Portfolio Entrepreneurs Research Articles

Explore or exploit? A process view on entrepreneurial decision-making in venture portfolio formation

This study explores the decision-making processes of portfolio entrepreneurs (PEs) regarding their exploration and exploitation strategies. It investigates how PEs’ expectations and eventual realizations affect their intentions and actions in forming portfolio ventures. In addition, this research highlights the dynamic nature of entrepreneurial decision-making in the context of portfolio formation to understand how intentions for portfolio formation are related to exploration and exploitation strategies. It presents evidence from in-depth interviews with 21 PEs (collectively owning 132 companies). This study classifies the structures of the venture portfolios held by the interviewed entrepreneurs into five novel categories to identify the nuanced interplay between intentionality and external influences in shaping PEs’ decisions. It introduces the concept of “emerging bounded agency” to characterize the complex nature of decision-making in portfolio entrepreneurship, challenging traditional notions of intentionality. This research advances the categorization of emerging portfolio structures and supports future research on entrepreneurial decision-making in venture portfolio development.

Human resource redeployability and entrepreneurial hiring strategy

AbstractResearch SummaryThe timing of talent acquisition is a central decision for new ventures. On one hand, hiring after demand is proven minimizes losses. On the other hand, hiring before demand is proven allows new ventures to start developing unique capabilities. We resolve this tension by proposing that the timing depends on human resource redeployability. We test our theory with the population of Finnish ventures showing that portfolio entrepreneurs hire more employees early on because of higher redeployment potential and that they hire employees with more transferable skills in order to benefit from the redeployment option. To probe our mechanisms, we examine how talent acquisition strategies in portfolio and standalone ventures vary with external conditions that reduce or amplify the benefits of redeployment.Managerial SummaryThis paper explores when startups begin scaling their team. Our findings suggest that the potential to redeploy employees (to another startup, for example) motivates entrepreneurs to scale earlier. At the same time, we find that the entrepreneurs who scale earlier due to redeployment potential tend to hire employees with skills that can be transferred more easily. We further show that our results are affected by the level of rigidity in the labor market. When labor markets become more flexible, the impact of easy redeployment on an entrepreneur's hiring strategy becomes less important. Our findings provide important insights into how the external environment and policy changes can affect the trajectory of startups even at their earliest stages.

Assessing the impacts of Covid-19 on stock exchange, gold prices, and financial markets: Fresh evidences from econometric analysis

This research analyses the relative efficacy of gold price, financial market, and stock exchange hedging against sectoral and industry-level global stock market returns. Incorporating Gold into equity-based asset allocation techniques and assessing the stock market and financial sector during the COVID-19 epidemic is one way to diversify your portfolio and reduce risk. After orthogonalizing raw returns concerning a robust collection of relevant universal variables, we conduct our analysis inside a bivariate GARCH(p, q) framework. To further assess ideal portfolio proportions and the efficacy of hedging methods, we expand the volatility spillovers study by calculating the optimal weights for a minimal risk portfolio and determining the hedge ratio. In high-volatility environments, our results show which financial market and stock exchange sectors and industries investors should prioritize to minimize the risk and maximize reward. Use of country-specific macroeconomic variables indices to supplement the worldwide index, (3) separate analysis for the COVID-19 first wave due to the existing argument that the pandemic raises unexpected market events and our early data showing co-movement among the three unpredictability metrics during the pandemic. These findings have important implications for portfolio entrepreneurs and business investors looking to buy international equities.

Portfolio Entrepreneurs: Structure, Strategy and Management of Business Groups

This paper draws on the experiences of portfolio entrepreneurs and develops new insights into this important mode of business development. Portfolio entrepreneurs own and manage multiple businesses simultaneously, providing an alternative growth process and the prospect of enduring entrepreneurship. Previous research has focused on either the genealogy of businesses in a portfolio or the human capital attributes that determine who becomes a portfolio entrepreneur and how they perform relative to other types of entrepreneurs. Key issues involving the structure, strategy and management of portfolios need further exploration and development. This multiple-case study conducted in New Zealand features eleven entrepreneurs with portfolios of different ages and sizes, each reflecting a series of opportunistic responses to different situations. Our results show that some entrepreneurs use structure as an internal seedbed to spawn new ventures, others seek opportunities to acquire more businesses, while some use both means to build and maintain their business groups. Structure is the dominant construct, providing a flexible canvas upon which entrepreneurs enact growth ambitions by creating and re-creating their portfolios over time. We found no evidence of portfolio-level decision making or performance measurement with the lead entrepreneur’s attention largely focused at the business unit level.

Leveraging international R&D teams of portfolio entrepreneurs and management controllers to innovate: Implications of algorithmic decision-making

We focus on how international research and development (R&D) teams of portfolio entrepreneurs and their management controllers can help to innovate and sustain entrepreneurial activities. An algorithmic decision-making model is implemented that indicates how such portfolio entrepreneurs build complex business structures and create a context for management accounting controllers’ information that is suggestive of R&D internationalization challenges. A case study is utilized to compare one large and one medium-sized business conglomerate. Open interviews were conducted with portfolio entrepreneurs and their management controllers. We found that the international R&D teams of portfolio entrepreneurs and their management controllers have different mindsets when assessing sustainable innovative approaches for the existing business and for future expansion through acquisitions. Our findings assert the importance of context when understanding the challenges of management controllers dealing with the internationalization of such R&D efforts.

Why Do Some Entrepreneurs Develop Venture Portfolios? And how do they Do So? A Meso-Level Analysis

The question how decisions made by entrepreneurs affect their individual business ventures is essential to research in entrepreneurship. While knowledge on the role of entrepreneurial learning and habits (Aldrich and Yang 2014), the influence of uncertainty on organizing entrepreneurial activities (Alvarez and Barney 2005) and the role of past career practices on entrepreneurial decision making (Engel, van Burg, Kleijn and Khapova 2017) is widely established, yet little is known on how this applies to entrepreneurs “simultaneously owning and engaging in a portfolio of entrepreneurial interests” (Carter and Ram 2003, p. 374). As such, portfolio entrepreneurs are a distinctive group of habitual entrepreneurs whom received increased and sustained scholarly attention over the recent years (Wiklund and Shepherd 2003 and 2008, Baert, Meuleman, Debruyne and Wright 2016, Lechner, Kirschenhofer and Dowling 2016, and Cruz and Justo 2017). However, yet little empirical evidence exists to explain variation within this group of entrepreneurs (Kutzewski, Bahlmann and Stam 2020); nor do we know how and through which practices the formation of business portfolios is affected. We conducted research asking why, how and with what effect, portfolio entrepreneurs engage in their activities. To answer these questions, a comparative multi-case study design was chosen. The research unit comprised management decisions made by individual portfolio entrepreneurs. Based on a case sample comprising the explorative and exploitative activities of 21 portfolio-entrepreneurs with a combined portfolio of 129 companies, this research found ample evidence that various forms of intention (Why?), decision making and coordination (How?) exist simultaneously within the same portfolio (With what effect?). The result of this research contributes to our understanding of how entrepreneurial principles through which portfolio-entrepreneurs organize their activities affect the structure of venture portfolios.

Inducements for Resource Redeployment in Portfolio Entrepreneurship

This paper investigates which factors serve as inducements to prompt portfolio entrepreneurs to redeploy their own time across ventures within their portfolios. While the corporate strategy literature assumes that portfolio managers take a rational approach to redeployment in attempt to maximize joint profits, we find that individual preferences and biases influence the redeployment decision when the unit of analysis is the individual entrepreneur. Through utilizing a descriptive phenomenological approach, we explore whether prior findings surrounding inducements to redeployment in corporate portfolios hold when studied in the context of portfolio entrepreneurship and discover several additional inducements that arise when the phenomenon is applied to the entrepreneurial context. We also shed light on the process through which time redeployment physically occurs and the requirements that must be in place in order for the entrepreneur to have the capacity to activate the option to redeploy when an inducement prompts the desire to do so.

Portfolio Entrepreneurs’ Behavior and Performance: A Resource Redeployment Perspective

Prior research suggests portfolio entrepreneurs—businesspeople who run more than one firm simultaneously—launch more successful ventures than their single-business counterparts. However, their ventures are less likely to survive. In an attempt to reconcile this paradox, this paper presents a framework in which portfolio entrepreneurs’ main advantage is not a superior ability to select the best business opportunities ex ante, but rather the ability to redeploy human and capital resources across businesses ex post, which reduces the sunkenness of their investments in new projects. This redeployment option facilitates their exit from new businesses that fail initial market tests. Thus, portfolio entrepreneurs’ heterogeneous termination decisions explain a greater portion of new firm performance differential than ex ante opportunity selection. We test these ideas using a longitudinal data set of more than 5,700 entrepreneurs and find consistent evidence. Portfolio companies do not show systematically higher performance at the time of entry; a performance difference emerges only over time, as the selection effect and resource redeployment occur.This paper was accepted by Ashish Arora, entrepreneurship and innovation.

Parallel Experimentation as an Entrepreneurial Strategy: Evidence from Finnish Microdata

Our study examines how experimenting with multiple businesses simultaneously can drive startup performance. We hypothesize that entrepreneurs who experiment with multiple businesses simultaneously face two interrelated tradeoffs: firstly, experimentation allows these so-called portfolio entrepreneurs to generate more innovative startups, but at the same time, the startups are more resource-constrained than those of their peers. Secondly, the startups of portfolio entrepreneurs underperform in the short run but, given the benefits of experimentation and selection, outperform their peers in the long run. To test our hypotheses, we use linked employer-employee data for Finnish entrepreneurs between 1995 and 2015. Our findings support our hypotheses and, as such, provide new insight into the drivers of entrepreneurial startup performance.

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.

Entrepreneurial Hiring Strategies in Standalone and Portfolio Ventures

Acquiring talent is a central decision for new ventures. Yet recruiting decisions are made under demand uncertainty, making the optimal hiring strategy unclear. We argue that such strategy depends on the type of entrepreneurship pursued: whether entrepreneurship entails founding a standalone venture or a portfolio of ventures. We predict that standalone ventures will prioritize size flexibility by minimizing the number of initial hires. By contrast, portfolio ventures will make greater investments because they can redeploy unused labor within the portfolio. Thus, portfolio entrepreneurs will prioritize resource flexibility by hiring non-specialized workers, who are easier to redeploy. Finally, we expect differences between hiring strategies to diminish with labor market flexibility. We test our predictions on the population of Finnish entrepreneurs between 2007 and 2017.

It’s Time We Talk About Time in Entrepreneurship

This editorial draws attention to time to advance entrepreneurship research by focusing on two aspects of time—time perspective and time management. We initiate a deeper conversation on time in entrepreneurship and illustrate the value of a time-based lens for entrepreneurship research through discussing examples at the individual, firm and context levels. These examples consider underdog and portfolio entrepreneurs; well-being; social and unethical entrepreneurial behavior; entrepreneurial teams and entrepreneur–investor dyads; firm strategy; industry and cultural contexts. We review promising methods for time-conscious entrepreneurship research: process, true longitudinal, diary, experience sampling, observational, work-shadowing and time-use studies; historical approaches; experiments; and simulations.

Determinants of novice, portfolio, and serial entrepreneurship: an occupational choice approach

In this paper, we first develop an original theory in which, based on their individual skills and the quality of their business, entrepreneurs can keep their original business (and thus remain novice entrepreneurs), start and keep a new business in the same or another sector along their current business (therefore becoming portfolio entrepreneurs), transfer or shut their original business down to either start a new one (turning themselves into serial entrepreneurs), or enter the labor market as wage workers. We then use the insights from our theory to develop three main hypotheses that are finally tested for a 10-year panel dataset (2001 to 2010) of more than 4000 Vietnamese manufacturing firms. We estimate an occupational choice model and a survival model and find that (i) a greater endowment of human capital is associated with a higher likelihood of a business owner to become a serial or a portfolio entrepreneur; (ii) a higher quality of the new business is associated to a higher likelihood that it is run by any type of habitual entrepreneur. Particularly, high entrepreneurial skills together with a high-quality business positively influence the likelihood of an individual to be serial or portfolio entrepreneur; (iii) ceteris paribus, firms run by serial or portfolio entrepreneurs tend to stay in business longer, although high-quality ones run by novice entrepreneurs endowed with high entrepreneurial skills are those with the lowest probability to leave the market.

ENTREPRENEURIAL OPTIMISM, THE NATURE OF ENTREPRENEURIAL EXPERIENCE AND DEBT DECISION FOR BUSINESS START-UP

This paper studies the entrepreneurial optimism and debt decisions for business start-up. By analysing a sample of 160 business start-up and by using the panel data estimation, we study entrepreneurs’ optimism and its impact on debt decision of business start-up. The measure of entrepreneurial optimism is based on the entrepreneur earnings forecasts initiated by Lin et al. (2005). Meanwhile, the nature of entrepreneurial experience (serial and portfolio entrepreneur) has an effect on entrepreneurial optimism and leads to more or less optimistic entrepreneur. The results reveal that optimistic entrepreneur prefers equity in funding the financial deficit. Serial entrepreneurs tend to use more debt funding. In the dynamic model, the entrepreneur acquiring business concurrently adjusts slowly to debt ratio. Nevertheless, the sequential entrepreneurial experience leads to more optimism and so on more debt use. Given the governance role played by banks, the high adjustment cost for start-up is a consequence of the efficiency of the quality of control exercised by banks that in spite of entrepreneurial optimism, the entrepreneur does not convince the financiers to be so confident on the prospect of the business.

Portfolio Entrepreneurs Behavior and Performance: A Dynamic Economies of Scope Perspective

The aim of this paper is to study the behavior and performance of entrepreneurs who run more than one business simultaneously - portfolio entrepreneurs. Borrowing from the literature on business gr...

African portfolio entrepreneurship and the creation of jobs

PurposeThe purpose of this paper is to focus on large-scale portfolio entrepreneurship and its impact on the creation of stable wage employment in African economies.Design/methodology/approachThe three studies focussed on Egypt, Uganda, and Malawi were all exploratory, inductive, and qualitative studies, which involved semi-structured interviews with 65 entrepreneurial founders of some of these countries’ most prominent business portfolios between 2009 and 2012. The data were collected through face-to-face interviews, which lasted between one and four hours, with the founders of each of these portfolios.FindingsThis inductive and qualitative study finds a connection between the creation of stable wage-paying jobs and portfolio entrepreneurship in three countries, representing three of the four different archetypal African economies. It also finds a strong connection between the development of new industries and portfolio entrepreneurship.Practical implicationsThe practical and societal implications of these findings are incredibly important. The current and looming shortage of stable wage employment in Africa is reaching calamitous proportions. The growth in religion-affiliated terrorism and high-risk economic migration to Europe can be directly related to the lack of employment opportunities in African nations. The findings indicate that portfolio entrepreneurs are major players in the creation of such employment opportunities and government policies focussing on this area, as compared to focussing solely on SMEs, may be more effective in mitigating some of the drivers for emigration and terrorism.Originality/valueThis is the only study of its kind that investigates the role of large-scale portfolio entrepreneurship in the growth of employment opportunities in Africa.

The influence of social capital on opportunity emergence and exploitation: a comparison of portfolio and serial entrepreneurs

Habitual entrepreneurs are a frequent and important phenomenon in entrepreneurship and for the economy. We lack, however, a systematic understanding of the advantages or disadvantages of multiple business ownership and specifically if portfolio and serial entrepreneurs are different in detecting and exploiting opportunities. Research on habitual entrepreneurs has mainly focused on a human capital and an organizational perspective. In order to further advance our understanding of habitual entrepreneurship, we conducted a case study research focusing on the social capital of habitual entrepreneurs and on how, by investigating differences between serial and portfolio entrepreneurs, it is related to the emergence and exploitation of opportunities.

Entrepreneurial experience and access to critical resources: a learning perspective

Purpose – Previous studies demonstrate that novice entrepreneurs access fewer resources than experienced portfolio entrepreneurs. From an entrepreneurial learning perspective, the purpose of this paper is to investigate why they differ in terms of accessing critical resources. Design/methodology/approach – The authors studied entrepreneurs in the Norwegian offshore petroleum industry, which is conservative with strict regulatory regimes and overall high-entry barriers, and in which a good reputation is crucial. Hence, the authors argue that the industry is well suited for a study of the research questions. Findings – The novices’ mind-sets were anchored in technological ideas and they had problems in prioritizing the critical business relationships and market opportunities. They were also unwilling to compromise on ownership control and to disclose business secrets. Portfolio entrepreneurs, on the other hand, acknowledged that technology had had little value if they could not convince market actors. Therefore, they proactively aimed to establish business relations early in the process. They emphasized that a major lesson was to avoid developing excessive attachment to the product but to be willing to share the risks and profits with other industry and market actors. Research limitations/implications – The authors had a limited number of cases, and future contributions should aim to study a larger pool of enterprises, preferably in different industries and national contexts. Practical implications – The findings indicate that novices can learn from the willingness to compromise, in terms of ownership control and disclosure of confidential information to business partners, shown by experienced entrepreneurs. They should also be more willing to involve potential customers at an early stage to gain market knowledge and access. Originality/value – From a learning perspective, this is the first study investigating why novice and experienced entrepreneurs differ in terms of accessing critical resources.

Do you plead guilty? Exploring entrepreneurs’ sensemaking-behavior link after business failure

Abstract Taking account of prior entrepreneurial experience, this study explores how the perceived cause of business failure influences an entrepreneur’s decision to start another business or to abandon entrepreneurship. Using Qualitative Comparative Analysis, we find that the attributional dimensions of locus of causality, controllability, and stability explain a large proportion of novice, serial, and portfolio entrepreneurs’ subsequent behavior in terms of abandoning entrepreneurial activity after business failure. Additionally, we found commonalities and differences between the different types of entrepreneurs. While across all experience levels perceiving the cause of business failure to be permanent yet controllable leads them to decide against starting another venture, differences in the decision to seek a different career path are evident, and depend on whether the entrepreneurs assess the cause of business failure to be internal or external, controllable or uncontrollable, and permanent or temporary.

Portfolio entrepreneurial processes in the context of individual ventures: exploratory findings from high technology industry

Ever since MacMillan's (1986) call to study habitual entrepreneurs, much has been learned about the differences between novice and habitual entrepreneurs as well as the differences between serial and portfolio entrepreneurs. This study attempts to go beyond the traditional analysis of portfolio entrepreneurs based on either firm or entrepreneur level. We try to open the black box of individual ventures launched by portfolio entrepreneurs so as to provide a street-level view of what is really happening at individual ventures. Since what, how, and why entrepreneurs do may vary significantly by individual type of ventures they launch, findings from our study, at the micro level of individual venture, should contribute toward better understanding of portfolio entrepreneurial processes. In view of a very limited amount of past research done at the micro level of individual ventures, however, we rely on in-depth interviews with four successful entrepreneurs from high technology industry in Korea to generate findings and insights.