Successful Entrepreneurial Firms Research Articles

The evolution of owner-entrepreneurs’ taxation: five tax regimes over a 160-year period

The institutional literature suggests that long-term tax incentives are crucial for entrepreneurs, but studies on this topic are hampered by problems related to how to define and measure entrepreneurial income. We resolve these problems by drawing on a theoretical definition of the entrepreneur as an owner, which enables us to identify entrepreneurship empirically by means of investments made by active owners of closely held corporations. Using detailed Swedish tax data, we analyze the tax incentives for such owner-entrepreneur investments from 1862 to 2018, thereby highlighting the evolution of a general institutional phenomenon through a long-run, in-depth, country-specific analysis. We calculate the annual marginal effective tax rate (METR) on capital income for investments, distinguishing between average- and top-income entrepreneurs, and between three sources of finance. We identify five tax regimes that indicate substantial differences in institutional quality over time according to the magnitude of the METR and METR differences between average- and top-income entrepreneurs and across sources of finance. Growth-conducive tax incentives shed light on why so many successful entrepreneurial firms were founded in Sweden around 1900, whereas increased taxation helps explain the absence of new large entrepreneurial firms in Sweden after World War II. Improved incentives can be associated with Sweden’s recent entrepreneurial renaissance.

Toward a complex adaptive system: The case of the Zhongguancun entrepreneurship ecosystem

Viable entrepreneurship ecosystems (EEs), which provide sustainable competitive advantages to innovative regions, have become increasingly important for producing high-impact entrepreneurial firms. However, little is known about the complexity nature that viable EEs uncover under specific regional entrepreneurial contexts. By integrating the EE literature and complex adaptive system (CAS) theory, we conducted a case study on the Zhongguancun EE in China. We demonstrate six interrelated complexity properties of a viable EE: a large number of self-organized agents, nonlinear interactions, (in)sensitivity to initial conditions, adaptation to the environment, emergence of successful entrepreneurial firms, and coevolution. Moreover, the integration of these six complexity properties offers an overarching understanding of how the Zhongguancun EE maintained its viability over time. We contribute to the EE literature by developing a more nuanced complexity-based understanding of a viable EE and extend CAS theory at the ecosystem level by highlighting an EE’s adaptive process to maintain its viability.

Value Drivers of Selected Small and Medium Entrepreneurial Businesses in Southwestern Nigeria

The study examined the value drivers of successful entrepreneurial firms in southwestern Nigeria. Customer relations, innovation, human capital, risk-taking and pro-activeness were proposed to be strategic areas firms explore to sustain their business in a turbulent period. Twenty four firms with minimum of fifteen years active operations were selected across the six states in southwest Nigeria. Each state accounted for four firms used for the study. Stepwise regression analysis was used to analyse and process the data. The result showed three- customer relationship, innovation, and human capital - of proposed value drivers made the threshold entry requirement at 0.05%. Innovation was identified to be highest driver of values among entrepreneurial firms in southwest. Human capital development and customer relations equally accounted for the drivers of successful entrepreneurial firms.

The link between creativity and credibility with sustainable growth of entrepreneurial firms: evidence from Sri Lanka

This paper shows how creativity and credibility of entrepreneurial firms in Sri Lanka contribute to sustained growth in constantly turbulent and hostile emerging market conditions characterised by high uncertainty and risk owing to political and economic instability, internal ethnic conflicts and changes in social values. This is a suitable context to test the significance of individual and corporate credibility on the survival and growth of entrepreneurial firms operating in different market environments. This study applied a mixed research methodology by combining case research and a questionnaire based large survey on the owners and top managers of 158 successful entrepreneurial firms operating in Sri Lanka. This research found that in a turbulent and hostile emerging market context, creativity and credibility significantly influence entrepreneurial firm growth. The findings offer entrepreneurs in emerging markets important insights into growth strategies for surviving and thriving in often-hostile market conditions.

The link between creativity and credibility with sustainable growth of entrepreneurial firms: evidence from Sri Lanka

This paper shows how creativity and credibility of entrepreneurial firms in Sri Lanka contribute to sustained growth in constantly turbulent and hostile emerging market conditions characterised by high uncertainty and risk owing to political and economic instability, internal ethnic conflicts and changes in social values. This is a suitable context to test the significance of individual and corporate credibility on the survival and growth of entrepreneurial firms operating in different market environments. This study applied a mixed research methodology by combining case research and a questionnaire based large survey on the owners and top managers of 158 successful entrepreneurial firms operating in Sri Lanka. This research found that in a turbulent and hostile emerging market context, creativity and credibility significantly influence entrepreneurial firm growth. The findings offer entrepreneurs in emerging markets important insights into growth strategies for surviving and thriving in often-hostile market conditions.

And the winner is—Acquired. Entrepreneurship as a contest yielding radical innovations

New entrants to a market tend to be superior to incumbents in originating radical innovations. We provide a new explanation for this phenomenon, based on markets for technology. It applies in industries where successful entrepreneurial firms, or their technologies, are acquired by incumbents that then commercialize the innovation. To this end we analyze an innovation game between one incumbent and a large number of entrants. In the first stage, firms compete to develop innovations of high quality. They do so by choosing, at equal cost, the success probability of their R&D approach, where a lower probability accompanies higher value in case of success—that is, a more radical innovation. In the second stage, successful entrants bid to be acquired by the incumbent. We assume that entrants cannot survive on their own, so being acquired amounts to a prize in a contest. We identify an equilibrium in which the incumbent performs the least radical project. Entrants pick pairwise different projects; the bigger the number of entrants, the more radical the most radical project. Generally, entrants tend to choose more radical R&D approaches and generate the highest value innovation in case of success. We illustrate our theoretical findings by a qualitative empirical study of the Electronic Design Automation industry, and derive implications for research and management.

Entrepreneurial business ethics: a special case or business as usual?

Entrepreneurs pursue opportunities [for business success] without regard to resources currently under [their] control. Often cited as primary agents of economic growth, entrepreneurs have been extensively analysed. Many articles address the personal traits and behaviours of entrepreneurs, the elements of successful entrepreneurial firms, the role of entrepreneurs and their firms in society and their obligations to society. There seems to be general agreement that entrepreneurs are more comfortable with ambiguity and risk (than general corporate managers). But, it should be noted, that entrepreneurs are not necessarily more or less successful in business endeavours; they are just different. This paper has three parts: firstly, it briefly explores the definition of entrepreneurs, entrepreneurial practices and ethical decision making by entrepreneurs. Secondly, it describes a qualitative research project that investigated entrepreneurs and their ethical decision-making environment. Finally, it makes recommendations to entrepreneurs concerning their ethical decision making.

The need for organization development in successful entrepreneurial firms

The need for organization development in successful entrepreneurial firms

Entrepreneurship's requisite areas of development: A survey of top executives in successful entrepreneurial firms

Precisely what does one “need to know” in order to become a successful entrepreneur? When should we first begin teaching this knowledge? How should this knowledge be conveyed? These questions and others were answered by 100 leading entrepreneurs and chief executive officers in America's fastest-growing entrepreneurial firms. Questions such as those listed above are rapidly taking on increased importance not only for enhancing U.S. national competitiveness, but also around the world. For instance, eastern block countries wish to understand these questions as they attempt to establish free market economies and foster the entrepreneurial spirit, while developing countries need answers as they turn more toward entrepreneurship as a viable vehicle for promoting economic development and improved living standards for their citizens. This research develops a theoretical framework suggesting four primary areas in which successful entrepreneurs must be developed. Specifically, these areas are content, skills and behavior, mentality, and personality. The first three areas, content, skills and behavior, and mentality are referred to as areas of creative knowledge. This is because new knowledge is brought into existence during the creation and subsequent management of growing business entities. The study analyzes the responses of 100 chief executives from Inc. magazine's list of the nation's most successful publicly held entrepreneurial firms for the years 1979–1989. A list of requisite areas of knowledge in terms of content, skills, and mentality is developed. Personality characteristics necessary for entrepreneurial achievement are also delineated. Examples of essential domains of knowledge include finance/cash management, engineering, accounting, etc. in the area of content. Leadership, communication, and human relations are some of the skills and behaviors deemed essential. Creativity, opportunistic thinking, vision, and positive thinking are examples of required mentality attributes. Self-motivation, propensity for risk-taking, and deep-seated ethical values are required in terms of personality characteristics. After determining the areas of knowledge required for successful entrepreneurship, the study goes further to determine (1) if the executives believe the knowledge can in fact be taught, (2) the priority level of importance of the knowledge, and (3) suggested methods for conveying or teaching such knowledge. The results of the study represent a first attempt in the U.S. for systematically determining, from successful entrepreneurs, the knowledge believed important for engendering successful entrepreneurship. The results will help the designers of entrepreneurship education curricula in deciding which areas might be included in such curricula and which should receive greater emphasis. Finally, while the results could very well be different in other cultures and countries, they could represent a starting point for further analysis in other parts of the world as governments, academicians, and business communities attempt to foster the entrepreneurial spirit as a means of economic development and improvement of local standards of living.

The relationship between governance structure and corporate performance in entrepreneurial firms

Organizational scholars and practitioners alike continue to focus on the role of chief executive officers and boards of directors in small and entrepreneurial firms. The popular business literature suggests strong linkages between these individuals and firm performance among the largest firms; however, this linkage may be strongest in the more modestly sized firm. While there is little agreement concerning the nature and strength of this relationship, it is clear that this issue remains a fruitful area of investigation. This study examines the organizational agent/firm performance linkage focusing specifically on the role of founder chief executive officers (CEOs) and the composition of the boards of directors. Extant research would suggest that founder CEOs rely on dysfunctional governance structures (e.g., CEO duality, lower numbers of outside directors, lower proportions of outside directors) to a greater extent than their non-founder counterparts. Additionally, it is believed that these inappropriate governance structures will be associated with decreased firm performance. The 1989 Inc. 100 corporations provide the sample of firms to test these propositions. The data reveal that CEOs of these successful entrepreneurial firms do not demonstrate a tendency to adopt inappropriate governance structures. This finding is contrary to related research which has found that stable small corporation founder CEOs are less likely to utilize prescribed governance structures, jeopardizing firm performance. Founder CEOs of the Inc. 100, however, apparently realize the benefit of outside direction and elect to rely on the independent structure and outside board direction in similar degrees as their non-founder cohorts. The CEO's ability to sacrifice some measure of control by inviting outside direction may contribute to the overall high performance of this sample of firms. While no performance differences were apparent under either dual or independent board leadership, modest performance advantages were found with greater numbers and proportions of outside directors. These findings provide some support for the ability of founder and non-founder CEOs to relinquish the tight control and effectively guide the growth of the firm. The board of directors, then, provides a sensible tool when striving for the goal affirm growth. While it is unlikely that there is one optimal board configuration that will effectively guide the entrepreneurial firm to success, utilizing the expertise and resources provided by outside directors appears to enable the desired growth. Future investigations in this area may provide further understanding of the value of outside assistance and the specific types of outside directors that may best contribute to firm performance.

Leadership: The Art of Empowering Others

I n his handbook, The Prince, Machiavelli assures his readers some being aspiring leaders, no doubt that only by carefully amassing power and building a fearsome respect could one become a great leader. While the shadowy court life of 16th-century Italy demanded such treachery to ensure one's power, it seems hard to imagine Machiavelli's advice today as anything but a historical curiosity. Yet, interestingly, much of the management literature has focused on the strategies and tactics that managers can use to increase their own power and influence.' As such, a Machiavellian quality often pervades the literature, encouraging managers to ensure that their power base is strong and growing. At the same time a small but increasing number of management theorists have begun to explore the idea that organizational effectiveness also depends on the sharing of power that the distribution of power is more important than the hoarding of power.2 While the idea of making others feel more powerful contradicts the stereotype of the all-powerful executive, research suggests that the traditional ways of explaining a leader's influence may not be entirely correct. For example, recent leadership studies argue that the practice of empowering or instilling a sense of power is at the root of organizational effectiveness, especially during times of transition and transformation.3 In addition, studies of power and control within organizations indicate that the more productive forms of organizational power increase with superiors' sharing of power and responsibility with subordinates.4 And while there is an increasing awareness of this need for more empowering leadership, we have only recently started to see documentation about the actual practices that leaders employ to effectively build a sense of power among organizational members as well as the contexts most suited for empowerment practices.5 In this article, I will explore these practices further by drawing upon a recent study of senior executives who proved themselves highly effective leaders. They were selected by a panel of professors at the Harvard Business School and management consultants who were well acquainted with them and their companies. The study included eight chief executive officers and executive vice-presidents of Fortune 500 companies and successful entrepreneurial firms, representing industries as diverse as telecommunications, office automation, retail banking, beverages, packaged foods, and managementconsulting. In each case, these individuals were responsible for either the creation of highly successful companies or for performing what were described as remarkable turnarounds. During my study of these executives, I conducted extensive interviews, observed them on the job, read company and other documents, and talked with their colleagues and subordinates. While the study focused on the broader issue of leadership styles, intensive interviews with these executives and their subordinates revealed that many were characterized as empowering leaders. Their actions were perceived as building confidence and restoring a sense of personal power and self-efficacy during difficult organizational transitions. From this study, I identified certain organizational contexts of powerlessness and management practices derived to remedy them. In this article I will also illustrate several of these practices through a series of vignettes. While the reader may recognize some of the basic ideas behind these practices (such as providing greater opportunities for initiative), it is often the creative manner in which the leader deploys the particular practice that distinguishes them. The reader will discover how they have been carefully tailored to fit the context at hand. I might add, however, that these practices represent just a few of the broad repertoire of actions that leaders can take to make an empowering difference in their organizations.