Innovation of entrepreneurial firms

An empirical test is provided of the effect of the degree of obsolescence on the effect of firm size and monopoly profits on a firm's ability to innovate. Recent theory suggests that innovation depends on firm size and monopoly profits only if the firm conducts product improvement as well as new product innovation. This is due to the allocation of limited entrepreneurial attention between improving current products and innovating new products. Current products are subject to obsolescence and innovation requires technological opportunities. The firm conducts product improvement as well as new product innovation only if the degree of obsolescence is sufficiently low relative to the level of technological opportunity. This theory provides an explanation for previously unexplained empirical observations. We find preliminary support for the hypothesis that product improvement reduces the positive effect of firm size on new product innovation and sufficient product improvement may reverse the negative effect of monopoly profits on new product innovations. In addition, product improvement reduces the positive effect of technological opportunity on new product innovation.     

Resource mobilization in entrepreneurial firms

We test the relative influence of power and social embeddedness in mobilizing resources between newly-formed businesses and other organizations by re-examining longitudinal data from the Van de Ven and Walker (1984) study of interorganizational relations. We find that resource flows to entrepreneurial ventures are predicted by the total dependence between parties engaged in the creation of value; they are not predicted by dependence advantage (or disadvantage) between the parties. We discuss the implications and propose that a theory of joint resource mobilization may be more useful than a theory of unilateral resource acquisition for understanding how new ventures access external resources.     

Knowledge and internationalization of returnee entrepreneurial firms

This study aims to answer whether and how returnee entrepreneurs’ international experience and returnee entrepreneurial firms’ international market knowledge influence these firms’ internationalization. Anchored in a framework combining an entrepreneurial and knowledge-based view, we develop a model and four hypotheses on the relations between returnee entrepreneurs’ international experience, international market knowledge, international market commitment, and level of internationalization of the returnee entrepreneurial firm. Empirical evidence of the proposed model is derived from a recent sample of Chinese returnee SMEs in knowledge-intensive and high-technology industries. The main finding is that returnee entrepreneurs’ international experience nurtures international market knowledge of returnee entrepreneurial firms, which in turn has a positive effect on these firms’ international market commitment and level of internationalization. In terms of theory, the study extends our understanding of returnee entrepreneurial firms by uncovering the role of returnee entrepreneurs’ international experience and returnee firms’ international market knowledge during their initial and early international expansion.     

Growth pattern of academic entrepreneurial firms

Academic entrepreneurship, the creation of new business ventures by university professors, technicians, or students, is increasingly being promoted by university-based innovation centers and university business offices. It is seen as an efficient university-industry technology transfer mechanism, and, in some cases may contribute to university revenue. Whereas most entrepreneurs leave the university at time of start-up, others keep their academic postings as full-time or part-time professors. “Part time” entrepreneurship may be interesting from a university point of view, because (i) it keeps in the laboratory a creative individual, (ii) it may provide through part-time academic positions for a more efficient use of university resources, and (iii) it encourages more contacts between faculty, students, and the business world. However, manufacturing firms led by part-time entrepreneurs do not seem to be as aggressive and growth-oriented as “independent” firms. The university professor interested in the successful transposition of an idea, an invention, to the commercial sector, may therefore have to do it through licensing, or resign from the university to devote all his time and energy to the development, manufacturing, and commercialization process. And the university interested in investing in a new “academic firm” created to exploit commercially an invention made in its own laboratories should beware of keeping the academic entrepreneur on staff, or, if he stays on staff, of involving him with the management of the new company.These are the main conclusions of a study of the evolution from 1980–1981 to 1984–1985 of 38 young firms originally created by entrepreneurs while at various universities in several Canadian provinces. The results, supported by the observation of a small control group of 8 Canadian hightechnology companies, bring out a dichotomy: for firms offering technical services, the continued this project were made by Colleen Bigelow and Branko Peterman. Their help was greatly appreciated. academic posting of the firm's creator does not appear to overly affect its operations and growth; however, manufacturing firms completely independent from the university tend to g row faster. Other results support the negative correlation that seems to exist between the growth rate of sales and closeness to academic life, as measured, for example, by the use of university laboratories and equipment. Whether they are still closely connected to a university or not, the entrepreneurs in our sample do note many potential positive benefits from continuing contacts with the academic world. It is possible that the negative correlation between growth and university links observed in the sample results more from the individual characteristics of the entrepreneurs than from a negative influence by the university. As venture capitalists have long noticed, one of the main determinants of growth and success is the entrepreneur himself. The entrepreneurs staying close to the university and using university services may be less aggressive and less risk-oriented than the others.     

The use of networks in human resource acquisition for entrepreneurial firms: Multiple “fit” considerations

This study proposes a multi-dimension, multi-contingent “fit” perspective for examining different practices adapted by entrepreneurial firms in acquiring human resources. We posit that while environmental constraints are important considerations for adapting recruitment practices through networks, strategic needs and interpersonal dynamics are the key drivers behind the evolution of such practices. As they transit from the startup to the growth phase, entrepreneurial firms utilize different network pools in search of diversity, yet cling to strong ties to find talents with common values and goals. Our findings carry important implications for future research in human resource management by integrating the macro- and micro-perspective, and at the same time, enhance the understanding of network effects and their strategic bearings in the entrepreneurial process, specifically in the acquisition of human resources.     

Top management teams and the performance of entrepreneurial firms

This article examines why some entrepreneurial firms succeed while others do not. The focal explanation is top management teams, including several studies that address when and how top management teams are likely to influence entrepreneurial firm performance. There are several insights. First, large and diverse teams with a history of working together are more likely to succeed. This effect is particularly large when they launch in growth markets. Second, teams are effective in making strategic decisions when they are fast, highly conflictual, and still get along. Third, they are also effective when they rely on “simple rules” heuristics to perform significant activities like new product development and internationalization that nonetheless happens often. A further insight is that these “simple rules” can become the strategy of their firms. Fourth, more effective teams continuously organize the structures of their firms at the “edge of chaos”. Overall, top management teams emerge as central to the success (or lack thereof) of entrepreneurial firms.     

Factors affecting the performance of entrepreneurial service firms

In the current climate, the importance of the role played by entrepreneurship as a palpable reality that enables economic growth at a macroeconomic level, and as a factor that favours the progress of companies at a microeconomic level, has made it the subject of continual analyses from many different perspectives and in a variety of contexts by researchers from around the world. In this study, Spanish entrepreneurial firms in the service sector are analysed in order to determine the factors that influence their performance.     

A comparative analysis of the entrepreneurial orientation/growth relationship in service firms and manufacturing firms

This article builds on the recently increasingly mentioned notion that entrepreneurship in the service sector is a worthwhile, but clearly underresearched topic. Using a sample of 1,612 small- and medium-size enterprises from the four German-speaking countries Germany, Austria, Switzerland, and Liechtenstein, and using structural equation modeling, this article finds that service firms have a significantly higher entrepreneurial orientation (EO) than manufacturing firms – both on the overall level as well as for each of the three sub-categories proactiveness, innovativeness, and risk-taking. With regards to the positive relationship between a firm's EO and its growth aspirations, nevertheless, no significant differences could be identified. Accordingly, this study shows that EO is a strategic orientation of highest value for service firms as well, under the premise of growth-orientation.     

Determinants of entrepreneurial activities in China

The institutional environment – including protection of private properties and contract enforcement – has been rather unfavorable for the emergence and development of China's private enterprises. This is in sharp contrast to the case of the developed economies where the institutional environment is conductive to the entrepreneurial activities and only the personal attributes of would-be entrepreneurs determine their entrepreneurship decision. We thus propose a theoretical framework for the entrepreneurship decision in China with a focus on the role of the institutional environment. Using a life-histories survey data of 2854 respondents from twenty cities in China, we find strong support for the impacts of the institutional environment and its interactions with other determinants of entrepreneurship decision.     

An entrepreneurial process perspective on succession in family firms

We review and analyze previous literature on succession in family firms from an entrepreneurial process perspective. Through a three-step cluster analysis of 117 published articles on succession in family firms published between 1974 and 2010, we find several themes within which succession can be understood from an entrepreneurial process perspective where both the entry of new owners and exit of old owners are associated with the pursuit of new business opportunities. We identify gaps within each cluster and develop a set of research questions that may guide future research on succession as an entrepreneurial process. Since succession involves implications for individuals, families and firms, we suggest researchers should adopt a multilevel perspective as they seek answers to these research questions. Our review and analysis also underlines the need to focus on ownership transition rather than only management succession, and the importance of carefully defining both succession and family firm.     

Decision making behavior in smaller entrepreneurial and larger professionally managed firms

The main findings in this study are that: • Entrepreneurs from smaller firms are less comprehensive in their decision behavior than professional managers from larger firms, with comprehensiveness defined as the degree to which an individual follows a formal rational decision process; • As decision comprehensiveness declines, so too does organizational performance, both among entrepreneurs and professional managers.The present study was based on the responses of 15 entrepreneurs from smaller firms averaging 25 employees and 13 CEOs and other top level corporate executives from larger, more professionally managed firms averaging 740 employees. The firms were randomly selected from a list of mid-Atlantic electronic manufacturing firms. Field interviews and questionnaires were employed, as well as a decision scenario involving a series of questions to which the entrepreneur or professional manager responded.After reviewing the literature on entrepreneurship, the researchers noted that most of it focused on developing profiles of entrepreneurs—for example, that they were high achievers, impatient and made decisions quickly. However, little—if any—research has focused on the behavior of entrepreneurs, particularly when compared to that of professional managers. Given this gap in the research, a field study was designed to compare the decision behavior of entrepreneurs and professional managers. It was expected that entrepreneurs would be less comprehensive than professional managers, but given previous research on comprehensiveness, it was difficult to predict the consequences of this less comprehensive model for performance.The researchers note in the discussion and conclusion that the results of the study have major implications for entrepreneurs and professional managers. Granted that decision comprehensiveness should be emphasized, they question the ability of entrepreneurs to change their decision behavior. It is argued that many of the drawbacks of comprehensiveness can be overcome by more sophisticated planning techniques and information processing systems. The paper concludes by stressing the need for research on techniques and ways to train entrepreneurs and managers to be more comprehensive.In summary, the present study has produced some important preliminary findings. It confirmed in larger scale studies, they could have major implications for the manner in which entrepreneurs and professional managers are trained and developed.     

Achieving sustained competitive advantage in retail and consumer service firms: The role of entrepreneurial orientation and entrepreneurial bricolage

The vital role of entrepreneurial orientation and entrepreneurial bricolage in creating sustained competitive advantage in retail and consumer service firms is increasingly acknowledged in modern markets. Using data from 246 retail and consumer service firms (hereafter R&CSFs) in Japan, this paper develops and empirically tests a framework delineating how entrepreneurial-oriented R&CSFs strategically combine existing resources while managing risks to differentiate their service portfolios to be competitive. The findings reveal that entrepreneurial orientation and entrepreneurial bricolage influence differentiation advantage and risk management, which, in turn, is associated with creating a sustained competitive advantage (hereafter SCA). This paper adds novel insights to the dynamic capabilities view and retail and service marketing literature by identifying entrepreneurial orientation, entrepreneurial bricolage, and risk management as dynamic capabilities, which allows R&CSFs to create service innovations in resource-constrained environments.     

High-growth entrepreneurial firms in Africa: a quantile regression approach

This article analyses the growth performance of a large set of entrepreneurial firms in ten manufacturing sectors of 11 Sub-Saharan African countries. The focus of the article is on identifying those entrepreneurs’ attributes and firm characteristics that tend to generate a significant number of high-growth firms in these countries. To this end, we use a quantile regression, which provides a more complete estimation of the growth distribution of firms conditional on different attributes. The results indicate that firms that engage in product innovation, have their own transport means and are connected to the internet through their own website are especially characterized by higher growth rates and also display a distribution of growth rates skewed to the right, hosting a higher number of high-growth firms. The effect of the last two variables, which relate to distance-bridging modes of infrastructure, points to the self-reinforcing growth effects they generate in creating wider input and output markets. Education raises growth opportunities by affecting the lower quantiles, but it does not appear to influence the upper quantiles. The estimated conditional growth distributions for the technology-intensive machinery and electronics sectors show more extreme tails and a lower mean in comparison to the traditional industries, indicating the more risky nature of doing business in these industries.     

Patterns of strategic alliances between rival firms

This article describes the results of a research project which examined 171 alliances set up by competing firms in an international context. It presents an empirically-based taxonomy of such alliances constructed on the basis of a set of variables chosen for their demonstrated or assumed influence on the evolution and outcomes of strategic partnerships. Three contrasted types of alliances are identified: quasi-concentration alliances, market penetration alliances and shared supply alliances. They differ according to two fundamental dimensions: their symmetrical or dissymmetrical nature and the way in which they alter competition. Legal structure, often emphasized in previous research on the subject, does not emerge as a strongly discriminating factor. Hypotheses on the likely evolution and outcomes of each type of alliance are derived from the taxonomy.We are grateful to Barbara Gray, Stuart Hart, Aneel Karnani, Will Mitchell, Michel Tenenhaus, and to two anonymous reviewers for their very valuable and helpful comments on earlier drafts of this article. Our research project was funded by Fondation HEC, whose support we gratefully acknowledge.     

Dynamic capabilities in entrepreneurial firms: A case study approach

Three entrepreneurial case studies in Canada show that changes in the environment??such as changes in customers?? needs and changes in competitive products??are the major sources of opportunities. To recognize and exploit these opportunities, the firm needs entrepreneurial capabilities. At the same time, to gain long-run competitive advantage, the firm needs dynamic capabilities. The case findings show that entrepreneurial capabilities have circular and iterative relationship with dynamic capabilities??each reinforces the other. The more often the iteration takes place, the stronger entrepreneurial capabilities and dynamic capabilities are. Further, the study builds on the extant literature and develops a new method to capture dynamic capabilities through capturing changes in ordinary capabilities.     

A new entrepreneurial drive in large and small manufacturing firms in Japan

Japan's per capita GDP growth has been decelerating for at least three decades, despite groping towards better ways of accommodating individualistic Smithian market forces. Japan has made great progress in opening markets and fostering profit seeking, yet it has not reaped the benefits anticipated so far. Facing the most severe economic downturn of the post-war period, it is now rethinking the fundaments of its economic and management system. The necessity of developing competitive advantages in new industries has been identified but a crucial question is how they will affect the way industry has organized itself to maximize quality, efficiency and flexibility. It is said that an entrepreneurial culture was not needed during the post-war period in Japan because a group-based industrial organization could generate about the same dynamism and outcome. Nevertheless, this time, a venture-type business culture may be a key factor in the renewal of the Japanese economy to put it back on a sustainable growth path. The objective of the article is to make a critical assessment of the trends in entrepreneurship in Japan, using secondary data. They are complemented by partial results of two surveys made by the author, the first one in 1997 in ten electronic companies on intrapreneurship schemes, and the second one in 1998 in 40 small companies in the Hiroshima prefecture, centred on human resource management. To these are added information obtained through interviews in the small business agency, MITI, and a number of universities on business-university research collaboration schemes.     

The performance effect of network and managerial capabilities of entrepreneurial firms

Building on the organizational capabilities view, this study explores the impact of network and managerial capabilities on the performance of entrepreneurial firms in the architecture and real estate sector. We apply an extended organizational capabilities model by integrating Porter’s value chain model and Grant’s hierarchy of organizational capabilities. Starting from differences in entrepreneurial orientation between architecture and real estate development firms, we argue that under higher environmental uncertainty, network capabilities are more important for the performance of architecture firms whereas managerial capabilities are more important for the performance of real estate development firms. Employing data from Austria, Germany, and Switzerland, the research results support the hypotheses. This study integrates Porter’s value chain concept and the organizational capabilities model and delivers a contribution to the organizational capability theory. In addition, it contributes to the entrepreneurship literature by showing that network capabilities are more important for creating competitive advantage in entrepreneurial firms than in other firms.     

The network of relationships between the economic environment and the entrepreneurial culture in small firms

In this article we maintain that the cultural evolution processes of small firms are strongly influenced by the type of relationships that they establish with the economic environment.In the first part of the article, the main points of the discussion are set forth. Here, the theoretical debate is presented and the existing relations between the entrepreneurial culture and the interaction of firms with their economic environment is analyzed. In the second part of the article, the methodologies adopted for the statistical analysis are explained, and the results of the empirical analysis are presented. Finally, in the third part the implications for practitioners, industrial policies, and future directions in research are discussed.The importance of openness to change in the entrepreneurial culture is a basic assumption in this study. It is well known that in small and medium firms, entrepreneurs often demonstrate “a resistance to change” that limits the firm's competitiveness. In some observed territorial and industrial contexts this resistance to change is determined by a cultural entrepreneurial homogeneity. This homogeneity is a result of the similarity of the social, educational, and entrepreneurial experiences of the subjects observed. Indeed, the entrepreneurs studied had, for generations, received the same education, lived in the same area, and come from the same social setting. This entrepreneurial culture is typified by distrust of innovation and discontinuity, which leads these entrepreneurs to favor already proven solutions and initiate the behaviors of others, rather than take innovative actions. Principal component analysis has been used to identify the influences that various factors, within and external to the firm, have in the forming of an entrepreneurial culture and thus on the openness of entrepreneurs and firms to learning. In the sample, a trade-off emerged between tendencies to homologous behaviors and the spirit of initiative. Through cluster analysis we identified categories of entrepreneurs with a different propensity to innovation regarding established firm routines. “Learning entrepreneurs” belong mainly to industries that serve the final consumer while “bounded entrepreneurs” tend to specialize in commodities more often for export.The implications of our results might interest new entrepreneurs who can include this element when analyzing the viability of new ventures. Small, already operational firms, can evaluate opportunities arising from export processes or might adjust their position on the production filiére to be closer to the final market.This empirical analysis should be reapplied to firms in areas with different environmental characteristics or to production filiéres where the relationship between customer and supplier is different, as for example in high-tech-industries, so as to verify whether the intensity of the relations with the market differs according to external factors or the technological intensity of the industries examined.     

The strategic role of quality in small size firms

It is often claimed that, especially in mature industries, European firms can compete against low-cost NICs firms only if they are able to implement quality based strategies. The emphasis on the strategic role of quality, however, often leads to underestimate the extent of organizational and economic efforts, needed to turn quality from a potential opportunity into a real advantage. The lack of a thorough comprehension of the requirements of a quality based strategy can question the effectiveness of the investments some firms plan to improve their quality level. These firms can in fact remain stuck in the middle, if they do not have enough resources to turn quality into a source of sustainable competitive advantage.This paper is aimed at a better comprehension of both benefits and costs of a quality based strategy, with regard to a specific class of firms, Small Size Firms (SSFs), where a strategic use of quality is more difficult. The paper is articulated into two parts. Part one discusses the main obstacles facing the adoption of a quality based strategy by SSFs. A dynamic model for the adoption of this strategy over time, aimed at minimizing the risks for SSFs, is also presented.Part two describes the results of an empirical research, aimed at verifying the viability of quality based strategies in an industry composed only by SSFs, the shoe-machinery industry. The empirical research supports the viability of the model presented in the first part of the paper.