new venture survival ignorance external shocks and risk reduction strategies abstract although scholars have long recognized the increased mortality risk that new ventures face in terms of a liability of newness most of the discussion around this risk has been in terms of the contextual constraints that new ventures face and the difficulties that managers have in overcoming them this emphasis is in part a reflection of the perils of newness but also stems from the retrospective and aggregate perspective taken by researchers although the macro level perspective of new venture mortality has made a significant contribution to our knowledge of mortality risk patterns there has been little interest in identifying how venture managers can address the risks that all new organizations face we argue that in order to make progress in explaining new venture survival a theoretical model is required that uses a more micro level perspective to explain new venture failure and the flip side new venture survival in this paper we develop such a model we establish a definition of mortality risk and argue that the liability of newness is largely dependent on the degree of novelty ignorance associated with a new venture novelty is viewed in three different dimensions viz to the market to the technology of production and to management novelty to the market concerns the degree to which the customers are uncertain about the new venture novelty in production concerns the extent to which the production technology used by the new venture is similar to the technologies in which the production team has experience and knowledge novelty to management concerns the entrepreneurial team s lack of business skills industry specific information and start up experience we argue that mortality risk increases with the degree of novelty in each dimension and with the number of dimensions in which the new venture is novel we propose that the decline in mortality risk occurs as the venture s novelty in each of the three dimensions is eroded by information search and dissemination processes this allows the new firm to become an established business and explains what we term the evolutionary path of mortality novelty and risk decline monotonically after a period of adolescence as ignorance decays over time due to passive learning we also propose that there is a strategic mortality risk path that reflects the impact of positive and negative shocks shocks are exogenous events that alter the overall degree of novelty at a point in time positive shocks decrease overall novelty while negative shocks increase overall novelty and reversals endogenous actions that increase the overall novelty of the new venture at a point in time on the mortality risk of a new venture if the incidence and effects of these disruptions can be managed then venture managers may be able to mitigate the mortality risk for their venture we argue that risk reduction strategies can be employed most of which impact on one or more of the dimensions of mortality risk in order to increase the firm s chances of survival a series of risk reduction strategies are proposed and their impact on the determinants of mortality risk is considered

campaign contributions and congressional voting a simultaneous probit tobit model m any citizens and scholars have been troubled by the influence that special interest groups appear to exert over policymaking as a result of their roles in the financing of political campaigns these concerns inspired the enactment of a number of election law reforms in the 1970s and have led to increasing popular support for public financing of electoral campaigns despite the public attention these issues have attracted few social scientists have attempted to analyze the financial relationships between interest groups and policymakers empirically 1 one such study was reported by durden and silberman 1976 who included contributions from the afl cio political action committee as an independent variable in an equation explaining congressional voting on minimum wage legislation their results indicated that campaign contributions significantly affected voting on that issue the work i have done differs substantially from that of durden and silberman in two ways first i have chosen to examine issues which were of considerably narrower concern than the minimum wage issue in the interest of simplicity i examine issues of concern to just one or a few groups i have also used a different econometric technique if campaign contributions are actually endogenous as seems plausible the single equation estimation technique employed by durden and silberman is subject to a possible simultaneous equations bias for each issue studied i have therefore jointly estimated a two equation system explaining both votes on the bill and contributions from an associated interest group the simultaneous probit tobit model which i use takes into account the dichotomous nature of the variable indicating a congressman s vote the non negativity constraint imposed on the contribution variable and the possibility of correlation between the error terms for the equations explaining these two variables 2 full information maximum likelihood fiml estimates for the model are consistent and asymptotically efficient

the influence of motivations and environment on business start ups some hints for public policies abstract this paper examines entrepreneurial motivations to start a business in different perceived environmental settings motivations to start a business for a sample of 163 entrepreneurs from growing and declining regions in the north center and south of italy were factor analysed in order to identify the main groupings of variables that lead people to start their own business the results proved to be highly consistent with friberg s 1975 1976 findings on incentives to start a business the motivation factor scores were then clustered and three verv different classes of entrepreneurs were identified each driven by very different sets of motivations self actualizers who started their business driven by a thirst for achievement and a sense of independence and autonomy discontented entrepreneurs unhappy with present working conditions and followers of family tradition role models the relationship between individuals motivations and their perceptions of the environment was then investigated resources and incentives to start a business were factor and cluster analyzed to yield three very different types of perceived environments munificent environments characterized by efficient infrastructures established capital markets and the availability of incentives to start a business supportive environments in which the creation of an infrastructure specifically aimed at encouraging new companies could lead to a significant increase in entrepreneurship sparse environments lacking both infrastructure and capital availability the proportions of entrepreneurial types differ significantly in each environment government intervention in stimulating the diffusion of entrepreneurship is legitimized by the role new companies play in job and wealth creation and the diffusion of innovation within a territory these results suggest some implications for public policies instead of blanket incentive policies applied on a wide geographical basis policies tailored on a local basis may be more effective in stimulating new venture creation

the tortoise versus the hare progress and business viability differences between conventional and leisure based founders social science researchers have long pursued answers to the puzzle of why some people achieve certain milestones more quickly than others and whether rate of progress matters for long run outcomes this tortoise versus hare puzzle raises the question of whether speed is a valid indicator of viability in an undertaking are those with slower rates of progress any less off in terms of long run achievement when compared to their faster counterparts we investigate this tortoise and hare puzzle in the context of business formation an activity pursued by millions in the united states our analysis of a nationally representative survey of u s business founders revealed that leisure based founders were slower to make progress initially but after a certain time threshold their progress was no different than other conventional types of founders more importantly leisure based founders showed more favorable initial economic and non economic outcomes as these founders were more likely to consistently report early sales and profitability and were more committed to investing time into their ventures our study findings have both theoretical and practical implications for the evaluation of venture performance when the rate of progress is considered to be a leading indicator of new business viability

internationalize to live a study of the post internationalization survival of new ventures despite a growing number of studies on the survival of new ventures who pursue an international entry strategy research in this area is not yet conclusive one line of argument tells a story of unprepared novices making a risky move and thus predicts negative consequences another line of argument tells a story of prepared entrepreneurs making a strategic decision and thus predicts positive consequences the problem of estimating the true effect involves an important endogeneity problem that can only be overcome by accounting for the fact that new ventures self select into internationalization the goal of this research is to add to the post internationalization survival literature by accounting for this self selection using an endogenous switching model in a potential outcomes or counterfactual inference approach leveraging a panel of us new ventures from the kauffman firm survey our results paint a picture more in line with the preparedness logic of new venture internationalization after controlling for this self selection we find a positive average treatment effect of internationalization on survival and we find evidence that early internationalization is better for post internationalization survival than late internationalization we argue that these results suggest that the new theories of new venture internationalization needs to be further unchained from the process theories of internationalization

variable risk preferences in new firm growth and survival we outline and test a decision making theory of new venture growth and survival building upon research in entrepreneurship and decision making under risk we hypothesize that entrepreneurs attention to survival and aspiration reference points changes based on venture age experience based learning size differences in decision complexity and performance decision domain examining a panel of 14 760 new ventures in the professional services sector our findings show how risk preferences change as a venture ages and increases in size this approach offers a more nuanced view of decision making under risk and provides a theoretical explanation for the common patterns of new ventures probability of exit and growth diminishing with age and size

does start up financing influence start up speed evidence from the panel study of entrepreneurial dynamics why are some entrepreneurs able to start a new firm more quickly than others in the venture creation process drawing on pecking order and agency theory this study investigates how start up capital structure influences the time to either new firm founding or quitting the start up process the temporal aspect of the start up process is one that is often discussed but rarely studied therefore we utilize competing risk and cox regression event history analysis on a nationally representative sample of us entrepreneurs to investigate how start up capital structure impacts the time in gestation to particular kinds of start up outcomes our findings suggest that external equity has an appreciable impact on new firm emergence over time and that the percentage of ownership held by the founders attenuates the benefits of external equity

how optimal distinctiveness affects new ventures failure risk a contingency perspective abstract in this article we apply the concept of optimal distinctiveness to test whether category spanning has a nonlinear effect on new ventures risk to fail we argue that by being optimally distinct i e by attaining a level of category spanning that allows new ventures to benefit from balancing the competing needs of conformity with and differentiation from competitors new ventures can improve their survival chances in addition we argue that the relevance of optimal distinctiveness varies with a venture s age and a category s density we tested our hypotheses using data from 1668 metal bands that were founded in the united kingdom between 1967 and 2005 the results indicate that optimal distinctiveness is relevant to new ventures failure risk moreover we show that venture age attenuates the relevance of optimal distinctiveness whereas category density strengthens that factor s relevance

conflict of interest and congressional voting a note results of this study are consistent with those of previous voting studies which have shown that party ideology and constituency characteristics are often significant explanatory variables in equations to explain voting no evidence was found to support the hypothesis that congressmen s voting decisions depend upon their private financial interests this suggests the conclusion that much of the concern about apparent conflicts of interest is unfounded but it must be recognized that this study has examined voting on just a few issues and has used data on financial holdings which were lacking in precision as more data becomes available in the next several years we should be able to resolve this question with greater confidence

the fallacy of only the strong survive the effects of extrinsic motivation on the persistence decisions for under performing firms abstract under performing firms persist even though existing theoretical perspectives indicate that they should be selected out of the market building upon threshold theory gimeno j folta t cooper a woo c 1997 survival of the fittest entrepreneurial human capital and the persistence of underperforming firms administrative science quarterly 42 750 783 and using staw s staw b m 1981 the escalation of commitment to a course of action academy of management review 6 4 577 587 theoretical model of commitment to a course of action we explore and test the factors that lead entrepreneurs to persist with under performing firms we found environmental munificence personal investment personal options previous organizational success and perceived collective efficacy impact the decision to persist with an under performing firm in addition extrinsic motivation moderates those relationships this research adds to the growing literature on highly persistent under performing firms and complements and extends threshold theory

discussion of why don t issuers get upset about leaving money on the table in ipos in this article loughran and ritter 2001 hereafter lr provide an interesting new theory and empirical analysis in this discussion i would like to elaborate on their analysis in several ways first in section 1 1 review microsoft s ipo process as documented in a 1986 fortune article and related this to the lr model and evidence in section 2 i briefly discuss the lr model and its implications and the empirical findings presented in lr that support the model in section 3 i present some additional empirical evidence suggesting that the lr prospect theory model can t fully explain the ipo puzzles section 4 proposes an alternative explanation for these data namely that the data are consistent with a bargaining game in which the issuers underwriters and investors bargaining power changes with business and industry cycles section 5 concludes

properties of emerging organizations empirical evidence from norway the process of new venture creation is of central importance to entrepreneurship the effects of initial organizing have a direct effect on survival yet empirical examination of the dimensions of emerging organizations is limited using longitudinal data on 203 nascent entrepreneurs from norway over the course of four years 1996 1999 this paper empirically tests four properties of emerging organizations intentionality resources boundary and exchange and their effect on the likelihood of continuing the organizing effort katz and gartner acad manage rev 13 3 429 441 1988 consistent with previous research our results suggest that organizations which engage in a greater number of organizing activities are more likely to continue the organizing effort in addition intentionality boundary and exchange are positively associated with organizational emergence whereas resources are a necessary but not sufficient condition for organizations to continue organizing the concentration of organizing activities is also positively associated with the likelihood of continuing the organizing effort

explaining micro entrepreneurship in rural vietnam a multilevel analysis in the literature on entrepreneurship there is an ongoing debate about the impact of regional factors on the entrepreneurial process to date most of the empirical work on the influence of regional characteristics on entrepreneurship has focused on developed countries while empirical work that analyses the regional determinants of micro entrepreneurship in rural areas of emerging markets remains scare this paper uses three level binary logistic random intercept models to analyse the effects of explanatory factors at different levels on micro entrepreneurship in rural vietnam our analyses show that identifying the motivation behind starting a micro enterprise is a good way to split entrepreneurship into two groups namely opportunity and necessity driven entrepreneurship which are influenced by very different explanatory factors at different levels we find evidence that in rural areas of emerging markets the individual level dominates with regard to explaining both opportunity and necessity driven entrepreneurship nevertheless the regional level has a significant impact albeit only on opportunity driven entrepreneurship

optimal linear income taxation in models with occupational choice the purpose of this paper is to investigate the implication of occupational choice for linear income taxation occupational choice is restricted to entrepreneurship versus wage earning different settings are considered concerning the introduction of uncertainty and that of individuals heterogeneity in ability or risk aversion for each setting an optimal tax formula is derived and shown to be made up of various components pertaining to insurance redistribution and efficiency

corporate entrepreneurship strategy extending the integrative framework through the lens of complexity science whereas our understanding of corporate entrepreneurship ce and corporate entrepreneurship strategy ces continues to expand there has been little theoretical development to support the most extensive framework to date the integrative model of ces as proposed by ireland et al entrep theory pract 33 1 19 46 2009 according to the model ces is built upon the three foundational elements of an entrepreneurial strategic vision a pro entrepreneurship organizational architecture and entrepreneurial processes and behaviors as exhibited throughout the organization ireland et al 2009 p 38 the purpose of this study is to present a broad overarching theory complexity science to examine the key elements and propositions of the ces model complexity science founded on assumptions of interdependent heterogeneous agents and nonlinear interactions as well as non deterministic and potentially extreme outcomes offers established multi level concepts theoretical boundary conditions and methodological guidance for scholars to build and test future studies on ce and ces though our complexity perspective draws extensively from conceptual work on complex adaptive systems and agent based models we ground our arguments on the empirical ubiquity of power law distributions in all constructs and levels of analysis within the ces model we conclude with a detailed research agenda as well as a prescriptive discussion related to theory development quantitative analysis and practical applications to guide future studies on ce

transfer seeking and avoidance on the full social costs of rent seeking we would like to thank gordon tullock and an anonymous referee of this journal for their helpful comments and suggestions this abstract was borrowed from another version of this item

the third sector and the regional development of social capital birch k and whittam g the third sector and the regional development of social capital regional studies there is a growing academic and policy interest in the third sector and its potential impact on regional development a key aspect of the third sector is its role in regional development through the promotion of social capital however there is considerable debate around the definition of the third sector that limits one s understanding of its impact the paper first disentangles a number of ambiguities to clarify the distinctions between the concepts before then exploring the relationship between the regional development of social capital and the various aspects of the third sector finally uk policy agendas and initiatives are considered in light of the earlier discussion birch k et whittam g le secteur tertiaire et le developpement regional du capital social regional studies le monde universitaire et la politique s interessent de plus en plus au secteur tertiaire et a son impact potentiel s

corruption and destructive entrepreneurship the negative effects of corruption at the macro level are well documented corruption reduces economic growth lowers investment and erodes trust in government officials creating an institutional environment that pushes entrepreneurs from productive to destructive activities corruption also has effects at the micro level because some industries are better situated to profit from corruption than others corruption not only lowers economic output but also shifts resources toward some industries and away from others using federal convictions in the usa as a measure of corruption regression results show that increased corruption shifts resources toward the construction industry and away from the education industry and professional scientific and technical service industry the evidence also shows that the distance from state capitals and voter turnout moderate the relationship between corruption and firm concentrations

seeking rents by setting rents the political economy of rent seeking in recent years there has been a large number of papers on the subject of rent seeking most such works on rent seeking have taken the rent as exogenously determined by regulators regulators howeve r may also be expected and indeed have been shown to be rent seeke rs and hence the determination of the rent itself should be endogeniz ed to reflect the fact that the rent setters are themselves rent se ekers in this paper the authors do this by presenting an analysis o f the interaction of regulators firms and consumers within a rent s eeking framework where all three groups are assumed to be self motiva ted the analysis is carried out under alternative assumptions regard ing the nature of the market and the reaction functions of the partic ipants policy implications are drawn where appropriate copyright 1987 by royal economic society

regional social capital why it matters malecki e j regional social capital why it matters regional studies social capital refers to a culture of interaction among people with productive economic outcomes social capital promotes regional learning both within a region and beyond as it reinforces openness to the ideas of others regional cultures vary in the degree to which people individually and within their organizations trust and interact with one another which is why regional outcomes vary innovation learning and entrepreneurship key processes of regional development take place largely within and among people as members of companies and territorial organizations innovative milieus industrial districts and knowledge economies are among the regions with extraordinary pools of social capital malecki e j

local social capital and entrepreneurship we aim to contribute to the analysis of the role that spacebound social capital plays in local regional entrepreneurship we compare social capital with other forms of capital the conclusion is that in the main social capital can be analyzed in the same way as other capital but it has some important special attributes with these attributes as starting point we sketch an outline model of how the spatially defined producer surplus and consumer surplus form a place surplus and of the role played by social capital in the creation of the producer surplus a rereading of schumpeter shows that he was aware of several aspects of what we denominate entrepreneurship inhibiting and facilitating aspects of social capital finally we discuss some formal economic modeling approaches to the theoretical relationship between social capital and entrepreneurship

legitimating first organizing activities and the survival of new ventures abstract the process by which firm founders create new organizations is of considerable interest to evolutionary theorists and entrepreneurship researchers this article tracks the life histories of 223 swedish new ventures started between january and september 1998 by a random sample of firm founders we explore the effect of legitimating activities on the hazard of disbanding and the transition to other firm organizing activities during their first 30 months of life we find that undertaking activities to generate legitimacy reduces the hazard of venture disbanding and facilitates the transition to other organizing activities

panel studies of new venture creation a methods focused review and suggestions for future research longitudinal panel studies of large random samples of business start ups captured at the pre operational stage allow researchers to address core issues for entrepreneurship research namely the processes of creation of new business ventures as well as their antecedents and outcomes here we perform a methods orientated review of all 83 journal articles that have used this type of data set our purpose being to assist users of current data sets as well as designers of new projects in making the best use of this innovative research approach our review reveals a number of methods issues that are largely particular to this type of research we conclude that amidst exemplary contributions much of the reviewed research has not adequately managed these methods challenges nor has it made use of the full potential of this new research approach specifically we identify and suggest remedies for context specific and interrelated methods challenges relating to sample definition choice of level of analysis operationalization and conceptualization use of longitudinal data and dealing with various types of problematic heterogeneity in addition we note that future research can make further strides towards full utilization of the advantages of the research approach through better matching from either direction between theories and the phenomena captured in the data and by addressing some under explored research questions for which the approach may be particularly fruitful

fractionalization entrepreneurship and the institutional environment for entrepreneurship the vast majority of the literature on ethnicity and entrepreneurship focuses on the construct of ethnic entrepreneurship however very little is known about how ethnic heterogeneity affects entrepreneurship and the institutional arrangements affecting entrepreneurship this study attempts to fill the gap and thus examines the effect of ethnic heterogeneity on various outcomes associated with entrepreneurship and the institutional environment for entrepreneurship using indices of ethnic and linguistic fractionalization we show that ethnic heterogeneity negatively influences entrepreneurship we argue that potential channels that can explain the negative effect of fractionalization on entrepreneurship include trust social network and innovation among others this study provides a new perspective on the existing debate that seeks to understand why the levels of entrepreneurial success vary across countries

out of sight but not out of mind why failure to account for left truncation biases research on failure rates we note at least three major issues in entrepreneurship theory that can be clarified by studying the survival chances of new ventures the extent to which entrepreneurs are so constrained by initial founding conditions that they are unable to learn the degree to which heterogeneity and innovative capabilities are lost due to the failure of new ventures and the imprinting effects of new ventures early days on their subsequent development however previous research on these issues has been inconclusive because of problems in research design and data analysis in this paper we shed light on new venture failure rates by assessing the validity and generalizability of previous findings we argue that research using registration data to study new ventures is very likely to generate biased results and that research attempting to track new ventures from a very early stage can still suffer from selection bias due to left truncation using a sample of new ventures from the panel study of entrepreneurial dynamics ii we provide evidence for the extent of such biases we offer a statistical solution to left truncation that can be easily applied in widely used statistical programs

is the ipo pricing process efficient this paper investigates underwriters treatment of public information throughout the ipo pricing process two key findings emerge first public information is not fully incorporated into the initial price range while the economic magnitude of the bias is small it is puzzling because it is not clear who benefits from it further it indicates that the filing range midpoint is not an unbiased predictor of the offer price as prior literature has assumed second while public information is similarly not fully incorporated into the final offer price the small economic significance of this relation indicates that the ipo pricing process is almost efficient

determinants of trust in supplier relations evidence from the automotive industry in japan and the united states abstract this study examines the determinants of inter organizational trust by using survey data from over 1000 suppliers in the automotive industry drawing on transaction cost economics game theory and sociological exchange theory we define trust and derive a model of its determinants regression analysis results indicate that determinants of trust are different from determinants of opportunism us japanese differences are found in three respects i the way trust is conceptualised by suppliers is more complex in japan than in the us ii the level of trust is higher in japan than in the us and iii the factors facilitating trust and those attenuating opportunism differ in the us and japan

scott a shane winner of the global award for entrepreneurship research scott a shane is the 2009 winner of the global award for entrepreneurship research in this article we discuss and analyze shane s most important contributions to the field of entrepreneurship his contribution is extraordinarily broad in scope which makes it difficult to pinpoint one or a few specifics that we associate with shane s scholarship instead they can be summarized in the following three points first he has influenced what we view as central aspects of entrepreneurship shane has been a leading figure in redirecting the focus on entrepreneurship research itself second he has influenced how we view entrepreneurship shane s research is arguably theory driven and it applies and develops theoretical lenses that greatly improve our understanding of entrepreneurship third he has contributed to how we conduct entrepreneurship research shane has been a forerunner in examining relevant units of analysis that are difficult to sample research designs and databases specifically designed for studying entrepreneurial processes and sophisticated analytical methods this has contributed to advancing the methodological rigor of the field summing them up the contributions are very impressive indeed

routine microprocesses and capability learning in international new ventures drawing on the distinction between the ostensive aspects abstract patterns and performative aspects specific actions of organizational routines the paper offers a micro level explanation of capability learning in international new ventures invs that is firms that internationalize actively from inception the paper argues that variability in the performative aspects of internationalization routines is associated with improvisational learning and new capability development whereas variability in the ostensive aspects is associated with trial and error learning and existing capability improvement furthermore psychic distance moderates these relationships low psychic distance facilitates both improvisation and trial and error learning high psychic distance frustrates learning of both types moderate psychic distance makes the success of both learning forms more likely but only for more experienced invs the paper also argues that social capital may mitigate the negative effects of high psychic distance it contributes to the extant literature by providing a micro level explanation of how invs accomplish capability learning and avoid wasteful learning efforts and by theorizing the moderating effects of psychic distance on the relationships between routine microprocesses and capability learning

planning for the market business planning before marketing and the continuation of organizing efforts abstract drawing on goal setting theory we argue that writing business plans before undertaking marketing activities should enhance the continuation of venture organizing efforts we examine 223 new venture organizing efforts initiated in the first 9 months of 1998 by a random sample of swedish entrepreneurs and show that those organizing efforts in which entrepreneurs completed business plans before talking to customers and beginning marketing or promotion had a lower hazard of termination than other organizing efforts

entrepreneurship and the intergenerational transmission of values there is mounting empirical evidence that there is intergenerational transmission of parental preferences for entrepreneurship however much of the work on this topic is not explicit about the role of values in this transmission process furthermore nearly all studies neglect potential heterogeneity of values among entrepreneurial parents this paper contributes to the literature by making use of a natural experiment that allows 1 identifying a group of entrepreneurial parents who have a distinct priority of challenging existing conditions mastery and 2 detecting whether this value orientation is transmitted comparing german entrepreneurs two decades after reunification reveals that the children of self employed parents who encountered a great deal of resistance in the socialist german democratic republic due to their self employment are much more likely to give mastery as the reason for running their own venture compared to entrepreneurs whose parents did not have to overcome this sort of challenge

screening item effects in estimating the prevalence of nascent entrepreneurs the use of human population surveys to estimate the prevalence of nascent entrepreneurs has become a major feature of both longitudinal studies of the firm creation process such as the us panel studies of entrepreneurial dynamics psed research program as well as cross national comparisons as reflected in the global entrepreneurship monitor gem initiative the basic procedure has been to use interview screening items to locate individuals that may be considered candidate nascent entrepreneurs other criteria are then used to identify those considered active nascent entrepreneurs in these human population surveys little attention has been paid to the potential impact of variations in wording in the initial screening items either across time in the same language or in different languages on the final prevalence rates analysis of 134 independent samples in the us over the 1993 2006 period where different screening items were employed indicates a major impact of item wording once adjustments to account for item variation were made there was no statistically significant change in the prevalence of active nascent entrepreneurs from 5 to 6 per 100 over the 1998 2006 period this pattern of temporal stability is consistent with three other national programs measuring u s new firm creation activity

success and risk factors in the pre startup phase why does one person actually succeed in starting a business while a second person gives up in order to answer this question a sample of 517 nascent entrepreneurs people in the process of setting up a business was followed over a three year period after this period it was established that 195 efforts were successful and that 115 startup efforts were abandoned our research focuses on estimating the relative importance of a variety of approaches and variables in explaining pre startup success these influences are organized in terms of gartner s academy of management review 10 4 696 706 1985 framework of new venture creation this framework suggests that start up efforts differ in terms of the characteristics of the individual s who start the venture the organization that they create the environment surrounding the new venture and the process by which the new venture is started logistic regression analyses are run for the sample as a whole as well as for subgroups within the sample namely for those with high ambition vs low ambition and for those with substantial vs limited experience the results point to the importance of perceived risk of the market as a predictor of getting started vs abandoning the startup effort

power law distributions in entrepreneurship implications for theory and research a long held assumption in entrepreneurship research is that normal i e gaussian distributions characterize variables of interest for both theory and practice we challenge this assumption by examining more than 12 000 nascent young and hyper growth firms results reveal that variables which play central roles in resource cognition action and environment based entrepreneurship theories exhibit highly skewed power law distributions where a few outliers account for a disproportionate amount of the distribution s total output our results call for the development of new theory to explain and predict the mechanisms that generate these distributions and the outliers therein we offer a research agenda including a description of non traditional methodological approaches to answer this call

complementary or compensatory a contingency perspective on how entrepreneurs human and social capital interact in shaping start up progress entrepreneurs can profit from both their human and social capital however research on how the two types of capital interact in shaping relevant outcomes has produced inconclusive results attempting to explain the inconsistencies in previous findings we suggest that the relationship between entrepreneurs human and social capital is neither fundamentally complementary nor fundamentally compensatory instead the nature of this relationship is contingent on the type of support derived from the network our analyses based on 474 solo nascent entrepreneurs from the psed ii support our reasoning while we find nascent entrepreneurs human capital and their financial social capital to positively interact in shaping start up progress we observe a negative interaction between nascent entrepreneurs human capital and their informational social capital implications for theory and practice are discussed

the empirical measurement of rent seeking costs this survey focuses on the efforts carried out mainly by public choice scholars to measure the social cost of rent seeking the concept introduced by gordon tullock in 1967 and coined by anne krueger in 1974 is well known and accepted by the profession but its empirical measurement has fallen behind with respect to its theoretical formulation an often criticized lack in the literature although there are good general surveys none has specifically focused on reviewing the empirical efforts made to measure the phenomenon the purpose of this paper is to provide such a survey it could be said that the rent seeking concept has been fully integrated into economic jargon it is commonly used when some agent seeks to obtain an artificial transfer usually from government and covers all the actions efforts or expenses that the agent has to carry out to obtain the prize the key issue however is the possible social waste that arises in these situations the empirical efforts to measure such waste constitute the main purpose of this survey the concept of rent seeking was introduced by tullock 1967 although the term was first coined by krueger 1974 in a paper not related to the former in a recent paper tullock himself wrote of the history of the concept and the intellectual context within which it arose tullock 2003 starting with the pioneering work by harberger 1954 several studies were conducted during the 1950s in which the calculation of the social cost of monopolies and tariffs always gave the result of very modest figures the first response to these results was made by leibenstein 1966 and his x efficiency which refers to a hypothetical loss in efficiency due to the absence of competition shortly after leibenstein s paper appeared tullock argued that the deadweight costs of monopoly and tariffs understate the true social cost because the expenditures made to capture related rents have to be included so rectangles as well as harberger s triangles have to be included in the calculations let us see this argument once more figure 1 depicts the iconic tullock graphic analysis of rent seeking it represents the demand schedule d for a monopolized good where pm is the monopoly

rent seeking and pesticide legislation this paper provides a test of the appelbaum and katz 1987 rent seeking model in which rents are endogenous the appelbaum katz model is theoretically modified to correspond to our empirical application in which rent seeking and rent avoiding coalitions are attempting to influence legislators votes on pesticide regulations probit estimations are used to analyze the legislators votes on two bills to amend pesticide legislation a proxy for rent empirical results generally support the rent seeking determinants identified in the model tobit estimation is used to investigate campaign contributions by the coalitions to the legislators these contributions are a proxy for rent seeking activities again the model is supported

measuring enterprises investments in social capital a pilot study westlund h and nilsson e 2005 measuring enterprises investments in social capital a pilot study regional studies 39 1079 1094 research into the impact of social capital on economic growth has focused mainly on the social capital related to the civic society social capital related to business enterprises has received little attention this pilot study aims to develop a method of measuring investment by enterprises in social capital and to study possible connections between the enterprises investments in social capital and their economic growth based on a network approach the paper makes a distinction between the networks links and the norms values etc that are created and sustained by the nodes i e the enterprises and other actors and distributed via the links the study has been limited to measurement of the links three types of link are analysed 1 direct investment in social links 2 investment in economic links forming the basis of social links and 3 investment in social li

the nascent entrepreneurship hub goals entrepreneurial self efficacy and start up outcomes entrepreneurship involves human agency the entrepreneurial process occurs because people are motivated to pursue and exploit perceived opportunities it is rooted in the theory that action is the result of motivation and cognition therefore this paper applies elements of goal theory and social cognitive theory to develop a motivational model of nascent entrepreneurial start up outcomes the objective of this model is to renew attention on motivational constructs in entrepreneurship research additionally it provides predictive value for the likelihood of new firm founding among nascent entrepreneurs results suggest that motivational antecedents among nascent entrepreneurs significantly influence the likelihood of quitting the start up process versus continuing nascent entrepreneurial start up efforts

founded in adversity operations based survival strategies of ventures founded during a recession abstract we examine the survival of 404 new ventures founded during the 2008 recession we find that industry explains a significant but small percentage of variance in survival 2 81 percent and therefore focus on which operations related actions could enhance ventures odds of survival we find marginally significant support for our hypotheses that a venture founded during a recession is more likely to survive if it increases its production efficiency increases both its production efficiency and variable costs or increases both its production efficiency and fixed costs in property plant and equipment our findings demonstrate that operational decisions are key determinants of survival for ventures founded during a recession

starting up in a turbulent environment a process model of failure among firms with high customer dependence abstract this paper proposes a process model on how new and small organizations may fail based on prior research the paper builds a foundation for a process model and then elaborates it inductively by explaining how and why significant reversals and shifts occurred between 1983 and 1985 in the entrepreneurial organizational and ecological conditions of ten new educational software companies the process model states that all organizations engage in transactions with others in the normal conduct of business and it is inevitable that a certain proportion of these transactions fail the probability of transaction failures is a product of the failure rate at the level of the organizational population as well as the kinds of transactions in which individual firms engage new and small firms in a turbulent environment represent a subset of the organizational population particularly vulnerable to the chance occurrence of a failed transaction because of liabilities of newness and small size these firms lack legitimacy furthermore in many industries there is an absence of tangible physical assets that entrepreneurs can use as collateral to attract valuable resources and customers in such situations entrepreneurs often use transactions with key external constituencies as a surrogate to attract other resource constituents thus giving rise to a leveraged set of transactions this leveraging strategy however makes the set of transactions of the firm tightly coupled and when any one transaction in a tightly coupled set fails the set often collapses hence a small business firm in this situation fails when a transaction in which it is highly dependent or leveraged happens to fail the very strategies that contributed to overcoming the problems of liabilities of newness and small size turn out to be the root causes of failure the experiences of the courseware companies are generalized to a process model of failure of new small businesses in turbulent environments

against parsimony three easy ways of complicating some categories of economic discourse economics as a science of human behavior has been grounded in a remarkably parsimonious postulate that of the self interested isolated individual who chooses freely and rationally between alternative courses of action after computing their prospective costs and benefits in recent decades a group of economists has shown considerable industry and ingenuity in applying this way of interpreting the social world to a series of ostensibly noneconomic phenomena from crime to the family and from collective action to democracy the economic or rational actor approach has yielded some important insights but its onward sweep has also revealed some of its intrinsic weaknesses as a result it has become possible to mount a critique which ironically can be carried all the way back to the heartland of the would be conquering discipline that the economic approach presents us with too simpleminded an account of even such fundamental economic processes as consumption and production is the basic thesis of the present paper this abstract was borrowed from another version of this item

why don t issuers get upset about leaving money on the table in ipos one of the puzzles regarding initial public offerings ipos is that issuers rarely get upset about leaving substantial amounts of money on the table defined as the number of shares sold times the difference between the first day closing market price and the offer price the average ipo leaves 9 1 million on the table this number is approximately twice as large as the fees paid to investment bankers and represents a substantial indirect cost to the issuing firm we present a prospect theory model that focuses on the covariance of the money left on the table and wealth changes our reasoning also provides an explanation for a second puzzling pattern much more money is left on the table following recent market rises than after market falls this results in an explanation of hot issue markets we also offer a new explanation for why ipos are underpriced copyright 2002 oxford university press

allocation of entrepreneurial attention abstract limited attention has been recognized by many economists as a scarce resource to be allocated among a given number of alternative uses however limited entrepreneurial attention is allocated between improving current operations and innovating new products which increases the number of current operations and perhaps the demands on the entrepreneur s attention the allocation of entrepreneurial attention thus endogenizes the number of uses to which attention can be allocated and the opportunity cost of attention this allocation has implications for the relationships between innovation firm size and monopoly profits between firm size and firm growth and the organization of the firm

when should entrepreneurs expedite or delay opportunity exploitation abstract we theorize on the performance implications of the timing at which entrepreneurs stop exploring their business opportunities and start exploiting them using an optimal stopping approach we characterize the time when exploitation should begin based primarily on when an entrepreneur s ignorance has been sufficiently reduced through knowledge accumulation this ignorance threshold captures a tradeoff between the time needed to increase legitimacy and the necessity to act now to minimize competition changes in legitimacy and competition are based on how entrepreneurs manage their knowledge tacit versus explicit under differing degrees of novelty for the business opportunity these changes in turn impact the performance and timing of opportunity exploitation

initial human and financial capital as predictors of new venture performance abstract this research seeks to predict the performance of new ventures based on factors that can be observed at the time of start up indicators of initial human and financial capital are considered to determine how they bear upon the probability of three possible performance outcomes 1 failure 2 marginal survival or 3 high growth four categories of initial human and financial capital are examined general human capital represented here by the entrepreneur s education gender and race may reflect the extent to which the entrepreneur has had the opportunity to develop relevant skills and contacts management know how embodied in the entrepreneur or available through advisors or partners reflects management specific skills and knowledge without regard to the kind of business industry specific know how reflects specific experience in similar businesses financial capital is one of the most visible resources it can create a buffer against random shocks and allow the pursuit of more capital intensive strategies which are better protected from imitation the study utilizes a longitudinal study of 1053 new ventures representative of all industry sectors and geographical regions the research departs from most previous studies in considering different measures of performance marginal survival and growth and in considering explicitly whether the factors contributing to marginal survival differ from those contributing to high growth it was found that measures of general human capital influenced both survival and growth except for gender with women owned ventures being less likely to grow but just as likely to survive management know how variables had more limited impact having parents who had owned a business contributed to marginal survival but not to growth number of partners contributed to growth but not to survival management level prior employment in non profit organizations or not having been in the labor force and the use of professional advisors did not have significant effects industry specific know how contributed to both survival and growth amount of initial financial capital also contributed to both the usefulness of the model is enhanced by the fact that the resource variables considered are relatively easy to assess and all can be considered at the time of start up although some of the human capital variables cannot easily be changed the benefits or risks associated with each can be assessed in some cases potential problems can be identified so that plans can be modified to improve prospects overall it appears that using a model based upon the initial human and financial capital of the venture it is possible to predict the performance of new ventures with some degree of confidence

reinvestment decisions by entrepreneurs rational decision making or escalation of commitment abstract among the most important decisions made by entrepreneurs are those relating to whether to expand maintain or contract their businesses we would expect these major commitments to be based upon expectations about future performance these expectations in turn would be heavily influenced by performance to date thus we might presume that businesses that have been receiving favorable feedback from the marketplace would be more likely to expand and those receiving negative feedback would be more likely to contract ongoing research in decision making suggests that psychological processes may play a role in influencing these decisions under certain conditions entrepreneurs may be influenced by a phenomenon termed escalation of commitment this may lead entrepreneurs to decide to expand the asset bases of their firms regardless of feedback from the marketplace the literature on escalation of commitment suggests that under certain conditions decision makers who make an initial decision become overly committed to the original choice and then subsequently make decisions biased by psychological commitment previous research most of which has been conducted in laboratory settings suggests that escalation bias is more likely to occur 1 if entrepreneurs have started their firms rather than purchased them 2 if entrepreneurs have partners 3 if entrepreneurs expect to use their skills in the new business and 4 if entrepreneurs are overconfident that is expected to do substantially better than others in the same kinds of business it is also expected that these escalation predictors will have a relatively greater influence when feedback is negative than when it is positive the negative feedback seems to invoke a self justification process it is also hypothesized that the influence of these predictors will be less in the third year of a business than in the second year finally it is expected that these psychological influences will help to provide systematic explanation of reinvestment decisions over and beyond what one could predict based upon financial feedback the hypotheses were tested using data from a longitudinal study involving 1112 firms it was found that entrepreneurs who had started their firms and those who had expressed substantial over confidence were significantly more likely to make the decision to expand the hypotheses that those who had partners and those who expected to apply their skills would be more likely to expand were not supported furthermore and consistent with previous research these psychological escalation predictors seemed to exert a greater influence when feedback from the marketplace was negative as expected there was a declining influence in the third year as compared with the second consistent with the prior literature and the hypotheses these psychological predictors did show a small but systematic influence upon reinvestment decisions decisions to expand or contract a business are not necessarily good or bad however it is important that entrepreneurs be aware of the factors influencing their decisions entrepreneurs should recognize that the escalation bias tendency is likely to occur seeking independent opinions from advisors who do not feel as much personal responsibility for the original decision to start may lead to more objective evaluation of alternatives advisors should also realize that the inclination to escalate exists and is natural they may thereby be able to guard against the tendency to be swept along by the entrepreneur s enthusiasm and propensity to escalate entrepreneurs and their advisors as well as researchers should recognize that important entrepreneurial decisions are often influenced by psychological as well as economic factors this awareness should enable entrepreneurs to make more rational decisions

small firms social capital and the enhancement of business performance through innovation programmes the paper explores the extent to which social capital is advantageous to small and medium enterprise sme growth social capital is a communal property involving civic engagement associational membership high trust reliability and reciprocity in social networks it is capable of being identified in social political and economic contexts often associated with strong communities however not all strong communities exert the effects of social capital in respect of business activities this paper assesses government programmes to promote collaboration amongst smes for improving innovation capacity by increasing social capital through networking it shows that for a sizeable proportion of programme funded firms in denmark ireland and wales u k social capital building was associated with enhanced business knowledge and innovation performance of particular importance was the opportunity afforded to firms for linkage with external innovation networks and the build up of embeddedness or the institutional basis for the enhancement of social capital as a consequence of discovering the advantages of social capital over a third of respondents planned to continue to develop it in future in many cases funding such activities privately rather than calling on the public purse

the value of business planning before start up a decision theoretical perspective in this paper we analyze business planning from the perspective of the nascent entrepreneur we measure its value for the entrepreneur at the point where he must decide whether or not to plan and we contrast our results with empirical studies that compare firms performance after market entry within a formal decision theoretical framework we show that the value of planning is driven by the possibility of evaluating alternative actions and being able to improve strategies before market entry the main purpose of evaluation is to pursue good and terminate bad business ideas we show how the value of planning is determined by the venture under consideration and how it depends on the quality of planning our theoretical model yields several behavioral and statistical implications that we compare with empirical observations found in the literature in particular we show how our model of rational decision making can be used to explain important hypotheses and contradictory observations that have fueled the debate on business planning

practice makes perfect entrepreneurial experience curves and venture performance abstract 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

multistage selection and the financing of new ventures using a random sample of 221 new swedish ventures initiated in 1998 we examine why some new ventures are more likely than others to successfully be awarded capital from external sources we examine venture financing as a staged selection process in which two sequential selection events systematically winnow the population of ventures and influence which ventures receive financing for a venture to receive external financing its founders must first select it as a candidate for external funding and then a financier must fund it we find evidence that founders select ventures as candidates for external finance based on their perceptions of market competition market growth and employment growth while financiers base funding decisions on objective verifiable indicators of venture development such as the completion of organizing activities marketing activities and the level of sales of the venture our findings have implications for venture financing and evolutionary theories of social processes

the network dynamics of international new ventures this study uses multi site case research to advance a set of propositions regarding the network dynamics of early stage international new ventures the investigative approach builds on arguments that network theory and analysis are fundamental to international entrepreneurship in the spirit of cross disciplinary research perspectives from the entrepreneurship literature are embraced to help inform our understanding of international new venture networks

sequential sales learning and cascades when ipo shares are sold sequentially later potential investors can learn from the purchasing decisions of earlier investors this can lead rapidly to cascades in which subsequent investors optimally ignore their private information and imitate earlier investors although rationing in this situation gives rise to a winner s curse it is irrelevant the model predicts that 1 offerings succeed or fail rapidly 2 demand can be so elastic that even risk neutral issuers underprice to completely avoid failure 3 issuers with good inside information can price their shares so high that they sometimes fail 4 an underwriter may want to reduce the communication among investors by spreading the selling effort over a more segmented market consider a scenario in which an issuer is selling a new security of uncertain value for example an ipo initial public offering of stock or high yield debt through an underwriter the s e c has banned variable price sales while the value of this new security is highly uncertain to individual market participants investors hold perfectly accurate information when aggregated moreover there are many potential investors and a small number of these investors can jointly determine the value of the firm or its project with high precision it would seem that in this scenario underpriced offerings would succeed and overpriced offerings would fail nevertheless this paper shows that if the distribution channels of invest ment banks are limited underpriced offerings can fail and overpriced offer ings can succeed with limited distribution channels it takes the under writer time to approach interested investors therefore later investors can observe how well an offering has sold to date or at least how successful it has sold relative to offerings previously undertaken by this underwriter

the double edged sword of legitimacy in base of the pyramid markets as compared to developed countries a much higher proportion of entrepreneurs within base of the pyramid bop markets operate unregistered businesses prior research has suggested that the primary cause of such informal activity in these settings is the general failure of weak institutions to provide sufficient resources to warrant formalization we attempt to extend such thinking by deconstructing the discrete and inter related effects of formal business registration on the level of resources obtained by entrepreneurs from financial labor and legal institutions within bop markets using a multi method approach involving 299 entrepreneurs within guatemala city our results suggest that being seen as a legitimate registered business can actually lead to both increased resource provision and resource appropriation more specifically adhering to the norms and rules prescribed by regulatory institutions within weak legal environments can convey positive signals of stability and profitability that both attract the desired attention from formal institutional actors as well as unwanted attention from criminals

uncovering the value of planning in new venture creation a process and contingency perspective researchers are engaged in a major debate on the value of business planning in new venture creation this study suggests a potential resolution by applying a process and contingency perspective the results indicate that planning is beneficial yet planning processes need to be governed by different planning regimes depending on the type of founding environment in highly dynamic environments entrepreneurs will get most value from planning when they focus on select planning activities and speed up the planning task in less dynamic environments they are better of pursuing a munificent approach to planning the analysis thus reveals a major component of theorization on business planning that has been neglected in previous discussions as for entrepreneurship teaching and practice the findings suggest the importance of an adaptive toolkit approach to business planning hypotheses were developed based on information processing and decision making theory and were tested with an ordered probit analysis on a sample of 100 start ups backed by venture capital

the road taken origins and evolution of employment systems in emerging companies excerpt drawing on a unique archive of qualitative and quantitative data describing 100 bay area high technology firms within their first decade this paper examines the models of employment relations espoused by company founders and bow those models shaped the evolution of human resource management within their organizations information gleaned from interviews suggests that founders and others involved in designing and launching these companies had blueprints for the employment relation that varied along three key dimensions the primary basis of employee attachment and motivation the primary means for controlling and coordinating work and the primary criterion emphasized in selection based on combinations of these three dimensions firms in our sample cluster fall into one of four distinct types which we label the star factory engineering and commitment models multivariate statistical analyses document how the founder s employment model shaped the subsequent adoption and timing of various human resource policies and documents over these companies early histories as well as the speed with which the first full time human resource manager was appointed the findings are strongly suggestive of complementarities and a tendency toward internal consistency among dimensions of human resource management and of strong path dependence in the evolution of employment systems in organizations some implications of these findings for transactions cost perspectives on the employment relationship are discussed