Founding Entrepreneur Research Articles

Conditional Allocation of Control Rights in Venture Capital Finance

When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the entrepreneur and the venture capitalist. We show that a combination of convertible securities and contingent control rights can be used to resolve this conflict efficiently. This contractual arrangement is frequently observed in venture capital finance.

The boys in the bubble: Internet entrepreneurs and stock market value

This paper expands the set of non-financial indictors of internet stock value to include that attributable to the retention of the founding entrepreneur. The failure of traditional financial value metrics to adequately explain the Internet stock boom has already provoked much research on non-financial indicators of firms value. The current paper adds to this trend of seeking “intangible” sources of Internet stocks value, by focussing on the role of the founding entrepreneur.

Opportunity recognition and product innovation in entrepreneurial hi-tech start-ups: a new perspective and supporting case study

As a key early stage in the formation of an entrepreneurial venture, there has been much recent interest in opportunity recognition as a field of academic study. Although early theorists proposed a holistic approach to the study of venture creation, much of the literature has been dominated by studies focussed on one or two components in isolation. Much of this historical research has an exclusive focus on the role of the entrepreneur or on knowledge within the firm. Such an exclusive focus can be misleading as it fails to consider the nature and dynamics of the inter-relationships taking place in high-tech firms. This paper seeks to synthesise the available literature into a more complete and integrative model of opportunity recognition in high-tech start-ups. We propose opportunity recognition to be a complex, interactive process involving three main components, the founding entrepreneur, the knowledge and experience of the firm and technology. A case study is used to demonstrate the nature of the component interactions. It is argued that more widespread use of the qualitative research can reveal new insights into the complex and interactive process of opportunity recognition in the high-tech start-up.

Productivity and Corporate Governance in Smaller Firms

Previous research suggests that founding entrepreneurs have little effect on firm productivity. The validity of this theory was examined using data gathered from a random sample of 427 independent, unquoted U. K. companies in 1995. During the following two years, the survey was supplemented with information from historical accounts. Findings indicated that in smaller firms, founding entrepreneurs played an integral part in firm productivity that is not easily replicated by others. However, as firms increased in size, the effect of the founding entrepreneur lessened making it more important to establish both a board of directors and an effective management team. In addition, board size was found to increase productivity—the largest returns were generated by increasing the size of the board and expanding the management team. (SFL)

Investment and decision making in the UK distant water fishing industry: a case study of the Consolidated Steam Fishing and Ice Company 1905‐1980

Analyses the relationship between concepts of enterprise and hierarchy and what effects both terms mean in the growth and development of companies. The method chosen to examine these issues is that of a case study of a UK trawling company. Attempts to look at the issue of a company management in a lateral way, not so much comparing enterprise and hierarchy to try and prove one or the other is the main reason for company success or failure, but to look at their relationship over a long period of time. Firms need to keep a capacity to be entrepreneurial in order to develop properly but they also need rigour to provide stability. However, as this case study proves, it would appear that a solely hierarchical management structure is more likely to be the norm after the founding entrepreneur has vacated power than the mixed needed to ensure ongoing viability.

Hustling, Hassling and Making it Happen: Researching Consultants in a Small Firm Context

The investigation of work in small consultancy firms poses particular challenges for researchers. These include the omnipotence of the founding entrepreneur, estrangement from the academic community, a lack of time, an ambiguous knowledge base and the ostensibly unitarist nature of work relations in such settings. Drawing on the experience of an intensive fieldwork study of employment relations in three small consultancy firms, this paper examines how an `entrepreneurial' approach was used to address such contingencies. Key features of this process were the enactment of fieldwork opportunities, the potential creation of a `joint venture' and the subsequent management of relations in the field. A degree of manipulation is an inherent feature of such an enterprise; but this should be seen in the context of a relationship of `symmetry' between researcher and researched.

Exploring the formation of entrepreneurial teams: the key to rapid growth business?

There is ample anecdotal evidence, as well as an emergent body of literature, which examines the role of entrepreneurial teams in the success and growth of businesses. Earlier research by the authors has demonstrated that the core competence required by founding entrepreneurs is the ability to build and manage relationships. Their more recent work suggests that this core competence must be based around a clear vision for the business. In other words, the founding entrepreneur must be able to build a team to deliver the business vision. A review of literature is provided in this paper, offering a definition of the concept and some of the core issues that have to be addressed by entrepreneurs and small firm policies if businesses are to continue growing. This is supported by some preliminary findings from empirical research into how entrepreneurial teams are formed. The paper continues with propositions that can lead to further research in this relatively unexplored field.

The Determinants of New Venture Performance: An Extended Model

This article argues that new venture formation is a special case of strategic management theory. Thus, Sandberg & Hofer's (1987) model of new venture performance, which states that new venture performance is a function of industry structure, venture strategy, and the founding entrepreneur, must be extended to include the resources and the organizational structure, processes, and systems developed by the venture to implement its strategy and achieve its objectives. The key assumptions underlying this model are presented, and specific propositions concerning how resources and organizational structure, processes, and systems affect new venture performance are developed.

Entrepreneurial human capital and the long-run survival of firms in India

This paper analyses the characteristics of entrepreneurs that contribute to firms' survival in less-developed countries (LDCs). The study, which relies on data collected in a 1971 survey of entrepreneurs in South India and a follow-up survey of surviving firms in 1993, finds that entrepreneurial human capital greatly influences firm survival. The results indicate that firms founded by older entrepreneurs in higher castes are most likely to survive, but that increased education of the founding entrepreneur reduces survival. These results provide evidence that opportunities of entrepreneurs outside the firm, ignored in most theories, are important in firm survival.

Effects of Innovativeness and Venture Stage on Venture Capitalist-Entrepreneur Relations

Innovative new ventures constitute a disproportionately large source of economic growth, and the amount of venture capital flowing into such ventures is increasing. A key component in the success of venture-capital-backed firms is the relationship between the lead venture capitalist (VC) and the venture's founding entrepreneur (E). We examined the impact of innovativeness and venture stage on VC-E relations in 51 venture-capital-backed firms and found: (1) greater marketing innovativeness in ventures associated with greater openness in VC-E pairs, (2) greater technological innovativeness in ventures associated with greater conflict in VC-E pairs, and (3) more frequent VC-E interaction in earlier stage ventures. We found that the relationship between technological innovativeness and openness of VC-E relations depended upon the venture's stage.

Business and politics in the United States and United Kingdom

Business and politics in the United States and United Kingdom