Born globals: A cross-country survey on high-tech start-ups

The paper empirically investigates what drivers affect the decisions of high-tech start-ups to internationalize from the outset, and their degree of born-globalness. The empirical data have been obtained from a cross-country survey on internationalized high-tech start-ups operating in the ICT and electronics sectors. The present findings show that the presence of a small domestic market and the scalability of the product put on sale have a positive effect on the probability of a start-up internationalizing from its inception. We have also observed that the niche strategy and the network relationships built up by the entrepreneur are key drivers for both an early internationalization and the scope of international expansion. The experiential knowledge and international commitment of an entrepreneur, as well as the diversity of team competences and organizational flexibility of a firm, have a significant impact on a born global's degree of born-globalness, although it is not a fundamental precondition for early internationalization.     

The Choice between Bank Debt and Trace Credit in Business Start-ups

This paper investigates the choice between bank debt and trade credit in business start-ups. While trade credit is more expensive than bank debt, suppliers tend to follow a more lenient liquidation policy when client firms encounter financial distress. As a result, suppliers are more willing to renegotiate the outstanding debt or grant additional debt whereas banks are more likely to liquidate borrowers upon default. Given the risky nature of business start-ups, we argue that the entrepreneur’s choice of debt instruments reflects these differences in liquidation policy between lenders and is thus determined by the venture’s failure risk, the entrepreneur’s private control benefits that are lost upon liquidation and the liquidation value of firm assets. Using unique data on 325 first-time business start-ups, we find that firms in industries with high historical start-up failure rates and entrepreneurs who tend to highly value private benefits of control use less bank debt. These effects are especially prevalent in start-ups where assets have a high liquidation value and thus banks are more likely to liquidate the venture following default. An erratum to this article can be found at     

Subsidizing Start-Ups: Policy Targeting and Policy Effectiveness

Start-up subsidies are a frequently employed policy instrument, the use of which is justified by alleged market failure resulting from positive external effects and capital market imperfections. This article investigates whether the allocation of subsidies reflects a policy focus on addressing these market failure occurrences. However, using survey data from the East German state of Thuringia, logistic regressions reveal a rather random subsidization of start-ups. Furthermore, propensity score matching suggests that subsidized start-ups would have survived and thrived in any case, an indication of deadweight losses of start-up subsidies. The analysis points to serious information problems arising when subsidies should be allocated to remedy market failure. Making the situation even more problematic is that failure to precisely target start-up subsidies is likely to result in market distortions and ineffectiveness.     

New firm formation and employment growth: regional and business dynamics

This study examines differences in the effects of start-up rates on subsequent employment change. Two sources of such differences—types of start-ups and types of regions—are analyzed. We find that differences between knowledge-based and other start-ups dominate differences between highly agglomerated and modestly agglomerated regions. In particular, differences in the effects of new start-ups on subsequent employment growth between highly agglomerated and modestly agglomerated regions are greater for knowledge-based start-ups than for other types of start-ups. The results suggest that, while knowledge-based start-ups are likely to impart greater benefits on future employment than other types of start-ups, these benefits are greater when those start-ups locate in more agglomerated regions.     

Making a first impression as a start-up: Strategies to overcome low initial trust perceptions in digital innovation adoption

High failure rates of digital innovations by start-ups indicate that consumers' initial trust perceptions are make-or-break for their survival. Hence, start-ups have to design adequate business models to manage consumers' initial trust perceptions of digital innovations. Five experiments explore how start-ups can signal trustworthiness in order to overcome low initial trust perceptions and boost adoption. We find three specific design strategies of start-ups' digital business models – customer ratings, benefit communication, and revenue model – to be effective to overcome low initial trust perceptions and to increase adoption of digital innovations. The findings demonstrate that initial trust serves as a critical mediator in the relationship between these design strategies and consumers' adoption intentions. Additionally, the chosen revenue model has differential effects on privacy concerns, which mediate the relationship between revenue model and initial trust. The present empirical insights help start-ups to craft business model design strategies for successful digital innovation launch.     

Effective Communications in Growing Pre-IPO Start-Ups

SUMMARY

This study discusses the establishment and evolution of effective internal communications in pre-IPO start-ups, with a focus on 6 variables: employee communications, organizational structure and culture, public relations and communication models, leadership styles, decision-making approaches, and employee motivation. The qualitative study explores how these variables establish effective internal communications in growing pre-IPO start-ups. In addition, the study provides an ideal internal communications model to guide entrepreneurs in establishing start-ups. The findings also emphasize human resources (HR) as a 7th influential variable.     

The Precursor Role of Cooperation,Coordination, and Relationship Assets in a Relationship Model

ABSTRACT

Purpose: The primary purpose of this study is to test the importance of activity-oriented precursors in a relationship model. This study supports the theoretical view that firms create trust and knowledge through activities and these activities make a commitment decision less risky (Johanson & Vahlne, 2009). The secondary purpose of this study is to collect and examine data from interorganizational relationships in both Sweden and the United States. By including data from two countries, results will be more generalizable. Results can also lead to several managerial implications.

Methodology/approach: This study focuses on a sample of distributors from both the United States and Sweden. One hundred sixty-one usable surveys were returned from the U.S. survey, for a response rate of 27%. One hundred twenty-four usable surveys were returned from the Swedish survey, for a response rate of 21%. The PLS-SEM method was used to examine the model’s constructs.

Findings: Similar to past research results show that trust and commitment have a direct positive influence on satisfaction, and that trust also has a direct positive influence on commitment. However, this study uniquely supports four out of six newly tested hypotheses. Both cooperation and relationship assets have a direct positive influence on commitment. Cooperation has a direct positive influence on trust and commitment. Relationship assets have a direct negative influence on trust but a direct positive influence on commitment. Surprisingly, two hypotheses were not supported: Coordination did not have a significant relationship with either trust or commitment.

Research implications: Managers who want to achieve a satisfactory relationship based on trust and commitment need to prioritize their attention toward cooperation. They should also be aware that participation in joint activities (i.e., coordination and relationship investments) does not guarantee higher levels of trust or commitment in the relationship. It is the quality of the joint activities and the how dependent firms are on each other and not just participation in joint activities that are likely to create higher levels of trust or commitment. The quality of coordination and manageable levels of dependence may counteract the higher costs associated with joint activities compared to the costs associated with cooperation. Managers may be wise to not make major commitments to other firms unless high quality joint activities have created knowledge and trust between firms. Originality/value/contribution: The model adds the joint activity-oriented antecedents associated with collaboration which is essential to a successful relationship. Because of the high failure rate of collaboration may be due to cooperation and coordination failures and because these two constructs are underspecified in interorganizational research, this study is unique in examining activity-oriented antecedents in a trust/commitment model of relationship satisfaction in a cross-cultural context (i.e., with U.S. and Swedish samples).     

Government subsidies and firm performance: Evidence from high-tech start-ups in China

This study applies fsQCA to examine the effectiveness of government subsidies on the performance of high-tech start-ups under different configurations. We find that 1) selective subsidies can help ventures maintain high-performance regardless of the legal environment in which start-ups operate; and 2) start-ups with non-selective subsidies do not necessarily have high-performance if they operate in regions with weak legal protection and face strong market competition. We contribute to the literature by emphasizing that the effectiveness of government subsidies relies on the interplay of firm attributes and legal environment. Our findings also have practical implications for government support of sustainable entrepreneurs.     

Earliness of internationalization and performance outcomes: Exploring the moderating effects of venture age and international commitment

This study examines the impact of early foreign market entry on new ventures’ performance outcomes. Venture age and international commitment are theorized as moderators to address the inconsistent findings of previous research surrounding the performance implications of early internationalization. Results from a sample of international new ventures in China found that the earliness of internationalization positively contributes to firm performance in terms of sales growth, but not innovation and profitability. The performance advantage of early internationalization becomes obsolete as young ventures become mature, especially among those with a low level of international commitment. This study highlights the importance of incorporating time-based dimensions of international venturing for a better understanding of the performance implications of early internationalization.     

The impact of venture capital on the persistence of innovation activities of start-ups

In this study we investigate the impact of early stage venture capital on innovation activities of start-ups. This is done based on a cohort of start-ups that is representative of all firms founded in Switzerland in 1996/97, as recorded by a census of the Swiss Federal Statistical Office for this period. We analyze not only the impact of early stage venture capital on innovation performance 3 years after firm foundation, but also 6 and 9 years after firm start, respectively, for those firms that survived and reported continuously innovation activities (persistence of innovation). The results support neither the hypothesis of a positive impact on initial innovation activities nor the hypothesis of a positive time-persistent effect on innovation performance of start-ups.     

Outside Board Members in High Tech Start-ups

Board composition in large organizations has been subject to much empirical research, however, little attention has been focused on board composition in start-ups, and more specifically high tech start-ups. This lack of research is surprising given that many high tech start-ups have multiple equity stakeholders such as venture capitalists or public research organizations, such as universities. Given that high tech start-ups are commonly resource-poor these external stakeholders may play an important role in accessing critical external resources. Drawing on agency theory, resource dependence theory and social network theory we examine the tensions that exist between the founding team and external equity stakeholders in determining the presence of outside board members. In particular we focus on whether or not the outside board members have either complementary or substitute human capital to the founding team. We test our model on a sample of 140 high tech start-ups in Flanders. Our results indicate that high tech start-ups with a public research organization as an external equity stakeholder are more likely to develop boards with outside board members with complementary skills to the founding team.      

Strategic decision making in start-ups: the effect of top management team organization and processes on speed and comprehensiveness

Technology-based start-ups operate in high-velocity environments that make considerable demands on the comprehensiveness and speed of strategic choices. This study argues that characteristics of top management team (TMT) organization as well as TMT processes, namely, debate and trust, significantly influence the comprehensiveness and speed of strategic decision making in start-ups. Hypotheses are theoretically developed and tested with data from an empirical investigation of German start-ups.     

The guppy and the whale: Relational pluralism and start-ups' expropriation dilemma in partnership formation

Start-ups have a high need for resources yet face significant risks when forming partnerships with incumbents to access those resources. We propose that a partnership strategy based on relational pluralism, forming multiplex and multifaceted ties with partners, can mitigate these risks. Such ties offer the start-up increased legitimacy and a relational safeguard against resource misappropriation by more powerful partners. However, we propose that there is a limit to the effectiveness of relational pluralism. Its effect is weakened when the start-up becomes entirely dependent on a small set of partners, or when an additional tie yields resources that are redundant. We argue that the start-up only benefits when the gains from relational safeguarding and legitimacy outweigh the costs of dependence and redundancy. We empirically observe the co-evolution of start-ups’ interlocking directorate and strategic alliance networks in the Australian mining industry over a 10-year period. Our results show that start-ups that engage in relational pluralism perform better than both start-ups that form no alliances and start-ups that form stand-alone alliances. Having a very small portfolio of partners or one that skews heavily toward local partners, however, indeed limits the effectiveness of relational pluralism. Intriguingly, we also find that the temporal sequencing of relational pluralism matters. One of our central findings is that the best performing start-ups first form board interlocks with promising partners and add a strategic alliance later. This offers a rare glance at the temporal sequencing in which peripheral start-ups can gain exceptional performance through partnership formation.     

高校创业大学生评价机制的改革探索

随着高校毕业生的增加,大学生就业难成为社会普遍关注的焦点。同时,社会各界对大学生的自主创业却充满了期待。由于种种原因,现阶段我国对于高校创业大学生的评价机制还存在着很多的问题,采取有效措施进一步加强高校创业大学生评价机制的改革与探索,进一步调动大学生创业的积极性,对于解决我国社会的就业难题具有十分重要的意义。     

University spin-offs and the “performance premium”

The creation of spin-off companies is often promoted as a desirable mechanism for transferring knowledge and technologies from research organizations to the private sector for commercialization. In the promotion process, policymakers typically treat these “university” spin-offs like industry start-ups. However, when university spin-offs involve an employment transition by a researcher from the not-for-profit sector, the creation of a university spin-off is likely to impose a higher social cost than the creation of an industry start-up. To offset this higher social cost, university spin-offs must produce a larger stream of social benefits than industry start-ups, a performance premium. This paper outlines the arguments explaining why the social costs of entrepreneurship are likely to be higher for academic entrepreneurs, and empirically investigates the existence of a performance premium using a sample of German start-up companies. We find that university spin-offs exhibit a performance premium of 3.4 % points higher employment growth over industry start-ups. The analysis also shows that the performance premium varies across types of academic entrepreneurs and founders’ academic disciplines.     

Start-ups and employment dynamics within and across sectors

We use a decade of longitudinal data on start-ups and employment in Swedish regions to analyze the effect of start-ups on subsequent employment growth. We extend previous analyses by decomposing the effect of start-ups on total employment change into within- and cross-sector effects. We find that start-ups in a sector influence employment change in the same as well as in other sectors. The results illustrate that the known S-shaped pattern can be attributed to the different effects of start-ups in a sector on employment change in the same sector and in others. Start-ups in a sector have a positive impact on employment change in the same sector. The effects on employment change in other sectors may be negative or positive, and depend on the sector under consideration. In particular, start-ups in high-end services deviate from manufacturing and low-end services in that they have significant negative impacts on employment change in other sectors. The findings are consistent with the idea that start-ups are a vehicle for change in the composition of regional industry.     

Picking the winner? Empirical evidence on the targeting of R&D subsidies to start-ups

This paper investigates the allocation of R&D subsidies given to start-ups. Considering the coexistence of various R&D project schemes, we take an aggregate view and analyze the determinants of the receipt of (any) R&D subsidies within the first three business years of the start-ups. We argue that policymakers and funding authorities follow a strategy of ??picking the winner??. Analyzing start-ups in the East German state of Thuringia, we conduct logistic regressions and find ambiguous support. R&D subsidies are given to start-ups with innovative business ideas, especially academic spin-offs. Although the ambitions and patent stock of the founder(s) do not decide the receipt of R&D subsidies, team start-ups and the initial capital of a start-up tend to affect this decision positively. Hence, we cannot exclude a ??picking the winner?? strategy in targeting R&D subsidies to start-ups. More generally, however, the problems of policy targeting question the massive subsidization of private R&D.     

The role of business subsidies in job creation of start-ups, gazelles and incumbents

This study contributes to the empirical literature concerning the role of business subsidies in job creation. Our empirical analysis, using an extensive firm-level data, suggests that the impact of business subsidies on employment growth differs more between high-growth start-ups and other firms than between start-ups and incumbents. On average, all subsidies relate positively to the contemporary employment growth for both start-ups and incumbents. Furthermore, after subsidy reception, the employment of both start-ups and older incumbents receiving employment or other subsidies grows more than that of non-subsidized firms. However, we find that business subsidies do not provide a significant additional boost to either contemporary or after-subsidy growth for young high-growth companies. There are apparently some other factors that promote growth in young high-growth firms; these factors help foster strong growth in many cases with or without subsidies.     

“Watch that Space! The County Hierarchy in Firm Births and Deaths in the UK, 1980–1999”

The paper investigates the relationships between registrations, de-registrations and population density at county level in the UK using VAT data for 20 years over the period 1980–1999. The rationale for this is based on the need to understand how the extent to which, in different parts of the UK, differences in the relationship between birth rates and death rates combine to produce an interpretable pattern in net birth rates. The analysis of the net birth rate shows that a strategy aimed at the net birth rate might, in principle, just as well aim at reducing business failure, rather than raising the birth rate. Indeed this might be more efficient, since it implies that less start-ups are “wasted^” as it would avoid the necessity, if targets are to be reached, of encouraging those individuals who are patently unsuited to running their own business into business ownership.