Trends in European Research on Entrepreneurship at the Turn of the Century

This article serves as an introduction to the special issue on Entrepreneurship Research in Europe, a selection of papers from the XIVth RENT conference held in Prague, the Czech Republic, November 23–24, 2000. It provides an overview of the articles and also discusses some of the themes that bind them together: Networking and the diffusion of innovations and family business. In addition, the paper includes a short section highlighting advances in the Italian entrepreneurship climate as evidenced by data provided by several of the papers in this issue carried out by Italian researchers on Italian SMEs.     

Professional HRM Practices in Family Owned‐Managed Enterprises*

This study examines determinants of professional human resource management (HRM) practices within a sample of approximately 700 small to medium‐sized firms. Predictions from the agency theory and the resource‐based view of organizations lead to alternate hypotheses regarding the direct and indirect negative effects of family ownership and management on the usage of professional HRM practices. Results support predictions for both direct and indirect effects. These indirect effects occur through intermediary variables that reflect organizational complexity, such as firm size, (the presence of a) formal business plan, and HRM specialization. The findings lend partial support to both theories.     

Postmaterialism influencing total entrepreneurial activity across nations

The relative stability of differences in entrepreneurial activity across countries suggests that other than economic factors are at play. The objective of this paper is to explore how postmaterialism may explain these differences. A distinction is made between nascent entrepreneurship, new business formation and a combination of the two, referred to as total entrepreneurial activity, as defined within the Global Entrepreneurship Monitor (GEM). The model is also tested for the rate of established businesses. The measure for postmaterialism is based upon Inglehart’s four-item postmaterialism index. A set of economic, demographic and social factors is included to investigate the independent role postmaterialism plays in predicting entrepreneurial activity levels. In particular, per capita income is used to control for economic effects. Education rates at both secondary and tertiary levels are used as demographic variables. Finally, life satisfaction is included to control for social effects. Data from 27 countries (GEM, World Values Survey and other sources) are used to test the hypotheses. Findings confirm the significance of postmaterialism in predicting total entrepreneurial activity and more particularly, new business formation rates.

Family-centered goals,family board representation,and debt financing

Small Business Economics - This study investigates the effect of both family-centered goals and family board representation (family member representation on the board of directors) on family firm...     

Deals without delusions

Pursuing a merger or acquisition is inherently difficult. Things get even harder when executives are blind to their own faulty assumptions, say Lovallo--a professor at the University of Western Australia Business School and a senior adviser to McKinsey--and three of his McKinsey colleagues. The authors identify biases that can surface at each step of the M&A process and provide practical tips for rising above them--an approach they call targeted debiasing. During the preliminary due-diligence stage, biases abound. To overcome the confirmation bias, aggressively seek evidence that challenges your initial hypothesis about a deal. The best medicine for overconfidence in identifying revenue and cost synergies is to learn from precedents at your firm and others. Avoiding underestimation of cultural differences between your company and the target requires understanding the differences in the ways people interact at each organization. Misjudging the time and resources you need is at the core of the planning fallacy, which you can elude by formally identifying best practices and continually revisiting them. Finally, dilute conflict of interest by soliciting dispassionate external expertise. The bidding phase is vulnerable to the winner's curse, a phenomenon common in auctions. To avoid paying too much for a target, actively generate alternatives to the deal under consideration and develop a set of bidding cutoff rules. After offering an initial bid, deal makers are susceptible to anchoring, whereby they remain attached to their original price estimate, and to the sunk cost fallacy that they've invested too much to stop now. The secret to overcoming both: Use your newly available access to the target's books to better assess the investment case--and change your tune accordingly.     

Disentangling the effects of organizational capabilities, innovation and firm size on SME sales growth

This paper focuses on certain drivers of SME sales growth related to knowledge and innovation. Building on the dynamic capabilities literature, we test whether two organizational capabilities (external sourcing and employee involvement in renewal activities) predict sales growth, and if so, whether such effects are mediated by process and/or product innovation. Based on survey data from a panel study of Dutch SMEs, and controlling for several firm characteristics (firm size, sector, age and family business), we conclude that external sourcing has direct effects on both product and process innovation, with an indirect effect (mediated by process innovation) on sales growth. In line with our hypothesis development, we also find that employee involvement, while positively affecting process innovation, has a negative effect on sales growth. Firm size moderates the effects of two of the variables (external sourcing and product innovation) on sales growth, with more positive effects found for the smallest firms, results supporting the nimbleness (versus resource-based) view.     

Private Firms and Corporate Governance: An Integrated Economic and Management Perspective

This article provides a definition of corporate␣governance and highlights the challenges in adapting understanding of governance to the privately-held firm. We emphasize the need to develop the scope of governance in privately-held firms beyond the traditional agency theory focus in the financial economics literature relating to large publicly-listed corporations. There is a need to draw on and integrate an array of theoretical perspectives from both economics and other social science disciplines as well. We present a schematic model of corporate governance which places the contributions presented in the special issue in context and which serves as a guide to highlighting gaps in the research base. We review the principal issues relating to corporate governance in privately-held firms which relate to: governance in different organizational contexts (institutional context; the industrial sector within which the firm finds itself, the ownership context of the firm, and the stage within the firm’s life-cycle); the scope of corporate governance; and other internal governance mechanisms to be considered We identify areas for further research on corporate governance in privately-held firms with respect to processes of governance, organizational contexts, assumptions about the owners, executive remuneration, financial reporting, the nature of the dependent variable relating to the expected outcome of different approaches to governance and various methodological issues. We suggest a need to develop governance codes for privately-held firms that are flexible enough to take account of the different types of governance needs of firms at different stages in their life-cycle.