Panel Study Of Entrepreneurial Dynamics 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.

Emergence of new firms: A test of the resource-based view, signaling and behavioral perspectives

The resource-based view, signaling, and behavioral perspectives focus on different theoretical mechanisms through which human capital and the behavioral characteristics of nascent entrepreneurs, in combination with insider and outsider financing, may influence the emergence of new ventures. This work tests the relative explanatory power of these different theoretical perspectives. We estimate a mediation model to disentangle the direct effect of nascent entrepreneur personal characteristics on new firm creation from their indirect effects, mediated by the amount of insider financing committed to new ventures and access to greater outsider financing. Our empirical results are based on data from the Panel Study of Entrepreneurial Dynamics (PSED II) and improve our understanding of the drivers of new firm creation and their underlying mechanisms. Our findings support the resource-based view and the behavioral perspective in our sample of nascent entrepreneurs, but do not provide evidence of the signaling perspective.

Outlier entrepreneurs: Nonlinear paths and novel ventures

Outliers in entrepreneurship are founders who are markedly different—both quantitatively and qualitatively—relative to the “normal” population. We use a power law perspective to hypothesize that, in order for new ventures to persist, founders with outlier endowments are more likely to have novel expectations about the opportunities they pursue and greater variation in the execution methods they employ, while normal founders are more likely to have much lower expectations and engage in a manner that is confined to fit within the smaller scope of explicit market demand. We leverage data from the Panel Study of Entrepreneurial Dynamics II, a longitudinal representative sample of 1214 nascent entrepreneurs organizing resources in preparation for startup, and employ fuzzy set qualitative comparative analysis to investigate our hypothesized relationships. In support, the results suggest that founders need to stay in their lane for their ventures to persist: whereas outlier founders have the option to successfully pursue more ambitious opportunities—those that are innovative, growth-oriented, and international focused—normal founders are primarily resigned to niche opportunities. Even more interesting, ventures are much less likely to persist when there is a misalignment between endowments, expectations, and engagement (i.e., when outlier founders pursue niche opportunities and normal founders pursue aspirational opportunities). This study makes meaningful contributions to the power law perspective, to the growing interest in outliers and exceptionality in entrepreneurship, and to the domain’s aggregated knowledge of new venture persistence.

Termination of nascent entrepreneurship: The central effects of action crisis in new venture creation

ABSTRACT Because current conceptualizations are insufficient with respect to explaining the termination subprocess of nascent entrepreneurship, little is known regarding the liminal space in which the decision between termination and persistence is made. To solve this problem, we apply the Theory of Action Phases, extend it using the notion of an action crisis, and propose that (i) the extent to which nascent entrepreneurs experience action crises informs the decision between persistence and termination and (ii) the odds of experiencing an action crisis and the temporal length of an action crisis phase depend largely on the goal-directed actions that have previously been taken. We test and find empirical support for our main hypotheses by reference to a harmonized dataset drawn from the panel study of entrepreneurial dynamics (PSED). These findings contribute to both theoretical and practical advancements in the field of nascent entrepreneurship and research on entrepreneurial action. With respect to research, the inclusion of the notion of action crisis allows us to conceptualize termination as a subprocess of nascent entrepreneurship and to explain decisions between termination and persistence in the context of new venture creation. By taking the time-saving and time-delaying effects of actions into consideration, our study also offers a more nuanced view of entrepreneurial action given that the length of an action crisis is informed by the actions of planning and implementation that have previously been taken. In practical terms, we address some lasting problems that arise in the context of entrepreneurship-focused public policies and provide practical advice for nascent entrepreneurs.

Entrepreneurs’ actions and venture success: a structured literature review and suggestions for future research

It is the actions of entrepreneurs that give rise to new organizations. However, a comprehensive understanding of what entrepreneurs do and what actually leads to venture success is currently lacking. To summarize existing research, we conduct a structured literature review including 59 empirical articles linking entrepreneurs’ behavior to venture success. We define “actions” as discrete units of “doing” that can—potentially—be observed by others and “success” as firm-level success measured by firm status (e.g., firm survival) or performance (e.g., sales). More than half of the included articles are based on data from the Panel Study of Entrepreneurial Dynamics (PSED), but there are also important “stand-alone” studies. We analyze the “what,” the “how,” the “how much,” and the “when” of entrepreneurs’ actions that lead to venture success. In addition, we integrate the view of entrepreneurship as an evolutionary process. The analysis reveals that studies typically analyze “what” entrepreneurs but less often “when” and “how much” and rarely “why,” “how,” and “what else” they do. Based on our findings, we develop a six-point research agenda. Specifically, we argue that future research should strive to understand the motives behind entrepreneurs’ actions, consider how entrepreneurs conduct activities, and what kind of business ideas they are working on. Also, applying alternative measurements and capturing a more complete picture of what entrepreneurs do when starting a business but also aside from their venturing efforts might contribute to a better understanding of the relationship to venture success.

The Relationship between Cognitive and Contextual Factors: A Self-Regulatory Mechanism Underlying Persistence in Nascent Entrepreneurs

Abstract In this study, we present a new approach to understanding the persistence of nascent entrepreneurs, by examining the role played by context and cognition through the mediation of a self-regulatory mechanism. Drawing on a sample of 316 nascent entrepreneurs from the Panel Study of Entrepreneurial Dynamics (PSED II), we first consider whether entrepreneurial self-efficacy and goal commitment predict persistence in nascent entrepreneurs. We then evaluate the role of perceived institutional support, both formal and informal. Finally, we examine the relationships between cognitive and contextual variables and their impact on entrepreneurial persistence. Our results show that goal commitment has a direct effect on entrepreneurial persistence, while self-efficacy acts indirectly through goal commitment, from which we infer the existence of a self-regulatory mechanism impacting on persistence in nascent entrepreneurs. Among the contextual factors, only informal institutional support presents a direct relationship to persistence, while perceived formal support exerts an indirect influence through cognitive self-regulation. From a practical standpoint, our findings may be useful for institutions that design policies and programmes to foster sustained economic growth through the promotion of entrepreneurship.

The role of opportunity feasibility beliefs and bribery on resource acquisition speed and new venture emergence

Venture creation is an entrepreneurial process initiated by nascent entrepreneurs to identify and exploit opportunities. Beliefs of opportunity feasibility are found to facilitate new venture emergence in developed economy contexts. This paper examines how opportunity beliefs influence venture creation in an emerging economy context. The results of the Chinese Panel Study of Entrepreneurial Dynamics show that opportunity beliefs are negatively related to new venture emergence and the speed of resource acquisition, respectively. Further, entrepreneurs’ bribery behavior moderates the relationship between opportunity beliefs and the speed of resource acquisition. Our research provides important theoretical and policy implications for entrepreneurs and policy makers, especially in emerging economies.

Relational composition and member turnover of entrepreneurial founder teams at the nascent stage: a typology and empirical evidence

Team composition matters in shaping entrepreneurial outcomes. Focusing on the preexisting relationships among team members, this study examines how the social relational structure of entrepreneurial founder team influences membership turnover. After distinguishing entrepreneurial teams into family-only, non-family only, and family/non-family mixed ones, the study explores the possibility that family ties can serve as a glue in family-only teams, while they can become a source of schism in teams mixed with family and non-family members. Using data from the Panel Study of Entrepreneurial Dynamics, this research finds that family-only teams have a stable and rigid relational structure with low levels of both member exit and entry, while family/non-family mixed teams have the most vulnerable structure where members tend to leave but new members are unlikely to be recruited. Additionally, non-family teams have an unstable and fluidic structure with a high rate of both member exit and entry. These findings have implications for advancing our understanding of how social relational composition influences the organizational outcomes of entrepreneurial teams.

An Examination of Rural and Female-Led Firms: A Resource Approach

Previous studies in entrepreneurship research indicate that external funding is critical for entrepreneurial success and that spatial funding inequities between nascent rural and non-rural firms are ever-present. Moreover, women entrepreneurs, rural or otherwise, receive fewer external resources than their male counterparts. To our knowledge there has been no research leveraging the Panel Study of Entrepreneurial Dynamics (PSED), a representative dataset of American individuals trying to create new firms, to better understand differences between rural, non-rural and female-led firms in terms of their ability to stay engaged in the entrepreneurial process and to earn a profit. Using the resource-based theory of the firm, this research will begin to examine some of the critical factors driving rural firm success and rural female-led firm success. We utilize Cox and logistic regression models to analyze the time to quit, time to profit, and the likelihood of firm survival and profit generation for these firms. Results reveal that externally monitored funds are a significant variable for rural firm success in comparison to non-rural firms and appear to be especially important for women-led nascent firms early in the firm gestation process. Future research would benefit from further exploration of funding bias, entrepreneurial motivation and personal characteristics of rural, female-rural and their non-rural counterparts. This research adds to the literature on rural entrepreneurship by using the resource based theory of the firm in conjunction with the PSED database to study the nature of firm success and firm profit for rural and female led rural firms.

Built to Sustain: The Effect of Entrepreneurial Decision-Making Logic on New Venture Sustainability

How entrepreneurs make entrepreneurial decisions to improve entrepreneurial performance is a popular concern in both theoretical and practical circles. Existing studies mostly analyze the effect of entrepreneurial decision-making logic on the survival and growth of new ventures from the perspective of financial performance, but few studies focus on new venture sustainability. Based on datasets from the first two survey rounds of CPSED (Chinese Panel Study of Entrepreneurial Dynamics), this paper selects a group of 259 entrepreneurs as a sample and uses logistic regression analysis as a research method. The purpose of this study is to examine the effects of entrepreneurial decision-making logic on new venture sustainability. There are two main entrepreneurial logics, namely effectuation and causation. The paper discusses causation in terms of four dimensions, namely goal orientation, expected returns, competitive analysis, and avoiding contingencies. It examines effectuation in terms of the dimensions of means orientation, affordable loss, partnerships, and leveraging contingencies. The empirical results show that goal orientation plays a negative role in promoting new venture sustainability, while avoiding contingencies has a positive influence on it. Partnerships are conducive to new venture sustainability, while means orientation and leveraging contingencies have a negative effect.

Teams in new ventures: gender, human capital and motivation

PurposeThis paper aims to dismantle the idea that sex per se explains entrepreneurial outcomes and demonstrates the influence of a gendered motivation on forging and shaping new venture teams, which is a disruptive choice affecting the future of start-ups.Design/methodology/approachA two-level research model is validated on data from the Panel Study of Entrepreneurial Dynamics II (PSED II), with a system of simultaneous equations. First, if team features affect the performance of new ventures is tested; then, the study investigates determinants of team features with a focus on sex and motivation of nascent entrepreneurs.FindingsHuman capital (HC) in terms of education and experience of team members consistently explains venture evolution only when considering the larger team of affiliates. The HC gathered by nascent entrepreneurs is not because of the simplistic sex condition, but rather to a gendered motivation related to the inferior need of achievement of women.Research limitations/implicationsLimitations of discretionary scoring assigned to items of the PSED II survey are present, but unavoidable when processing qualitative data.Practical implicationsWomen need to be (culturally) educated on how to re-balance their personal motivation towards entrepreneurship by fostering their incentives for achievement. Political and educational programmes could trigger success in the creation of new businesses led by women.Originality/valueThis paper contributes to the literature on nascent entrepreneurship, focusing on the entrepreneurial teams in the initial phase of business creation, and provides the basis for further studies aimed at eradicating the stereotypes of gender roles that lead women to self-exclusion and organizational errors.

Jumping in at the deep end! The role of motivational forces in starting a new venture

Entrepreneurial motivation is a decisive factor for new venture creation, yet sometimes high motivation does not translate into corresponding behaviour. Comparing the intention-action gap of nascent entrepreneurs, we find that variances in motivation do not sufficiently explain the decision to not pursue a start-up idea. We propose and show that through applying an enhanced version of expectancy theory (ET), it is possible to identify additional personality factors of nascent entrepreneurs which add explanatory power to answer the question, why, out of a seemingly similarly motivated group, some will found a company and others will not. Through framing our study as an attempt to add to the intention-action gap literature by demonstrating the general applicability of ET, yet the need for further contextualisation of the theory, we contribute to previous studies and advance our knowledge in this important field. Our study provides a conceptual model, tests it using data from the Panel Study of Entrepreneurial Dynamics (PSED II) and, finally, offers suggestions regarding future research as well as practical implications.

Entrepreneurial Tenacity and Self-Efficacy Effects on Persisting Across Industry Contexts

This study examines trait and context antecedents of entrepreneurial persistence in new venture creation. Two personality traits, entrepreneurial self-efficacy and tenacity, differently impact subsequent entrepreneurial persistence behavior in different industry contexts. These relationships are tested using logistic regression in a sample of entrepreneurs from the Panel Study of Entrepreneurial Dynamics (PSED-II; Curtin & Reynolds, 2018). In developing the PSED-II dataset, 31,845 individuals were screened using phone interviews in order to identify a sample of 1,214 nascent entrepreneurs. Results of the current study identify significant relationships between entrepreneurial persistence in efforts to launch a new business and entrepreneurial self-efficacy and tenacity. However, the relationships have diminishing returns and vary with the industry context of the business (manufacturing, retail, services). In the retail industry sector, neither trait was significant; however, in manufacturing industry contexts, tenacity seems to matter more for continuing to pursue new ventures than self-efficacy, while in services industries, self-efficacy seems to matter more than tenacity.

The Four Motives of Educational Innovators

Education systems across the world are experiencing significant transformations. Grassroots innovators play an important role in these changes. To stimulate the development of grassroots innovations it is important to understand the mechanisms that underlie their creation. This paper investigates the motivation of individuals who initialize innovative projects in education. The approach to measuring motivation was adopted from the Panel Study of Entrepreneurial Dynamics (PSED) initially developed for social and commercial entrepreneurs. The Russian version of the methodology was elaborated and validated to study educational innovators. The sample consists of 437 participants of the Competition for Innovation in Education (KIVO). Four types of motivation are identified: social, self-realization, status, financial. They are explained within the self-determination theory (SDT) and grassroots innovations. The social and self-realization motives are inherent in all the actors, while the other two vary among innovators. This motivational structure allows the authors to differentiate between specific types of innovators – social entrepreneurs and ‘non-entrepreneurs’. The discussion, following the conclusion in this article, focuses on which environment would be favorable for developing innovations, considering the personal motives for innovative activity. The results can be valuable for education policy.

Growth intentions in family-based new venture teams

PurposeThe purpose of this paper is to investigate how family ties in new venture teams (NVTs) influence the intended future growth of a nascent entrepreneur’s business. The authors posit that R&D-oriented entrepreneurs in NVTs with family ties have higher growth intentions relative to those who are less oriented toward R&D.Design/methodology/approachThe hypotheses were tested using data from the Panel Study of Entrepreneurial Dynamics II (PSED II). One distinctive feature of the PSED is that it is based on a random sample of 1,214 nascent entrepreneurs in the process of starting new ventures in the USA, which overcomes the recall biases associated with surveying entrepreneurs already in business and potential survivorship biases.FindingsThe results show that growth intentions in NVTs with family ties is greater when the nascent entrepreneur shows an R&D behavior, even though the presence of family members in the team is negatively related to the intentions of nascent entrepreneurs with regard to new venture growth. This effect is attributed to entrepreneurs’ long-term vision and a more favorable attitude toward change.Research limitations/implicationsData on startup teams in the PSED II come from one team member (the respondent). Therefore, differences in perceptions regarding growth intentions cannot be determined. Moreover, the sample consisted exclusively of nascent entrepreneurs in the USA.Practical implicationsKnowledge about the determinants of growth intentions during the venture creation phase becomes relevant if we want to influence and support the growth of newly founded firms. Nascent entrepreneurs need to understand the trade-off between emotional and financial concerns.Social implicationsNascent entrepreneurs more oriented toward R&D become more risk tolerant, and may accept certain losses to their emotional endowment in favor of pure financial goals, being more able to access the additional external resources (tangible and intangible) needed for growth.Originality/valueThe research expands previous evidence on the family involvement-performance debate in large firms by focusing on new ventures with family ties, with distinctive characteristics that may affect growth intentions. The authors also shed new light on the interplay between family business and entrepreneurship. In particular, the research helps gain an understanding of how NVTs with family ties deal with the opposition between the benefits from venture growth and the tendency to preserve team member’s emotional attachment.

Speed to Legal Registration and Nascent Venture Performance: A Temporal Dilemma for Nascent Entrepreneurs in an Emerging Economy

In this paper, we examine the effect of a nascent venture's speed to legal registration during its formation on the initial venture performance in an emerging economy. Quickly obtaining legitimacy via legal registration in the early stages of a new venture's formation accelerates its resources acquisition and transition to other start‐up activities, facilitating the venture to seize dynamic entrepreneurial opportunities; however, in an emerging economy, quick legal registration also incurs substantial costs and compliance activities that may inhibit the venture's engagement in other start‐up activities. A nascent venture in an emerging economy suffers from being either too fast (early) or too slow (late) in registering its business during the formation process, and the relationship between the speed to registration and nascent venture performance is best reflected by an inverse U‐shape. Moreover, the inverse U‐relationship becomes more pronounced when the entrepreneurial opportunity is more innovative. Based on analyzing 145 nascent entrepreneurs from the event history data set of the China Panel Study of Entrepreneurial Dynamics (CPSED), we found strong support for our arguments.

Do government and legal barriers impede entrepreneurship in the U.S.? An exploratory study of perceived vs. actual barriers

Abstract In this exploratory study, we investigate how the actual and the perceived level of government bureaucracy correlates with nascent ventures' outcomes, a largely understudied topic in entrepreneurship literature. We use data merged (N = 922) from the U.S. Panel Study of Entrepreneurial Dynamics II (PSED II)—which tracked nascent startups over a six-year period—and the Economic Freedom of North America Index from the Fraser Institute. We find no relationship between state-level economic freedom and startups' outcomes and no relationship between the actual and the perceived government bureaucracy. Additionally, government is perceived as a major barrier by only 6% of entrepreneurs (of whom only 54% actually check government regulations), and 1% of entrepreneurs list regulations as the main reason for quitting the startup process. Overall, our results suggest that government and legal barriers are not significantly related to nascent startups’ outcomes and are not major barriers for entrepreneurs.

Impact of Marketing Activities in the Early Years of a Firm’s Life on Its Future Performance

The aim of this paper was to analyze in which year, after launching a new venture, marketing activities (dialogue with customers and engaging in promotional efforts) impact its future performance. To do so, logistic regression models were created in which the dependent variables considered as performance were survival and firm profitability. The independent variables considered were dialogue with customers and engaging in promotional efforts. The sample consisted of data collected in a longitudinal survey of 1,214 American nascent entrepreneurs, who formed the Panel Study of Entrepreneurial Dynamics II (PSED II). The beginning of marketing activities in the firm’s first and second years was related to its performance in the second, third and fourth years. The results of this research show that the first year of operation is the optimal time for the entrepreneur to initiate dialogue with customers. They also show that engaging in promotional efforts in the firm’s first year of operation leads to strong performance in subsequent years.

FINANCIAL MOTIVATIONS AND SMALL BUSINESS LONGEVITY: THE EFFECTS OF GENDER AND RACE

It is well established in previous research that female and minority entrepreneurs are less successful with business ventures in comparison to whites and males. In that same literature, motivation and growth expectations have been shown to be positively associated with business success. This paper examines how motivations and business goals differ by gender and race and how they affect disparity in business outcomes. Using data from the Second Panel Study of Entrepreneurial Dynamics (PSED II), we find that stronger motivations for financial gain have a negative effect on business survival rate for black women and Hispanic men. In contrast, the effect is positive for black men and Hispanic women. When considering interactions between financial motivations, race and gender, various significant effects were found and are detailed in the paper. It is important for researchers and practitioners who want to promote entrepreneurship to understand the differences and adapt advisory and training curricula accordingly.

Getting your hopes up but not seeing them through? Experiences as determinants of income expectations and persistence during the venturing process

ABSTRACT In this study, we investigate the effects of industry and startup experiences on income expectations and persistence of nascent entrepreneurs. We posit that experience can have two interrelated effects: (1) it provides skills that may affect persistence, but also (2) affects performance expectations. We develop and test hypotheses about the impact of industry and startup experience on both expectations and persistence. Data of 808 nascent entrepreneurs from the Panel Study of Entrepreneurial Dynamics show that industry experience increases income expectations and persistence alike, whereas startup experience increases expectations without increasing persistence. We discuss implications for scholarship and practice.