Venture Performance Research Articles

Rags to riches? Entrepreneurs' social classes, resourceful time allocation, and venture performance

Social classes shape entrepreneurial pursuits in that entrepreneurs from lower social class groups face more resource deficiencies compared to those from higher social class groups. In this study, we theorize that being resourceful with a particular resource—time—helps ventures run by lower-class entrepreneurs achieve better performance. However, we further argue that the extent to which entrepreneurs use time resourcefully is affected by the cognitive schemas stamped on them by their social class backgrounds. Our empirical analysis of 8663 Chinese private entrepreneurs between 2006 and 2010 lends robust support to these arguments. By revealing both material and cognitive constraints stemming from entrepreneurs' social classes, our study contributes to research on social classes and entrepreneurial resourcefulness and has important implications for understanding the persistence of inequality in entrepreneurship.

Digital Technology Search and New Venture Performance in Dynamic Environments

Technology search is crucial to establishing competitive advantage and improving firm performance. However, it is still unclear how different technology search strategies affect competitive advantage and performance at the firm level and how to determine technology search strategies in dynamic environments. Therefore, based on resource-based theory, this study explores the relationship between digital technology search, competitive advantage, and new venture performance (NVP) in dynamic environments with a sample of 267 Chinese new ventures. The results show that the breadth and depth of digital technology search positively affect NVP. Environmental dynamism weakens the positive effect of digital technology search breadth on NVP but strengthens the positive relationship between digital technology search depth and NVP. Moreover, digital technology search breadth affects NVP via differentiated competitive advantage, and digital technology search depth affects NVP through differentiated and cost-leadership competitive advantage. Finally, implications and limitations are discussed.

The Call of the Heart: Entrepreneur’s Calling, Resilience and New Venture Performance

Drawing on upper-echelon theory and psychological resource perspective, this paper explores the relationship between entrepreneur’s sense of calling and new venture performance. Although the importance of work as calling in shaping individual job outcomes has been well studied, the pathway from entrepreneur’s calling to firm performance is poorly understood. To address this, we develop a theoretical model of relationships between entrepreneur’s calling, resilience, and new venture performance, and the role of family support. We test our model with time-lagged survey data from 175 entrepreneurs in China using structural equation modeling and a series of robustness tests. Results indicate that psychological resilience mediates the positive relationship between entrepreneurs’ calling and new venture performance. Besides, family support moderates the links of the calling and entrepreneurs’ resilience. These findings demonstrate how and when entrepreneurs’ calling contributes to the new venture performance.

Identity Fusion and New Venture Performance: Team Average and Dispersion Effects

The present paper studies the relationship between entrepreneurial identity on new venture performance through a group level analysis. It expands on the concept of identity with a metric of identity fusion for the new venture team context and uses a longitudinal field design with repeated survey responses of multiple members in knowledge-intensive new venture teams from Sweden, Denmark, and Russia. Results from multilevel structural equation modeling (MSEM) showed that while there was significant dispersion in intensity of identity fusion among members within a new venture team, there was no direct effect between average team identity fusion and venture performance, as represented by external funding, customer acquisition status and product advancement status. The results run contrary to recent findings of a positive effect between identity fusion and firm performance and makes the case for further explorations into the consistency of the relationship between identity fusion and venture outcomes. The study is among the first to consider venture outcomes of group-level identity in entrepreneurship, highlighting the salience of identity fusion as one of several potential forms of group identity.

Stigma and Immigrant Entrepreneurship: Black September, Ethnic Enclaves, and New Venture Performance

Prior research on immigrant entrepreneurship has largely overlooked the difficulties faced by stigmatized immigrant groups and the strategies that such immigrant groups can undertake to improve new venture performance. To address this issue, we examine immigrant entrepreneurship in Jordan. We find that stigmatized immigrant entrepreneurs in Jordan are more negatively affected by government practices than native and non-stigmatized immigrant entrepreneurs. Moreover, we find that stigmatized entrepreneurs can partially mitigate these effects by founding their ventures in established ethnic enclaves where entrepreneurs can access brokers with social ties that can help overcome discrimination. Empirically, we examine this phenomenon using data on new venture performance of 8756 entrepreneurs in the Hashemite Kingdom of Jordan from 2003 to 2013 and supplemented with 60 qualitative interviews.

Playing the Business Angel – The Impact of Business Angel Publicity on New Venture Performance

More and more celebrities appear as business angels (BAs) for young and innovative ventures worldwide. Celebrities, while well-known in the public eye, are typically less known for their venture valuation skills. The signaling function of celebrity affiliations through certification and quality assurance could therefore be less relevant. Nonetheless, a venture’s affiliation with a publicly known BA may still positively alter the quality perceptions of various stakeholders as publicity increases awareness, social recognition, and the ease of information processing, thereby improving the venture’s performance. Using a sample of more than 2,900 early-stage ventures that made a venture pitch during the Canadian, German, UK, or USA versions of the reality television show Dragons’ Den, we find that BA publicity has a positive impact on target firm survival, web traffic, and sales. The impact of BA publicity is particularly strong if the congruency between the investor and the target venture is high. These effects exist above and beyond potential selection effects, value-adding activities such as active involvement through board seats, and the mere fact that a funded venture has more financial resources. Our empirical findings have broader implications for BA financing and other nascent players in the entrepreneurial finance ecosystem. We also advance theories about signaling and reputation by providing a novel framework and empirical evidence regarding the role of investor publicity when studying new venture performance.

Relationship Between Effectuation/Causation and New Venture Performance: A Situational Perspective

Although some studies have addressed circumstances under which effectual or causal actions yield better venture performance, until now, there are still unanswered questions about whether entrepreneurs can cognitively recognize when effectual/causal actions are likely to yield better performance and execute them. In this research, we utilize a contingency theory lens to address this question for different levels of product/service disruptiveness. Based on a sample of 200 entrepreneurs in Canada, we study the effect of openness to change and ambition on the ventures’ capability of choosing and fulfilling the best course of action (effectuation vs causation) at different levels of product/service disruptiveness.

Problem-Solving Approaches, Working Capital Management, and New Venture Performance

This study investigates how, under the pressure of working capital constraints, a problem-solving approach influences decision-makers’ financing decisions, and also how it affects consequent venture performance. Using a mixed-method research design including a survey study, a text-based analysis based on secondary data, and a behavioral laboratory experiment, we show that decision-makers with limited working capital (i.e., financial constraints) who use an abstract problem-solving approach can achieve better new venture performance compared with those using a concrete problem-solving approach. Implications for new venture managers and policymakers are discussed.

When Age Differences Make a Difference: How Co-founder Age Dissimilarity Improves Performance

In recent research, two arguments have emerged on how a founder’s age might influence new venture performance through its innovative abilities. First, younger founders are more innovative in their new ventures in comparison to older founders due to their higher rates of creativity and exploration that stem from fewer cognitive constraints. Second, older founders are more innovative than their younger counterparts, which has been ascribed to their greater focus on the implementation of new ideas in their new ventures. This paper reconciles both streams of research by proposing that new venture innovation is improved when combining these benefits of both younger and older founders. Specifically, we show that new ventures led by co-founders with increasingly dissimilar ages (i.e., one younger and one older founder) are more likely to be innovative; however, this effect is mitigated by gender dissimilarities among these co-founders or when such founders identify as dissimilar genders (i.e., one younger female and one older male). Further, we also show that the increased ability of new ventures co-founded by founders with increasingly dissimilar ages to be innovative is an important mechanism through which they improve new venture performance. Using a sample of 1,237 new ventures recently started across the world, we find support for our theoretical arguments. We discuss the implications of these findings for the entrepreneurial age and new venture literature research streams.

The Dynamics of Shared Leadership: New Directions in Research

Shared leadership is an emergent team property resulting from the distribution of leadership roles and influence across multiple team members, where different team members may share different leadership functions simultaneously or across different time points. Despite theories suggest that shared leadership is a dynamic process and an emergent team property, little is known about how shared leadership develops and evolves over time. Since shared leadership is gaining increased popularity in practice as a promising way to actively adapt to a team-based approach to work, studying shared leadership with a time-sensitive approach is urgently needed for more accurate understandings and better practical implications. In this symposium, we put forth a set of studies that examines the development trajectory, antecedents, and consequences of the dynamics of shared leadership from different approaches (e.g., latent growth cure, latent change score, and cross-lagged approaches) and different perspectives. In sum, these studies advance some new directions in shared leadership research and provide some examples for scholars and practitioners to better understand and investigate the dynamics of shared leadership. We hope this symposium can attract more attention to studying the dynamics of shared leadership and spawn a new genre of shared leadership research. The Development of Shared Leadership in Entrepreneurial Teams: A Latent Growth Curve Approach Presenter: Chu-Ding Ling; Renmin U. of China Presenter: Nan Wang; Lingnan U. Reciprocal Relationships between Shared Leadership and Team Coordination: A Cross-lagged Analysis Presenter: Li Zhu; National School of Development at Peking U. Presenter: Chunhua Chen; National School of Development at Peking U. Presenter: Jinlong Zhu; Renmin U. of China Shared Leadership and New Venture Performance: A Latent Change Score Approach Presenter: Nan Wang; Lingnan U. The Effects of Shared Leadership on Team Resilience and Creativity after Disruption Events Presenter: Jinlong Zhu; Renmin U. of China

Built to Last: A Human Capital Resource Formation Perspective on Diversity and New Venture Survival

New venture team diversity and entrepreneurial success or failure remain critical topics in the field. Utilizing a strategic human capital resources framing, this study leverages data from the Kauffman Firm Survey to assess the degree to which racial diversity and human capital within the founding team affect new venture survival. In a study of 2,459 ventures, results indicate that industry-specific human capital (ISHC) moderates the relationship between racial diversity in the founding team and hazard of failure. The relationship is such that for teams with a high level of ISHC, racial diversity helps reduce the likelihood of entrepreneurial failure. Similar results did not hold for generic human capital (GHC) operationalized as percentage of team members with a bachelor’s degree; however, an effect was demonstrated when the measure used the percentage of team members with a master’s degree or higher. In addition, the three-way interaction between ISHC, GHC and racial diversity is significant, suggesting that teams benefit most from diversity when human capital stocks are high in the team. This result supports human capital resources theory by demonstrating the utility of the emergence of complex unit-level resources within the new venture team. Implications suggest that the make-up of the founding team plays a role in venture performance and that potential challenges associated with diverse teams may be countered with higher levels of human capital.

Founder Cross-Cultural Experience and Venture Profitability: A Serendipity Mindset Lens

Research on the constructive linkages between forms of multicultural experience and entrepreneurial activity continues to proliferate. However, to date empirical research at the individual level has largely focused on cognitive, pre-launch outcomes such as entrepreneurial intention, alertness, or opportunity recognition. We advance this literature by probing the role of cross-cultural experience on venture performance using a longitudinal design on a primary sample (n = 357) of new and small ventures. We draw from and integrate research on serendipity mindset with cultural tightness-looseness theory to explain why exposure to foreign cultures is so conducive for venture performance. Specifically, spending time abroad takes founders out of their normative frames of reference and provides uniquely impactful ‘serendipity fields’ for valuable encounters to emerge that help systematically bolster novel bisociations of foreign ideas, concepts, resources, and contacts—which enhances venture profitability over time. Critically, we theorize that founders socialized into tighter sociocultural norms and expectations stand to leverage cross-cultural experience to constructive ends in their ventures to a much greater extent than those socialized into looser norms as foreign experiences provide deeper cultural juxtapositions that spark innovativeness. We find support for our theorizing by unpacking the differences between male and female founders and family versus non-family businesses in a culturally tight national setting with relatively fixed gender and family role expectations. Our findings provide several key theoretical advancements to this literature along with some meaningfully practical insights on the transformative role of cross-cultural experience, especially among entrepreneurs from marginalized or socially restrictive contexts.

Does Entrepreneurial Education Matter for the Performance for Medium-Sized Venture Entrepreneurs?

We explore the question of whether entrepreneurial education matters for medium-sized venture performance. We do so to better understand the conflicting evidence where such education appears to have significant positive micro-level effects while also indicating no significant macro-level effects. The growing investment in entrepreneurial education increases intentions and start-up rates in treatment effects studies, but such investments in that education do not appear to increase national start-up or survival rates. We apply a different empirical approach – based on the capabilities view – of surveying venture entrepreneurs about their performance and their education in order to determine whether their skills-enhancing entrepreneurial training is a driver of success. We find that while that training significantly increases their confidence, when taken as a whole – as a multidimensional measure – it is not a significant influence on venture performance. We discuss the implications for research, policy and education.

How Information Search Powers the Relationship Between Business Planning and New Venture Performance

We explore when and how business plans improve venture performance by focusing on two mechanisms: the informational, based on the intrinsic value derived from gathering valuable information, and the institutional, based on the ceremonial value of business plans to signal objectives and expectations to stakeholders. We empirically isolate the mediating role of information search and show that planning affects performance beyond the informational mechanisms, and analyze the role of plan formality, suggesting that the institutional mechanism plays out only in the case of formal business plans. We connect our findings within the debate among promoters and opponents of business planning.

New Venture Performance: Specific Innovativeness, Digital Entrepreneurship and Gender

We build on strategic choice theory to predict 1) that specific innovativeness impacts new venture financial performance, 2) that a high degree of digital entrepreneurship enhances this effect by providing more room for strategic choices, and 3) that female entrepreneurs make better use than male ones of the opportunities offered by a high degree of digital entrepreneurship. We confirm our hypotheses using primary data from Ghana and Vietnam. We conclude that strategic choices among new ventures yield best results if bounded by prior strategic choice and specific innovativeness, enabled by a high degree of digital entrepreneurship, and enacted by women.

Institutional Support is Good for Female Entrepreneurs but How?

Female entrepreneurs often face challenges that can be magnified in constrained contexts where they lack the same rights and resources as men. Although past research suggests that institutional support may help contribute to female entrepreneurs’ success, it is still unclear how this support affects post-founding entrepreneurial processes and outcomes in constrained contexts. Using a unique sample of Iranian female entrepreneurs, our moderated mediation analysis shows that institutional support moderates the effect of entrepreneurial actions on new venture performance through entrepreneurial self-efficacy. Thus, while female entrepreneurs face significant challenges in constrained contexts, institutional support can enable them to translate their entrepreneurial actions into higher self-confidence and better venture outcomes. Post-hoc comparisons with an American sample also suggest that the type of institutional support varies between constrained and less constrained contexts. In sum, these results suggest that institutional support helps female entrepreneurs succeed after the venture founding stage by strengthening the entrepreneurial action — self-efficacy relationship.

How Entrepreneurial Experiences Foster Crises Resilience - Survival and Performance of New Ventures

This paper estimates the relationship between entrepreneurial human capital (EHC) of employees in new firms and incumbents and their resilience to major global crises using individual and firm-level data for 1997-2016. EHC is measured as employees' previous experience being entrepreneurs. We use longitudinal register data for Sweden covering the IT-crisis 2001-2003 and the Great Recession 2008-2009. The results show that having employees with an entrepreneurial background decreases the probability of exiting especially for the new ventures, albeit the effect differs between these two crises. We elaborate with alternative measures of EHC, distribute it on occupational function, educational level, and the reason for employees quitting their previous entrepreneurial endeavors (closures, mergers and acquisitions). In addition, we implement three different estimation techniques. Our results remain robust to all these alterations. Besides providing new empirical insights, we argue that our findings are of theoretical interest as well as have practical and policy implications.

Intellectual Property Rights Enforcement and Firm Performance of International New Ventures in China

How does intellectual property rights (IPR) enforcement influence innovation and performance of international new ventures (INVs)? According to the literature on IPR enforcement, innovation, and internationalization, we predict that IPR enforcement directly and indirectly (via innovation speed and innovation quality) impacts firm performance of INVs, and international intensity (INT) moderates the indirect effects. Based on both primary data and secondary data, the empirical results indicate that IPR enforcement promotes firm performance. In addition, innovation speed and innovation quality partially mediate the relationship between IPR enforcement and firm performance. Moreover, the relationship between IPR enforcement and innovation quality is weakened with high levels of INT. Theoretical contributions, practical implications, limitations, and future research avenues are discussed.

The Endogamy Tradition and the Performance of Informal Owner-Manager Ventures in Sub-Saharan Africa

The Endogamy Tradition and the Performance of Informal Owner-Manager Ventures in Sub-Saharan Africa

Reflective Analysis of Failure and the Performance of Subsequent Ventures

Learning is a process that begins with the occurrence of concrete experiences that are reflectively analyzed and transformed into new knowledge that is tested using active experimentation. Although the notion that business failure provides an opportunity for learning is widely accepted, existing studies have not sufficiently paid attention to the entrepreneur’s learning behavior. This study investigates learning with a focus on the relationship between the reflective analysis of prior business failure and the subsequent venture performance. We examine the efficacy of the entrepreneur’s reflective analysis of the cause-and-effect of failure events. We also examine the boundary conditions of disruptive visions and industry changes, which may affect this relationship. Our sample is 286 entrepreneurs enrolled in a support program for reentry after business failure in Korea. We find that efficacious reflective analysis of failure increases the subjective positive perception of subsequent venture performance and that this relationship was weakened when entrepreneurs had disruptive visions for subsequent ventures or when there was low industry similarity between the failed and subsequent venture. These results inform entrepreneurship research on failure attribution, entrepreneurial learning, and reentry decision-making.