The entrepreneurial regime,learning, and industry turbulence

The role which the technological regime and learning play in determining the extent of industry turbulence, or the amount of firm movements into, within, and out of an industry, is examined. The entrepreneurial regime, in which firms outside of the industry incumbents have the innovative advantage, is found to promote industry turbulence. By contrast, the routinized regime, in which the existing incumbents have the innovative advantage, is identified as impeding industry turbulence. The determinants of small-firm turbulence are found to differ from those for large-firm turbulence. Small-firm turbulence is particularly high in capital-intensive industries, where firms must quickly learn or else face extinction.     

Institutional quality and market selection in the transition to market economy

This paper investigates the impact of institutional quality on the productivity, profitability and survival of new entrants versus those of incumbent firms in a transitional setting, Vietnam. By integrating economic and institutional perspectives, we emphasize the importance of institutional quality in shaping the evolution of industry dynamics. We find that poor institutional quality that acts as institutional buffering for incumbents jeopardizes the Schumpeterian market selection process. In particular, despite being more productive and profitable, new entrants are still more likely to exit than incumbents on average. As a consequence, facing poor institutions, only new entrants with sufficiently high productivity and profitability are able to survive. However, improving institutional quality does not enhance new entrants' survival and entrepreneurial performance; rather, it removes the survival advantage of incumbents and thus reduces the differences in performance and exit hazard between new entrants and incumbents. We investigate this seemingly paradoxical relationship using Vietnamese census data from 2006 to 2013.     

Turbulence in growing and declining industries

Turbulence over the industry life cycle is examined for the case of Portugal using the lowest possible level of industry aggregation, thus allowing for the use of panel data to study the evolution of product markets. Replacement of exiting firms by subsequent entrants plays a primary role in generating turbulence in high growth markets, while displacement of incumbents by recent entrants is the main selection force in declining markets. As the industry life cycle progresses, trial-and-error entry and entry mistakes decrease, and turbulence subsides.     

Corporate Governance, Ethics, and the Backdating of Stock Options

Backdating of stock options is an example of an agency problem. It has emerged despite all the measures (i.e., new regulations and additional corporate governance mechanisms) aimed at addressing such problems? Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary. What ethical measures need to be taken to address the agency problem? What values and norms should guide the board of directors in protecting the shareholders’ interests? To examine these issues, we first discuss the role values and norms can play with respect to underlying corporate governance and the proper role of directors, such as transparency, accountability, integrity (which is reflected in proper mechanisms of checks and balances), and public responsibility. Second, we discuss various stakeholder approaches (e.g., government, directors, managers, and shareholders) by which conflicts of interest (i.e., the agency problem) can be addressed. Third, we assess the practice of backdating stock options, as an illustration of the agency problem, in terms of whether the practice is legally acceptable or ethically justifiable. Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism. We conclude that while executive compensation schemes (e.g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become “part of the problem,” and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values.     

Technological Regimes and Sources of Entrepreneurship

This paper concerns the technological determinants of entrepreneurial behaviour. By applying a typology of technological regimes, which describes the nature of the technological environment in which firms operate, this paper examines the sources and obstacles to entrepreneurial entry related to the process of technical change. Two major points are suggested. First, innovation in technologies of high or increasing opportunities is not always associated with entrepreneurial behaviour, but can enhance the competitive advantage of existing firms. Second, opportunities for entrepreneurship are shaped by the nature of knowledge underlying different technologies. These points are illustrated using U.S. patent statistics classified by technical field and sector of firm's principal product activity. Different combinations of sources of technological entry barriers and technological opportunity are identified in science-based technologies, chemical technologies, core technologies in complex systems, product-engineering technologies and process-engineering technologies. This paper argues that such a characterisation of the dynamics of knowledge accumulation is important for interpreting the variety of dynamics of industrial competition.     

Innovations, Stakeholders & Entrepreneurship

In modern societies entrepreneurship and innovation are widely seen as key sources of economic growth and welfare increases. Yet entrepreneurial innovation has also meant losses and hardships for some members of society: it is destructive of some stakeholders’ wellbeing even as it creates new wellbeing among other stakeholders. Both the positive benefits and negative externalities of innovation are problematic because entrepreneurs initiate new ventures before their private profitability and/or social costs can be fully recognized. In this paper we consider three analytical frameworks within which these issues might be examined: pre-commitments, contractarianism, and an entrepreneurial framework. We conclude that the intersection of stakeholder theory and entrepreneurial innovation is a potentially rich arena for research. Nicholas Dew, Ph.D. is an assistant professor at the Naval Postgraduate School in Monterey, CA. He teaches strategic management in private and public sector organizations. His research interests include entrepreneurship, strategy and innovation. He has published in several scholarly journals, including Strategic Management Journal, the Journal of Business Venturing, Industrial and Corporate Change and the Journal of Evolutionary Economics. Saras D. Sarasvathy, Ph.D. is an associate professor at the Darden Graduate School of Business Administration. She teaches courses in entrepreneurship and ethics in Darden's MBA and doctoral programs. Her research focuses on the cognitive basis for high-performance entrepreneurship. She has published in various scholarly journals, including the Academy of Management Review, Strategic Management Journal, the Journal of Businesss Venturing and the Journal of Evolutionary Economics. Her first book Effectuation: Elements of Entrepreneurial Expertise was recently published by Edward Elgar.     

Survival of New Plants in Different Industry Environments in Norwegian Manufacturing: AS Semi-Proportional Cox Model Approach

Using a rich plant level data set from Norwegian manufacturing we analyse possible determinants of survival for ten plant cohorts during the period 1977–92. By specifying a semi-proportional hazards model of plant exit, we are able to accommodate for structural differences between entrepreneurial entrants and new plants of existing firms. Industry heterogeneity in terms of plant size, capital intensity and productivity is also accounted for in the model. According to our estimated models, there are significant structural differences between new small firms and new plants of existing firms. For example, the size of the plant relative to the industry average had less influence on the survival probability for entrepreneurial entrants. Hence, the empirical results suggest that the two types of entrants establish themselves in different market niches with distinct technological characteristics. The results underscore the necessity of adjusting for the dissimilar environments facing plants which enter different industries.     

Factors Influencing Growth Potential of E‐Commerce in Emerging Economies: An Institution‐Based N‐OLI Framework and Research Propositions

Given the tremendous success of the Internet and e‐commerce in developed countries, emerging economies are quickly embracing information technology as well. The purpose of this study is to examine factors (both determinants and deterrents) influencing the growth potential of e‐commerce in emerging economies from a multitheoretical perspective (namely, institution‐based network‐ownership, location, and internalization, i.e., i‐based N‐OLI framework). Factors are identified at three levels. At the global level, we identify multilateral agreements, strategic behavior of multinational enterprises (MNEs), and technological innovation as the key factors. At the national level, institutional environment, infrastructure, and culture are identified. The transactional level examines the role of integrity of transactions, online intermediaries, and network externalities and value clustering as the key factors for growth of e‐commerce in emerging economies. Based on the multitheoretical framework, the study advances several propositions and highlights implications for MNEs, both from developed markets and emerging markets, operating in emerging economies. © 2015 Wiley Periodicals, Inc.     

Disruption in the automotive industry: A Cambrian moment

The automotive industry is experiencing a moment of innovation. With electronics gaining importance, the need to find sustainable solutions and the rampant availability of sharing platforms, the dynamics of this sector is witnessing a paradigm shift. A host of startups is colonizing every niche of what seems to be the new architecture: shared and self-driven electric vehicles. Old incumbents and emerging startups are interacting to control key technologies and the user interfaces of the future. The mechanical machine is being converted into a computer. The connected car is creating a new ecosystem for entrepreneurial opportunities. This study analyzes a set of 156 venture-backed startups: the nature of the firms, their founders’ profiles, their origins, their technological capabilities, and their investors. Our findings and conclusions are: (1) a phase of instability and vibrancy is beginning wherein multiple emerging firms compete to impose their standards, (2) the competitive battle is conducted in the digital arena, (3) disruption is led by outsiders with entrepreneurial experience and deep knowledge of digital technologies, and (4) a final winning dominant design may emerge. Entrepreneurial outsiders and outsiders coming from consumer electronics, electrical companies, and/or digital platforms have a window of opportunity to enter this new market.     

Occupational Choice: The Influence of Product vs. Process Innovation

Prior studies have found that knowledge gained from work experience is a way to gather insights for business opportunity recognition. However, little is known about the specific types of knowledge that lead to business founding. Utilizing concepts from knowledge spillovers and from the opportunity recognition literatures, this paper argues that an organization’s technological innovation activities can help its employees develop specialized knowledge that provides them with the entrepreneurial opportunities to found new businesses. Besides highlighting the positive relationship between technological innovation activities in organizations and the propensity of individuals leaving the organizations to start new businesses, this paper also provides a more fine-grained explanation of the types of technological innovation activities that can lead to business founding. We argue that knowledge acquired through product innovations is more easily adopted by individuals for commercial uses, while knowledge acquired through process innovations must be integrated with other parts of the organization to be valuable. This study proposes that product innovation activities in an organization, more so than process innovation activities, are related to new business founding. Implications for opportunity exploitation and ways to exploit knowledge spillovers are discussed.      

Going Beyond Customers – A Business Segmentation Approach Using Network Pictures to Identify Network Segments

Existing approaches to segmentation, in particular business segmentation, are often conceptualized and applied in a limiting way, providing a narrow interpretation of the surrounding business network. This could be attributed to a rather myopic view of the multiple complexities and indirect links inherent in networks of business exchange relationships. The task for companies developing innovative segmentation approaches is to simultaneously enhance the company’s understanding of downstream as well as upstream preferences and resources, while going beyond immediate interaction partners to include relevant indirect business partners. The challenge is therefore not to identify attractive customer segments, but attractive network segments. As such, the managerial challenge becomes one of creating a business network segmentation from the perspective of a focal company within this network, taking a far wider interpretation of the concept of segmentation. Using the concept of network pictures, we outline the different dimensions that are important within a business network segmentation, and exemplify their use through a case study of an entrepreneurial company. Our study contributes to the literature by providing a detailed example of a practical application of abstract concepts, in this case the translation of the network picture concept into a way to apply a business network segmentation to an entrepreneurial context.

Greening Goliaths versus emerging Davids — Theorizing about the role of incumbents and new entrants in sustainable entrepreneurship

This paper proposes a model of how incumbents and new entrants engage in sustainable entrepreneurship. We suggest that in the early stages of an industry's sustainability transformation, new entrants (‘Emerging Davids’) are more likely than incumbents to pursue sustainability-related opportunities. Incumbents react to the activities of new entrants by engaging in corporate sustainable entrepreneurship activities. While these ‘Greening Goliaths’ are often less ambitious in their environmental and social goals, they may have a broader reach due to their established market presence. This paper analyses the interplay between ‘Greening Goliaths’ and ‘Emerging Davids’ and theorizes about how it is their compounded impact that promotes the sustainable transformation of industries.     

The Perceptions of Consumers Regarding Online Retailers’ Ethics and Their Relationship with Consumers’ General Internet Expertise and Word of Mouth: A Preliminary Analysis

Ethical concerns of Internet users continue to rise. Accordingly, several scholars have called for systematic empirical research to address these issues. This study examines the conceptualization and measurement of consumers’ perceptions regarding the ethics of online retailers (CPEOR). Also, this research represents a first step into the analysis of the relationship between CPEOR, consumers’ general Internet expertise and reported positive word of mouth (WOM). Results, from a convenience sample of 357 online shoppers, suggest that CPEOR can be operationalized as a second-order construct composed of four dimensions: security, privacy, fulfillment, and non-deception. Our findings also indicate that consumers’ general Internet expertise significantly improves CPEOR and CPEOR are strongly predictive of consumers’ WOM. Managerial and research implications are offered.     

An Essay on the Origins of Entrepreneurial Opportunity

In this article, we apply a process of logical inference to draw conclusions about the origins of entrepreneurial opportunity from existing conversations in the field of strategic management. We equate the execution of a competitive strategy – as described in the strategic management literature – to the exploitation of an entrepreneurial opportunity – as described in the entrepreneurship literature. Given this assumption, we survey five extant theories of strategy in an attempt to categorize and describe the circumstances that define how and with what consequence entrepreneurial opportunity exploitation results in future opportunity. Given this review, we characterize the `outcomes’ of strategy execution as a function of the ‹match’ between strategy and environment in an effort to extend and refine Holcombe’s [Holcombe, Randall, 2003, Review of Austrian Economics 16(1), 25–43] position that entrepreneurial opportunity is born of prior entrepreneurial action.

‘Let your hook always be cast; in the pool where you least expect it, there will be a fish.’ Ovid, A.D. 17

     

Innovation and internationalization as growth strategies: The role of technological capabilities and appropriability

Firms grow either by launching new products (innovation) or by attracting new customers (internationalization) or by using a mixed strategy. An interesting question is whether innovation and internationalization activities are complementary or substitutive. The paper discusses the connections between technological capabilities, their appropriability, innovation activities, and internationalization, and derives hypotheses from the knowledge-based view of the firm. The hypotheses are empirically analyzed using survey data from 300 Finnish firms clustered as follows: (i) domestic replicators, (ii) domestic innovators, (iii) international replicators, and (iv) international innovators. The performance of the clusters is empirically analyzed, the success criteria being actual growth rate and profitability. We conclude that a profitable firm needs to have unused technological capabilities in order to exploit economies of scope through innovation. A strong appropriability regime strengthens growth. Internationalization and innovation combined is the most advisable option when domestic markets are limited.     

Psychological drivers in the adoption of morally controversial innovations: the moderating role of ethical self‐identity

The present article conceptualizes morally controversial innovations as a category of innovations that raise ethical issues due to their potentially undesirable long‐term consequences on society or the natural environment. Then, it analyzes the case of biofuel crops by applying an extended version of the theory of planned behavior, which includes moral norm (i.e. the personal convictions of what is wrong or right for society) and ethical self‐identity (i.e. the extent to which one perceives himself/herself as an ethical person). The obtained results show that attitude and subjective norms are positively related to farmers' intention to grow biofuel crops. Yet the intention of those farmers with a higher ethical self‐identity is also influenced by perceived behavioral control and moral norm. In particular, moral norm negatively affects their intention to grow biofuel crops, thus restraining the adoption of this innovation. Implications for theory, as well as for policymakers interested in promoting the diffusion of morally controversial innovations, are discussed.     

Examining Entrepreneurial Cognition: An Occupational Analysis of Balanced Linear and Nonlinear Thinking and Entrepreneurship Success

This empirical study advances entrepreneurial cognition research by examining whether entrepreneurs possess a high nonlinear (e.g., intuitive, creative, emotional) thinking style, as some studies and a common stereotype of entrepreneurs would suggest, or whether they possess a more versatile balance in both nonlinear and linear (e.g., analytic, rational, logical) thinking styles. As predicted, 39 entrepreneurs demonstrated greater balance in linear and nonlinear thinking styles than their professional actor (n = 33), accountant (n = 31), and frontline manager (n = 77) counterparts, though they did not significantly differ in thinking style balance from senior executives (n = 39). Unexpectedly, educational background was associated with thinking style balance, suggesting that years of formal education may contribute to one's versatility in utilizing both linear and nonlinear thinking styles. For the entrepreneur sample, linear and nonlinear thinking styles balance predicted years in current business after controlling for industry, number of employees, and demographic variables. Implications for future entrepreneurial cognition research and entrepreneurship education are discussed.     

Are Intellectual Property Rights Detrimental to Innovation?

Intellectual property rights are legal constraints that limit conditions of entry in industries where incumbents are innovators. The set of legal constraints is the same for all industries, and there is no consideration of the possibility that the externalities created by entry in a given industry may not necessarily be negative for the incumbent, or that the incumbent's R&D expenditures might actually be detrimental to new entrants. We show that one unique set of legal rules can foster innovation in some industries and be detrimental in others. Our model is illustrated by case studies from the Information and Communication Technologies industry.