness is critical for less mature firms, whereas

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a balanced management team assumes greater importance for more mature firms. Taken together, the analysis suggests a strategic profile for growth and one that evolves as companies develop.

Shepherd, J. 1991. Entrepreneurial growth through constellations. Journal of Business Venturing, 6(5): 363-373.

Constellations are particular types of networks in which particular roles in marketing and production are divided between leading and external firms. This division of roles and the coordination of the group through the links that connect leading and external firms within the constellation are examined. Constellation-style growth not only allows the firm to grow with a reduction of investment risk, but adds to competitive advantage by fostering personal entrepreneuring through the use of coordinated partnerships of external firms with a leading firm. Several cases are cited to demonstrate how the constellation functions in practice in Italy, and, from the mechanisms explained, it should be clear that the model can be adapted for international use.

Slevin, D. P., & Covin, J. G. 1997. Time, growth, complexity, and transitions: Entrepreneurial challenges for the future. Entrepreneurship Theory & Practice, 22(2): 53-68. <strategy>

This paper presents a model that depicts the relationship between time, complexity and transitions in the context of high-growth new venturs or stable ventures that have been forced into radical change as a consequence of environmental conditions. This model treats time as an unrelenting driving force that requires organizational change and adaptation. Key parameters affecting transitions needed by successful organizations are explored, as are the rates at which these changes are accomplished. It is proposed that managers should seek to minimize overall transition time by making any required quantum changes to the organizational system quickly. Such changes are argued to best ensure the rapid reestablishment of viable organizational gestalts.

Weinzimmer, L. G., Nystrom, P.C., & Freeman, S. J. 1998. Measuring organizational growth: Issues, consequences, and guidelines. Journal of Management, 24(2): 235-262.

Although the literature contains an impressive volume of studies attempting to identify determinants of organizational growth, researchers have recently noted important inconsistencies in findings. They may be explained, in part, by the variety of approaches used to measure growth. This paper provides a critical review of the literature to identify issues regarding the measurement of growth. Alternative approaches are examined in order to assess the consequences of using inappropriate measures. Consequently, three concepts as well as three different measurement formulas are considered. Based on comprehensive data from 193 firms in 48 industries for 20 periods, results from comparative regression analyses reveal that the significance of relationships between determinants and organizational growth, as well as amount of explained variance, depend on the specific approaches used to measure growth.

Zacharakis, A. L. 1997. Entrepreneurial entry into foreign markets: A transaction cost perspective. Entrepreneurship Theory & Practice, 21(3): 23-39.

The best opportunity for growth is often overseas, even for smaller entrepreneurial firms. However, resource-constrained small firms do not have as many available entry strategies as do larger multinational corporations. Smaller firms frequently must ally themselves with partners in order to make international expansion feasible. The alliance of 2 distinct parties central to these entry strategies lends itself to a transaction costs economics perspective. TCE illuminates the underpinnings of these relationships, highlighting problems and risks that the respective parties face when entering into the partnership. A paper develops these problems within the entrepreneur/export agent realm.

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Aldrich, H. E. 1990. Using an ecological perspective to study organization founding rates. Entrepreneurship Theory and Practice, 14(3): 7-24.

Entrepreneurship involves mobilizing resources in pursuit of opportunities, resulting in the founding of a new business. Researchers have traditionally looked at the personal attributes of founders, asking what makes them different from others. Gartner (1989) called this the traits approach. Other researchers have focused on the environmental conditions generating variation in the number of foundings over time. Ecologists call this the rates approach. The 2 approaches are complementary. Ecologists work at 4 levels of analysis - group, organization, population, and community - and take a longer term view than is typical of the social-psychological perspective behind the traits approach. Prior foundings and dissolutions, rising density, and other intrapopulation processes are key events in the history of an organizational population. Competitive relations between populations may depress founding rates, but full competition is only one of at least 6 possible interpopulation relations.

Aldrich, H. E., & Wiedenmeyer, G. 1993. From traits to rates: An ecological perspective on organizational foundings. Advances in Entrepreneurship, Firm Emergence, and Growth, 1: 145-195.

Entrepreneurship involves mobilizing resources in pursuit of opportunities, resulting in the founding of a new business. Some researchers have looked at the personal attributes of founders, asking what makes them different from other people. This is called the “traits” approach. Other researchers have taken a different path, focusing on the environmental condition – social, economic, political – generating variations in the number of foundings over time. This is called the “rates” approach. The approaches are complementary, as each draws on different research traditions in the social sciences. The traits approach implies a micro-level of analysis, whereas the rates approach invokes a macro-evolutionary approach. In this paper, the authors concentrate on the rates approach, taking an ecological perspective.

Baumol, W. J. 1986. Entrepreneurship and a century of growth. Journal of Business Venturing, 1: 141-145.

It typically is agreed that entrepreneurship has been a key to growth in productivity and per capita incomes in industrialized nations. To examine this issue, an indirect method of inference was employed. The collection of historical data revealed that: 1. the growth rates in industrialized countries over the last 100-150 years exceeded any historical precedent, 2. there has been a narrowing in the levels of per capita productivity and output in the last 110 years, 3. the relatively poor industrialized countries have been outperforming the relatively well-off nations, and 4. this convergence extends both to free-market and to centrally planned economies. However, the less developed countries have failed to share in this convergence process. It was found that the central direction of an economy was less of an impediment to the exercise of imitative entrepreneurship than it was to the practice of initiating entrepreneurship.

Baumol, W. J. 1996. Entrepreneurship: Productive, unproductive, and destructive. Journal of Business Venturing, 11(1): 3-22.

It is hypothesized that entrepreneurial attention can be allocated to both constructive purpose and also to "parasitical" existence, where the entrepreneur benefits at the cost of society. How entrepreneurs choose to allocate their attention between these 2 roles is a function of the rules of the game prevailing in society at any point in time. Although the supply of entrepreneurial talent is rarely a problem for any society, it is the attendant social circumstances, such as the laws, governance structures, and incentive schemes, that dictate whether the entrepreneurial class chooses to lead a constructive or parasitical existence.

Birley, S. 1986. The role of new firms: Births, deaths, and job generation. Strategic Management Journal, 7(4): 361-376.

The extent to which new firms contribute toward economic recovery remains unclear. Still, governments at all levels continue to design strategies for encouraging entrepreneurial activity. With little specific knowledge of the target population, such efforts have been either general in nature or based solely on

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economic theory. Thus, little is known about whether they have been effective in affecting the natural process and in what geographic locations. Research reported here concerns itself with the birth and death patterns of firms, and the net jobs generated in St. Joseph County, Indiana, between 1977 and 1982. One finding, which confirmed the general findings of others, was that new jobs generated by the new firms accounted for a consistent 2.9% of the total number of jobs in the industrial sectors studied. Most activity was found to be centered in a few existing standard industrial classification (SIC) categories. Lost jobs amounted to 1.75%. Analysis that suggests simple tests of volatility and gain will help to focus plans for aid on sectors in which the natural process is already generating new jobs.

Brooks, O. 1986. Economic development through entrepreneurship: Incubators and the incubation process. Economic Development Review, 4(2): 24-49.

An incubator is a multitenant facility that provides entrepreneurs with: 1. flexible leases on small, inexpensive spaces, 2. shared support services to lessen overhead, 3. professional and managerial assistance, and 4. help in obtaining seed capital. The incubation process fosters community support for start-up companies, and it involves formal education and theory demonstration programs. The physical incubator provides: 1. visibility, 2. tenant support, 3. a focus for entrepreneurial assistance groups' activities, and 4. close proximity between start-up companies. Real estate incubators provide inexpensive, flexible lease space, while economic growth incubators serve businesses in early development. As firms outgrow the economic incubator and its hands-on assistance, they feed into the real estate model. Major incubator elements are: 1. the support network, 2. daily help in business operations from pooled support services, and 3. an active connection with a university.

Kirchhoff, B. A. 1991. Entrepreneurship’s contribution to economics. Entrepreneurship Theory & Practice, 16(2): 93-112.

Recent evidence of entrepreneurship's significant contribution to economic growth and development challenges the dominance of general equilibrium theory in macroeconomic thought, which ignores the role of entrepreneurship in wealth creation and distribution. An alternative to general equilibrium theory may be seen in the theory of Schumpeter (1942). He defines entrepreneurship as the formation of a new firm that uses innovation to enter existing markets and to grow by creating new demand while taking market share away from existing suppliers. Because entrepreneurship creates wealth as it destroys existing market structures, Schumpeter describes it as a process of creative destruction. Schumpeter's conception offers the potential for a meaningful theory, because he describes capitalism as it actually operates. Economists should desert general equilibrium theory and search for a new macro-theory that incorporates entrepreneurship.

Kirchhoff, B. A., & Phillips, B. D. 1988. The effect of firm formation and growth on job creation in the united states. Journal of Business Venturing, 3(4): 261-272.

During the last 25 years, the US has created new jobs at a far greater rate than have other Western nations. An analysis of recent data shows that small firms have created most of the new jobs. A major component of the new job creation is the entry of new small firms into the marketplace. According to the analysis, exits from the marketplace remain relatively stable over time. Thus, variations in the number of new entries account for differences between economic expansion and contraction in the US. Three job additions and 2 job losses occur for each net new job created as a result of the firm dynamics of entry, exit, expansion, and contraction. This means the US is an excellent example of competitive capitalism, given the acceptance of Schumpeter's argument that new firm entry is the essence of competition in capitalism. New firm entry may have been stimulated by recent deregulation, although government economic policies do not consider firm entry a significant factor in competition and growth.

Malecki, E. J. 1997. Entrepreneurs, networks, and economic development. Advances in Entrepreneurship, Firm Emergence, and Growth, 3: 57-118.

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This chapter reviews some of the research on entrepreneurs, networks, and economic development. It discusses the process of local development and the role of entrepreneurship in that process. Then, the chapter turns to the “entrepreneurial event” and the geographical environment within which that event takes place. The key aspect of favorable entrepreneurial environments are thriving networks of entrepreneurs, other firms, and institutions, providing capital, information, and other forms of support. Then, the chapter turns to policy issues, especially attempts to foster local development through the creation of innovative entrepreneurial environments and through the fostering of institutions, networks, and a technical culture. Chapter concludes with observations made of entrepreneurship in developing cultures.

Pennings, J. M. 1982. Organization birth frequencies: An empirical investigation. Administrative Science Quarterly, 27(1): 120-144.

This research has hypothesized that: 1. A positive association exists between urban dominance and organizational birth rates. 2. Organizational birth frequencies increase at a decreasing rate as a function of urban size. 3. An inverted u-shaped curvilinear relationship exists between urban differentiation and organizational birth frequency. 4. Volatile, unpredictable change in an urban area is positively related to the birth frequency of new organizations. 5. The greater the organizational population, the higher the birth frequency in that population. 6. The concentration of organizational populations is negatively linked with birth rates. 7. Price and accessibility of these resources are related to organizational birth frequencies. An examination is made of organizational birth frequencies in 70 urban-metropolitan areas of the US. Birth frequencies in 3 chosen industries (plastics, telecommunication equipment, and electronic components) were related to attributes of the urban ecology and the abundance of socioeconomic resources. Results indicated that occupational and industrial differentiation, the percentage of immigrants, the size of the relevant industry, the size of the urban area, and the presence of financial resources were most critical for predicting the creation of new organizations.

Porter, M. E. 1998. Clusters and the new economics of competition. Harvard Business Review, 76(6): 77-90.

Today's economic map of the world is dominated by what are called clusters: critical masses - in one place - of unusual competitive success in particular fields. Clusters are not unique, however; they are highly typical - and therein lies a paradox: the enduring competitive advantages in a global economy lie increasingly in local things - knowledge, relationships, motivation - that distant rivals cannot match. Untangling the paradox of location in a global economy reveals a number of key insights about how companies continually create competitive advantage. What happens inside companies is important, but clusters reveal that the immediate business environment outside companies plays a vital role as well. This role of locations has been long overlooked, despite striking evidence that innovation and competitive success in so many fields are geographically concentrated.

Shane, S. 1996. Explaining variation in rates of entrepreneurship in the United States: 1899-1988. Journal of Management, 22(5): 747-781.

The rates of entrepreneurship over time in the US economy are examined. Strong support is found for the argument that variations in rates of entrepreneurship appear to be driven by changes in technology. Some evidence is also found for the effects of the Protestant Ethic, interest rates, prior rates of entrepreneurship, risk-taking propensity, business failure rates, economic growth, immigration, and age distribution of the population.

Spilling, O. R. 1996. The entrepreneurial system: On entrepreneurship in the context of a mega-event. Journal of Business Research, 36(1): 91-103.

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A study introduces the concept of the entrepreneurial system, i.e., the complexity and diversity of actors, roles and environmental factors that interact to determine the entrepreneurial performance of a region or locality. The empirical basis for the study is found in the industrial changes related to the organizing the 1994 Olympic Winter Games in Lillehammer, Norway. Behind the scene of some very successful games, there were failures, successes, crises and victories. A complex system of initiatives, actions, and events was displayed. As a result, the entrepreneurial system of the region went through a process of change, and it is hypothesized that a more dynamic regional economic environment was created. The study suggests that behind the economic development of a region or a sector is an entrepreneurial system, the quality of which is of vital importance for the economic performance of the region.

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Classic Books

Birch, D. L. 1987. Job Creation in America: How Our Smallest Companies Put the Most People to Work. New York: Free Press

Birch, drawing on seven years of empirical research with a Dun & Bradstreet database, seeks to provide a portrait of the US economy in which small enterprises, not giant corporations, are the major source of economic growth and development. Chapters summarize the findings from the aggregate analyses of this database. Chapters 1 and 2 discuss structural changes that are occurring in the US economy. Chapter 3 (seeks to) explore some of the basic factors that are producing the social and economic changes, and Chapter 4 compares US economic development with that of several European and Asian countries. Chapters 5 and 6 analyze some of the spatial implications of the innovation revolution that Birch asserts best describes the US economy. Chapter 7 discusses the impact of this economic growth on the American worker. Chapter 8 treats various policy choices. (Choice Book Reviews)

Burns, T., & Stalker, G. M. 1961/1966 2nd ed. The Management of Innovation. London: Tavistock Publications Limited.

This book is based on twenty studies that are primarily ethnographic. The core of the book is the description and explanation of what happens when new and unfamiliar tasks are put upon industrial concerns organized for relative stable conditions. When novelty and unfamiliarity in both market situation and technical information become the accepted order of things, a fundamentally different kind of management system (mechanistic vs. organic) becomes appropriate from that which applies to a relatively stable commerical and technical environment.

Chandler, A. D. 1962. Strategy and Structure: Chapters in the History of the Industrial Enterprise. Cambridge, MA: M.I.T. Press

This book marks the beginning of the field of strategic management; however, it has some strong lessons for entrepreneurship. The now famous “structure follows strategy” adage resulted from Chandler’s comparative analysis of the administrative histories of four companies (DuPont, GM, Standard Oil, and Sears, Roebuck & Company). Chandler concluded:

Strategic growth resulted from an awareness of the opportunities and needs – created by changing population, income, and technology – to employ existing or expanding resources more profitably. A new strategy required a new or at least refashioned structure if the enlarged enterprise was to be operated efficiently. The failure to develop a new internal structure, like the failure to respond to new external opportunities and needs, was a consequence of over concentration on operational activities by the executives responsible for the destiny of their enterprises, or from their inability, because of past traing and education and present position, to develop an entrepreneurial outlook. …Growth without structural adjustment can lead only to economic inefficiency. (pp 15-16)

Chandler distinguishes between entrepreneurs and managers. Entrepreneurs are the executives who allocate available resources. Those who coordinate, appraise, and plan within the means allocated to them are managers. Chandler also distinguishes between entrepreneurial and operating decisions. Entrepreneurial decisions and actions are those which affect the allocation or reallocation of resources for the enterprise as a whole. Operating decisions and actions refer to whose which are carried out by using the resources already allocated. Finally, Chandler distinguished between empire builders and organizational builders. Empire builders were those individuals who brought in all the resources necessary to build the empire. The empire builders, however, resisted change and avoided strategic planning. As a result, when the organization need to change (and grow) the empire builder had to be replaced by the organizational builder. The organizational builders were professional administrators who developed and implemented change in structure to meet the demand imposed by growth strategies.

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Classic Books

Drucker, P. 1986. Innovation and Entrepreneurship. New York: Harper and Row.

This book presents innovation and entrepreneurship as a practice and a discipline. Part I on the Practice of Innovation presents innovation as purposeful and as a discipline. It shows first where and how the entrepreneur searches for innovative opportunities. Part II, The Practice of Entrepreneurship, focuses on the institution that is the carrier of innovation. It deals with entrepreneurial management in three areas: the existing business; the public-service institution; and the new venture. Part II, Entrepreneurial Strategies, talks of bringing an innovation successfully to market. These three parts are flanked by an introduction that relates innovation and entrepreneurship to the economy, and by a conclusion that relates them to society.

Kirzner, I. 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press.

According to Kirzer, this book can be viewed as 1) a critique of contemporary price theory from an Austrian perspective, 2) a theory of entrepreneurship, or 3) an essay on the theory of competition. He views price theory not from the neo-classical equilibrium position, but rather views price theory as a market process where the decisions of individuals interact to change market relationships. Therefore, the concern is with the alterations made from these decisions and the learning process that occurs from previous decisions that alters future decisions. The entrepreneur comes into play as the individual who gathers information about previous decisions made in the market. The entrepreneur is alert to new opportunities and resources in the market resulting from poor previous decisions by existing market players. So, the “pure entrepreneur” is a decision maker whose entire role arises out of alertness to unnoticed opportunities. The entrepreneur capitalizes on these opportunities and moves the market towards a hypothetical equilibrium.

Penrose, E. 1959. The Theory of the Growth of the Firm. New York: John Wiley.

Penrose is concerned with the process of firm growth and with limits to the rate of growth. Her theory of the growth of the firm emphasizes the internal resources of the firm and with those services created by the resources. The utilization of available resources results in a dynamic interacting process which encourages continuous growth but limits the rate of growth. Three potential limits to the rate of the growth of the firm are 1) managerial ability (conditions within the firm), 2) product or factor markets (conditions outside the firm), and 3) uncertainty and risk (combination of internal attitudes and external conditions). Penrose places heavy emphasis on entrepreneurial services as a productive resource of the firm that can lead to growth and expansion. Productive resources internal to the firm are combined with external resource to produce and sell products. The productive activities of a firm are governed by its productive opportunity. The productive opportunities are defined as the productive possibilities that the firm entrepreneurs (those that carry out entrepreneurial services) can see and take advantage of. Penrose reasons that some opportunities are not seen by all firms because the environment cannot be looked at objectively. What the firm is able to accomplish is not important; rather, what the firm thinks it can accomplish (subjective view) is the immediate determinant of firm behavior. These perceptions shape judgments that aid in decision making which leads to some type of action. Accordingly, the environment is “an image in the entrepreneur’s mind.”

Schumpeter, J. 1934. Theory of Economic Development. Cambridge, MA: Harvard University Press.

The economic system moves toward equilibrium and disequilibrium is created by an entrepreneurial shock. These shocks lead to increased economic development through the development of new combinations. New combinations include 1) the introduction of a new good, 2) the introduction of a new method of production, 3) the opening of a new market, 4) the conquest of a new source of supply of raw materials or half-manufactured goods, or 5) the carrying out of a new organization of any industry. An entrepreneur is anyone whose function it is to carry out new combinations. Schumpeter believed the initial profit (entrepreneurial profits) in excess of normal returns will only last a short time because “swarms” of individuals will converge on that industry and emulate the initial entrepreneur. This will

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Classic Books

drive down profits and return the market to equilibrium. (See also Schumpeter, J. 1942. Capitalism, Socialism and Democracy. New York: Harper & Row)

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USEFUL THEORIES FOR ENTREPRENEURSHIP RESEARCH

ABSORPTIVE CAPACITY (Cohen & Levinthal, 1990)

The premise of absorptive capacity (AC) is that the organization needs prior related knowledge to assimilate and use new knowledge. Prior related knowledge confers an ability to recognize the value of new information, assimilate it, and apply it to commercial ends. These abilities collectively constitute “absorptive capacity.” An organization’s AC will depend on the ACs of its individual members. Therefore, the development of an organization’s AC will build on prior investment in the development of it constituent, individual ACs, and, like individuals’ ACs, organizational AC will tend to develop cumulatively. A firm’s AC is not the sum of its individual ACs. AC refers not only to the acquisition or assimilation of information by an organization but also to the organization’s ability to exploit it. Therefore, an organization’s AC does not simply depend on the organization’s direct interface with the external environment. It also depends on transfers of knowledge across and within subunits that may be quite removed from the original point of origin. Overall, the development of AC can result in innovative performance. However, innovative performance from AC is history and path dependent. A lack of investment in an area of expertise (e.g. R&D) early on may foreclose the future development of a technical capability in that area. <Organizational Learning>

AGENCY THEORY (Eisenhardt, 1989; Jensen, 1986; Jensen & Meckling, 1976; Fama, 1980)

Agency theory deals with the design of incentive agreements and the allocation of decision rights among individuals with conflicting preferences or interests. Whereas transaction costs economics begins with the assertion that one cannot write enforceable contracts that cover all contingencies, agency theorist seek the optimal form of such a contract. The theory rests on the combination of opportunism and information asymmetry. Agency theory has developed into two branches: 1)principal-agent and 2)corporate control. The principal-agent branch is concerned with the design of optimal incentive contracts between principals and their agents. This perspective states that the contract between the agent and the principal coalign the preferences of agents with those of the principal because the rewards for both depend on the same actions, and therefore, the conflicts of self-interest between the principal and the agent are reduced. The corporate control branch is concerned with financial claims and the overall governance structure of the firm. Most famous here is Jensen’s free cash flow theory of leverage and takeovers. According to Jensen, managers direct free cash flow to wasteful investments. To combat this problem Jensen proposed the use of high level of debt to commit management to payouts and hostile takeovers, which put new management teams in place. <Economics>

CHAOS THEORY (Bygrave, 1989; Gleick, 1987)

Chaos theory was introduced by Lorenz (1961) and his “butterfly effect” has become famous. The butterfly effect basically states that a butterfly flapping its wings in the united states may cause a tidal wave in Japan. In other words, the premise of chaos theory is that systems are nonlinear and a incremental change in the initial condition or state can produce large and unexpected change in the final outcome. In order to relate empirical findings to chaotic, nonlinear mathematical models, a regular pattern must be found in what appear to be irregular data. <Mathematics>

COMPLEXITY THEORY (Stacy, 1995; Brown & Eisenhardt, 1997, 1998)

Complexity theory began with an interest in how order springs from chaos. Adaptation is most effective in partially connected systems. According to Stacey (1995) organization are nonlinear feedback systems characterized by bounded instability and spontaneous self-organization and emergent order. Bounded instability says that a state is neither stable or unstable but rather both at the same time. As a result the system is unstable in the sense that specific behavior is unpredictable over the long-term but predictable in the short-term. This paradox state is chaos. Operating in instability leads to innovation and to efficiency in stability. Spontaneous self-organization and emergent order result from informal network

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systems. Changeability becomes an internal property of an organization when its informal network system, consisting of self-organizing patterns of connections between people within and across its boundaries, is richly connected enough to operate on the edge of instability, where it produces ever-changing emergent patterns of behavior. <Mathematics>

EVOLUTIONARY ECONOMICS (Nelson & Winter, 1982)

Firms compete through a struggle to improve or innovate. A firm cannot change its strategy or structure quickly; therefore, current capabilities of the firm are a function of its history. Organizational capacities are based on routines which are not explicitly comprehended, but which are developed and bettered with repetition and practice. Imitation by competitors is difficult even when observed. <Economics>

GAME THEORY (Von Neuman & Morgenstern, 1944; Nash, 1950; Camerer, 1991)

Game theory combines information asymmetries and asset specificity as it raises serious questions about the assumptions of rational behavior. Actors in the game are assigned beliefs about what others’ beliefs will be in the event of irrational acts. The premise of game theory lies in competitive moves and countermoves. Prisoners dilemma is the most cited example. <Economics>

ISOMORPHISM (DiMaggion & Powell, 1983)

Isomorphism seeks to explain why organization are similar. Three isomorphic process – coercive, mimetic, and normative – offer an explanation of why organizations become increasingly similar as they change and adapt. Coercive isomorphism is the form and informal pressures placed on organizations by other organizations on which they are dependent. By succumbing to pressures and norms placed on the firm by other firms, an organization gains legitimacy as a member of a specific industry or group. Mimetic isomorphism is driven by uncertainty encouraging imitation. When organizational technologies are poorly understood, when goals are ambiguous, or when the environment creates symbolic uncertainty, organizations may model themselves after other organizations. Normative isomorphism stems from professionalism. Members of organizations may be diverse, but members of one organization at one level will be similar to members of other organizations at the same level. <Sociology>

NETWORK THEORY (Granovetter, 1973; Nohria, 1992; Lincoln, 1982; Larson & Starr, 1993, Tichy, Tushman, & Fombrum, 1979; Birley 1985; Laumann et al. 1978; Dubini & Aldrich, 1991)

Network theory can be used at either an individual, organizational, or population level of analysis. It’s a very rich theory that can be used to describe linkages among people and organizations and the impact of these linkages over time. Specifically social networks great applicability to entrepreneurship research. Social networks are described as a set of nodes (persons, organizations) linked by a set of social relationships or a specified type. The social network approach views organizations in society as a system of objects joined by a variety of relationships. <Sociology>

OPTIONS THEORY (McGrath, 1997, 1999; Bowman & Hurry, 1993; Trigeorigis, 1993; Cox & Rubinstein, 1985; Sanchez, 1993; Kogus & Kulatilaka, 1994)

“Keeping options open” against the unforeseeable future has motivated the development and use of option contracts in order for individuals to retain the right to future investment choices without making the full commitment to invest. In financial options, the investor makes a small investment to buy the option, holds it open until the opportunity arrives, and finally decides between striking the option to capture the opportunity or abandoning it. Used in strategic management, options come into existence when existing resources and capabilities allow preferential access to future opportunities (e.g. opportunity for growth). An organization’s resources constitute a bundle of options for strategic choice.

ORGANIZATIONAL SLACK THEORY (Bourgeois, 1981; Cyert & March, 1963; Marino & Lange, 1983)

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Organizational slack theorists predict that slack resources provide the means for achieving flexibility in developing strategic options. Organization slack is that cushion of actual or potential resources which allows an organization to adapt successfully to internal pressures for adjustment or to external pressures for change in policy, as well as to initiate changes in strategy with respect to the external environment. <Management>

POPULATION ECOLOGY (Aldrich, 1990; Hannan & Freeman, 1977; Astley, 1985)

Population ecology models attempt to predict the probability of births and deaths within a population of firms in a given industry niche; a Darwinian “survival of the fittest” theory; seeks to explain why firms are different. Aldrich (1990) argued for the “rates” approach as a replacement for the traits approach in entrepreneurship research. He posited that the foundings of new organizations are highly dependent upon the events experienced by already existing organizations, both in a population and in the larger community of populations. <Biology/Sociology>

RESOURCE BASED THEORY (Penrose, 1959; Lippman & Rumelt, 1982; Barney, 1986, 1991; Wernerfelt, 1984; Mahoney & Pandian, 1992; Conner, 1991; Grant, 1991; Conner & Prahalad, 1996)

Firms are viewed as bundles of productive resources and different firm possess different resources (resource heterogeneity). Additionally, RBT assumes that some of these resources are either very costly to imitate/copy or inelastic in supply (resource immobility). If resources are seen as valuable, inimitable, rare, and organizationally complex, then the resource(s) may be a source of competitive advantage and earn abnormal returns. Firm resources are all assets, capabilities, competencies, organizational processes, firm attributes, information, knowledge, etc., that are controlled by a firm and that enable the firm to conceive of and implement strategies that improve its performance. <Economics>

SENSEMAKING (Weick, 1995, 1993, 1969/79)

Sensemaking is one way to shift the focus from decision making to meaning. The basic idea of sensemaking is that reality is an ongoing acomplishment that emerges from efforts to create order and make retrospective sense of what occurs. Sensemaking emphasizes that people try to make things rationally accountable to themselves and others. When one is unable to make sense of an event, normal routines and interlocking begin to break apart. There is no longer glue holding the organization together. Sensemaking is a process that is 1) grounded in identity construction, 2) retrospective, 3) enactive of sensible environments, 4) social, 5) ongoing, 6) focused on and by extracted cues, and 7) driven by plausibility rather than accuracy. <Psychology>

STRATEGY ABSENCE (Inkpen & Choudhury, 1995)

Strategy in organizations is not all-pervasive. Limited attention has been directed towards cases of strategy absence (where strategy is expected but is not). Rather than assuming that all firms must have a strategy, it may be necessary to ask: Why is there no strategy here? Viewing strategy as a pattern in a stream of decisions provides a foundation for empirical investigation of strategy absence because a firm that exhibits no pattern in decisions is strategy-less. Strategy absence can occur on three fronts: 1) Strategy absence as failure (not finding strategy where one is expected is deemed a management failure); 2) Strategy absence as transition (young firms will not have a history of decisions that have evolved into a pattern of decisions so it may be appropriate to refer to strategy as absent); 3) Strategy absence as virtue (absence is a result of conscious decisions and action or inaction by management to deliberately build in strategic voids and incoherent decision making into the firm’s design). <Strategy>

STRATEGIC REFERENCE POINT THEORY (Fiegenbaum, Hart, & Schendel, 1996)

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By signaling what issues are important, top managers establish the strategic reference points for their firms – the benchmarks against which people gauge appropriate action and behavior. Understanding a firm’s choice of reference points is one way to achieve strategic alignment. This theory extends prospect theory that states that individuals use targets or reference points in evaluating choices and that behavior depends upon whether they perceive themselves as above (better than) or below (worse than) a specific targets or reference point they choose. SRP theory assumes management control over establishing the reference point for the firm. The theory predicts that strategic choice behavior will be risk-averse when firms perceive themselves as above the SRP and risk-taking when below the SRP. < Strategy/Cognition>

TRANSACTION COST ECONOMICS (Williamson, 1975; Coase 1937)

According to Rumelt, Schendel, and Teece (1994), this theory represents the conjuction of bounded rationality, asset specificity, and opportunism and the ground where economic thinking, strategy, and organizational theory meet. This theory seeks to explain why one particular clause appears in a contract. Williamson’s (1975) framework explored the limits or boundaries of both markets and business firms as arrangement for conducting economic activity. There are four steps to the TCE framework. First, markets and firms are alternative modes of organizing transactions. Second, the decision is based on relative efficiency of contracting in each mode. Third, the cost of writing and executing complex contracts is affected by human and environmental factors. Fouth, the mode of organizing with the lower transaction cost will be chosen. TCE is a comparative strategy between the cost of organizing in either of the two modes. <Economics>

UPPER ECHELON THEORY (Hambrick & Mason, 1984)

Upper echelon theory argues the importance of the top management teams’ actions and their effects on firm behavior and performance. <Strategy/TMTs>

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THEORY REFERENCES

Aldrich, H. E. 1990. Using an ecological perspective to study organizational founding rates. Entrepreneurship Theory & Pracice, 14(3): 7-24.

Astley, W. G. 1985. The two ecologies: Population and community perspectives on organizational evolution. Administrative Science Quarterly, 30: 224-241

Barney, J. B. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17: 99-120.

Birley, S. 1985. The role of networks in the entrepreneurial process. Journal of Business Venturing, 1(1): 107-117.

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