The knowledge spillover theory of entrepreneurship

Contemporary theories of entrepreneurship generally focus on the recognition of opportunities and the decision to exploit them. Although the entrepreneurship literature treats opportunities as exogenous, the prevailing theory of economic growth suggests they are endogenous. This paper advances the microeconomic foundations of endogenous growth theory by developing a knowledge spillover theory of entrepreneurship. Knowledge created endogenously results in knowledge spillovers, which allow entrepreneurs to identify and exploit opportunities.

The knowledge spillover theory of entrepreneurship

According to the knowledge spillover theory of entrepreneurship, the context in which decision-making is derived can influence one’s determination to become an entrepreneur. In particular, a context that is rich in knowledge generates entrepreneurial opportunities from those ideas. By commercializing ideas that evolved from an incumbent organization via the creation of a new firm, the entrepreneur (human capital) not only serves as a conduit for the spillover of knowledge, but also for the ensuing innovative activity and enhanced economic performance through resource allocation. The knowledge spillover theory of entrepreneurship brings together contemporary theories and thoughts of entrepreneurship with prevailing theories of economic growth, geography, and strategy and therefore explains not just why some people choose to become an entrepreneur, but also why this matters significantly for the economy and society.     

Localized competition in the knowledge spillover theory of entrepreneurship

The knowledge spillover theory of entrepreneurship predicts that the relationship between new knowledge and entrepreneurial activity depends on the commercialization efficiency of incumbents. We extend the theory to contend that localized competition impedes entrepreneurial activity by reducing the incentive to exploit new knowledge, and we test this conjecture using spatial panel estimation. We find a positive relationship between new knowledge and entrepreneurial activity, which is negatively moderated by localized competition. We also find that greater agglomeration counteracts the moderating effect localized competition has on the relationship between new knowledge and entrepreneurial activity.     

The missing pillar: the creativity theory of knowledge spillover entrepreneurship

Knowledge spillover theory of entrepreneurship and the prevailing theory of economic growth treat opportunities as endogenous and generally focus on opportunity recognition by entrepreneurs. New knowledge created endogenously results in knowledge spillovers enabling inventors and entrepreneurs to commercialize it. This article discusses that knowledge spillover entrepreneurship depends not only on ordinary human capital, but more importantly also on creativity embodied in creative individuals and diverse urban environments that attract creative classes. This might result in self-selection of creative individuals into entrepreneurship or enable entrepreneurs to recognize creativity and commercialize it. This creativity theory of knowledge spillover entrepreneurship is tested utilizing data on European cities.     

What fuzzy requests bring to frontline employees: An absorptive capacity theory perspective

This study uses absorptive capacity theory to construct a model to explain how frontline employees learn from customers’ fuzzy requests and then improve their performance. The research model is empirically examined using data collected from 364 hotel front desk service employees and further analyzed through a structural equation model. The study shows that request severity significantly influences need recognition, experience assimilation, concept transformation and inertia change. Request legitimacy has a positive effect on need recognition, experience assimilation, concept transformation, inertia change and cost assessment. Performance is positively affected by experience assimilation, concept transformation, inertia change and cost assessment. Some meditation and moderation effects are also identified. This study is the first to reveal the positive effects of fuzzy requests. These findings may help managers better handle and utilize fuzzy requests, with implications for organizational policy and for the support of frontline employees.     

The effect of experience and absorptive capacity on foreign market knowledge

Learning about foreign markets often occurs through collaboration with other firms who have this knowledge. In this paper, we focus on one aspect of foreign market knowledge, which is the knowledge a partner in a dyadic relationship, has of the other partner and of their respective business network relationships. The concept ‘absorptive capacity’ [Admin. Sci. Q. 35 (1990) 128] is used to describe the firm’s ability to use its prior related knowledge and diverse background to identify the value of new information and to develop this into something creative. We develop and empirically test a model of how depth and diversity of experience affect absorptive capacity, and how this absorptive capacity affects the way a lack of foreign market knowledge is perceived as an obstacle in carrying out the ongoing business activity.The results show that the lack of foreign market knowledge in the ongoing business is determined both by the firm’s absorptive capacity generated in dyadic relationships with foreign customers and the customer’s network. The dyadic and network absorptive capacities, however, appear to be used differently in the ongoing business. Dyadic absorptive capacity seems to decrease the lack of foreign market knowledge, whereas customer network absorptive capacity seems to increase it.     

Consulting knowledge and organisation's absorptive capacity: A communication chain perspective

This study investigates the communication chain of consulting knowledge constituted by consultants and internal lecturers. We analyse the differences between consultants and internal lecturers in their capability of knowledge training and discuss its influence on organisations' absorption of consulting knowledge. Based on a Mann–Whitney U test of data from 47 quality management consultants and 235 internal lecturers in Taiwan, we found that internal lecturers significantly exhibited weaker capability than consultants, especially in knowledge structure, knowledge transformation, trainee orientation and training ethics. The capability gap was disadvantageous for organisations to absorb consulting knowledge and suggestions for improving this problem were provided finally.     

Non-R&D SMEs: external knowledge,absorptive capacity and product innovation

The relationship between external knowledge, absorptive capacity (AC) and innovative performance for small and medium-sized enterprises (SMEs) is investigated empirically. Using data from a survey on firms located in North Norway, we ask whether AC plays a mediating role between different external knowledge inflows and innovative performance. The results are consistent with AC as an important mediator for transforming external knowledge inflows into higher innovative performance if we include all SMEs in the sample. However, this result is not robust when considering the sub-sample of non-R&D SMEs only. External knowledge inflows have a much stronger direct effect on innovation performance for non-R&D firms and leave a weak mediating effect of AC. Our findings suggest that measures of AC should be developed further in order to make AC a more relevant concept for empirical studies of SMEs without in-house R&D.     

Bibliometric analysis of absorptive capacity

This study contributes to our understanding of absorptive capacity (AC) by reviewing AC articles systematically using two types of blibliometric co-citation analysis – bibliometric co-citation and bibliometric cartography – for the last 25 years. In total, we analyzed 336 articles (using HistCite) and 2088 articles (using VOSviewer), respectively, finding five research streams in AC: (1) intra-organizational learning; (2) inter-organizational learning; (3) knowledge transfer; (4) dynamic capability; and (5) micro-foundations. This integrative literature review of AC adds to the categorization of the literature, links the international business research to AC, and provides promising future research directions. Our study gives detailed information about the development of each research stream by measuring the number of publications in each stream over 25 years using bibliometric cartography analysis. Based on the literature, we propose 26 future research questions for these five research streams.     

Knowledge spillover entrepreneurship in an endogenous growth model

We present a model that separates entrepreneurship from profit-motivated corporate R&D aimed at improving existing production processes. Our model embeds the core idea of the knowledge spillover theory of entrepreneurship in established knowledge-based growth models by enriching their knowledge spillover structure. Introducing knowledge spillovers drives a wedge between the optimal and market allocation of resources between new knowledge creation and commercialization. We show the first best allocation depends exclusively on the relative strength of knowledge spillovers between them and derive propositions to guide policy that can bring the market equilibrium closer to this optimum.     

Fostering integration through HRM practices: An empirical examination of absorptive capacity and knowledge transfer in cross-border M&As

Transfer of knowledge-based resources from acquirers to the acquired units has been ubiquitously emphasized as an important driver of post-acquisition integration. Equally emphasized is the importance of recipient unit’s absorptive capacity for the success of knowledge transfer and the facilitating role of HRM practices in developing absorptive capacity. In this paper, we integrate different streams of research on post-acquisition integration, knowledge transfer, absorptive capacity and HRM practices. Different from most past research, we pay attention theoretically and empirically to the multi-dimensional nature of both knowledge transfer and absorptive capacity. We test our hypotheses on a sample of acquired Chinese subsidiaries of 181 multinational corporations from seven countries. We find that successful inflow and implementation of knowledge require the acquired unit to have distinct types of capabilities each of which can be developed by a specific HRM practice. These results contribute literature by recognizing absorptive capacity as a manageable capability and identifying how different components of this capability could be developed by specific HRM practices. Furthermore, our results shed light on human side of M&As by examining how companies can foster post-acquisition integration by fine-tuning the absorptive capacity of acquired units.     

The effects of absorptive capacity,knowledge sourcing strategy,and alliance forms on firm performance

This paper explores the relationship between absorptive capacity, knowledge sourcing strategy, alliance forms, and firm performance. Based on the literature, the concept of a knowledge sourcing strategy in alliance contexts is proposed, which can be categorised into two types: a knowledge internalisation strategy and a knowledge access strategy. From an organisational learning perspective, it is argued that a firm's absorptive capacity has a positive influence on a knowledge internalisation strategy, and accordingly a firm's choices of alliance forms are also influenced. R&D performance is also included in the theoretical model in order to generate further managerial implications. Instead of using conventional regression methods, structural equation modelling (SEM) is adopted to conduct path analysis, as SEM is well suited in verifying multiple-dependent models. The arguments advanced are supported by empirical analysis of a sample of 148 alliances.     

Towards a theory of entrepreneurship

Over 200 years of the study of entrepreneurship have provided many definitions of the word “entrepreneur”. However, no theory of entrepreneurship has been developed that would explain or predict when an entrepreneur, by any of the definitions, might appear or engage in entrepreneurship. Indeed, the search for a best definition may have impeded the development of theory.The Schumpeter economic outcome-based concept that an entrepreneur creates value by carrying out new combinations causing discontinuity is embodied in many of the definitions offered within the last 50 years. We strongly recommend the adoption of Schumpeter's definition for academic and policy-making purposes.We offer the following tentative entrepreneurship theory, extracted from anecdotal observations and extant literature, in the hope that it will better explain and begin to predict the phenomenon of entrepreneurship:“A person will carry out a new combination, causing discontinuity, under conditions of:

• 1.1. Task-related motivation,
• 2.2. Expertise,
• 3.3. Expectation of personal gain, and
• 4.4. A supportive environment.

”Several relevant research questions are posed in the hope that they will encourage discontinuity in further development of theory.     

A theory of serial entrepreneurship

The contribution of serial entrepreneurs to entrepreneurial activity is significant: in Europe, 18–30% of entrepreneurs are serial; in the US, their contribution is about one-eighth. Yet, theories of entrepreneurship and industry dynamics presume that all firms are launched by novice entrepreneurs and firm failure is synonymous with exit from entrepreneurship. We propose a theory of serial entrepreneurship in which an entrepreneur has three occupational choices: maintain his business in operation, shut it down to enter the labor market to earn an exogenous wage, or shut it down to launch a new venture while incurring a serial startup cost. In equilibrium, a high-skill entrepreneur shuts down a business of low quality to become a serial entrepreneur, launching and subsequently closing firms until a high quality business is found; a low-skill entrepreneur shuts down a business of low quality to enter the labor market, never to become a serial entrepreneur. A decrease in the wage or serial startup cost, or an increase in the startup capital, enhances the contribution of serial entrepreneurs to entrepreneurial activity and promotes new firm formation (by increasing entrepreneurship and the number of new firms that survive), but its effect on the exit rate of new firms is ambiguous. We show the model is consistent with evidence relating to the impact of an entrepreneur’s characteristics and prior experience in entrepreneurship on the survival of his firm and his entry into and survival in entrepreneurship.     

Technological variables and absorptive capacity's influence on performance through corporate entrepreneurship

Technology and corporate entrepreneurship constitute an important source of competitive advantage for organizations, as they enable the development and exploitation of new opportunities. This study proposes a model to analyze the effects of top management support for technology on the promotion of technological skills, absorptive capacity, and technological distinctive competencies. The research also considers the impact of technological skills and absorptive capacity on the development of technological distinctive competencies, analyzing the influence of these variables on organizational performance through corporate entrepreneurship. The study tests these relationships empirically using 160 European technology firms. The paper ends with discussion of the findings and provides several theoretical and practical implications for future research.     

Parkinson’s Law and absorptive capacity

Parkinson’s Law, or the principle that work expands to fill the time available for its completion and that the number of subordinates multiply at a fixed rate regardless of the amount of work produced was postulated by Professor Parkinson as a satire as well as a serious social comment on the development and growth of bureaucracy. Over the years it has come to be used as a shorthand expression for the inefficiency and mindless expansion of officialdom.¹ Absorptive capacity, on the other hand, is defined as the amount of capital which a country can utilise productively in the short run. This article analyses the relationship of these two concepts in the context of development aid.     

Expectancy theory and nascent entrepreneurship

Motivation is an important factor that distinguishes those nascent entrepreneurs who make progress towards an operating venture from those who do not. Based on Vroom??s (Work and motivation, 1964) expectancy theory, we predict that startup-specific instrumentality, valence and expectancy are key components of entrepreneurial motivation and closely related to those intentions, efforts, and behaviors that will eventually lead to operating a firm. Hypotheses are tested using data from the first Panel Study of Entrepreneurial Dynamics I. Our results show that valence is a multidimensional construct, and that various types of valence are related to different intent and behavioral outcomes. All types of valence, instrumentality, and expectancy are related to a nascent entrepreneur??s intended effort level in a cross-section of data, and over time, intended effort is positively related to operative firm status. Overall, our results suggest that expectancy theory holds promise for research on nascent entrepreneurs?? motivation.     

Threshold effects,technology purchasing,and firm outcomes: An absorptive capacity perspective

External technology purchasing is frequently adopted as a strategy to facilitate technology innovation and to enhance firm performance. However, research shows that there is considerable heterogeneity across firms with respect to innovation output and firm performance after technology purchasing. This study uses an absorptive capacity perspective in proposing the existence of an R&D employees threshold and a technology purchasing scale threshold. Using a sample of 1460 high-tech companies in China, we find support for both thresholds. We also find that the two variables are complementary with each other, jointly promoting innovation when both thresholds are crossed.     

The pedagogical side of entrepreneurship theory

This is the second article in a set of two in this issue that deals with challenges in entrepreneurship education related to theory building and pedagogy. The first article argued that educators must increase the theoretical content in their courses if they hope to develop in students the cognitive skills to make better entrepreneurial decisions. This second article discusses a strategy for teaching entrepreneurship theory.The difficulty with teaching theory to entrepreneurship students is that they are likely to complain that “theory is boring! Lectures are boring! School is boring!” All three of these—theory, lecture, and school can also be irrelevant. We as teachers can also be boring and irrelevant! Students may not understand that learning theory can be highly interesting. Unfortunately, the process used to teach theory could be boring.We become boring as teachers when our classroom style becomes predictable because students are never surprised. We become irrelevant as teachers when we fail to apply theory as a tool to answer student questions. Good theory can always pass the test of applicability. If we fail to teach our students how to apply it in surprising ways, it is we who are at fault, not the theory.An effective strategy for teaching theory to students must be approved by them and monitored by teachers to be effective. If our purpose is to assist students to become skilled in theory-based competencies, the most effective method is to establish a student-approved system for class meetings that requires students to practice specific skills. Obtaining student approval is important because almost any system will work better if students feel good about it. In other words, students acquire competencies through their practice with theory-based activities.A theory-based activity approach is based on the assumption that to the extent that a teacher is the initiator of knowledge transfer, students tend to practice less and acquire fewer competencies. This occurs because it is the teacher who is the most engaged, not the students, which is the reverse of what is optimal.One way to evaluate our involvement in the classroom is to ask ourselves if our goal is to have students leaving class talking about how great we are as a teacher, rather than about how wonderful it would be to be an entrepreneur. If our students leave talking about being entrepreneurs instead of about us, we have probably figured out how to involve them in activities that help them to develop personal competencies.The teacher's primary role is to achieve student approval of the learning contract and to identify the theory-based competencies to be mastered. The question for educators faced with ensuring student mastery is not, “What an I going to teach today?” but “What am I going to have my students do today?” The teacher's task can be made easier by delegating part of the responsibility for the second question to students. Delegation of learning activities to students can introduce more variety and surprises into the classroom, each of which can aleviate boredom. It also provides teachers an opportunity to work more closely with students as they attempt to understand theory in anticipation of their classroom assignment to lead the learning activity.The remainder of this article discusses how to implement a theory-based activity approach, obstacles to its success and advantages of its use. The greatest advantage of its use is that students will be learning theory that can improve their odds of being successful as entrepreneurs. Of course their success depends upon us as scholars having gone before them and discovered the rules (theory) according to which events occur (c.f., Whitehead, 1917).     

Patents, knowledge spillovers, and entrepreneurship

We develop an endogenous-growth model in which we distinguish between inventors and innovators. This distinction implies that stronger protection of intellectual property rights has an inverted U-shaped effect on economic growth. Intellectual property rights protection attributes part of the rents of commercial exploitation to the inventor that would otherwise accrue to the entrepreneur. Stronger patent protection will therefore increase the incentive to do research and development (R&D) and generate new knowledge. This new knowledge has a positive effect on entrepreneurship, innovation, and growth. However, after some point, further strengthening of patent protection will reduce the returns to entrepreneurship sufficiently to reduce the overall growth rate.