Venture Founding Research Articles

Are corporate affiliations conducive to nascent entrepreneurship?

Founding an entrepreneurial venture does not comprise a dichotomous choice between market entry and non-entry; instead, a wide variety of entrepreneurial strategies are available to the nascent entrepreneur. Using data from the second Panel Study of Entrepreneurial Dynamics (PSED II), a representative sample of nascent entrepreneurial activity in the United States, this study documents that nascent entrepreneurs generally choose between founding an independent new venture and following a type of corporate-affiliated entrepreneurial strategy (CAES), such as a franchise, spin-off, or similar approach. The success of this decision is contingent upon entrepreneurs’ stock of human capital. Relevant industry experiences tend to reduce the likelihood of an entrepreneur employing a CAES, while managerial experience and previous start-up experience increases the probability. Overall, those nascent entrepreneurs who follow a CAES are more likely to achieve a first positive cash-flow; this highlights the benefits of corporate affiliations in the field of new venture founding.

Event-based entrepreneurship

Many entrepreneurial opportunities are associated with events, including sports competitions, races and tournaments, concerts and music festivals, and conferences and exhibitions, yet this variant of entrepreneurship has not been specifically accounted for in the literature. We integrate insights from entrepreneurship research with research on temporary organizational forms, stakeholder theory, and platform strategy to define Event-Based Entrepreneurship (EBE) and propose factors that account for the founding and scaling of event-based ventures. In so doing, we lay the conceptual foundations and offer theoretical and practical directions for an expanded research agenda on EBE.

Open source software and global entrepreneurship

This is the first study to consider the relationship between open source software (OSS) and entrepreneurship around the globe. This study measures whether country-level participation on the GitHub OSS platform affects the founding of innovative ventures, and where it does so, for what types of ventures. We estimate these effects using cross-country variation in new venture founding and OSS participation. We propose an approach using instrumental variables, and cannot reject a causal interpretation. The study finds that an increase in GitHub participation in a given country generates an increase in the number of new technology ventures within that country in the subsequent year. The evidence suggests this relationship is complementary to a country's endowments, and does not substitute for them. In addition to this positive change in the rate of entrepreneurship, we also find a change in direction—OSS contributions lead to new ventures that are more mission- and global-oriented and are of a higher quality. Together, the results suggest that OSS can boost entrepreneurial activity, albeit with a human capital prerequisite. Finally, we consider the implications for policies that encourage OSS as a lever for stimulating entrepreneurial growth.

Community and aftershock: New venture founding in the wake of deadly natural disasters

The entrepreneurship literature has advanced our understanding of how natural disasters affect new venture founding in their wake. However, despite providing valuable insights, most existing studies focus on theoretical mechanisms that, explicitly or implicitly, invoke material losses or do not hone in on the theoretical effect of human losses caused by these events. This is an important omission because the social psychology literature suggests that individual reactions to human death are not only stronger than (i.e., higher in scale), but qualitatively different (i.e., infinitely stronger) from, those involving other types of losses. The present study addresses this oversight by drawing from the social psychology literature on the emotive and cognitive heuristics (e.g., the incidental emotion and availability biases) induced by human death and developing and testing a theory of how the death toll caused by natural disasters decreases new venture founding by inducing irresolvable uncertainty. Moreover, the study draws from research on how strong pre-disaster local participation in voluntary associations—by increasing the social, symbolic, cultural and material resources in a community—protects against such negative effects. Contributions to both the post-disaster venturing and the broader resiliency literatures are discussed.Executive summaryNatural disasters are on the rise, and the United Nations predicts that these phenomena will pose the single most important threat to social, political and economic stability in the upcoming decades. Entrepreneurship holds great promise for helping regions recover from the havoc wreaked by these events. However, much of the existing entrepreneurship research has not focused sufficiently on how the human death toll caused by natural disasters affects subsequent new venture creation. This is an important question because the existing psychology literature suggests that human death elicits disproportionately high negative individual reactions, which may lead prospective entrepreneurs in afflicted regions to stop or delay their plans to start new ventures, precisely at the time when those ventures are needed the most to help with regional recovery. This study fills this gap by examining how the death toll caused by natural disasters affect new venture creation in counties in the United States between 1991 and 2018. The study finds that the death toll caused by natural disasters in a county has a negative effect on post-disaster venturing in that county, but that strong pre-disaster participation in voluntary associations (e.g., the Girl Scouts, parent teacher associations, etc.) protects against this effect because it allows communities to work together to overcome the challenges posed by these deadly events. This last result highlights the importance that policymakers at every government level and local communities realize the critical role that local participation in voluntary associations prior to deadly disasters can have in fostering entrepreneurship after such events, thereby accelerating regional recovery.

The roles of innovation strategy and founding team diversity in new venture growth

Using fsQCA, this study explores how venture strategy, as well as founding team knowledge diversity and demographic diversity interact to explain revenue growth of new ventures. Based on a longitudinal dataset containing 210 new ventures, we find that the effects of team diversity are complex such that different diversity conditions explain short-term (i.e. one year) compared to sustained growth (i.e. over three years) and that their role is contingent on the venture’s strategy. We identify three recipes that explain revenue growth in the short-term and four recipes that explain revenue growth in the longer-term. One recipe is the same for both time periods pointing towards the potential role of imprinting of certain team diversity conditions in combination with an innovation strategy. Our findings provide a nuanced and in-depth picture of the relative relevance of an innovation strategy, knowledge diversity, and demographic diversity at distinct stages of venture founding.

The IMPACT of FAMILY SOCIAL CAPITAL on RESOURCE DEPLOYMENT in CHINESE ENTREPRENEURIAL FIRMS

One of the most important determinants of performance for any firm is the unique bundle of resources the company possesses. To date, however, empirical results on whether “familiness” as an element of this resource bundle has a positive or negative impact on firm performance have been mixed (Dyer, 2018; Gottardo & Moisello, 2019; Oswald et al., 2009; Pitchayado et al., 2018). This paper employs structural equation modeling to examine how entrepreneurs in China’s Zhejiang Province include members of their nuclear families, extended kin networks, and professional networks in their top management teams to access different bundles of family and non-family human resources, leading to variance in firm performance results. We find firms that leverage “guanxi” (a particular concept of kin, common in China but not often employed as a construct in western-based research, which encompasses both extended family members and close friends) for industry, technical, or entrepreneurial expertise enjoy certain types of higher performance results. In comparison, firms that leverage nuclear family members for management or marketing expertise achieve certain types of lower performance results. Post-hoc analysis indicates that leveraging guanxi specifically for prior entrepreneurial experience or for technical expertise leads to greater employee growth and higher subjective assessment of success. Conversely, leveraging nuclear family members for management or technical expertise leads to lower levels of these same performance variables. However, only firm size, measured by number of employees at venture founding, is predictive of revenue growth.

Community & Aftershock: New Venture Founding in the Wake of Natural Disasters with a High Death Toll

Management scholars, in both Organization Theory (OT) and Organizational Behavior (OB), have recently started to examine how natural disasters affect new venture founding, and rightly so. According to the United Nation’s Security Council, natural disasters will pose the single most important threat to social stability in the upcoming decades. Given the importance of entrepreneurship to social stability (e.g., by providing employment for large swaths of the population), understanding how natural disasters affect entrepreneurial activity can shed light into the broader socioeconomic consequences of these natural phenomena. However, the existing literature offers competing theoretical perspectives and empirical results regarding the effect of natural disasters on new venture creation. This study advances the management literature on the topic by examining, the under-researched question of, how disaster-induced human losses affect new venture founding, while empirically controlling for the other major type of losses caused by these natural phenomena, i.e., material losses, which have been the focus of most existing work. In doing so, this study underscores the need for a nuanced theoretical perspective on the impact of natural disasters on entrepreneurship. Specifically, we build on the extant social psychology literature to theorize that disaster-induced fatalities will have a negative effect on new venture founding in a community afflicted by such an event, but that community collective-level social capital can help alleviate this effect. We test and find empirical support for our theory in the context of all new venture foundings in the U.S. between 1991 and 2018.

Better disagree? Corporate Venture Evolution and Motives among Parent Firm and Corporate Ventures

The strategies of internal corporate ventures generally evolve as these new businesses explore their business environments. Parent firms and venture’s motives guide corporate venture strategic evolution. Deviating from common belief on the merits of consensus, our research uses a dialectical process theory lens on strategic change and hypothesizes that venture founding motive divergence influences corporate venture strategic evolution. Our empirical findings on dyadic data from parent firms and from their corporate internal ventures reveal contextualized effects about how venture founding motive divergence is associated with the degree to which ventures strategically evolve. We reveal that the advantages of motive divergence depend on dynamism of the environment into which the venture is launched as well as the venture’s level of operations autonomy.

Imprinting of founders' entrepreneurial motivations on enterprises' practices and processes: The context of creative industries

This paper explores the imprinting of entrepreneurs' motivations on the practices and processes of enterprises. We investigate the question in the context of creative industries (CIs) as an extreme case of entrepreneurial motivations (EMs) prevalence. We analyse the EM of 14 founders of design consultancies. Three EMs emerge: self‐fulfilment, freedom and financial motivation. The qualitative analysis reveals that the founders' EMs at the time of a venture's founding has a lasting impact on the characteristics of the venture (name, processes formalization, decision‐making processes, performance measures and growth strategies). Specifically, founders driven by self‐fulfilment tend to build ventures named after them. In these ventures, processes are informal, decision‐making is centralized, performance measures are based on personal satisfaction and recognition and enterprise growth is restrained. Founders who seek freedom tend to run enterprises with semiformal processes, semicentralized decision‐making, a client satisfaction focus, and slow growth strategies. In contrast, founders with financial motivations tend to create enterprises with formal processes, decentralized decision‐making, financial performance metrics and growth ambitions. By focusing on EM and adopting a holistic approach beyond some characteristics of the venture, we complement the imprinting literature.

Portfolio Entrepreneurship: A Multilevel Review of the Literature

The successful identification and exploitation of commercial activities in a market place is demanding and subject to several potential pitfalls. However, some entrepreneurs choose to do so effectively on even more than one premise simultaneously. Prior research found evidence that many entrepreneurs deploy portfolio activities (Westhead et al. 2003), and that new high-growth ventures frequently arise through portfolio activities of portfolio entrepreneurs (Rosa and Scott 1999a). Furthermore, those portfolio ventures are more likely than both nascent and serial entrepreneurs to report high levels of exporting activities (Robson et al. 2012a), and innovation (Robson et al. 2012b). As a consequence, we need to understand what enables portfolio entrepreneurship (henceforth PE) to succeed. The literature has shown that PE is characterized by unique challenges related to the founding, growth and management of multiple ventures simultaneously (Carter and Ram, 2003). Therefore, it is critical to integrate existing knowledge on these challenges and ways that PE reconcile these challenges. However, prior work has most often focused on contrasting PE with other forms of entrepreneurship (Westhead et al. 2003). What we need is a dedicated review of the PE field that provides an understanding of antecedents, mechanisms and outcomes across the multiple levels within portfolio entrepreneurship.

Open Source Software and Global Entrepreneurship

Does more activity in open source lead to more entrepreneurial activity and, if so, how much, and in what direction? This study measures how participation on the GitHub open source platform affects the founding of new ventures globally. We estimate these effects using cross-country variation in new venture foundings and open source participation. The study finds that a 1 percent increase in GitHub commits (code contributions) from people residing in a given country generates a 0.1-0.5 percent increase in the number of technology ventures founded within that country, a 0.6 percent increase in the number of new financing deals, a 0.97 percent increase in financing value, a 0.3 percent increase in the number of technology acquisitions, and a 0.1-0.5 percent increase in the number of global and mission-oriented ventures. The analysis develops an approach to identification based on various instrumental variables and shows that these associations can support causal inferences. We conclude that OSS contributes to different rates of entrepreneurship around the world and therefore can act as a policy lever to improve economic development and can also indicate promising investment opportunities.

Cultural Diversity in New Venture Founding Teams: Does it Matter for Accelerators’ Selection Decisions?

In recent years, accelerator programs experienced substantial growth, becoming an important part of the entrepreneurial ecosystems around the world. New ventures that want to participate in such programs must go through a multi-stage and highly competitive process, with only one out of ten applicants being successful. However, our knowledge with regards to the factors that drive the decisions of accelerator programs is limited, and empirical research on this topic is scarce. We hypothesise that the national culture of the founding team can play an important role as a proxy for the unobservable values and the behaviour of the venture founders, and we examine the impact of cultural diversity on the probability of being admitted into an accelerator program. The results show that diversity enhances the probability of being selected. This finding is robust across several specifications, and while accounting for the potential endogeneity of cultural diversity.

A perfect couple? Institutional theory and entrepreneurship research

Purpose This paper aims to evaluate the progress made in understanding the impact of multi-level institutions on entrepreneurship. Design/methodology/approach Based on scientific articles published between 1992 and 2017, the authors take a unique focus on both institutional theory applied and research topics of this area. Bibliometric method and systematic literature review method are used. Findings The results demonstrate that although institutional theory is well prepared for entrepreneurship context operating at different levels, the major knowledge foundation used predominantly focuses on macro and meso level. When it comes to research topics, entrepreneurship is often simplified as the founding of new venture, and the unique venture founding process has rarely been explored. Originality/value This paper is the first to provide a full picture of the multi-level institutions and their consequences on different kinds of entrepreneurial activities. The authors’evaluation of this research area also points out directions for future study.

Social Ties, Prior Experience, and Venture Creation by Transnational Entrepreneurs

The interaction between resources, and host and home country contexts of transnational entrepreneurs (TEs), is important for understanding their strategies and hence performance of their ventures. Yet, how they deploy their unique experiences and social networks in the founding of ventures in multiple institutional contexts is less understood. Based on 15 in-depth interviews with TEs of Indian origin in the UK, and nine of their counterpart heads of transnational venture (TNV) operations, we explore the use of prior experience, and personal and industry ties in the founding of TNVs in their home country. Our findings show that the way TEs use personal and industry ties in the host and home countries is contingent on whether they have prior experience of: 1) entering the home country; 2) implementing the business opportunity underlying the TNV in the home country, respectively, with a former employer. The implications of these findings are discussed.

IGNORANCE IS BLISS: ANOTHER LOOK AT ENTREPRENEURIAL VENTURING

ABSTRACT Ignorance has been defined as the lack of knowledge, information, or education about a particular subject matter. In its most basic form, ignorance means lacking in knowledge or in training. Being ignorant is not the same as being unintelligent or stupid; instead, it is being uninformed about or untrained something. Given the high risks involved in entrepreneurship, the high rates of startup failures, and the equally high rates of entrepreneurial entry, this paper submits that a certain dose of ignorance is required for one to engage in entrepreneurial venturing. Not knowing all the facts before launching a business (bliss of ignorance) may at least in part explain the high rates of new venture founding. The purpose of this paper is to illuminate the importance and the role of ignorance in business venturing. Keywords Ignorance, Passion, Entrepreneurship, Education, and Structural Inertia.

Entrepreneurial Capabilities in the Founding and Survival of New Ventures

The founding and survival of new ventures are at the heart of entrepreneurship research. Building from dynamic capabilities, previous studies argue that entrepreneurial capabilities (1) is a micro-foundation for dynamic capabilities, and (2) includes firm-level abilities of opportunity identification and enacting in founding a business. However, these studies remain silent about the role of entrepreneurial capabilities in the process of new venture survival, and neglect the micro-foundation of entrepreneurial capabilities itself. Building from previous studies on individual entrepreneurs, we offer a model involving four distinct elements of individual entrepreneurial capabilities: passion and self-achievement, active learning and analysis, leadership and operation skills, and integrity and commitment. We then conduct multiple studies to develop and validate a 30-item entrepreneurial capabilities scale to capture these four dimensions. Results demonstrate strong dimensionality, reliability, and content, convergent, discriminant, and nomological validity. In doing so, the article contributes to identifying individual-level entrepreneurial capabilities that underpin the founding and survival process of new ventures and to the debate on the nature of such capabilities.

Exploring the Puzzle of Functional Homophily in Venture Founding Team Formation

Despite the long-term benefits of establishing a founding team with diverse functional knowledge, many entrepreneurs assemble a team of cofounders who are homogenous with respect to functional back...

The relationship between Founding Team Diversity and a New Venture’s Innovation Performance

Fundamental to the success of a new venture is innovation performance. This research investigates the relationship between new venture founding team (NVFT) diversity and new venture’s product innov...

Entrepreneurship and employment stability — Job matching, labour market value, and personal commitment

This paper challenges the conventional belief that entrepreneurship is an unstable career path. Using longitudinal matched employer–employee data from Denmark, the analysis reveals that a transition to entrepreneurship decreases individual's employment turnover tendency. Three explanations are identified and empirically explored: (i) job matching, (ii) labour market value, and (iii) personal commitment. Entrepreneurs appear to be more productive and thus better matched compared to wageworkers. However, they also appear to be locked in entrepreneurship because of their anticipated lower value in the labour market and because of their personal attachment to the venture. The counter-intuitive finding – entrepreneurship yields greater employment stability – only holds with respect to subsequent transitions to wagework and not for new venture founding. The results have implications for our understanding of entrepreneurial entry and labour market dynamics.

After the Venture: The Reproduction and Destruction of Entrepreneurial Opportunity

Research summary The endogenous formation of entrepreneurial opportunity has become an important theoretical perspective. Research to date focuses on initial opportunity creation dynamics leading to venture formation. This excludes the ongoing enactment of opportunity that takes place after venture founding. We focus on this phenomenon, arguing that opportunities must be continually reproduced through maintenance of consensus among stakeholders about their viability. If consensus fails, the objectivity of the opportunity is ‘destroyed’ in a process we label ‘opportunity de-objectification.’ We identify predictors of opportunity de-objectification and summarize their effects in propositions suitable for future empirical testing. Implications for future theory and research are also discussed. Managerial summary Previous entrepreneurship research has focused attention on the process through which opportunity ideas become objectified and perceived as external facts by entrepreneurs and their stakeholders during venture formation. While such attention is critical, we argue that venture founding marks the beginning, rather than the end, of a dynamic process in which the fact-like status of opportunities is maintained. If stakeholder consensus about opportunity viability is disrupted, it raises questions about this factual status and opens up the possibility that the opportunity is a subjective cognition of the entrepreneur rather than an objective reality. We call this phenomenon ‘opportunity de-objectification,’ and we identify a number of factors that precipitate it. We also suggest that entrepreneurs may reduce the likelihood of this phenomenon by managing some of the factors that induce it. Copyright © 2016 Strategic Management Society.