Initial Public Offering Investor Valuations: An Examination of Top Management Team Prestige and Environmental Uncertainty

Relying on one of the more notable entrepreneurial settings, an initial public offering (IPO), this article extends prior work on top management team (TMT) characteristics. We examine whether or not prestigious TMTs at the time of an IPO enhance organizational legitimacy and thereby provide a signal to potential investors. Because an IPO represents an entrepreneurial context characterized by high levels of uncertainty, we also consider the impact of environmental uncertainty on the TMT prestige/investor valuation relationship. We find that both an element of TMT prestige and environmental uncertainty influence investor valuations. However, we also find that the influence of prestige does not assuage investors when analyzing IPOs in different environmental conditions.     

Mixed ownership and firm performance: Evidence from the Chinese venture capital industry

We examine the impact of mixed ownership on the performance of venture capital (VC) firms in China. We use successful/unsuccessful exits from VC-financed entrepreneurial companies and number of patent applications by VC-financed companies as proxies for VC firms' performance. Consistent with existing research on the inferior performance of SOEs relative to non-SOEs, we find that on average government-controlled VC firms (GVCs) underperform domestic private investors-controlled VC firms (PVCs). More importantly, we find that introducing minority private investors (i.e., mixed ownership) helps improve the performance of GVCs. However, we find no evidence that introducing minority government investors (i.e., mixed ownership) helps improve the performance of PVCs. Our results provide relevant information to the ongoing debate on the role of the government investors and private investors in developing the VC industry in emerging markets.     

Internationalization of business angel investments: The role of investor experience

In this study, we examine business angels (BAs)’ appetite for investing abroad and the role played by investment and entrepreneurial experience. To investigate BAs’ propensity to internationalize their investments, we study cross-border deals and culturally distant investments. Using an international sample of US and European BA deals, we find that both individual investment and entrepreneurial experience foster the internationalization of BAs’ investments, consistent with the predictions based upon the local bias theory. When splitting experience into domestic and foreign, we find that the former increases while the latter decreases local bias. When we separate US and European BAs, we find that the experiential background of BAs does not matter in the same way in Europe and in the US: while the general results are confirmed in Europe, both investment and entrepreneurial experience have a reduced impact in the US. We interpret these results in light of the reduced risk aversion of US BAs that lowers transaction costs.     

Ethics-focused dynamic capabilities: a small business perspective

Our analysis of survey data of US small and medium-sized enterprises (SMEs) explores (1) whether firms have ‘dynamic’ capabilities that change their ethics-focused operational capabilities; (2) what effects those dynamic capabilities have on both ethical and competitive performance; and, (3) whether those effects are contingent on a firm’s entrepreneurial characteristics. Our survey reveals that about a quarter of SMEs self-report high levels of these ethics-focused dynamic capabilities. We use hierarchical OLS to analyze the survey data to find that the general effect of these capabilities is positive on an SME’s ethical performance, and that the performance effects are contingent on an SME’s degree of entrepreneurial orientation and sensitivity to changes in the business context. The main implication is that the extent of heterogeneity in types, roles, and performance effects of ‘higher-than-operations-level’ capabilities is likely underestimated in current dynamic capabilities theory and application.     

CEO Entrepreneurial Leadership and Performance Outcomes of Top Management Teams in Entrepreneurial Ventures: The Mediating Effects of Psychological Safety

This study examines whether the exhibition of entrepreneurial leadership by CEOs within entrepreneurial ventures fosters higher levels of top management team performance and job performance of team members, and whether psychological safety explains such effects. Utilizing four waves of multisource, multilevel data from 262 team members across 56 top management teams, we find that the exercise of entrepreneurial leadership by the CEO leads to higher levels of performance at the team and individual levels, and that psychological safety mediates such relationships.     

Practice makes perfect: Entrepreneurial-experience curves and venture performance

This study tackles the puzzle of why increasing entrepreneurial experience does not always lead to improved financial performance of new ventures. We propose an alternate framework demonstrating how experience translates into expertise by arguing that the positive experience–performance relationship only appears to expert entrepreneurs, while novice entrepreneurs may actually perform increasingly worse because of their inability to generalize their experiential knowledge accurately into new ventures. These negative performance implications can be alleviated if the level of contextual similarity between prior and current ventures is high. Using matched employee–employer data of an entire population of Swedish founder-managers between 1990 and 2007, we find a non-linear relationship between entrepreneurial experience and financial performance consistent with our framework. Moreover, the level of industry, geographic, and temporal similarities between prior and current ventures positively moderates this relationship. Our work provides both theoretical and practical implications for entrepreneurial experience—people can learn entrepreneurship and pursue it with greater success as long as they have multiple opportunities to gain experience, overcome barriers to learning, and build an entrepreneurial-experience curve.     

Entrepreneurial passion diversity in new venture teams: An empirical examination of short- and long-term performance implications

Empirical evidence is mounting that passion is an important part of entrepreneurship, contributing to behavior and outcomes for entrepreneurs, employees, and ventures. Yet knowledge of the performance implications of passion within new venture teams is sorely lacking. We examine how both the average level of entrepreneurial passion and the diversity of passion within new venture teams contributes to venture performance in both the short- and long-term. We test our model with multi-source, multi-wave data collected from 107 new venture teams participating in an accelerator program. Our findings indicate that average team passion is not significantly related to performance, but passion diversity, particularly intensity separation, is negatively related to performance. These findings have important implications for the literature on passion, new venture teams, and group affective diversity.Executive summaryWhile existing studies have substantially improved our understanding of entrepreneurial passion, its sources, and its subsequent impact, insight into this topic remains limited in at least three ways. First, most new ventures are founded and led by teams rather than individuals, yet existing studies predominantly focus on entrepreneurial passion at the individual rather than team level. Second, while there is a prevailing assumption in existing literature that entrepreneurial passion leads to beneficial outcomes consistent with longstanding work in psychology, there is emerging evidence in entrepreneurship that passion may not always be functional and that it can even be dysfunctional. Despite this, we have limited understanding of what types of passion or when or for whom it is dysfunctional. And third, extant work on entrepreneurial passion for individuals and within teams has focused on behavioral or self-report measures of performance (e.g. Cardon and Kirk, 2015; Santos & Cardon, 2019) as well as venture survival, rather than objective team or firm performance in the short- and long-term.In this paper, we study the influence of team passion on new venture team performance. We draw on theory concerning entrepreneurial passion within venture teams (Cardon et al., 2017) that suggests that different aspects of entrepreneurial passion within teams shape team dynamics and venture outcomes. While generally, theories of passion suggest that entrepreneurial passion is positively related to team outcomes due to the positive emotions it brings about, we find that in teams, the relationships are more complex. While the average level of passion among team members is positively related to team performance when considered alone, this effect is not significant when passion diversity is also considered. Diversity of passion among individual team members has a negative relationship with team performance, including diversity in the level of passion team members experience (intensity separation), as well as diversity in the object of their passion (focus variety). These negatively affect team dynamics due to conflicting emotions and identities among team members associated with passion diversity. We examine these relationships on specific team performance outcomes including evaluation of the business idea in the short-term and venture performance five years after their participation in an accelerator.The sample used in this study includes 107 entrepreneurial teams that were part of an accelerator program in the Netherlands. Teams were evaluated on the quality of their business ideas at the end of the accelerator program and the amount of investment the team had received five years later. Our results provide no support for positive effects of average team passion on the quality of the business ideas and confirm the negative effects of passion intensity separation on the quality of the business idea and the negative effects of passion focus variety on later venture performance.This paper makes several contributions. First, we expand the literature on passion in entrepreneurship, specifically adding to our understanding of passion within new venture teams. More specifically, we contribute to the growing body of evidence concerning potential dysfunctions of passion by uncovering a dysfunctional property of team passion diversity that uniquely manifests itself at the team level of analysis. We contribute to the literature on new venture teams by examining team composition in the form of passion diversity, and its relationship with team performance. Finally, our study extends work on the effects of entrepreneurial passion by looking at objective team performance outcomes in both the short- and long-term.For entrepreneurs, our findings confirm the importance of affect and identity for new venture teams, and specifically our findings indicate that there is a dark side to team passion. While passion is generally positioned as a positive phenomenon, we highlight the negative outcomes that passion can have in the team context. Diversity in the amount of passion team members experience can diminish the quality of the business ideas the team is able to generate in the short-term, while diversity in the focus of team members' passion can diminish the firm's long-term performance. For investors and accelerator communities this research validates the importance of considering entrepreneurial team composition and specifically entrepreneurial passion levels and domains when investing in teams or when supporting venture building.     

Private equity and entrepreneurial management in management buy-outs

Critics claim that short-term profit orientation and high deal price strategies of private equity (PE) firms can negatively affect the ability of management buyouts to initiate and sustain entrepreneurial management. This study investigates this claim by comparing effects of majority PE backed and other buy-outs at different levels of financial leverage on post buy-out increases in entrepreneurial management. We propose that PE can be used as an organizational refocusing device that simultaneously increases entrepreneurial and administrative management. We find that majority PE-backed buy-outs significantly increase entrepreneurial management practices. Furthermore, the increased financial leverage positively affects administrative management in management buy-outs. However, the effect of high financial leverage is larger for majority PE-backed buy-outs. These results support the notion that PE firms help buy-out companies develop ambidextrous organizational change: i.e. simultaneously develop entrepreneurial and administrative management practices. The findings have important implications for practitioners and policy makers.     

Knowledge context and entrepreneurial intentions among students

The current paper analyzes the role of the individual and regional knowledge context in forming university students?? entrepreneurial intentions. As access to knowledge resources is crucial for the growth and survival of knowledge-based start-ups, we argue that an individual??s decision in favor or against becoming an entrepreneur should critically depend on the multilevel context providing her with access to strategically relevant knowledge. A unique dataset for German students and regions allows us to analyze a variety of personal and regional determinants of entrepreneurial intentions among students. At the individual level we find that role models facilitating the transfer of tacit knowledge and the expectation that strong ties will provide know-how and know-who positively impact entrepreneurial intentions. At the regional level we find that a high regional start-up rate in knowledge-based industries and a high growth rate of regional knowledge production positively influence entrepreneurial intentions.     

Entrepreneurial strategy making,resources, and firm performance: evidence from China

This article builds a model to answer a critical but unsolved research question: What are the resources and/or the resource portfolio firms need to achieve the performance implications of entrepreneurial strategy making (ESM)? Based on a survey of Chinese firms, we find that ESM has a significant positive influence on firm performance. In addition, to accomplish the performance implications of ESM, firms need both flexible employed resources and unabsorbed slack, while just one of them does not work. Thus, a resource portfolio composed of high flexible employed resources and unabsorbed slack is the appropriate one to achieve the value of ESM.     

Should I stay or should I go? Career choice intentions of students with family business background

Personal and motivational patterns of intentional founders have been researched in great depth; however, antecedents to career choices of intentional successors have been conspicuously missing in entrepreneurship research. By drawing on theory of planned behavior, we investigate how intentional founders, successors, and employees differ in terms of locus of control and entrepreneurial self-efficacy as well as independence and innovation motives. We find that transitive likelihood of career intent depends on degree of entrepreneurial self-efficacy and the independence motive. Unexpectedly, we see that high levels of internal locus of control lead to a preference of employment, which challenges traditional entrepreneurship research and suggests that the feasibility of an entrepreneurial career path does not automatically make it desirable. Our findings suggest that students with family business background are pessimistic about being in control in an entrepreneurial career, but optimistic about their efficacy to pursue an entrepreneurial career.     

Entrepreneurship and dynamic capabilities: how firm age and size affect the ‘capability enhancement–SME performance’ relationship

The entrepreneurship and dynamic capabilities literature adds to our understanding of how strategic change can drive firm performance. We draw on a recent survey of US SMEs to determine whether entrepreneurial ventures have dynamic capabilities, and, if so, whether differences in the characteristics of those ventures lead to differences in how dynamic capabilities benefit firm performance. We find that most entrepreneurial ventures report having such capabilities and that their differences in age and size lead to differences in how dynamic capabilities affect firm performance. We consider how these results redefine the overlap of the dynamic capabilities view literature with the entrepreneurship literature, because the redeployment of resources to create and adapt to opportunities that defines what are dynamic capabilities lies at the core of what is entrepreneurial activity.     

Linking Processes and Dynamic Capabilities of International SMEs: The Mediating Effect of International Entrepreneurial Orientation

Previous research on the internationalization of small and medium‐sized enterprises (SMEs) has highlighted the role of knowledge and learning about foreign markets. However, empirical results on the performance implications of foreign market scanning and planning have been mixed. Following the dynamic capability perspective, we argue that SMEs can capitalize on scanning and planning processes because of their international entrepreneurial orientation. We test our hypotheses with a sample of 604 established SMEs and find that entrepreneurial orientation completely mediates the relationship between scanning and planning and international performance. Moreover, the results implicate a bidirectional relationship between processes and international entrepreneurial orientation.     

Entrepreneurial capacities as antecedents of business performance in Brazilian firms

We investigate the relationship between entrepreneurial capacities and firm performance. More specifically, we investigate the effects of radical innovation and learning orientation on business performance. We test the effects of entrepreneurial orientation on learning orientation and radical innovation. The results suggest that radical product innovation and companies' orientation to learn have a positive effect on organizational performance. Additionally, we find that entrepreneurial orientation positively influences a firm's capability to learn and innovate. Our findings also show a direct effect of learning orientation on radical innovation, which means that companies with a higher proclivity to learn are more likely to create products and processes, representing a major departure from the state of current knowledge. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

Antecedents and Performance Implications of a Sales Department's Learning and Entrepreneurial Orientation in SMEs

Existing research on entrepreneurial orientation (EO) has concentrated on the organizational level but neglected the analysis of more fine‐grained effects of EO in organizations. This study applies the concept of EO to the departmental level and investigates the sales department's entrepreneurial orientation (SDEO) and salespeople's learning orientation (SLO) and these orientations' impact on sales performance. Using a survey of 268 small and medium‐sized enterprises, the authors find that SDEO is a key performance lever, whereas SLO only indirectly fosters sales performance through driving SDEO. Furthermore, informal controls and technological turbulence are found to be important drivers of SDEO and SLO.     

The impact of industry-wide and target market environmental hostility on entrepreneurial leadership in mergers and acquisitions

Based on survey data from 115 acquisitions completed between 2008 and 2011 by European acquirers from German-speaking countries, we find evidence that entrepreneurial leadership is a strong predictor of exploration and a weaker but significant driver of exploitation outcomes following M&A. Industry-wide environmental hostility negatively impacts the influence of entrepreneurial leadership on exploitation. Target market environmental hostility negatively impacts the influence of entrepreneurial leadership on exploration. Thus, while entrepreneurial leadership is a key success factor of M&A performance by increasing both, post-merger exploration and exploitation, acquirers need to take environmental conditions at the industry and market level into account.     

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.     

The effects of entrepreneurial orientation and marketing information on the performance of SMEs

In this study, we investigate the effects of entrepreneurial orientation and marketing information on the performance of small and medium-sized enterprises. We build and test a causal model using data obtained from Singaporean entrepreneurs and find support for most of our hypotheses. The results indicate that entrepreneurial orientation plays an influential role on the acquisition and utilization of marketing information, and also has a direct effect on firm performance. The utilization of information regarding marketing mix decisions (particularly the Promotion and Place elements) positively affects firm performance, and it partially mediates the relationship between entrepreneurial orientation and firm performance. The implications and future research directions are discussed.     

Entrepreneurship and survival over the business cycle: how do new technology-based firms differ?

We investigate the survival performance of new technology-based firms (NTBFs) over the business cycle and compare them against other entrepreneurial firms. Our data comprise the entire population of entrepreneurial firms entering the Swedish economy from 1991 to 2002, which we follow until 2007. Discrete-time duration models are employed to investigate whether the business cycle impacts differently on the survival likelihood of NTBFs vis-à-vis other entrepreneurial firms. Our main findings are three. First, NTBFs generally experience a lower hazard rate compared to other entrepreneurial firms, which is interpreted as a sign of their high ‘quality.’ Second, all entrepreneurial firms are sensitive to and follow a pro-cyclical pattern of survival likelihood over the business cycle. Three, when comparing NTBFs with the broader group of other entrepreneurial firms, we find that NTBFs are more sensitive to business cycle fluctuations. The above results come with a qualification, though. The sensitivity during the business cycle mainly pertains to self-employed NTBFs. Also, NTBFs’ higher survivability is only linked to not being characterized as self-employed.     

Entrepreneurial orientation,export channel selection,and export performance of SMEs

Although research indicates that the export channel a firm uses can significantly impact export performance, it is unclear how firms should select this channel. Models of export channel choice tend to concentrate on transaction cost efficiencies, ignoring value adding orientations that entrepreneurial firms may possess. In this paper we develop and test the theoretical notion that in addition to transaction costs, differences in entrepreneurial orientation (EO) influence export channel choice and as a consequence export performance. Using data from a sample of Dutch and Italian SMEs we find that adding EO (moderated by institutional distance) significantly improves our model of export channel choice. Further we find that firms selecting export channels that align not only with transaction cost factors but also firm level EO, moderated by institutional distance, have higher export market performance. Thus, our study adds to and extends the export channel choice literature and provides interesting new insights into how EO helps firms create more successful export operations.