Knowledge‐based resources,entrepreneurial orientation,and the performance of small and medium‐sized businesses

While theory suggests that management has discretion in manipulating resources in order to build competitive advantage, resource‐based research has focused on the characteristics of resources, paying less attention to the relationship between those resources and the way firms are organized. In explaining performance, entrepreneurship scholars have focused on a firm's entrepreneurial strategic orientation (EO), leaving its interrelationship with internal characteristics aside. We argue that EO captures an important aspect of the way a firm is organized. Our findings suggest that knowledge‐based resources (applicable to discovery and exploitation of opportunities) are positively related to firm performance and that EO enhances this relationship. Copyright © 2003 John Wiley & Sons, Ltd.     

Too much of a good thing? Absorptive capacity,firm performance,and the moderating role of entrepreneurial orientation

Absorptive capacity (ACAP) refers to a firm's ability to acquire, assimilate, transform, and exploit new knowledge. Research has yet to acknowledge the possibility of limits to the financial returns of this important strategic construct. This study suggests an inverted‐U shaped relationship between ACAP and financial performance. Based on data from 285 technology‐based small and medium enterprises, we observe gains within three prospective, secondary measures of growth to diminish beyond lower levels of ACAP, even turning negative and becoming harmful beyond intermediate levels. We find that entrepreneurial orientation (EO) moderates the ACAP‐performance relationship, enhancing financial gains at lower levels of ACAP and mitigating the decline in financial performance at higher levels of ACAP. Further, with higher EO, higher ACAP can be achieved before financial returns diminish.Copyright © 2012 John Wiley & Sons, Ltd.     

Construct measurement in strategic management research: illusion or reality?

Strategic management research has been characterized as placing less emphasis on construct measurement than other management subfields. In this work, we document the state of the art of measurement in strategic management research, and discuss the implications for interpreting the results of research in this field. To assess the breadth of measurement issues in the discipline, we conducted a content analysis of empirical strategic management articles published in leading journals in the period of 1998–2000. We found that few studies discuss reliability and validity issues, and empirical research in the field commonly relies on single‐indicator measures. Additionally, studies rarely address the problems of attenuation due to measurement error. We close with a discussion of the implications for future research and for interpreting prior work in strategic management. Copyright © 2004 John Wiley & Sons, Ltd.     

Disruptiveness of innovations: measurement and an assessment of reliability and validity

Strategic management scholars have long explored the broad topic of innovation, a cornerstone in creating competitive advantage. Any attempt at theory construction in this area must encompass reliable and valid measures for key innovation characteristics. Yet, with respect to an important construct, i.e., disruptiveness of innovations, there has been relatively little academic research. Without formalizing the disruptiveness concept with a reliable and valid measure, it is difficult to conduct rigorous research to uncover the causes of the innovator's dilemma and identify mechanisms to help incumbents develop such innovations. In this paper, we develop a scale for the disruptiveness of innovations. We collected data from senior executives (vice president or general manager level) at 199 strategic business units (SBUs) in 38 Fortune 500 corporations and performed a series of analyses to establish the reliability and validity of the disruptiveness scale. The reliability measures, exploratory factor analysis, confirmatory factor analysis, and subsequent statistical tests strongly support our measure. Further, we also present nomological validity of the disruptiveness construct, thus establishing its predictive validity. Thus, this paper distinguishes the disruptiveness concept from other established innovation constructs, such as radicalness and competency destroying. Finally, we discuss the significance of our results and how this study might be useful to other researchers. Copyright © 2006 John Wiley & Sons, Ltd.     

Paths to Success: How Do Market Orientation and Entrepreneurship Orientation Produce New Product Success?

The purpose of this paper is to examine the relationship between strategic orientation and the performance of new products. In this paper, we develop a conceptual model that explores the roles of market orientation (MO) and entrepreneurship orientation (EO) on new product performance and seek to understand the mediating roles of process and product characteristics. Based on a survey of 471 small and medium‐sized enterprises in Korea, we found that MO and EO positively affect new product performance. The main impact of MO is through new product development proficiency and product meaningfulness and that of EO is through proficient intellectual property management and product novelty. Academic and managerial implications are also discussed.     

Testing metric equivalence in cross‐national strategy research: an empirical test across the United States and Japan

We propose a conceptual and analytical framework for assessing metric equivalence in cross‐national strategy research. We illustrate this framework by testing the equivalence of measurement models for a set of strategy constructs across the United States and Japan. Results of a two‐group LISREL analysis conducted on a data set of 447 interorganizational relationships reveal that some constructs have strong cross‐national equivalence, while others need content respecification or reconceptualization. We discuss implications and offer suggestions about how to conduct empirical strategy research in cross‐national settings. Copyright © 1999 John Wiley & Sons, Ltd.     

Firm growth,adaptive capability,and entrepreneurial orientation

Research summary: This paper posits adaptive capability as a mechanism through which a firm's prior growth influences the exhibition of future entrepreneurial action. Defined as the firm's proficiency in altering its understanding of market expectations, increased adaptive capability is a consequence of the new resource combinations that result from expanding organizational boundaries. Increased adaptive capability in turn corresponds to expansion of entrepreneurial activity, as firms increase their entrepreneurial orientation as the strategic mechanism to capitalize on their improved understanding of market conditions. We find support for our research model in a two‐study series conducted in South Korea and the United Kingdom. Managerial summary: Most would agree that entrepreneurially oriented firms—being innovative, entering new markets, and taking risk—grow faster. But how a firm becomes entrepreneurial is a complicated question. In this study, we flipped the growth relationship around and found support for growth contributing to a firm's entrepreneurial orientation. But between growth and being more entrepreneurial is the firm's ability to recognize changes in market expectations. We argue that as a firm grows, it acquires new resources and new knowledge of how to use those resources. These new resource combinations increase its ability to recognize changes in market expectations—its adaptive capability. This capability uncovers new entrepreneurial opportunities for value creation. To capture this potential value, firms expand their entrepreneurial orientation. Copyright © 2016 John Wiley & Sons, Ltd.     

Conceptualizing executive hubris: the role of (hyper‐)core self‐evaluations in strategic decision‐making

Researchers have long been interested in how an executive's self‐concept affects his or her behaviors, but have lacked a theoretically grounded, validated construct for conducting systematic inquires. The concept of ‘core self‐evaluation’ (CSE), which has been recently validated in the psychology literature, concisely encompasses and consolidates the common, overlapping portions of four previously unconnected personality dimensions: self‐esteem, self‐efficacy, locus of control, and emotional stability. CSE has great potential to provide substantial leverage for research on executive self‐concept. We review and reconcile prior research on related constructs in executive settings (including narcissism, hubris, and overconfidence) and argue that CSE should be adopted as a robust, well‐validated umbrella construct for research on executive self‐concept. Indeed, a very high level of CSE, or hyper‐CSE, aligns closely with what is often colloquially called ‘hubris.’ We anticipate that hyper‐CSE executives—who possess supreme levels of self‐confidence, self‐potency, and conviction that they will prevail—will manifest this trait in their job behaviors. We develop a set of integrated propositions that describe the implications of CSE for strategic decision processes, strategic choices, and organizational performance. Finally, we propose additional avenues for research. Copyright © 2005 John Wiley & Sons, Ltd.     

Entrepreneurial orientation‐as‐experimentation and firm performance: The enabling role of absorptive capacity

According to the perspective of entrepreneurial orientation‐as‐experimentation, entrepreneurial orientation (EO) increases variability in innovation outcomes. Although increased variability in the innovation portfolio could increase performance, it could also lead to a decline in performance. We propose that absorptive capacity plays a role in both increasing and managing variations in innovation outcomes. Potential absorptive capacity enhances the effects of EO on variability in innovation outcomes, whereas realized absorptive capacity helps transform and exploit variability in innovation outcomes to enhance firm performance. Copyright © 2014 John Wiley & Sons, Ltd.     

The impact of CEO core self‐evaluation on the firm's entrepreneurial orientation

Although much has been attributed to a CEO's personality, one particularly intriguing, and as yet unexplored, investigation is its impact on the firm's entrepreneurial orientation. Additionally, despite calls from the upper‐echelon literature, CEO personality research has been hobbled by the absence of a unifying construct that captures core dimensions of personality, and by the difficulty in obtaining such intimate assessments from executives. Building on recent advances in personality research, in particular the identification and validation of the core self‐evaluation construct that captures the core facets of an executive's sense of self‐potency, we develop and test a model of the impact of CEO core self‐evaluation on entrepreneurial orientation. Then, consistent with upper echelons and personality theory, we specify the contingent role of environmental dynamism. Using multisource data from a sample of CEOs and their top management teams from 129 firms, including a time‐lagged assessment of the firm's entrepreneurial orientation, we find evidence to suggest that CEOs whose personalities reflect higher core self‐evaluations have a stronger positive influence on their firms' entrepreneurial orientation. In addition, we find that this influence is particularly strong in firms facing dynamic environments, but negligible in stable environments. Copyright © 2009 John Wiley & Sons, Ltd.     

Reconceptualizing professional service firm innovation capability: Scale development

Building on capability theory, this paper presents a reconceptualization of the innovation capability construct within a knowledge-intensive service context, specifically, professional service firms (PSFs). Employing a rigorous multi-stage scale development process we interviewed 37 participants and surveyed 463 respondents across a wide range of PSFs including lawyers, accountants, consulting engineers and management consultants. The results of exploratory and confirmatory factor analyses highlight the multi-dimensional nature of innovation capability within this context. Three dimensions were identified: client-focused, marketing-focused, and technology-focused innovation capability. We provide evidence of face validity, content validity, convergent and discriminant validity, nomological validity and reliability of our scale. Our scale offers a new way to measure innovation capability within PSFs and highlights the need to move beyond the narrow manufacturing mind-set focus of prior innovation research. Implications for theory and practice are discussed.     

Why strategic factor markets matter: “New” multinationals' geographic diversification and firm profitability

This study examines firm profitability differences among “new” multinational enterprises (NMNEs) pursuing geographic diversification into two distinct types of geographic locations based on the development of strategic factor markets. Building on strategic factor markets theory, we propose that firm‐specific advantages of NMNEs contribute differentially to firm profitability because they evolve differently given strategic factor market differences in host compared to home countries. Using a sample of Korean manufacturing MNEs during the 1993–2003 period, we find that geographic diversification into resource‐poorer host countries has a positive relationship with firm profitability, whereas geographic diversification into resource‐richer host countries has a U‐shaped relationship with firm profitability. Our study demonstrates why strategic factor markets—an important and often overlooked contextual factor—matter in exploring rationales for geographic diversification. Copyright © 2014 John Wiley & Sons, Ltd.     

How entrepreneurs leverage institutional intermediaries in emerging economies to acquire public resources

Research summary: Governments in emerging economies often use institutional intermediaries to promote entrepreneurship, and bridge the void between ventures and public funding. While prior literature describes what institutional intermediaries do, it leaves open how intermediaries support different types of entrepreneurs. By comparing science park and non‐science park firms in Beijing and across China, we distinguish which entrepreneurs benefit from certification versus capability‐building through the introduction of two new constructs: skill adequacy and context relevance. Broadly, our study adds insights at the nexus of emerging economies and entrepreneurship research, and to the tie formation and institutional intermediaries literatures. Managerial summary: A key dilemma facing entrepreneurs is how to finance their ventures. While entrepreneurs in developed economies can seek VC or angel investment, entrepreneurs in emerging economies often need to pursue potential government funding opportunities. Our study highlights three strategies for acquiring government funding. Well‐connected entrepreneurs can leverage their political ties to acquire such funding. Less‐connected entrepreneurs can leverage science parks that in emerging markets are designed to help governments to identify promising ventures. For returnees whose ample experience abroad may not fit with local ways of doing business, gaining science park admission can certify quality and so ease the path to government funding. For technically skilled local entrepreneurs who lack business skills, science parks can help build such skills, which then ease the path to government funding. Copyright © 2016 John Wiley & Sons, Ltd.     

Performance feedback and middle managers’ divergent strategic behavior: The roles of social comparisons and organizational identification

Research Summary: What drives middle managers to search for new strategic initiatives and champion them to top management? This behavior—labeled divergent strategic behavior—spawns emergent strategies and thereby provides one of the essential ingredients of strategic renewal. We conceptualize divergent strategic behavior as a response to performance feedback. Data from 123 senior middle managers overseeing 21 multi‐country organizations (MCOs) of a Fortune 500 firm point to social performance comparisons rather than historical comparisons in driving divergent strategic behavior. Moreover, managers’ organizational identification affects whether they attend to organizational‐ or individual‐level feedback. These results contribute to research on performance aspirations and strategy process by providing a multilevel, multidimensional framework of performance aspirations in middle management driven strategic renewal. Managerial Summary: Middle managers are essential actors in strategic renewal. Their unique positions offer insights into operations alongside knowledge of strategy. In contrast to typical assessments of managerial performance with reference to a prior year, this research shows that performance comparisons relative to peers and other organizational units better motivate managers’ divergent strategic behavior. Our results also show that managers who identify with the firm are more attentive to organizational rather than individual performance discrepancies. Thus, our study unveils an important approach for organizations aiming to spark strategic renewal.     

Entrepreneurial beacons: The Yale endowment,run‐ups,and the growth of venture capital

Research summary : This article investigates the social context of entrepreneurship in organizational sectors. Prior research suggests that firm foundings are driven by collective patterns of activity—such as patterns of prior foundings in a given sector. Building on research on social salience and signals, we consider the influence of singular sector‐level triggers, which we call entrepreneurial beacons. We argue that the actions or outcomes of single, salient organizations attract and motivate entrepreneurs, thus increasing the rate of foundings. We test this logic by examining the impact of the Y ale U niversity endowment's investment choices and of venture‐capital‐backed IPO run‐ups on venture‐capital foundings between 1984 and 2011. We find support for the existence and influence of beacons and outline boundary conditions for their effects . Managerial summary : What leads entrepreneurs to found new companies in nascent sectors? In contrast to prior research, which emphasizes patterns of activity, we argue that entrepreneurial activity can sometimes be driven by the actions of a singular trigger—what we call an entrepreneurial beacon. We examine the influence of two such beacons, Y ale U niversity's endowment investments and exceptional venture‐capital‐backed IPO run‐ups, on the founding of new venture‐capital firms over a 28‐year period. We find that Y ale's increased allocations to the venture‐capital asset‐class has a significant influence on the founding of new venture‐capital firms, while exceptional venture‐capital‐backed IPO run‐ups only influence venture‐capital foundings under certain conditions. Overall, we offer an explanation for heretofore anecdotal accounts of certain organizations or events that appear to have an outsized influence on entrepreneurial activity . Copyright © 2016 John Wiley & Sons, Ltd.     

The contingent effects of differentiation and integration on corporate entrepreneurship

This paper develops a contingency view regarding the effects of structural differentiation and integration on levels of corporate entrepreneurship. Integrating notions of benefits and costs resulting from integration with structural contingency theory, we argue that the joint effects of structural differentiation and integration on corporate entrepreneurship levels are moderated by organizational size and environmental dynamism. Our findings from a time‐separated sample demonstrate that in smaller organizations and more dynamic environments, the positive effects of integration on the structural differentiation‐corporate entrepreneurship relationship strongly diminish. As such, with this research we begin to identify contingencies that influence the corporate entrepreneurship levels observed among firms striving to balance the needs for structural differentiation and integration. Copyright © 2014 John Wiley & Sons, Ltd.     

Leveraging ties: the contingent value of entrepreneurial teams' external advice networks on Indian software venture performance

This study investigates the impact of entrepreneurial teams' external networks on their ventures' performance. We first argue that ventures whose entrepreneurial teams span many structural holes in their external advice networks experience higher performance. We then propose that network ties are not uniform in their effect, but rather are contingent on two distinct features of entrepreneurial teams: (i) their strategic consensus—extent of agreement on key goals and strategies within the team—and (ii) internal cohesion—extent of interpersonal friendships within the team. Finally, we propose that team demographics and team networks complement (rather than substitute) each other. Data from Indian software ventures provide support for these arguments. We extend entrepreneurship research by highlighting how venture teams' internal processes and external networks jointly shape performance outcomes. We also add to the literature on team networks by drawing attention to the role of strategic consensus as a distinct pathway through which teams can leverage their external networks.     

Unpacking functional alliance portfolios: How signals of viability affect young firms' outcomes

This article investigates how alliance portfolio composition affects young firms' outcomes. Drawing on signaling theory, we propose how alliance portfolio composition—number, functional domains (R&D, manufacturing, and marketing), and single‐purpose or multi‐purpose nature of alliances within the portfolio—may affect a firm's likelihood of achieving a liquidity event (IPO or acquisition). We study 8,600 U.S.‐based, VC‐backed firms during the period of 1990 to 2002 from 10 industry sectors. We find that alliance portfolios (to a certain extent) increase a firm's liquidity event likelihood. Further, firms with heterogeneous alliance portfolios, including portfolios emitting greater efficiency signals versus endorsement signals, are more likely to experience an IPO versus acquisition. Our findings lend support to the value of multi‐function alliances within portfolios. Copyright © 2013 John Wiley & Sons, Ltd.     

Resources as dual sources of advantage: Implications for valuing entrepreneurial‐firm patents

Why and how do resources provide sources of competitive advantage? This study sheds new light on this central question of resource‐based theory by allowing a single resource—entrepreneurial‐firm patents—to play distinctive roles in different competitive arenas. As rights to exclude others, patents serve a well‐known role as legal safeguards in product markets. As quality signals, patents also could improve access and the terms of trade in factor input markets. Based on the financing activities of 370 venture‐backed semiconductor start‐ups, we provide new evidence that patents confer dual advantages in strategic factor markets, improved access and terms of trade, above and beyond their added product‐market protection. The study has important implications for empirical tests of resource‐based theory and the measurement of resource value. Copyright © 2013 John Wiley & Sons, Ltd.     

Whose Innovation Performance Benefits More from External Networks: Entrepreneurial or Conservative Firms?

The primary contribution of this research is positing and empirically supporting the proposition that learning through external networks disproportionately benefits conservative, risk‐averse firms. The construct, entrepreneurial orientation (EO), is used to discriminate conservative, risk‐averse firms from proactive, risk‐seeking firms. Organizational learning theory and social capital theory are employed to support our hypotheses. Based on a study of 1978 U.S. firms, the paper suggests that the utilization of external networks (i.e., the process of learning from information, perspectives, and insights embedded in external networks) may act as a primary driver for innovation for those firms that are either not inclined and/or do not have the capabilities to adopt entrepreneurial culture. Specifically, weak EO firms' innovation performance benefits from utilizing external networks more than strong EO firms'. This research also tests for the moderating role of firm size and finds that the negative moderating effect of EO on the external network utilization–innovation performance relationship is more pronounced in small and medium sized enterprises (SMEs) than large firms.