Founding scale and survival: double-edged effects of corporate sponsorship

This study examines the effects of founding scale on survival rates across independent and corporate-sponsored Taiwan securities firms. Empirical results confirm the positive effects of founding scale and corporate sponsorship on new venture survival. Results also indicate that when founding scale is large, corporate-sponsored new ventures have higher survival rates than independent ventures. However, when founding scale is smaller, the reverse is true: corporate-sponsored new ventures have lower survival rates than independent ventures. Therefore, corporate sponsorship comes off as a double-edged sword; new ventures may benefit from the parent's existent resources and social linkages, but also suffer from a loss of autonomy and control over major decisions.     

An examination of the influence of industry structure on eight alternative measures of new venture performance for high potential independent new ventures

This study examined the influence of the structure of new ventures’ entered industries on eight alternative measures of new venture performance for 199 high potential independent new ventures. Each of the 199 entrepreneurial ventures had undertaken an initial public offering (IPO) within the first 6 years of the venture’s founding date and were free of corporate sponsorship or prior corporate parentage.Specifically, this research examined the influence of: (1) stage of the life cycle; (2) industry concentration; (3) entry barriers; and (4) product differentiation on eight alternative measures of new venture performance. The eight measures of new venture performance examined in this research consisted of: (1) change in sales; (2) sales level; (3) net profit; (4) earnings before interest and taxes; (5) return on sales; (6) return on assets; (7) return on invested capital; and (8) return on equity.Most prior research examining the influence of industry structure on new venture performance has: (1) utilized only one or two measures of new venture performance as indicators of the venture’s overall effectiveness and efficiency; (2) often failed to provide theoretical justification for the measure(s) of new venture performance or industry structure examined; and (3) utilized data derived from questionnaires and/or the PIMS data base of corporate-sponsored new ventures. In addition, prior industry structure studies examining independent new ventures have often utilized relatively small sample sizes.This study sought to advance the progress in the field of entrepreneurship with regard to understanding the influence of the structure of new ventures’ entered industries on new venture performance by: (1) examining eight alternative measures of new venture performance; (2) providing theoretical justification for the measures of new venture performance and industry structure examined; and (3) utilizing the largest nonquestionnaire data base of independent new ventures developed to date.This research found that the stage of the life cycle of the venture’s entered industry was the most important determinant of new venture performance among the four industry structural elements examined. Stage of the life cycle had a statistically significant relationship, at a 0.05 level, with the majority of the new venture performance measures examined in this research. In addition, ventures entering industries in the introductory stage of the life cycle achieved the highest levels of venture performance, particularly when compared with those ventures that entered industries in the mature stage of the life cycle.However, this study did not find a statistically significant relationship between stage of the life cycle and change in sales. This suggests that there is a trade-off between profitability and sales growth, and that new ventures that undertake an IPO have a stronger focus on achieving profitable operations rather than sales growth during the initial years after their IPO. This may be due to pressures placed on the new ventures to achieve profitability by the external credit market.Conversely, this research found that: (1) industry concentration; (2) entry barriers; and (3) product differentiation did not have statistically significant relationships, at a 0.10 level, with any of the eight alternative measures of new venture performance examined in this research. However, this research did find that over 90% of the new ventures entered industries characterized by: (1) a low degree of industry concentration and (2) a high degree of product differentiation.The relative absence of new venture entry into industries characterized by: (1) high degrees of concentration and (2) low degrees of product differentiation provides support for prior theory, which suggests that successful entry into such industry environments may be substantially more difficult.In sum, the results of this research suggest that high potential independent new ventures that undertake an IPO should enter industries in the introductory stage of the life cycle. In addition, the results of this research suggest that industries characterized by: (1) relatively low degrees of industry concentration and (2) highly heterogenous products may be necessary but not sufficient conditions for successful entry by high potential independent new ventures seeking to raise equity capital through an IPO.     

The Impact of Environment Uncertainty and Effectual Flexibility on Entrepreneurial Resource Combination: The Moderating Effect of Entrepreneurial Self-efficacy

Entrepreneurial resource combination is widely recognized as a key enabling factor to a new venture’s survival and growth, but how and why resources are integrated remain elusive. Borrowing from the theory of resource combination proposed by Sirmon, Hitt and Ireland (2007), this study empirically examines how environmental uncertainty impacts entrepreneurial resource combination. We also examine the mediating effect of effectual flexibility on the relationship between environmental uncertainty and entrepreneurial resource combination to see how new ventures utilize flexibility to neutralize the threat of environmental uncertainty. The moderating effect of entrepreneurial self-efficacy is also examined to see how entrepreneurs’ self-cognition affects these relationships. Examining data from 287 new ventures, we find that both environmental dynamism and environmental hostility have significantly positive influence on entrepreneurial resource combination (including entrepreneurial resource cohesion and entrepreneurial resource coupling). We also find that flexibility mediates the relationship between environmental uncertainty (including environmental dynamism and environmental hostility) and entrepreneurial resource combination. Empirical studies also show that entrepreneurial self-efficacy positively moderates the relationship between environmental dynamism and flexibility but negatively moderates the relationship between environmental hostility and flexibility. Theoretical and practical implications are discussed.     

Industry environments and new venture formations in U.S. manufacturing: A conceptual and empirical analysis of demand determinants

Through integration of theoretical perspectives from Austrian economics, industrial organization economics, and organizational theory, this study builds and examines empirically a model of the demand determinants of new venture formations in manufacturing industries. Austrian economics and other writings on market disequilibrium imply that the dynamics of industries create market opportunities that are available to economic actors. The greater the changes occurring in an industry, the greater the opportunities created, and the further the market is moved from an equilibrium state. Entrepreneurship is viewed as the process of seizing opportunities through combinations of productive inputs. The more available market opportunities in an industry, the greater is the potential for entrepreneurial activity and, more specifically, new venture formations. Entry barriers constrain the formation of new ventures by prohibiting new ventures from taking advantage of available emerging opportunities. The inertial properties of existing firms constrain their ability to move toward these opportunities and thereby increase the potential for new ventures to exploit these market opportunities.The empirical analysis utilizes the Small Business Administration's U.S. Establishment and Enterprise Microdata file to test the model on a large sample of U.S. manufacturing industries. Results indicate that dynamic industries have greater new venture formations. More specifically, new venture formations are associated with industry growth, the dynamism of industry niches, and technological development. Moreover, entry barriers were found to strongly constrain rates of new venture formations. Industry capital requirements, concentration, and excess capacity were all related negatively to the formation of new ventures. The hypothesized positive relationship between industry-level measures of organizational inertia and new venture formations was also borne out in the empirical analysis. New venture formations were related positively to the extent of vertical integration in an industry as well as to the failure of incumbent firms to invest in new capital.Overall, the independent variables explained more than 50% of the variance in rates of new venture formations in manufacturing industries. The results support an Austrian perspective on entrepreneurship and imply that demand factors and industry structural variables are important determinants of new venture creations.The results imply that dynamic industries should spawn new ventures, and industries with high sales growth, changing consumer preferences, and rapid technological change should exhibit high rates of venture formations. For potential entrepreneurs, the model presented herein might be a useful guide to focus their venture activities. Entrepreneurs who can spot the fundamental sources of market change can exploit their knowledge for economic gain. Yet, there are a number of difficulties in suggesting that the model presented herein could be directly applied by entrepreneurs. First, it is always easier to estimate the dynamics of an industry post hoc than it is ex ante. For example, whereas it is simple to catalogue the technological change that occurred in an industry over time, it is another matter to predict the nature of future technological developments. Second, entrepreneurial opportunity can persist only if other potential economic actors do not know of the presence of the opportunity or cannot act upon it. Any model that gains acceptance as a means of predicting the presence of opportunities would, through its widespread usage, neutralize those opportunities for economic profit. Nonetheless, entrepreneurs who have that unique capability to spot industry dynamics and associated profit opportunities where others do not will gain from that ability.     

Supporting innovation and venture development in established companies

Accumulated research findings call into question the ability of established corporations to develop and manage new ventures successfully. This article argues that the problem comes in large part from failing to differentiate between the requirements of administrative management—geared to managing existing activities and holding things in place to ensure continuation of already-developed activities—and the requirements of entrepreneurial management—designed to create change by developing something new. The two kinds of management are in tension and may interfere with each other, but every established organization needs both in order to get both innovation and efficiency.Innovations and new ventures have four particular characteristics that account for their special management requirements: uncertainty, knowledge-intensivity, competition with alternative courses of action, and boundary-crossing. Thus entrepreneurial management to support creation of the new puts a stress on such features as visionary leadership, “patient money,” planning flexibility, team continuity/stability, and interfunctional cooperation. But the usual requirements of administrative management in established corporations contradict these principles. Thus some companies try to set their new ventures apart from the old to avoid conflicts in management requirements. However, this this only partially solves the problem.All companies need both to manage ongoing activities and to create new ones—with the proportions of each depending on the nature of the business. They need to strike a balance between administrative and entrepreneurial management. The problem of venture development in established corporations occurs when administrative management comes to dominate and innovation is not valued sufficiently. The command system of administrative management needs to be replaced by a mutual adjustment system.High innovation companies build mutual adjustment into their design. They allow flexibility to move into an entrepreneurial mode. They are characterized by broader jobs: structures built around small business units or functionally complete project teams; cultures stressing the ability of people to contribute more over time; and easy access to the key “power tools” of information, support, and resources.A more entrepreneurial corporation minimizes hard-and-fast rules and procedures governed by a rigidly defined command structure and emphasizes instead flexibility and broadly-skilled sets of employees in flexible units that can be grouped or regrouped as changing circumstances require.Large corporations must institute deliberate programs to encourage innovation and entrepreneurship, including removing the roadblocks of unnecessary administrative requirements; encouraging integration across departments and functions: changing budgeting and accounting procedures and providing internal venture capital and special project funds; discretionary time; and new business performance measures.     

Turning water into wine? Exploring the role of dynamic capabilities in early-stage capitalization processes

Technology-based ventures face considerable challenges when attempting to raise early-stage capital during the early-stages of development. To create an operational business they need access to financial capital, but external investors prefer to see an operational business before investing capital. This study extends arguments grounded in dynamic managerial capabilities theory to examine the extent to which various trade-offs among the quality of a venture's management team, radicalness of the firm's technological resources, and demand uncertainty in focal markets impact the ability of ventures to resolve these capitalization challenges. We find that higher levels of demand uncertainty and more radical innovations do not appear to enhance the impact of strong management teams on the raising of early-stage capital. However, lower levels of uncertainty do appear to strengthen the effects of strong management teams. Implications of these findings for dynamic capabilities theory and early-stage capitalization processes are discussed.     

Examining the influence of uncertainty on marketing mix strategy elements in emerging business to business export-markets

The degree of adaptation or standardization of the marketing program is critical in international business ventures. However, findings within this important research field and, consequently, implications for practice remain contradictory and confusing. The purpose of this paper is to examine determinants of an international marketing-mix strategy within a specific business-to-business context that includes the effects of uncertainty. Is the degree to which the marketing program is adapted or standardized dependent on the managerial perception of uncertainty? Does a firm's international entrepreneurial ability or the use of networks positively influence the degree of positive assessment of the environment? Data were collected from German companies working in different international business-to-business markets. The results indicate that international entrepreneurship has a greater impact on uncertainty reduction than the use of networks. After having reduced uncertainty, a firm tends to adapt their communication and pricing strategy, whereas the adaptation of the product and distribution strategy in general is not significant.     

Organizational sponsorship and the economics of place: How regional urbanization and localization shape incubator outcomes

Organizational sponsorship impacts new venture emergence and survival prospects by shaping the relationship between new ventures and their surrounding environment. While extant literature offers an explanation as to why heterogeneity in the effectiveness of sponsorship emerges based on the sponsor's characteristics, current theorizing largely overlooks how sponsorship interacts with local economic conditions. This study introduces insights from urban economics to extend organizational sponsorship theory by showing how different types of agglomeration economies affect the effectiveness of organizational sponsorship. We test our hypotheses with a comprehensive database that includes over 46,000 sponsored and non-sponsored firms in the years 1997–2007. Our results reveal organizational sponsorship delays new venture exit when urbanization levels are low, localization is low, and both urbanization and localization are high.Executive Summary.Organizational sponsorship (OS) is an institutional arrangement whereby private or public entities provide assistance to new firm ventures. Since young firms face low survival chances at birth, it is assumed that any assistance such firms receive is to their advantage. However, very little research supports this assumption (Clayton et al., 2018; Dutt et al., 2016). It is in this context that we examine the impact of OS in different regional environments. Specifically, we look at the interplay between business incubation, a ubiquitous form of OS, urbanization, the city-scale of the region in which the firm is founded, and localization, the presence of same-industry firms in the region, in determining new venture survival. By exploring this interaction, we identify how the efficacy of OS varies in differing environmental circumstances. Additionally, it provides a better understanding of the specific OS mechanisms that are most likely to promote new venture survival depending on regional characteristics.For the purposes of our study, we combine insights from OS and agglomeration literatures. Specifically, we look at the interplay between the bridging, buffering and curating functions of OS with the externalities that arise from urbanization and localization. We consider the regional characteristics that provide new ventures with positive agglomeration externalities of input sharing, quick and quality matching with resource providers, and knowledge spillovers. Similarly, we also consider regional characteristics that give rise to negative externalities of rising costs and congestion. Thus, we identify urbanization and localization scenarios in which new ventures are most in need of buffering from competition, in the form of financial aid and subsidies, and scenarios where new ventures need to be bridged or curated with non-monetary resources such as accountants, lawyers, or industry-specific suppliers and investors. That is, we identify founding environments in which OS functions are most valuable.We test our hypothesis on a population of US business incubators operating between 1997 and 2007. To study the impact of OS at different levels of urbanization and localization, we compare the probability of exit by incubated new ventures with that of a control group of non-incubated new ventures in the same county. We find that incubators are most effective in improving the survival of new ventures when both localization and urbanization in the founding environment are low or when both are high.By linking OS literature with agglomeration literature our study identifies the conditions under which OS is most effective and finds that it is most effective when mitigating the lows of resource-deprived environments or the highs of a hyper-competitive landscape. We also extend the theoretical link between these two streams of literature by identifying the critical role of the OS function of curating in a highly localized and urbanized environment.Our study sheds new light on why OS is often met with varying levels of success in promoting new venture survival. We see that specific regional characteristics determine the type of OS mechanisms that are most beneficial. Thus, for instance, simply mimicking successful incubators in one region may not lead to success for incubators in other regions. Furthermore, we see that OS is counterproductive in regions with low urbanization and high localization. Together, these findings suggest that policy-makers need to consider the specific constraints faced by entrepreneurs in different regions before they seek to promote entrepreneurship through OS. It also stresses the need for entrepreneurs to do due diligence prior to joining an incubator.     

New venture internationalization,strategic change,and performance: A follow-up study

Although many scholars, business experts, and government agencies enthusiastically advise all firms, including new and small ventures, to internationalize, such advice does not appear to be based on empirical evidence. Few researchers have empirically examined the link between new venture performance and the internationalization of new ventures. At best, the evidence suggests that there is no significant relationship.We used a sample of 62 U.S. new venture manufacturers in the computer and communications equipment industries during the late 1980s. These industries were purportedly globalizing and may have been leading other industries into increased international operations. We found that higher levels of internationalization (percentage of foreign sales to total venture sales) were associated with higher relative market share two years later. However, there was no significant direct relationship between percentage of international sales and subsequent return on investment (ROI). Perhaps international operations simply cost more than expected. Or perhaps, as MacMillan and Day (1987) found in their study of corporate ventures over a 4-year time period, increases in market share may be a prelude to higher ROI as scale benefits translate into higher profitability. However, the 2-year time period of our study may simply not be long enough for investments in higher market shares to produce improved profits.During the 2-year study period, many of the ventures changed their level of internationalization. Of the 36 ventures who were domestic (no international sales) in the prior study, 10 expanded into international markets over the 2 years. Of the 26 originally international ventures (international sales of at least 5%), half increased their percentage of international sales, nine reduced it, and four stayed the same. Whereas the average change in international sales percentage of the ventures was only 2.9 percentage points, the large standard deviation of 13.0 percentage points, and the leptokurtic distribution (9.2) reflected the dramatic changes made by some of the ventures. Using subgroup analysis we examined these changes in percentage of international sales in conjunction with changes in strategies and performance. Ventures that had increased international sales, relative to those that had not, exhibited more positive associations between the degree of strategic change and performance as measured in terms of both relative market share and ROI. Increased international sales in technology-based new ventures seems to require simultaneous strategic changes in order to positively impact venture performance.This study is a follow-up to McDougall's (1989) finding that technology-based new ventures that had sales in foreign markets had significantly different strategies than similar ventures that sold their products only domestically. The current study enriches the previous findings by adding consideration of (1) changes in degree of internationalization, (2) changes in strategy, and (3) venture performance.Although we found no performance penalty associated with increasing international sales alone, indiscriminant advice for new ventures to sell in foreign markets without other supporting strategic actions is inconsistent with our findings. Internationalization, alone, did not lead to increased profitability.Entrepreneurs of young technology-based firms who are considering internationalization should take heed of our results. Internationalization of sales does not appear to be a simple matter of applying established strategies and procedures developed for a domestic arena. Successful internationalization appears to require changes in the venture's strategy as well.     

Critical assumption planning: A practical tool for managing business development risk

Although much has been written about the practice of new business development, the authors continue to find corporate managers and entrepreneurs repeating the same mistakes and often reaching the conclusion that venturing in the corporate environment won't work. The problem stems from a mental model about how business should be managed and managers' performance assessed. Corporate managers of existing businesses are judged against meeting plan. In growing new businesses, however, strict adherence to “the plan” can lead to business failure. To manage business development risk, venture managers must learn to deal with uncertainty. Whereas managers of mature businesses practice the ethic of predictability, venture managers must follow a learning ethic.Working with Fortune 100 corporations, the authors have evolved a practical, disciplined process for business development risk management that focuses on learning. Titled critical assumption planning (CAP), the process maximizes learning about new markets at lowest cost. Major uncertainties in the business proposition are isolated as critical planning assumptions. Critical assumptions in the plan are then tested. The test sequence is determined by the potential reduction of uncertainty per dollar of test cost. Assessment of the assumption test results marks a milestone. At each milestone the business plan is revised to reflect what has been learned, and the venture is redirected or terminated. This process avoids the wasted effort and expense of pursuing the original plan until commercial failure becomes obvious.The key steps in this learning process are identification of critical assumptions and cost-effective testing of assumptions. Because these steps are unfamiliar to most corporate managers, effective use requires a new perspective and new planning tools. The study explains this perspective and introduces new tools for employing the process. Following are some planning innovations that have been effective in changing perspective and that also are of practical use:

1. 1. Differentiation between primary and derivative assumptions with focus on extracting and understanding the primary assumptions.

2. 2. Early construction of a model of the business plan that allows calculation of the impact of primary assumptions such as price or sales productivity factors on derivative assumptions such as revenues and income.

3. 3. Assignment of uncertainty ranges to the primary assumption values, not just the most likely values.

4. 4. Identification of the critical planning assumptions by determining the impact of their uncertainty ranges on venture net present value.

5. 5. Selection of the next venture milestone based on the test program that results in maximum reduction of uncertainty at least cost in least time for the most critical assumption(s).

Using CAP, managers can control risk despite the many uncertainties surrounding a new business proposition. Above all, decisions to stop or redirect ventures can be taken earlier, saving the corporation money and venture managers their career credibility.     

Survival patterns among newcomers to franchising

This study examines survival patterns among franchisee and nonfranchise small firms and establishments that entered business during 1986 and 1987. Aspiring entrepreneurs purchasing franchises choose this path to small business entry, in part, because they expect to improve their chances of survival during the turbulent early years of operation. Evidence to date has been mixed: some studies conclude that franchising is a low-risk route to small business ownership, while others suggest that independent start-ups are more likely to remain in operation than franchises.This study utilizes two distinct methodological approaches to investigate franchisee survival patterns. The first approach demonstrates that franchise units have better survival prospects than independents, and the second approach demonstrates that young firms formed without the benefit of a franchisor parent are more likely to remain in operation than franchised start-ups. Reconciliation of these seemingly inconsistent findings is explored.Survival measurement is heavily influenced by the unit of analysis in franchising. Firm-specific data show different patterns than establishment-specific data when young franchise units are tracked through time. Analysis of establishments owned by corporations is undertaken for restaurants opened nationwide in 1986 and 1987. Using Census Bureau data describing corporate-owned restaurant establishments that reported payroll to the IRS in 1987, 52,088 young establishments were identified; 22.5% were franchises. Comparison of the franchisee and independent restaurant units indicated that independents were more likely to cease operations by 1988 than franchises.The fact that franchisee establishments had a better survival track record than independent restaurants does not, however, demonstrate that aspiring entrepreneurs improve their survival prospects by purchasing a franchise. In fact, 84% of the new franchise establishments under consideration were units of multi-establishment corporations, and few of these corporate parents were new businesses. Envision a corporation in operation for 15 years that owns 20 McDonalds restaurants; in 1987 they opened their twenty-first unit. The findings of this study indicate that this twenty-first unit has excellent survival prospects, more so than either an independent start-up or a franchisee opening a restaurant for the first time. New franchised restaurant units, overall, may be a safe investment, although simultaneously, the newcomer opening a franchise may face a high-risk situation.The analysis then shifts from establishments owned by franchisees to young firms (not establishments) started in 1986 and 1987 as proprietorships, partnerships, or S-corporations. Among these young firms, franchisees are found to have lower survival rates than independent start-ups, and these differences persist when various firm and owner traits are controlled for statistically. Retailing is found to be a particularly difficult field for young franchised firms: risk of firm closure is high and mean profits are negative. The most common route into retailing entailed purchasing an operating franchise unit from its previous owner, that is, an ongoing franchise. Over 53% of the young franchised retailing firms started in 1986 and 1987 were ongoing operations. By 1991, only 52.4% of these firms were still operating with the owner of record present in 1987.The findings of this study indicate, on balance, that purchase of a franchise is unlikely to reduce the risks facing a new business start-up. This does not imply that the multi-establishment franchisee adding another new franchise unit to its existing chain of operations faces a high-risk situation. Rather, the high risk facing the franchisee newcomer is partially rooted in the fact that so many of the newly-opened units in mature franchising niches are owned by multi-unit franchisees that have greater experience and resources than newcomers who are attempting to enter the industry.     

The Role of Service Operations Management in New Retail Venture Survival

While the factors related to the survival of established retail firms are well researched, current understanding of drivers of new retail venture survival is limited. We assess the influence of retail operations characteristics on the survival of new retail ventures. Based on data from 15,901 Portuguese retail ventures that were founded between 2006 and 2010 and followed until 2014, the new retail ventures with faster inventory turnover or higher staff expenses per employee had a higher likelihood of survival while higher investment in intangible assets had a negative but negligible effect on survival. The implications of these findings for entrepreneurs of new retailing ventures are discussed.     

Developing brand identities for international new ventures under uncertainty: Decision-making logics and psychic distance

While many models describe efforts to build brand identity, none specifies the brand identity development for small firms facing uncertainty, such as rapidly internationalizing international new ventures. By examining four such case firms informed by interviews and archival data spanning five years, this study identifies three brand identity development states: unbranded, sporadically branded, and focused branded international new ventures. Brand values, brand personality, and brand relationships are critical brand identity dimensions that manifest in the three states. A related model and propositions help explicate how uncertainty owing to psychic distance moderates the impact of decision-making logics on brand identity development. We show how the role of decision-making logic affects the prominence given to different dimensions of brand identity in the developmental states. Moreover, we reveal the associated change and state mechanism allowing for the rapid advancement of brand identity states in international new ventures.     

International versus domestic entrepreneurship: New venture strategic behavior and industry structure

International entrepreneurship is defined in this study as the development of international new ventures or start-ups that, from their inception, engage in international business, thus viewing their operating domain as international from the initial stages of the firm's operation.One hundred and eighty-eight new venture firms in the computer and communications equipment manufacturing industries are classified according to the percentage of their sales in the international market. Ventures with no sales derived from international activities are considered “domestic” new ventures, and ventures with sales from international activities comprising greater than 5% of total sales are considered “international” new ventures.The strategy and industry structure profiles of international new ventures are significantly different from domestic new ventures. The internationals pursue much broader market-based strategies, seeking a strategy of broad market coverage through developing and controlling numerous distribution channels, serving numerous customers in diverse market segments, and developing high market or product visibility. The internationals also emphasize a more aggressive entry strategy, building on outside financial and production resources to enter numerous geographical markets on a large scale. Securing patent technology is also an important component of their strategy. This suggests that the internationals compete by entering the industry on a large scale, seeking to penetrate multiple markets, with the recognition that external resources are necessary to support such an entry.Whereas both the domestics and the internationals characterize domestic competition as being relatively intense, the international new ventures compete in industries with higher levels of international competition. It is not clear from this research whether the new venture selects an industry with a high degree of international competition and therefore responds with an international orientation or, because the new venture has an international orientation, it perceives or recognizes a higher degree of international competition. Another industry structure difference is the internationals' perceived higher degree of restrictiveness due to government regulation. It is unclear whether this restrictiveness motivates new ventures to seek less-regulated international environments or if it indicates that when competing internationally, the new venture is confronted with increased regulatory requirements.Domestic new ventures are distinguished by their emphasis on a production expansion strategy and customer specialization strategy. The production specialization strategy consists of focusing on limited geographical markets, maintaining excess capacity, and pursuing forward integration. The customer specialization strategy incorporates the production of a specialty product that is purchased infrequently. Thus, for both of the domestic strategies, a consistent “closeness” between the producer and consumer is implied. This may be an important basis underlining the new venture's decision to compete in an exclusive domestic context.This study offers initial support for the notion of international entrepreneurship by its findings that there are significant differences between new venture firms competing domestically and new ventures choosing to also enter international markets.     

The impact of foreign direct investment on new firm survival in the UK: evidence for static versus dynamic industries

The paper examines the impact of Foreign Direct Investment (FDI) on the survival of business start-ups. FDI has potential for both negative displacement/competition effects as well as positive knowledge spillover and linkage effects on new ventures. We find a net positive effect for the whole dataset. However, a major contribution of the paper is to outline and test an argument that this effect is likely to be comprised of a net negative effect in dynamic industries (high churn: firm entry plus exit relative to the stock of firms) alongside a net positive effect in static (low churn) industries. We find evidence to support this view. The results identify new effects of globalisation on enterprise development with associated challenges for industrial policy.

New venture adaptation in international markets: A goal orientation theory perspective

This study uses goal orientation theory to investigate why managers of international new ventures make adaptations to markets served, entry modes used, and the organization. We use the case method to identify the international adaptation behaviours of six new ventures and managers’ explanations regarding those adaptations. We infer two different profiles of managerial goal orientation. The goal orientation associated with proving one’s competence is common across managers, but firms only pursue international adaptation if their managers also hold a learning goal orientation. In contrast, if managers have the goal orientation associated with avoiding failure, firm-level adaptation is not apparent.     

Dynamic capabilities and venture performance: The effects of venture capitalists

After going through the initial public offering (IPO), new ventures face increased competition, greater public examination, and increased government scrutiny. Resource base weaknesses and external forces pose severe threats to the survival and success of new ventures. Building from resource-based theory, we first examine and delineate dynamic capabilities from entrepreneurial capabilities in entrepreneurship. We then develop theory to explain how venture capitalists (VCs) endue their ventures with greater dynamic capabilities in order to address these weaknesses and threats. We test our hypotheses on a match-pair sample of VC-backed and non-VC-backed new ventures and find that VC-backed ventures demonstrate greater dynamic capabilities as they relate to product and management development but do not display any greater dynamic capabilities as they relate to legal and government regulation threats. Further analysis also revealed that VC experience and VC reputation were positively related to 1-year stock price returns.     

New venture development: The costs and benefits of public sector assistance

In recent years there has been an extraordinary level of entrepreneurial activity occurring in the United States. Venture start-ups, new incorporations even bankruptcies are reaching record numbers. Concurrent with the increase in entrepreneurial activity has been an effort within the Reagan Administration to privatize public sector programs designed to aid new and small, ongoing business ventures. The premise behind this movement is that private sector initiatives can better, and more efficiently, serve the needs of entrepreneurs and small business managers and can also offer new business opportunities for some entrepreneurs. At the same time, however, privatization could reduce the assistance programs currently targeting fledgling ventures, many of which are unable to afford a private consultant.The purpose of this article is to examine the economic impact of one public sector assistance program, the Small Business Development Center (SBDC), in terms of its contributions to new venture initiation in Georgia and South Carolina. The focus on the SBDC program is appropriate since over 50% of the counseling activities of most of the centers is devoted to pre-venture clients, i.e., individuals or groups considering starting a business. This study is important and timely, not only in respect to assessing the effectiveness of public sector assistance programs for pre-ventures, but also for assessing whether it is worthwhile from an economic perspective, to offer assistance to such individuals in the first place.Although it is difficult to be precise in attributing cause to effects in dynamic business ventures, our study indicates that the Small Business Development Center's client sample experienced a greater than expected number of business starts, and a higher than expected rate of survival. The results suggest that the net taxable sales, generated by these new ventures in 1984. was approximately $20 million in Georgia and $10 million in South Carolina. Results also suggest that almost 500 new jobs were created in Georgia and 600 new jobs were created in South Carolina between 1981 and 1984 as a result of successful business starts among SBDC pre-venture clients.While such figures are impressive, the bottom line of this study is that the new tax revenues generated by client firms exceeded the cost of delivering the services. Specifically, our conservative estimates suggest a $3.80 to $1.00 and $1.50 to $1.00 benefit to cost ratio for the center's pre-venture consulting services in Georgia and South Carolina, respectively. Furthermore, the value attached to the assistance received, by the entrepreneurs themselves, closely paralleled our estimates, lending additional validity to our conclusions. Resource constrained entrepreneurs can obtain effective business assistance from the SBDC free-of-charge, and the benefits to society accruing from this service far outweigh the cost of providing them.     

What happens to international new ventures beyond start-up: An exploratory study

Since its inception, research in international entrepreneurship has focused mainly on how and why international new ventures internationalize early on. To date, there has been hardly any research regarding the issue of continuing corporate growth in such ventures beyond their start-up phase or initial internationalization. Theoretically, we ground our study within the dynamic capabilities view of the firm and through an inductive theory building research explore how and whether international new ventures made-it beyond the start-up phase, aiming to generate early theoretical constructs to guide international entrepreneurship research in this substantive area. Grounded in data, we develop the following constructs related to made-it points: strategic experimentation, tensions in organizational gestalt, and legitimacy lies. To get to a made-it point, entrepreneurs experiment with their venture at several levels: organizational, business model, and operational. These experimentation efforts are fueled by tensions that exist in the organizational gestalt, such as ownership structure, business proposition to the market, and product development process. To legitimate themselves and their venture in the stakeholders’ eyes, entrepreneurs may tell legitimacy lies. We maintain that international new ventures do not reach a made-it point if they only manage to develop substantive capabilities to produce desired outputs at various levels within the venture but fail to create dynamic capabilities to change and reconfigure existing substantive capabilities.     

Ownership coordination in a channel: Incentives,returns, and negotiations

In many industries firms have to make quantity decisions before knowing the exact state of demand. In such cases, channel members have to decide which firm will own the units until demand uncertainty is resolved. The decision about who should retain ownership depends on the balance of benefit and risk to each member. Ownership, after all, is costly. Whichever member owns the units accepts the risk of loss if more units are produced than can be sold. But ownership also grants firms the flexibility to respond to demand once it becomes known by adjusting price. In this study, we analyze ownership decisions in distribution channels and how those decisions are affected by demand uncertainty. We model demand based on micro-modeling of consumer utility functions and capture demand uncertainty related to market size and price sensitivity. This study shows that as long as the degree of uncertainty about market size is intermediate, the retailer and the manufacturer both benefit when the manufacturer maintains ownership of the units. But when there is substantial uncertainty about market size, the retailer and the channel are better off if the retailer takes ownership but the manufacturer still prefers to maintain ownership. Thus, there is potential for channel conflict regarding ownership under high levels of uncertainty. We show that, using product returns, the manufacturer can achieve the same outcome under retailer ownership as under manufacturer ownership. This provides an additional new rationale for the prevalence of product returns. The first-best outcome (from the perspective of total channel profit), however, is under retailer ownership without product returns when uncertainty is high (i.e., product returns reduce the total channel profit). Negotiations between the manufacturer and the retailer can lead to the first-best outcome but only under quite restrictive constraints that include direct side payments by the retailer to the manufacturer and the retailer being pessimistic about its outside option (when an agreement cannot be reached) during the negotiation.