Venture Formation Research Articles

Country-specific strategy and new venture formation in Central and East Europe

Country-specific strategy and new venture formation in Central and East Europe

Formation and Survival of New Ventures

This article proposes a staged model of how relevant interpersonal and interorganizational networks can affect the formation and survival of new entrepreneurial ventures. Focusing on two critical points in new entrepreneurial venture formation, the article posits that the formation process requires not only the supply of appropriate resources, but also specific patterns of resource exchanges between the entrepreneur, the potential new venture and their respective networks. The model advances the existing literature on new entrepreneurial venture formation by highlighting the importance of maintaining appropriate patterns of resource exchanges between the entrepreneur’s new venture and the relevant networks in which the venture embeds.

The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures

We analyze the role of knowhow acquisition in the formation and duration of joint ventures. Two parties become partners in a joint venture in order to benefit from each other's knowhow. Joint operations provide each party with the opportunity to acquire part of its partner's knowhow. A party's increased knowhow provides the impetus for the dissolution of the joint venture. We characterize the conditions under which dissolution takes place, identify the party that buys out its partner, determine the time to dissolution, establish its comparative statics, and examine the implications of knowledge acquisition for the desirability of joint venture formation.

Packages and Mitsubishi — International Joint Venture Negotiations

This case covers the negotiations between Packages Limited, Pakistan (Packages) and Mitsubishi Corporation, Japan (Mitsubishi) for the formation of a joint venture to produce Biaxially Oriented Polypropylene (BOPP) film in Pakistan. Packages was established in Pakistan in 1957 as a joint venture between the Wazir Ali Group and AB Auckerland and Rausing of Sweden. Packages manufactured paper and board and converted them to packaging products. Mitsubishi was one of the biggest conglomerates in Japan, operating internationally. In 1992, Syed Babar Ali, founder and advisor to Packages proposed establishing a joint venture with Mitsubishi, during his visit to Japan. Upon returning to Pakistan, he asked Packages' senior management to negotiate a joint venture agreement with Mitsubishi. Both Packages and Mitsubishi agreed in principle to establish a joint venture to manufacture BOPP film in Pakistan. In this case, the negotiation process was divided into three phases. The case describes the issue discussed and tactics employed by the two sides during the three phases. The major issues discussed included the price and capacity of the plant, the reimbursement of Mitsubishi's investment if the company suffered repeated losses, raw material supply from Mitsubishi, equity participation, and the control of the management and the board of the new company. In April, 1993, Mr. Javed Aslam, the Deputy General Manager of Packages, received a quotation of US $6.4 million for a 6000-ton plant from Mitsubishi Heavy Industries (MHI). He had to decide if it was feasible for Packages to go ahead with the joint venture with Mitsubishi and what counter offer to make to Mitsubishi Heavy Industries.

Creating Entrepreneurs—Progress and Opportunity in Japan

Well over a decade of economic reforms in Japan has led to a sustained rise in entrepreneurial activity and the formation of high-tech ventures. This transformation offers an example of how shifts in incentives can substantially alter seemingly ingrained business structures, often misunderstood as “cultural” patterns of behavior, and stimulate new sources of innovation. These reforms address such factors as the risks and rewards for entrepreneurs, the transition to commercialization, company formation, company growth, regulation, and financing. Invention disclosures and venture business formation at universities both increased by ten-fold over the seven years between 1996 and 2003, achieving levels comparable to the United States on a per-capita basis, and Japan9s exchanges continue to be receptive to venture offerings. International investors have been minor participants in this rise, but this article argues that there are unique opportunities for such investors in the context of Japan9s investment environment.

Taiwanese Joint Ventures in China

This paper identifies and explains the key strategic motives for joint venture (JV) formation by Taiwanese partner firms investing in China. The leading strategic motives are concerned with economies of scale and cost reduction in order to improve the relative competitive position in the international market and to obtain fast entry into the Chinese market. The paper also examines selection criteria adopted by Taiwanese firms when selecting IJV. This analysis distinguishes between task-related and partner-related selection criteria. The paper further considers the relationship between selection criteria and strategic motives by examining a multiple regression model using the factors of selection criteria and the factors of strategic motives as dependent and independent variables respectively. There is some support for the hypothesis that the relative importance of the selection criteria applicable to Taiwanese partner firms tends to vary with the relative importance of the strategic motivation for JV formation. The paper relates findings to previous studies on strategic motives and partner selection and considers the implications of the findings for practice.

Entrepreneurial Team Development in Academic Spinouts: An Examination of Team Heterogeneity

This article examines the dynamics of entrepreneurial teams as they evolve through the different stages of a spin–out process. Using a unique, hand–collected set of data covering all team members in 10 cases, an in–depth analysis of the heterogeneity of team members’ experience and perception of the strategic orientation needed to attain different milestones in the spin–out process was performed. Our findings suggest that teams evolve over time and change in composition, and therefore, they cannot be studied as immutable entities. At the start of the venture formation, we introduced a new team role, the privileged witness, potentially specific for spinouts. Analysis of the teams indicates that the team's heterogeneity changes as it evolves through the different stages of the spin–out process. In particular, we found that new team members brought in different kinds of experience; however, they did not introduce a different view on doing business from the initial team members.

Country-specific strategy and new venture formation in Central and East Europe

In this study, we examine the influence of three country-specific strategies ( market-seeking, client-following and resource-seeking) on new venture formation decisions for firms entering Central and East Europe. We found that market-seeking and resource-seeking strategies tend to influence venture choice while no such relationship was found for firms pursuing a client-following investment strategy. We conclude by discussing the implications of our findings for future research on new venture formation.

Should Government be Stimulating Start-ups? An Assessment of the Scope for Public Intervention in New Venture Formation

Although there is broad recognition amongst policymakers of the significance of new business start-ups to the economy, there is an ongoing debate in the research literature as to the feasibility and desirability of intervention at this stage of business development. Of particular concern is the extent to which government can target resources so that there is substantive additional impact arising from public intervention. Using the experiential ‘decision rules' of private investors, the author develops a broad framework for assessing the future potential of new ventures. Implications are considered for intermediaries working with all types of new venture prospect.

Entrepreneurial learning: A conceptual framework for technology-based enterprise

Entrepreneurial learning has emerged as an important yet insufficiently understood area of enquiry. This paper develops new understanding in this area from a social constructionist perspective by using narratives elicited from technology-based entrepreneurs to explore their learning experiences and behaviours. The unit of analysis is the emergent entrepreneur in the technology-based enterprise. The paper develops a framework for analysing entrepreneurial learning through in-depth analysis of entrepreneurial experiences by using discourse analysis based on a social learning perspective. This conceptual framework includes three major themes of personal and social emergence, contextual learning and the negotiated enterprise, and 11 related sub-themes. These demonstrate connections between the emergence of entrepreneurial identity, learning as a social and contextual process, opportunity recognition, and venture formation as a negotiated activity.

Innovation success through corporate venturing: an empirical analysis of the relevant success factors

Established and market-dominating corporations, operating in hypercompetitive global markets, have to overcome obstacles to successful innovation, because of a lack of strategic flexibility and speed. This is mainly due to their huge size. Corporate venturing (CV) could be a means to overcome these laggard tendencies of incumbents through the formation of ventures, where the elaborated resource base of the established corporation can be joined with the dynamism of small start-up ventures. The empirical investigation undertaken had the purpose to find success factors of corporate venturing in the case of European corporations. A survey with internet-based questionnaires was conducted and a statistical analysis was performed based on the results. The questionnaire has been generated from the resource-based view and competence-based view literature (RBV/CBV) on corporate venturing. The statistical analysis of the success factors confirms many of the theoretical assumptions, which can be made about CV from the RBV/CBV perspective.

New ventures based on open innovation an empirical analysis of start-up firms in embedded Linux

An important and intriguing aspect of e-entrepreneurship is the formation of new ventures in the domain of open source software (OSS). Previous research on these ventures has primarily looked at the design of business models. The purpose of this paper is to explore how three key challenges of venture management – the liabilities of newness and smallness of start-ups and market entry barriers – affect new ventures in OSS. Based on empirical data from personal interviews and a large scale survey, we find that several liabilities that are typically discussed in the entrepreneurship literature are much less of a challenge for new ventures in OSS. Our findings have implications for the emerging theory on e-entrepreneurship and for entrepreneurs considering to exploit business opportunities based on OSS and on open innovation in general.

Confucian value system and its impact on joint venture formation

Prior research suggests that in international joint ventures (IJVs) between firms from diverse cultures, partner related factors are of importance for the successful management of the joint venture. This paper reports the study of IJVs formed by Singapore firms in People's Republic of China and India. Since Singapore and China share a common Confucian culture, it was expected that a Singapore firm's approach to joint venture formation in India will differ significantly from its approach to joint ventures in China. The results, however, suggest that the partner selection process follows a different logic in Confucian societies, and Singapore firms were as successful in forming IJVs in India as in China. The paper further explores the influence of Confucian ethics and values on the formation of Chinese business networks. Findings also suggest that Singapore firms have bought into the Confucian value system, and the argument that partner commitment and trustworthiness are critical to long-term, harmonious and successful joint ventures.

POINTS OF VIEW Assessing the scale of the equity gap

PurposeThis paper sets out to assess the market for start‐up finance in the UK for high growth potential entrepreneurial firms.Design/methodology/approachThe paper uses data from the UK's Global Entrepreneurship Monitor surveys between 2001 and 2003 to assess the scale of equity finance in the UK. It further examines the strengths and weaknesses of the UK financial markets for supporting high growth potential firms on the basis of an additional survey of 60 experts conducted during September and October 2003.FindingsThe paper suggests that there are areas of the market that are strongly served by existing financial mechanisms. However, there is a perception amongst business support agencies, venture capitalists and entrepreneurs alike that the size of investments in the formal venture capital market has been increasing and that companies seeking investments above this level, up as high as £2 million, may be restricted in their access to finance. The paper tests this qualitative finding on a number of empirical data sources and finds that there is indeed an “equity gap” of between £150,000 and £1.5 million. It concludes that lack of finance in this area represents a brake on the expansion of high growth potential businesses in the UK.Research limitations/implicationsThe empirical data covered in this paper are from three large‐scale surveys of the adult population in the UK. While this is robust as a reflection of what is happening amongst the whole spectrum of business start‐up activity, the methodology was not originally conceptualised as a mechanism for assessing the scale of the equity gap. This evidence was gained from a qualitative survey of actors in the market. Further research should survey high growth potential firms and financiers themselves in more detail to develop the analysis on a more systematic basis.Practical implicationsThe research will be of interest to policy makers who seek appropriate mechanism for developing a funding “ladder” to support businesses through the growth process. It identifies a clear gap in the market for growth finance that is evidence on which to base funding priorities in the future.Originality/valueAcademic and policy attempts to quantify the scale of the equity gap in the UK have been limited by availability of longitudinal and systematic data. As a result, they have tended to be largely qualitative in nature and prone to anecdote. Many of these studies do corroborate the findings reported here, but this does represent a first attempt to provide a quantification of the equity gap and thus should be of interest to policy makers, practitioners and academics alike.

NOVEL APPROACH TO STUDY COMPRESSION PROPERTIES IN TEXTILES

Abstract Data analysis of a fabric.s compression properties can only be done when the limits of compression are known. The best formula is van Wyk.s, although the meaning of the physical parameter is still not clear. On the basis of van Wyk.s equation, a study of the compressibility of woven fabrics can be initiated in partnership with Pierce, Kemp and Hamilton.s approach for circular yarns and the flattened yarns of a fabric under pressure. Neural network models promise to solve the drawbacks of de.Jong.s and other models. The fit of the pressure-thickness relationship may be improved by using exponential function and the Iterative method, such as Marquardt.s algorithm for evaluating compression properties. Back-propagation promises to give better results, since the KESFB3 compression measuring instrument works by minimising error levels. The optimisation of low-stress mechanical properties is possible by using trained networks, and this venture forms an absolute method for comparing the functional properties of fabrics.

Swedish BioTech SMEs: The veiled values in online networks

For many years, sociologists have conceptualized and debated the value of ‘social capital’, the resources embedded in an actor's social network. The notions of network organizations and strategic alliances have become important forms of entrepreneurial venture, yet often the value in these networks is veiled by network complexity. These associations of individuals and organizations are typically undocumented, difficult to identify by third parties, and even pass unrecognized by their constituent members. They consist of informal Internet networks that are extremely valuable because of the strategic social capital embedded in them. Drawing on social network theory, this paper outlines a methodology for viewing and valuing informal Internet networks, using small-to-medium sized enterprises in the Swedish biotechnology arena as a backdrop. It demonstrates that networks can be constructed from the links between the web sites of actor firms, and that it is possible to use social network theory to identify the most prominent actors. Then, using structural hole analysis, the entrepreneurial opportunities surrounding these actors can be unveiled.

Investment practices and outcomesof informal venture investors

This study explores a model of venture investing developed from the literature on formal venture capital research in the setting of angel investing in the USA. The model explores the role of venture stage, due diligence, deal flow, co-investing and post investment participation on the distribution of returns to angel investors. Doing so directly addresses an interesting question regarding the extent to which formal venture capital practices are appropriate and effective in the typical angel investment setting. In the process, results from the first relatively large-scale study of angel investor outcomes in the USA are reported and related to earlier findings for UK angel investors.

Executive forum: Seven ways to stimulate business angels' investments

Government policy to stimulate growth, innovation and especially the creation of new enterprises is rather focused on access to finance mainly through increasing the supply of capital. As formal venture capitalists are moving towards larger deals and shifting their investments to a later stage of development, creating a ‘second’ equity gap, business angels become more important in the financing of seed, early stage and second round phases. Government policy to stimulate financing should hence be considered as a priority. However, policies have to be focused both on the supply side and the demand side and combined with a cultural change. Government should look at innovative ways to stimulate business angel financing rather than coping with market failures by bureaucratic subsidy schemes. The paper identifies seven ways to stimulate business angel investment. Coping with the second equity gap can mainly happen by stimulating syndication and by setting up co-investment schemes. Investor readiness, corporate orientation, business angel networks, business angel academies and the integrated finance concept can be considered as key concepts in coping with the information asymmetry problem.

A BIOGRAPHICAL STUDY OF ISAMBARD KINGDOM BRUNEL AS INSIGHT INTO ENTREPRENEURIAL MARKETING ENDEAVOUR

This paper focuses on a biographical approach to entrepreneurial marketing research. Conventional research methodologies such as in-depth interview and questionnaires have a range of advantages, disadvantages and bias. Biographical research can result in the generation of longitudinal data which can be triangulated with data and theory from these more conventional approaches in order to enhance understanding of entrepreneurial marketing behaviour. In marketing, formal prescriptions of stepwise, linear processes dominate and in entrepreneurship the focus is often on new venture formation rather than in growing the firm. Previous research by the authors has focused on the creativity of individuals, groups and organisations using a combination of conventional research methods and the biographical approach. The paper builds on this research by investigating the entrepreneurial marketing endeavour of perhaps the best known British engineer, Isambard Kingdom Brunel. Although Brunel was first and foremost an engineer he was also a shrewd business person who demonstrated understanding of entrepreneurial marketing procedures. Comparing the findings with previous research results, it can be seen that a set of core entrepreneurial marketing constructs hold true over long periods of time. These factors can then be taken into consideration when developing more creative, entrepreneurial marketing theory for the firm.

Entrepreneurial learning: a narrative‐based conceptual model

PurposeEntrepreneurial learning is an important area of enquiry which is not well understood in either the academic study of entrepreneurship or the practical development of new entrepreneurs. The article aims to explore two questions: first, how do people learn to work in entrepreneurial ways – are there significant processes and experiences in their learning, which can be related to existing learning theories? Second, can a useful framework to understand entrepreneurial learning be developed and applied both in entrepreneurial practice and conceptually by educators?Design/methodology/approachThe article includes a brief critical review of the theoretical literature in the areas of entrepreneurship and learning. Thematic discourse analysis is used to interpret the life story narratives of three entrepreneurs in the creative industries. Material from their learning experiences is used to support the development of a conceptual model. This demonstrates connections between the emergence of entrepreneurial identity, learning as a social process, opportunity recognition, and venture formation as a negotiated activity.FindingsThe principal finding is to propose a conceptual framework of entrepreneurial learning as a triadic model, including major themes of personal and social emergence, contextual learning, the negotiated enterprise, and a group of 11 related sub‐themes.Practical implicationsApplications of the model in entrepreneurship education, work‐based learning and practice, are proposed, within and beyond the context of the creative media industry.Originality/valueThe paper develops an original and distinctive conceptual understanding of entrepreneurial learning through analysis of entrepreneurs' experiences, based on a social learning and constructionist perspective.