Firm Experience and Market Entry by Venture Capital Firms (1962–2004)

In this paper, we examine a firm's decision to enter new markets as related to the depth and breadth of its experience and the relative distance of those markets. We situate our discussion and analysis in the context of the venture capital (VC) industry, and examine whether and when US VC firms enter five high‐technology investment markets through first‐ or later‐round investments. This setting allows us to observe both the firms that chose to enter a new market and those that did not, and analyse the antecedents of these decisions. We find that VC firms overall are less likely to enter distant markets; those with broader experience are more likely to make first‐round entries. In addition, VC firms with deeper investment experience are more likely to make first‐round entries in proximate markets and less likely to enter distant markets and make later‐round entries. These results offer interesting implications for the literature on organizational learning and entrepreneurship.     

The Internationalisation Process of Danish Firms -Gradual Learning or Discrete Rational Choices?

Abstract

The Uppsala Internationalisation model has greatly influenced Nordic research on the internationalisation process of firms. In this article, the Uppsala model is tested on Danish empirical material. The Danish firms largely follow a sequential development as regards the geographical dimension, where, typically, they set up in culturally close markets first and later set up in the more distant markets. On the other hand, the firms seem to follow to a less extent a pattern of sequential expansion of market commitment on the single foreign markets, just as a surprising number of establishments are set up without previous activity on the market. Crucial differences cannot be found between the establishment pattern abroad of large and small firms. The Uppsala model in itself cannot explain the internationalisation pattern of the Danish firms, which is why the article advocates that the internationali-sation process should be understood as an interaction between internal conditions in the firm (“learning” processes), external competitive conditions and more basic economic factors (assessment of market potential).     

Following in Partners’ Footsteps: An Uncertainty‐Reduction Perspective on Firms’ Choice of New Markets

In this paper, we develop a new perspective on what determines firms’ choice of new markets for entry. First, drawing on the open‐system theoretical tradition and literature on inter‐organizational networks, we advance and empirically test the proposition that firms tend to enter new markets to which they are connected by partnership ties. We then show that this network influence is filtered through the structure of firms’ network connections to new markets and firms’ experience. Specifically, we find that multiplicity of connections to new markets, as well as the extensiveness of firms’ experience and its relevance to new markets weaken the effect of network ties on firms’ choice of new markets. The results of this study indicate that firms’ choice of new markets for entry is a nuanced process that is affected by the interplay of firms’ collaborative ties, the structure of their network, and firms’ internal capabilities. We test our hypotheses in the empirical context of the U.S. venture capital (VC) industry using panel data over a 23‐year period and find broad support for them.     

Costs of short-term credit for small and large firms

Changes in costs of credit for small and large firms respond differently to economic conditions and the markets are segmented. Costs for small firms are less responsive to changing economic conditions. Small firms borrow via credit card loans and from banks. Dynamic models prove the costs of funds are negative functions of quantities borrowed and positive functions of the Fed funds rate. During recessions, the decline in funds’ prices to large firms is greater than the reductions to small firms. Large firms benefit to a greater extent than small firms when prices of credit are changing.     

Patents, Thickets and the Financing of Early-Stage Firms: Evidence from the Software Industry

Legal changes in the patentability of software since the mid 1990s have resulted in a substantial increase in the number of patents on software inventions. We focus here on the impact of transactions costs associated with patent "thickets" on new entrants' interactions with the capital markets. Using data on the financing of entrants into 27 narrowly defined software markets, we show that start-up software companies operating in markets characterized by denser patent thickets saw their initial acquisition of VC funding delayed relative to firms in markets less affected by patents after the mid 1990s. The relationship between patent thickets and subsequent financing activity such as IPO or acquisition is more complex, but there is weak evidence that firms without patents became less likely to go public if they operated in a market characterized by patent thickets. Firms with patents are more likely to be funded or experience a liquidity event. However, the application for a patent appears to matter more than its grant.     

Knowledge combination in networks: evidence from the international venturing of four small biotech firms

Although international forms of venturing are critical for the sustained economic growth of small firms, this phenomenon remains surprisingly unexplored in international small business research. This study aims to contribute to this field by shedding light on the underlying factors of the international venturing of these firms. In this endeavor, the study rests on the assumption that knowledge combination in networks is a critical requisite for seizing business opportunities in foreign markets. Hence, the specific purpose of this study is to investigate how knowledge combination in networks underlies the international venturing of four small biotech firms. The findings demonstrate that international venturings are strongly shaped by proactive strategies of identifying and implementing knowledge combinations that span across internationally dispersed network relationships. The findings also reveal that different strategies of knowledge combination in networks are pursued depending on the nature of the venture (namely, international product ventures and international market ventures).     

Small firms and internationalisation: learning to manage and managing to learn

Small firms contribute significantly to the UK economy, but most research into learning and work features the experience of large organisations. This article focuses on learning and work in small organisations. An interpretive framework relating to organisational learning is derived from the literature. Data on learning in small firms that internationalise are analysed to assess the extent to which models of organisational learning are applicable to the context and challenges they face. The article suggests that the large firm model of learning is inappropriate; the distinctive culture and communication systems of small organisations require different approaches to the acquisition, transmission and interpretation of knowledge. Tacit knowledge, developed through informal learning, is a priority and learning through local business networks is more important than participation in formal programmes. Advocacy of human resource development (HRD) practices based on conventional theories of organisational learning, therefore, may hinder rather than encourage performance in small organisations.     

High technology localization and extra-regional networks

Firms in spatial concentrations of advanced-technology activities do not constrain their knowledge inputs to opportunities found within their industrial cluster. Rather, firms seeking extra-regional markets augment their in-house resources by means of material (embodied technology) and knowledge inputs obtained from sources at the extra-regional scale in addition to within the region. Literature is reviewed on the clustering of firms and their network geography, models of open and closed industrial systems, and absorptive capacity. The latter is used to interpret the search for knowledge undertaken by firms, which are discussed in terms of their organizational differences and strategic choices. A sample of manufacturing establishments from the electronics cluster in the Toronto metropolitan region (Canada) shows firms that are export-intensive have significantly stronger international input connections, especially with consultants and alliance partners. Export orientation is associated with higher levels of expenditure on the in-house generation of knowledge, more innovation inputs from external sources, and distinctive network geographies. Differences in network relations occur within and between three organizational groups of firms – foreign affiliates, multi-location and single-location domestic firms. Geographically wide-ranging networks are interpreted in terms of opportunities in extra-regional locations compared with local supplies. Regional innovation policy implications are considered.     

Linking entrepreneurial and market orientation to the SME’s performance growth: the moderating role of entrepreneurial experience and networks

Entrepreneurial orientation and market orientation (EO and MO, respectively) have received extensive research attention in the past several decades. Although scholars widely agree that both MO and EO are critical to firms’ performances, a better understanding is still needed about how market and entrepreneurial orientation develop over time as well as their relative impact on the growth of the SME’s performance. This study does not consider MO and EO as generic resources that always positively influence firms’ performances; instead, it tries to explore contingent elements, such as social and business networks and accumulated entrepreneurial experience. The hypotheses were tested on 191 small and medium-sized electronic firms located in an Italian geographical cluster during two periods: 2005 and 2016. This study suggests that SMEs, which develop social networks, may enjoy considerable advantages from entrepreneurial and market orientation, improving their performance benefits. Moreover, our results show that previous entrepreneurial experience, when specific, can reinforce the impact of entrepreneurial and market orientation on firms’ performance growth. This analysis makes several important contributions to the management literature on the strategic orientation of firms, the entrepreneurial experience and network development.

     

政策不确定与审计师选择——基于省委书记更替的经验证据

考察省委书记更替带来的政策不确定性对审计师选择的影响。研究发现,省委书记更替时,事务所会提高审计质量,倾向于委派经验更丰富的审计师,尤其是拥有合伙人身份和执业经验丰富的审计师。省委书记更替对审计师选择的影响在国有企业、低市场化进程以及高盈余操纵的公司更为显著。进一步研究发现,事务所更可能对省级国有企业委派经验丰富的审计师,尤其是第一顺位的签字审计师。     

When does defection pay?

The present paper investigates cluster adjustment to changing economic environments by focussing on the role and stability of institutional arrangements in their local culture. It postulates two idealtypical local cultures where firms act in the common (collective) or in their own interest (egoistic). By comparing adjustment performance and stability for both types, the model finds that clusters in very volatile environments are unlikely to exhibit collective local cultures as these are unstable and provide only limited benefits for adjustment performance. Clusters facing more stable environments are more likely to show collective local cultures as these increase adjustment performance and are more stable against individual defection. Both findings suggest that collective local cultures in clusters can be relatively stable for limited environment volatility.     

How do firm characteristics affect behavioural additionalities of public R&D subsidies? Evidence for the Austrian transport sector

Interest of STI policies to influence the innovation behaviour of firms has been increased considerably. This gives rise to the notion of behavioural additionality, broadening traditional evaluation concepts of input and output additionality. Though there is empirical work measuring behavioural additionalities, we know little about what role distinct firm characteristics play for their occurrence. The objective is to estimate how distinct firm characteristics influence the realisation of behavioural additionalities. We use survey data on 155 firms, considering the behavioural additionalities stimulated by the Austrian R&D funding scheme in the field of intelligent transport systems in 2006. We focus on three different forms of behavioural additionality—project additionality, scale additionality and cooperation additionality—and employ binary regression models to address this question. Results indicate that R&D related firm characteristics significantly affect the realisation of behavioural additionality. R&D intensive firms are less likely to substantiate behavioural additionalities, while small, young and technologically specialised firms more likely realise behavioural additionalities. From a policy perspective, it may be concluded that direct R&D promotion of firms with a high R&D intensity may be misallocated. Attention of public support should be shifted to smaller, technologically specialised firms with lower R&D experience. The findings deliver important insights into interactions of public R&D support and R&D behaviour of firms operating in the Austrian transport sector, bearing significant implications for future policy designs.     

Asymmetric information about workers' productivity as a cause for inefficient long working hours

In this paper, a model of labor contracting with asymmetric information is developed in order to explain the existence of inefficient long working hours. Since firms cannot observe workers' true productivity, they use long working hours as a mechanism to sort productive workers. The model therefore predicts that workers with a high productivity will tend to work inefficient long hours. An empirical analysis confirms this prediction: high-productivity workers are more likely to experience hours constraints in the form of overemployment than low-productivity workers. Moreover, the extent of overemployment is positively related to productivity.     

The Role of Institutional and Economic Factors in the Strategic Use of Non-GAAP Disclosures to Beat Earnings Benchmarks

Abstract

We use hand-collected data for a sample of large European firms to investigate the influence of countries’ institutional and economic factors on managers’ non-generally accepted accounting principles (GAAP) disclosures. We find that managers are more likely to use non-GAAP measures to meet or beat earnings benchmarks that GAAP earnings would miss in countries with efficient law and enforcement, strong investor protection, developed financial markets, and good communication and dissemination of information. We also find that managers in countries with developed institutional and economic conditions are more likely to adjust non-GAAP earnings for recurring expenses such as R&D, depreciation, and stock-based compensation expenses. Our findings suggest that in environments in which there is more pressure to achieve earnings benchmarks and less opportunity to manipulate GAAP earnings, managers use more non-GAAP earnings disclosures to meet the benchmarks.     

Determinants and Consequences of a Voluntary Turn Away from IFRS to Local GAAP: Evidence from Switzerland

Abstract

We examine determinants and consequences of a turn away from International Financial Reporting Standards (IFRS) to local generally accepted accounting principles (GAAP), thereby exploiting a unique feature of the Swiss setting in which listed firms are allowed to switch from IFRS to Swiss GAAP, all else being equal. We posit that net benefits of IFRS are less for small firms with higher insider ownership. In addition, we predict that the net benefits of IFRS are not constant over time because of changes in IFRS and/or changes in firm-specific circumstances. To the extent that the switching firms’ costs of IFRS reporting outweigh its benefits, we do not predict adverse capital-market effects after a switch. Consistent with predictions, we find that (a) small firms with higher insider ownership and fewer foreign investor holdings are more likely to switch, (b) increasing reporting costs as well as changes in firm-specific circumstances affect switching propensity, (c) switching firms substantially reduce their disclosures after they switch, and (d) switching firms neither experience a decrease in liquidity nor negative announcement returns. Overall, our findings are important for standard setters and securities regulators in shaping (future) reporting requirements for listed firms.     

The institutional embeddedness of local inter-firm networks: a leverage for business creation

There is an increasing concern for the notion of ‘embeddedness’ of economic activity; yet the conceptualization of the concept and its operationalization remain underdeveloped. First, embeddedness may concern, on the one hand, the structure of relations that tie economic actors together (structural embeddedness) and, on the other hand, the social strands supplementing economic strands in each relation (substantive embeddedness). In this paper, a network framework is outlined which proposes several layers or ‘orders’ of embeddedness. Focusing on small firms, the point of departure is individual exchange relationships as personal ties combining economic and social concerns. First-order embeddedness concerns the localized business networks created by combining these dyadic relations. Second-order embeddedness is achieved when considering also the memberships of business persons in economic and social local institutions while third-order embeddedness concerns the special cases where these institutions bridge gaps between firms. The network model is operationalized and applied to a small Swedish industrial (furniture) community, its firms and economic/social institutions. The findings generally support the applicability of the model and demonstrate the supplementarity of different layers/orders of embeddedness. Further research challenges are deduced and implications for practitioners are provided.     

Does the Lack of a Profit Motive Affect Hiring in Academe? Evidence from the Market for Lawyers

The comparative performance of academic and economic markets continues to be debated. One factor potentially distinguishing academic markets is the profit motive. Profit and competition have been shown to curb discrimination in markets, and the absence of profit discipline could result in myriad forms of prejudice in academic hiring. We explore the role of the profit motive in the performance of academic markets by comparing the pedigree of employees of top law schools and top law firms. Top law schools are much more likely to employ graduates of top ranked law schools than elite law firms, and the difference exists at both the junior and senior levels. We find no evidence that the graduates of top 5 law schools outperform grads of less prestigious schools in publications or citations. In the absence of a profit motive, academic hiring appears more likely to indulge a preference for pedigree, and by implication, this may explain other scholarly prejudices in the academy.     

Knowlege networks for innovation in small Scottish software firms

This paper examines the emergence of small indigenous software companies in Scotland, focusing on the strengths and weaknesses of the region's socio-economic infrastructure as a foundation for innovative new business ventures. Following a brief review of some of the accepted wisdom on high-tech start-ups and regional economic development the paper provides some background information on the Scottish region, comparing new firms in the software industry with the foreign multinationals that dominate the local IT industry. A framework - the ‘sociotechnical constituencies’ approach - is then proposed that allows the author to examine networks of specialist knowledge that underlie new business development. Agglomeration effects and the influence of ‘clusters’ of complementary types of knowledge, expertise and innovative competencies at the regional level are at the heart of the analysis. The framework is applied to a sample of local firms, looking at how ‘learning’ via sociotechnical networks underlies their evolution. Policy-makers' attempts to boost the region's new business birth rate and promote the hoped-for ‘silicon glen’ effect are viewed in the light of the study's findings.     

Culture and Economic Systems

A bstract .   Applying a cluster analysis to the results of the World Value Study, this article shows that the OECD nations have five distinct patterns of cultural characteristics. Moreover, these five cultural systems are almost the same as a classification of economic systems that have been derived from a cluster analysis of their economic institutions. A comparison of the cultural characteristics of East and West Germany suggests that the economic system has relatively little influence on the cultural systems. Instead, in a democracy, where the economic system is not imposed by force, the cultural characteristics are more likely to determine the economic system, rather than the reverse.     

Eastern European Economic Integration and Foreign Direct Investment

Economic transition in Eastern Europe should generate market growth. In addition, current discussions on economic integration and the development of a free-trade area in Eastern Europe will improve market accessibility. These two forces will significantly affect the strategies by which external firms will choose to supply markets in Eastern Europe. This paper examines the ways in which supply strategy is likely to change. We show that both market growth and improved market accessibility will lead the external firms to switch from exporting to foreign direct investment. However, market growth is likely to lead to dispersed investment in the growing economies, whereas increased market accessibility, by establishing an integrated regional bloc in Eastern Europe, is more likely to lead to concentrated investment plus infra-regional exports to the remainder of the regional bloc. The switch from exporting to local production through foreign direct investment will favor consumers through lowered prices but will harm national producers by depressing profit margins.