Entrepreneurs' Personal Values,Compensation, and High Growth Firm Performance

We tested whether high growth firms' performance is related to the number of benefits offered and/or the values of the entrepreneur. Using data from the 2007 top 500 fastest growing entrepreneurial firms in America, we discovered that entrepreneurs' values do not relate to the total number of benefits offered, meaning the mediation model does not exist and lending strength to the argument that entrepreneurs' values greatly influence the success of a new venture. However, the total benefits offered are positively related to firm performance. We determine that the entrepreneurs' values and the total benefits offered are instrumental to firm performance.     

Toward a theory of international new venture survivability

In this longitudinal study, we explore in-depth how entrepreneurs acquire legitimacy for their new ventures in an attempt to internationalise and survive before and after the dot.com bubble. We adopted a longitudinal multiple-case study methodology for the purpose of theory building. Five firms were selected on the basis of purposeful sampling logic from a homogeneous empirical context: they were small, software firms from Scotland that internationalised and struggled for survival between 1999 and 2001. To explore these companies’ critical events and episodes, the method of critical incident technique was employed. The method of constructing typologies by reduction was employed to advance the typology of hype defined as the overall sentiment of the environmental context, within which the firm is embedded, about the future. Grounded in data, there emerged a middle-range theory of international new venture survivability that postulates that the closer the new venture is to the hype, the higher the likelihood of failure. Several implications to the theory of new venture legitimacy could be singled out. The paper makes an attempt to understand the nature of a legitimacy threshold. The data in the study points to the continuous nature of the legitimacy threshold and suggest that it may be defined by the time when the emergent industry moves away from hype towards risk decision making settings. A set of propositions is put forward to stimulate future research in the area of new venture legitimacy.     

Measuring the performance of emerging businesses: A validation study

To identify and substantiate the correlates and antecedents of new venture performance, it is requisite to identify the most relevant performance dimensions and move toward the use of common measures of performance. Relevant, reliable, and valid measures of new venture performance are essential to explore vital relationships between independent variables and venture success and develop sound venture performance theory.In this paper we discuss three of the most common measurement approaches used in new venture performance research when only self-report data are available, and present a comparison of these approaches: (1) measuring firm performance in broadly defined categories, (2) the use of subjective measures of executive or owner satisfaction with firm performance, and (3) the use of subjective measures of firm performance relative to competitors. After discussing the relevance and potential benefits and drawbacks of each approach we use empirical data to examine and compare the availability, reliability, and relative validity of measures developed using these approaches.The sample consisted of manufacturing businesses (SIC codes 20–39) started or reorganized in the corporate form between 1980 and 1991 in nine counties in northwestern Pennsylvania's identified by a major marketing research service. Questionnaires were returned by primary respondents in 120 companies; complete matching firm performance data from a second respondent were returned for 45 of the firms.The pattern of results favors the use of two dimensions of venture performance: growth and business volume. The growth and business volume measures operationalized in this research have good availability and internal consistency and are superior to the satisfaction with performance and performance relative to competitors' scales in terms of content validity. Evidence of the external validity of the measures is provided by regression analysis showing independent variables identified and substantiated by previous research to be related to performance in the hypothesized manner.The satisfaction with performance index had a high disclosure rate, strong internal consistency, and relatively strong inter-rater reliability. There is little evidence supporting its external validity. With the exception of its negative relationship with the level of competition, none of the predicted relationships are substantiated.The performance relative to competitors' disclosure rate was somewhat lower as was the inter-rater reliability; however, it emerged as a strong independent construct with a high level of internal consistency. There was evidence for the external validity of this measure. The independent variables related to the performance relative to competitors' index are similar to those related to both the growth and business volume dimensions as predicted from previous theoretical work and research findings.In summary, this research makes several contributions to the new venture performance literature. First, when researchers are required to use self-reported measures of venture performance, growth and business volume are the dimensions of performance most familiar to and most commonly referenced by the founders. Second, it provides additional evidence for the accuracy and reliability of founder reported performance data. Third, it provides examples of specific measures with evidence that supports their relevance, availability, reliability, and validity. We believe this research can provide a base for future venture performance research. We hope that these findings will be used to help better our understanding of the dynamics impacting new venture performance and lead to improved managerial practice in emerging firms.     

Progress without a venture? Individual benefits of post-disruption entrepreneuring

Entrepreneurial action only rarely results in the full transition to venture creation. Yet, extant research has focused almost exclusively on explaining how entrepreneurial action influences venture performance outcomes such as emergence and growth. Therefore, to advance theory, there is a need to uncover other outcomes of entrepreneurial action by decoupling it from venture creation. In this study, we begin such decoupling by exploring how entrepreneurial action can create individual benefits irrespective of venture emergence and financial success. We collected longitudinal data from a group of individuals who, due to forced migration, experienced significant disruption and then engaged in entrepreneurial action with the general goal of adapting to a new (to them) context. From this data, we integrated theory on entrepreneuring to develop a grounded model of post-disruption entrepreneuring. This model has three main components: (a) disruption assessment impact—interpretation of how the disruption will influence one's ability to pursue tasks and goals that provide meaning in life; (b) use of entrepreneuring—function and application of entrepreneuring activities in addressing opportunities or threats; and (c) projected goals—anticipated outcomes that provide meaning, motivation, and purpose. These attempts at assessing the contextual conditions provide individuals with an objective way of framing their situation. Thus, entrepreneuring can serve as an accessible mental structure that facilitates adaptation. In elaborating on post-disruption entrepreneuring, this study contributes to the literature by demonstrating the generative capacity of entrepreneurial action even in the absence of venture creation.     

Corporate venture capital and the balance of risks and rewards for portfolio companies

This paper contributes to the literature on corporate venture capital (CVC) by examining the management of CVC investments from the perspective of the investee firm. We focus on the trade-off between social interactions and relationship safeguards and examine their effects on the twin relationship outcomes of learning benefits and risks. The model is tested using data collected from CEOs of U.S. technology-based new firms receiving CVC funding. Complementarities between the investee firm and its CVC investor are positively related to the level of social interaction and negatively related to the use of different types of relationship safeguards by the investee firm. The use of safeguards is further negatively related to both realized relationship risks and social interaction. Social interaction is positively related to realized learning benefits. These findings highlight the fine balance that the investee firm has to strike between openness and self protection in a CVC relationship. Implications for future research and current practice are discussed.     

Understanding the dynamics of new venture top management teams: cohesion,conflict, and new venture performance

Research conducted under the upper echelon perspective has produced consistent evidence of a relationship between top management team (TMT) interaction and firm performance. We draw upon and extend this research in an effort to explain new venture performance as a function of cohesion and conflict within the top management team. Based upon data collected from a sample of 70 new ventures, we find that TMT cohesion is negatively related to affective conflict and positively related to cognitive conflict. As expected then, we also find that TMT cohesion is positively related to new venture growth.     

Strategic Interactions,Bargaining Power and Stability of Joint Venture in an Emerging Nation

We model strategic interaction between a domestic firm and a foreign firm involved in a joint venture, incorporating negotiations over equity shares and its implications for stability in the context of an emerging country. The foreign firm has superior technology, whereas the domestic firm has better local market knowledge. Modelling simultaneous innovation effort and bargaining power over equity share, we provide a rationale for the stability of the joint venture. We find that a certain level of technological knowledge can empower the bargaining power under certain parameter configurations and assumptions, such that the firms will negotiate to agree over their equity shares and maintain the joint venture. In this context, the stability of the joint venture is always an expected outcome. We have also shown that the domestic firm’s bargaining power and knowledge acquisition directly affect the domestic firm’s R&D effort and threaten the stability of the JV. We try to justify a probable situation where the firms may negotiate hard over equity shares but still maintain the joint venture.

     

What you are is what you like—similarity biases in venture capitalists' evaluations of start-up teams

This paper extends recent research studying biases in venture capitalist's decision making. We contribute to this literature by analyzing biases arising from similarities between a venture capitalist and members of a venture team. We summarize the psychological foundations of such similarity effects and derive a set of hypotheses regarding the impact of similarity on the assessment of team quality. Using data from a conjoint experiment with 51 respondents, we find that venture capitalists tend to favor teams that are similar to themselves in type of training and professional experience. Our results have important implications for academics and practitioners alike.     

How entrepreneurial intentions influence entrepreneurial career choices: The moderating influence of social context

In this paper, we build on social cognitive career theory to examine the relation between entrepreneurial intention and new venture creation (i.e., the entrepreneurial career choice). We model how contextual influences at different levels may favor or inhibit the translation of entrepreneurial intention into new venture creation. Using unique longitudinal data from almost the entire population of Italian university graduates, we are able to assess how the immediate (i.e., the influence of relevant others) and larger context (i.e., organizational and environmental influences) affect new venture creation. Our research contributes to the emerging literature of the intention–behavior link in entrepreneurship.     

The Relationship between Resource Acquisition Methods and Firm Performance in Chinese New Ventures: The Intermediate Effect of Learning Capability

Despite the omnipresent popularity of the resource‐based view of the firm, our understanding of how firms convert resource acquisition into performance returns remains something of a black box. We seek to unpack this problem in this study. Building on the resource‐based view and combining insights from organizational learning theory, this paper develops a theoretical model consisting of seven hypotheses in which resource purchase, resource attraction, and resource internal development are positively related to new venture performance, and in which learning capability mediates these relationships. We also posit that resource acquisition methods augment the learning capability of the firm en route to securing superior new venture performance. We test these hypotheses using survey data from new ventures in China. The results indicate that all three methods of resource acquisition have positive effects on new venture performance, that resource attraction and internal development have positive effects on learning capability in new ventures, and that learning capability mediates the relationship between these two resource acquisition practices and new venture performance. We put forward implications for theory and practice to close the work.     

Risk bias and the link between motivation and new venture post-entry international growth

We link research in international entrepreneurship and on behavioral decision making with the international business literature on firm degree of internationalization to advance an integrative model of new venture post-entry international growth. We test this model on a sample of 286 new ventures. Results demonstrate that the extent to which entrepreneurs perceive internationalization choices more or less risky than an objective standard (i.e. internationalization risk bias) leads to variations in international growth rates, in particular international scope. Further, we show that the decision-maker's motivation leads to differences in both internationalization risk bias and international scope.     

The entrepreneur's mode of entry: Business takeover or new venture start?

We extend the well-known occupational choice model of entrepreneurship by analyzing the mode of entry. Individuals can become entrepreneurs by taking over established businesses or starting up new ventures from scratch. We argue that the new venture creation mode is associated with higher levels of schooling whereas managerial experience, new venture start-up capital requirements and industry level risk promote the takeover mode. A sample of data on entrepreneurs from The Netherlands provides broad support for these hypotheses, and also bears out a prediction that entrepreneurs whose parents run a family firm tend to invest the least in schooling. We go on to discuss the implications for researchers, entrepreneurs and public policy makers.     

Cognitive biases,risk perception,and venture formation: How individuals decide to start companies

Despite the high risk involved, thousands of individuals decide to start ventures. Past research, however, has found that entrepreneurs do not have a high-risk propensity, that is, a great willingness to knowingly take risks. This study, therefore, explores how individuals cope with the risks inherent in their decisions, and suggests that entrepreneurs may not perceive the riskiness of starting ventures.The study's findings suggest that risk perceptions may differ because certain types of cognitive biases lead individuals to perceive less risk. Cognitive biases are common types of mental shortcuts used to make judgments. This study examines three cognitive biases that previous research has suggested may lower risk perception. The first, overconfidence, refers to the failure to know the limits of one's knowledge. The second bias tested, the illusion of control, occurs when individuals overemphasize the extent to which their skill can increase performance in situations where chance plays a large part and skill is not necessarily the deciding factor. Because the individuals believe that they can control largely uncontrollable events, they also think they can accurately predict the outcome of the events. Finally, the third bias, the belief in the law of small numbers occurs when an individual uses a limited number of informational inputs (a small sample of information) to draw firm conclusions.This study's sample consisted of 191 students pursuing a Masters of Business Administration. The students' responses to a survey based on a case study regarding a decision to start a venture were examined. The survey included questions about the students' willingness to start the venture, their perception of the venture's riskiness, and the extent to which they exhibited cognitive biases in their decision processes.The study's findings tentatively suggest that individuals start ventures because they do not perceive the risks involved, and not because they knowingly accept high levels of risks. The belief in the law of small numbers lowered an individual's perceptions of a venture's riskiness, suggesting that some individuals draw firm conclusions from small samples. An illusion of control also decreased risk perception, suggesting that individuals starting ventures might not acknowledge that certain tasks, important to the venture's success, are beyond their control.Some argue that biases might be associated with venture failure. If this is the case, the very processes that increase the likelihood of starting a venture may actually decrease performance. Entrepreneurs may choose to minimize their biases by soliciting and paying heed to the advice of outsiders, or by using group decision-making techniques, such as devil's advocacy or dialectical inquiry.Others, however, suggest that early in the decision process, biases may be beneficial because they lower risk perception, which allows entrepreneurs to generate the commitment needed for success. Even if this is true, entrepreneurs should still institute processes to increase learning so the venture can adjust to unfolding realities and avoid any damage caused by initial misperceptions. Similarly, entrepreneurs need adequate safety nets in case their biases lead them to encounter unforeseen difficulties. The potential positive and negative effects of biases and perceiving low levels of risk suggest the importance of exploring this area further.     

The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions

Entrepreneurs are thought to engage in riskier behavior than nonentrepreneurs, yet little empirical evidence supports that intuitively appealing notion. We argue instead that differences in information, not risk aversion, may explain the decision to launch or grow a venture. We separately test risk taking propensity and risk assessment. We hypothesize that entrepreneurs will not differ from nonentrepreneurs on risk taking propensity. Additionally, we propose and test a model of risk assessment. The sample size for this exploratory study is n=53 with 30 respondents declaring themselves as entrepreneurs and 23 declaring themselves as nonentrepreneurs. The study’s design is a simulation. Each respondent is provided with data on a potential acquisition that would result in either the launch of a new venture or significant growth for an existing firm. Consistent with the hypotheses, the results show no difference between entrepreneurs and nonentrepreneurs on the risk taking measure. We also find that we can predict entrepreneurial behavior based on risk assessment. We close with a discussion of limitations and directions for future research.     

Perceived risks and choices in entrepreneurs' new venture decisions

Though risk plays a central role in most entrepreneurial decision making, little empirical research has explicitly examined how the elements of risk, risk perceptions, and entrepreneurs' propensities to take risks influence choices among potentially risky entrepreneurial ventures. This experimental study asked a sample of entrepreneurs leading America's fastest growing firms to make choices among a series of hypothetical new ventures. The results indicate that such choices are influenced by the risks inherent in the new ventures, as evidenced by the pattern of outcomes anticipated in each venture, the entrepreneurs' differing perceptions of those risks, and differences in their personal propensities to take risks.The subjects in our sample of entrepreneurs tended not to choose ventures having a high degree of variability in their pattern of anticipated outcomes. This avoidance of outcome variability suggests that the sensitivity analyses commonly prescribed for examining new venture attractiveness may inhibit risk taking, and may deter potential investors from investing in their firms. New approaches to assessing and presenting new venture risk, other than the traditional best case/expected case/worst case approach, may be advisable, as well as sufficiently through market research to provide evidence of the degree to which market acceptance is likely for the venture's products or services.We also found an effect of differences in risk propensities among entrepreneurs on their new venture choices. This effect suggests not only that entrepreneurs should be wary of any biases they bring to their new venture decisions, but that prospective investors should consider the degree to which entrepreneurs in whom they choose to invest are well-matched to the investors' own risk-taking propensities.Finally, while our sample of entrepreneurs tended to shun high levels of variability in their new venture choices, they appeared willing to accept a considerable degree of hazard, or possible downside, in their new venture choices, presumably in pursuit of potentially significant gains. Entrepreneurs are advised to seek a clear understanding of the downside entailed in their proposed ventures, and develop strategies to mitigate the likelihood of adverse outcomes. Thus they will not jeopardize chances for near term success and attracting support of investors and others in later stages of the venture or in subsequent ventures.Our research did not attempt to examine how our subjects' choices would have played out in terms of performance, but the apparent biases which entrepreneurs' risk propensities bring to their assessment of proposed new ventures is a potentially important issue that merits further scrutiny. On one hand, such biases may lead to patterns of suboptimal decisions. On the other hand, our results suggest that investors should entrust their new venture investments to entrepreneurs whose risk propensities (and perhaps other personal characteristics) best match the needs of both the opportunity at hand and the investor's objectives. As many venture capitalists attest, the management of a proposed new venture should lie at the heart of their investment decision.     

Emotional Intelligence and Venture Performance

Scholars emphasize the importance of emotion in entrepreneurship and the potential of emotional intelligence, but research is sparse in the field. We develop and test a novel partial mediation model of emotional intelligence, interpersonal processes, and venture performance. The results indicate that interpersonal emotional skills, which entail the recognition and management of emotions in others, has a direct effect on venture performance, but intrapersonal emotional skills pertaining to self‐awareness and regulation of emotions do not. Additionally, both the intrapersonal and interpersonal dimensions of emotional intelligence have an indirect influence on firm performance via interpersonal processes that entail functioning in key activities within the firm. We discuss the implications and address potential avenues for future research on this important topic.     

What happens to international new ventures beyond start-up: An exploratory study

Since its inception, research in international entrepreneurship has focused mainly on how and why international new ventures internationalize early on. To date, there has been hardly any research regarding the issue of continuing corporate growth in such ventures beyond their start-up phase or initial internationalization. Theoretically, we ground our study within the dynamic capabilities view of the firm and through an inductive theory building research explore how and whether international new ventures made-it beyond the start-up phase, aiming to generate early theoretical constructs to guide international entrepreneurship research in this substantive area. Grounded in data, we develop the following constructs related to made-it points: strategic experimentation, tensions in organizational gestalt, and legitimacy lies. To get to a made-it point, entrepreneurs experiment with their venture at several levels: organizational, business model, and operational. These experimentation efforts are fueled by tensions that exist in the organizational gestalt, such as ownership structure, business proposition to the market, and product development process. To legitimate themselves and their venture in the stakeholders’ eyes, entrepreneurs may tell legitimacy lies. We maintain that international new ventures do not reach a made-it point if they only manage to develop substantive capabilities to produce desired outputs at various levels within the venture but fail to create dynamic capabilities to change and reconfigure existing substantive capabilities.     

Social networks and speed of new venture internationalization during institutional transition: A conceptual model

This paper examines the role of social networks in the internationalization process of new ventures in the context of transition economies. We introduce a conceptual model in which the relationship between various dimensions of an entrepreneur’s network and new venture internationalization speed is contingent upon a country’s stage of institutional transition. We theorize that strong national ties and weak international ties, accessible through brokers, contribute to speedier new venture internationalization in contexts characterized by fundamental institutional upheaval. We also theorize that the value of various structural aspects of an entrepreneur’s network changes as transition progresses.     

Global supply network embeddedness and power: An analysis of international joint venture formations

As a subset of the international business literature, cross-border equity based partnerships have drawn significant academic attention. In the context of inter-firm partnerships, the power dynamics between parties and the implications that power has on the relational dynamics between firms is an important consideration. Research that connects power with network theory has recently emerged, suggesting that the network, as a source of power, plays a significant role in inter-firm dynamics. Yet, while there has been a substantial body of work either articulating the antecedents and consequences of power, little research has paid attention to the role that power plays in international JV formations; this presents a significant gap in the international business literature. Consequently, this study investigates the role that global network structure plays in the formation of new equity based international partnerships. Secondly, it contributes to the international JV literature by developing and testing a theoretical framework that examines inter-firm power dynamics as derived from the network position of each firm in the global network. Global network prominence, brokerage and weakness are key factors utilized in the analysis. The hypotheses are tested using a global manufacturing joint venture longitudinal dataset that contains 985,689 observations from 1985 to 2003. The results of the event history analysis indicate that for the manufacturer global network prominence, brokerage and weakness play an important role in new joint venture formations. On the other hand, only global network prominence is a significant factor for the potential partner.     

A woman's place is in the… startup! Crowdfunder judgments,implicit bias,and the stereotype content model

We examine investor stereotypes and implicit bias in crowdfunding decisions. Prior research in formal venture capital settings demonstrates that investors tend to have a funding bias against women. However, in crowdfunding – wherein a ‘crowd’ of amateur investors make relatively small investments in new companies – our empirical observations reveal a funding advantage for women. We explain the causal mechanism underlying this counterintuitive finding by drawing upon stereotype content theory and testing a dual path moderated-mediation model. Based on archival data and a follow-up experiment, our findings suggest common gender biases held by amateur investors function to increase female stereotype perceptions in the form of trustworthiness judgments, which subsequently increases investors' willingness to invest in early-stage women-led ventures. We discuss our results with specific attention to how our findings extend the entrepreneurship funding literature as well as the gender dynamics literature in entrepreneurship and organization research more broadly.