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We thank John Freeman, AnnaLee Saxenian, and David Vogel for their helpful comments on earlier
versions of this article and Adrian Bangerter and Chip Heath for sharing their questionnaire on the
Mozart effect. Many research assistants helped with this project and the authors are especially
grateful to Ara Cho. The authors thank California Management Review for funding a 2004-2005
doctoral student fellowship for Chris Rider.
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 20056
A Garage and an Idea:
W
HAT
M
ORE
D
OES AN
E
NTREPRENEUR
N
EED
?
Pino G. Audia
Christopher I. Rider
Silicon Valley started with a garage (or so the story goes). In a small
garage in Palo Alto, California, in 1938-1939, William Hewlett and
David Packard experimented with numerous electronic devices,
including a prototype for an audio oscillator. That oscillator eventu-
ally enabled the pair of entrepreneurs to launch Hewlett-Packard (HP), one of
the largest high-tech companies in the world today. Over the next 50 years,
numerous technology companies—including Apple, Cisco, and Intel—would
be founded in Silicon Valley, the world’s foremost high-tech region. In 1989,
the garage at 367 Addison Avenue was designated California Historic Landmark
Number 976 and a plaque declaring “Birthplace of Silicon Valley” was placed at
the front of the garage.
The HP garage is the most celebrated example of a popular belief in the
United States—that it is common for entrepreneurs to start companies in garages
(hereafter, “the garage belief”). Indeed, U.S. business history offers numerous
stories of successful entrepreneurs (e.g., Walt Disney, Steve Jobs) whose garages
served as early workshops for the products and services that eventually
launched prominent U.S. businesses. However, the garage signifies more than
just a commonly perceived locus of entrepreneurship. Rather it is a symbol that
conjures up some common images of entrepreneurship, including the inspira-
tional generation of innovative ideas, old-fashioned hard work and American
ingenuity, bootstrapping resources to chase a dream, a rejection of the status
quo, and the freedom of working for oneself.
This article explores the realities of the entrepreneurial garage by address-
ing three main questions. First, how popular is the garage belief? Second, how
accurate is the garage belief (and what other stories might be more accurate
than the garage)? Third, why is the garage belief popular and why does it
persist?
For many “garage entrepreneurs,” the garage (or basement or dorm room
or kitchen) is primarily a temporary logistical arrangement and not a prerequi-
site for entrepreneurship. Moreover, the garage is not nearly as common to
entrepreneurship as is commonly believed. The garage entrepreneur is a con-
temporary legend that obtains its staying power not from its accuracy but,
rather, from its ability to tap common emotions in the portion of the American
public that is interested in entrepreneurship (i.e.,
entrepreneurs, the business press, venture capi-
talists, and business school students and faculty).
The legend of the garage entrepreneur obscures a
more central reality of entrepreneurship research.
Many entrepreneurs acquire the psychological
and social resources necessary to form new com-
panies through prior experiences at existing orga-
nizations in related industries. Although some
individuals become successful entrepreneurs without related prior experience,
they are the exception, not the rule. Entrepreneurs are often organizational
products.
1
The legend of the garage entrepreneur is misleading because it implic-
itly teaches the wrong lessons about what it takes to become a successful entre-
preneur. While the legend of the garage entrepreneur evokes the image of the
lone individual who relies primarily on his or her extraordinary efforts and tal-
ent to overcome the difficulties inherent in creating a new business, the process
of creating a new company is eminently social. By misrepresenting the process
by which many individuals become entrepreneurs, the garage belief may lead to
seriously misinformed employment choices by individuals, ill-advised resource
allocation decisions by companies, unsuccessful course offerings by business
schools, and/or ineffective program offerings by governments.
How Popular Is the Garage Belief?
In addition to its association with HP and Silicon Valley, the garage owes
much of its prominence to its association with the founding stories of several
successful companies. For example, the Walt Disney Company’s story includes
at least two different garages (one in Kansas City and one in California) that
Walt Disney used as animation workshops prior to founding his company. In
addition, the history of Apple Computer includes tales of Steve Jobs and Steve
Wozniak and Apple’s early days in Jobs’ parents’ garage. Furthermore, the
founding stories of toy companies Mattel (the Los Angeles garage of founders
Elliott and Ruth Handler) and Wham-O (a Pasadena garage) also feature garages
in prominent roles.
2
These examples are a few of many such stories.
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 7
Pino Audia is an Assistant Professor of
Organizational Behavior at the Haas School
of Business at the University of California,
Berkeley. <audia@haas.berkeley.edu>
Chris Rider is a Ph.D. student in Organi-
zational Behavior at the Haas School of
Business at the University of California,
Berkeley. <rider@haas.berkeley.edu>
At some point, the entrepreneur’s garage began to symbolize the proto-
typical early, formative phase of a startup company. For example, a prominent
Silicon Valley venture capital firm bears the name Garage Technology Ventures.
Co-founder Guy Kawasaki explains his firm’s name by stating that “‘Garage’ is
a state of mind. It’s a rejection of the status quo. It’s ‘I don’t need dozens of
engineers and marketers with MBAs to clean the competition’s clock.’”
3
Garage
Technology Ventures is no bit player in Silicon Valley—the biggest investor in
the firm’s $20 million Garage California Entrepreneurs Fund is the California
Public Employees Retirement System,
4
the largest public pension fund in the
United States. In 2004, Kawasaki published a best-selling book, The Art of the
Start, that offered strategies and tactics for nascent entrepreneurs. Summarizing
the book’s contribution to entrepreneurs, Michael Moritz, a partner at Sequoia
Capital, remarked: “A successful entrepreneur requires three things: a garage,
an idea, and this book.”
5
Now, is the garage belief primarily a Silicon Valley or even a California
phenomenon? The U.S. National Commission on Entrepreneurship funded a
study by two Harvard Business School researchers that investigated the founding
histories of the 1997 Fortune 200. The product of this study was a report titled
“From the Garage to the Boardroom: The Entrepreneurial Roots of America’s
Largest Corporations.”
6
Clearly, the garage belief has national prominence.
Moreover, references to the garage belief have surfaced outside of North Amer-
ica. For example, in discussing the promotion of Bruce Chizen to CEO of Adobe
Systems, an article in The Economist suggested that the company’s founders real-
ized that “Adobe had to outgrow its ‘garage’ culture.”
7
This is a rather peculiar
choice of words given that Adobe was founded in December of 1982 by John
Warnock and Charles Geschke on the basis of the PostScript language the two
developed at Xerox PARC.
The garage is a symbol of entrepreneurship that elicits common under-
standings among business professionals. This belief is supported with more than
just anecdotal observations. We conducted a survey of business school students
to gauge their familiarity with the idea of the garage entrepreneur. While the
garage appears to be the most prominent reference for entrepreneurial work-
shops, other stories of successful entrepreneurs include the basement (Jim Casey
and Claude Ryan and the American Messenger Company—now UPS), the dorm
room (Michael Dell and Dell Computer), and the kitchen (catalog entrepreneur
Lillian Vernon).
8
We included these alternative workshops in our survey.
Respondents (N = 204) reported familiarity with the notion that entrepreneurs
often start businesses in garages, basements, dorm rooms, or kitchens (mean =
4.1 on a 1-5 scale of increasing familiarity). In addition, 89% of respondents
were able to name at least one company started in such locations. Furthermore,
respondents estimated, on average, that 48% of entrepreneurs start businesses
in this way. To check the popularity of the garage entrepreneur belief outside
of business schools, we conducted a random telephone survey in the 510 area
code, with respondents (N = 79) representing a broad range of occupations (e.g.,
architects, painters, business owners, lawyers, consultants, full-time mothers)
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 20058
and age groups (range: 20 to 85). They also reported familiarity with the notion
of the garage entrepreneur (mean = 3.5 on a 1-5 scale of increasing familiarity).
Furthermore, 87% of the respondents named at least one company started in a
garage, basement, dorm room, or kitchen. Apple and HP were the most common
examples. On average, these respondents estimated that 30% of entrepreneurs
started businesses in such locations.
We also conducted an archival study to estimate the popularity of the
garage belief in the U.S. business and finance press as compared to a common
indicator of entrepreneurial activity, annual venture capital investment (in mil-
lions of dollars). We conducted searches on the Lexis-Nexis
TM
Academic search
engine from 1980 to 2003 to measure the number of business and finance news
articles that included the term “entrepreneur” and “garage, basement, dorm, or
kitchen.” Then, each article returned by the search was counted as a “hit.” The
annual hit counts ranged from two in 1981 to 245 in 2000. Next, we plotted the
time series of hit counts along with the annual total dollar amount of venture
capital invested in early- and expansion-stage companies from 1980 to 2003.
9
The raw data from this analysis is represented in Figure 1. The general trend
is a steady rise in the number of hits until the mid-1990s when the hit counts
increased substantially, coinciding with the dot-com era. The relationship in
Figure 1 is remarkably clear. References to the garage rise with increases in
entrepreneurial activity (as measured by venture capital investment); the corre-
lation between the two time series is 0.95. Notably, the hit counts peak in the
same year in which venture capital investment peaks—at the height of the
Internet bubble in 2000. We can infer from this that the garage has gained in
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 9
FIGURE 1. Venture Capital Investment and Media References to “Entrepreneurs” and
“Garages, Basements, Dorms or Kitchens,” 1980-2003
1980 1984 1988 1992 1996 2000
VC Investment
Hits
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
300
250
200
150
100
50
0
popularity over time and, furthermore, that the garage’s popularity is promoted
by the business press.
How Accurate Is the Garage Belief?
While this quantitative evidence supports the garage’s popular status as
a startup icon, how accurate is the belief that garages and alternative workshops
are common to entrepreneurship? We conducted a random survey of actual
startup companies to gauge the prominence of the garage in the emergence of
new firms and, by extrapolation, the accuracy of the garage belief. We sampled
young companies in the hopes that the founders would still be working at the
company and, if the founders were unavailable, that other employees would
be familiar with the company’s recent history and able to answer our questions.
The sampling frame was all U.S. startup companies receiving venture capital
financing in the second half of 2004.
10
From this list, we randomly selected 90
startup companies in a variety of industries, including biotechnology, construc-
tion, digital media, food distribution, software, and telecommunications. We
were able to discuss the company’s founding story with 32 of the startups.
11
This study revealed that some companies are indeed started in such
places as garages, basements, dorm rooms, and kitchens. Representatives of
eight (25%) of the 32 companies whose representatives we interviewed reported
starting in a garage, basement, dorm room, or a room in one of the founders’
residences.
12
That is approximately half of the average estimate that business
school respondents provided in our first survey and is only slightly below the
average estimate of the respondents of the random phone survey. However, in
each case, the arrangement was temporary, lasting only until the company
found a suitable office space. In addition, of the 32 companies in our sample,
29 companies were operating businesses (91%) that were in some way related
to the founders’ prior experience (e.g., same industry, idea developed at a previ-
ous employer, founder is a serial entrepreneur). Moreover, 16 of the 32 compa-
nies (50%) were founded by individuals who had previously worked together,
and another five companies (16%) were started by close friends or family mem-
bers. So, nearly 66% (21 of 32) of the companies in our random sample were
founded by people with strong prior social ties.
Not surprisingly, the findings of our survey are consistent with an emerg-
ing literature in entrepreneurship research. A key idea emerging from this litera-
ture is that organizations are social contexts within which individuals acquire
many of the psychological and social resources necessary to create new organi-
zations.
13
To use Freeman’s felicitous expression, this body of work suggests
that entrepreneurs often are organizational products.
14
Entrepreneurs as Organizational Products
The notion of entrepreneurs as organizational products suggests that,
in comparisons between otherwise similar people, those employed by existing
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200510
organizations
15
are more likely to start a new company in the same or a related
industry. There are three reasons why organizational experience increases the
probability that an individual may start a new company. First, organizations
create opportunities for individuals to build confidence in their abilities to create
and run a new company.
16
Second, organizations provide access to broad indus-
try knowledge and fine-grained information about entrepreneurial opportuni-
ties, neither of which are readily available to outsiders.
17
Third, organizations
help individuals form social networks that facilitate the mobilization of resources
necessary to form a new company.
18
Confidence in one’s “judgment and disposition” is essential to entrepre-
neurship.
19
Starting a company is a time-consuming challenge that discourages
many individuals from trying and also causes many who do try to give up.
20
Confidence, a belief in one’s ability to perform a task,
21
is a critical differentiating
factor between those who start a business and those who do not. For example,
Cooper, Woo, and Dunkelberg found that 95% of entrepreneurs surveyed per-
ceived their business’s chances of success to be better than or equal to the
chances of any similar business.
22
In a laboratory study, Camerer and Lovallo
found evidence of excess market entry—entry into crowded markets that offered
slim success chances—ostensibly instigated by individuals who held biased (i.e.,
overconfident) assessments of their competitive abilities.
23
How do organizations provide employees with confidence? While
employed, individuals accumulate mastery experiences through success on tasks
important to organizational functioning,
24
especially tasks similar to those per-
formed in the role of entrepreneur. In addition, vicarious experiences expose
employees to peers succeeding through sustained effort who then become social
models.
25
These entrepreneurs transmit knowledge, vicariously, to other
employees that may stimulate employees to entertain notions of becoming
entrepreneurs. For example, Saxenian quotes a founder of a minicomputer firm,
“Those guys [entrepreneurs] were just like you and me. There was nothing
unique or special about them. I figured if they can do it, why can’t I?”
26
In this
way, organizations are instrumental in enhancing employees’ confidence in their
entrepreneurial abilities and these opportunities to build confidence are less
available to those outside the organization.
In addition, the motivation to create a new organization is strengthened
by an individual’s access to information about entrepreneurial opportunities.
27
Individuals employed by organizations in a particular industry generally enjoy
greater access to this information than individuals employed elsewhere. For
example, as vice president of engineering at Grid Systems, Jeff Hawkins met
frequently with Grid’s customers—vending machine route salespeople—who
used Grid’s devices to record sales data on-site and expressed an interest in simi-
lar devices for personal use.
28
Shortly thereafter, Hawkins founded Palm Com-
puting to commercialize just such a device. In this way, organizational contexts
filter information on markets, technologies, and resources to employees.
29
Furthermore, employees obtain blueprints
30
from their employers related
to appropriate and, often, inappropriate ways of organizing a company and
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 11
conducting business. Individual career trajectories shape the activities and
processes that compose an individual’s body of knowledge.
31
Possession of this
knowledge increases these individuals’ abilities to recognize entrepreneurial
opportunities and, as a result, increases the probability that those individuals
will start a new company. For example, a study of 201 firms with at least eight
employees found that 58% of the ventures’ founders listed the source of their
business idea as a “prior job.”
32
Similarly, a survey of 100 founders of the 1989
Inc. 500 fastest-growing companies found that 71% of the founders sampled
“replicated or modified an idea encountered through previous employment.”
33
In this way, possession of information about entrepreneurial opportunities and
knowledge of the business is more likely to be held by individuals employed by
existing organizations than those that are not.
Moreover, entrepreneurs typically rely upon social relationships for mobi-
lizing resources to build new companies.
34
Especially critical are social ties to
people who are well-connected within the industry in which the entrepreneur
hopes to start a company. Such ties provide a basis for referrals to customers,
suppliers, and potential employees who are more likely to support the new com-
pany if the reliability of the potential entrepreneur is substantiated by trusted
parties. Social ties may also provide information that helps entrepreneurs pitch
the new company in a way that appeals to potential customers, suppliers and
resource providers. Consider the case of Ross Perot. After leaving a sales job at
IBM, Perot started Electronic Data Systems (EDS) and also worked part-time as a
consultant for Texas Blue Cross. In 1965, Perot secured data-processing contracts
with Blue Cross/Blue Shield Medicare and Medicaid programs in 11 states. Tap-
ping this emerging market for data processing enabled EDS to achieve profits of
$2.4 million just six years after Perot left IBM, in large part because of exposure
to not only specific and timely information, but also to key decision makers at
Blue Cross/Blue Shield.
35
Social ties also aid entrepreneurs in forming a management team and
attracting financing for a new company. For example, Ruef, Aldrich, and Carter
analyzed multi-industry data from the Panel Study of Entrepreneurial Dynamics
and found that the trust and familiarity of strong social ties are more critical to
founding team composition than are complementary skills.
36
Other social ties
link the potential entrepreneur to key resource providers through third parties,
facilitating the flow of reputational information that mitigates the uncertainty
inherent in the new company. For example, a study of 202 seed-stage investors
found that both direct and indirect ties between entrepreneurs and investors
positively influenced investors’ decisions about which ventures to finance and
concluded that network ties are mechanisms for information transfer.
37
In short,
organizations provide opportunities for employees to form social ties to the criti-
cal resource providers who enable the pursuit of entrepreneurial opportunities.
Key Findings of Academic Research
Entrepreneurs typically come from within the industry because not
everyone has access to the resources (i.e., confidence, information, knowledge,
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200512
and social ties) so critical to entrepreneurship. As Freeman states, “The capital
required [for entrepreneurship], human resources, space, information, permits
and licenses are all provided, perhaps grudgingly, by existing organizations.”
38
Therefore, not everyone with a garage is equally likely to become an entrepre-
neur and becoming an entrepreneur is not merely a function of effort or plan-
ning. Two particular bodies of academic research strongly support the notion of
entrepreneurs as organizational products: career history studies focus on individu-
als’ experiences prior to entrepreneurship; and spatial distribution studies focus on
geographic variation in entrepreneurial activity.
First, career history studies demonstrate that a large proportion of founders
of new organizations come from the ranks of pre-existing organizations in simi-
lar industries. For example, Cooper found that 70% of 890 founders from a
cross-section of industries started businesses closely related to their prior
employment and that 85% of 250 technical entrepreneurs did the same.
39
In a
subsequent study of 161 new firms, Cooper found that in most technical indus-
tries entrepreneurs started businesses related to their previous employment.
40
For example, 78% of 46 founders of electronics and computer companies were
previously employed in those industries. In addition, many innovative new
products are introduced by entrepreneurs with prior industry experience. For
example, several studies of the hard-disk-drive industry document the high
degree of intra-industry mobility of employees from existing to new
companies.
41
Entry by new companies started by ex-employees of pre-existing
companies was often accompanied by repeated introductions of disruptive
innovations.
42
Certain organizations develop reputations for preparing employees for
entrepreneurship. For example, Higgins found that for 23% of the biotech com-
panies that went public in the period 1979-1996, at least one member of the IPO
team had previous employment at Baxter, a prominent biotech company.
43
Bax-
ter gained a prominent reputation in the biotech industry for producing entre-
preneurs
44
as former Baxter employees were management team members of
29 venture-backed startups from 1986-1999.
45
Career history studies like these
highlight the role that existing organizations play in exposing employees to the
confidence-building tasks, information on entrepreneurial opportunities, and
social contacts that often lead to the production of entrepreneurs.
Second, spatial distribution studies demonstrate that geographic areas that
have a greater number of organizations of a certain kind tend to generate a
greater number of new organizations of that same kind. For example, Sorenson
and Audia’s study of the U.S. footwear industry demonstrates that states popu-
lated with a greater number of footwear plants tend to generate a greater num-
ber of new footwear plants than do less-populated states.
46
The founding rates
of Dutch accounting firms from 1880 to 1986 also exhibit this pattern
47
and
similar results are obtained in studies of U.S. biotechnology firms,
48
the U.S.
computer workstation industry,
49
and the British motorcycle industry.
50
Existing
organizations expand the pool of potential entrepreneurs available in a locale
by employing individuals in roles conducive to acquiring information about
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 13
entrepreneurial opportunities and to developing the social ties necessary for
resource mobilization.
Because entrepreneurs tend to rely upon supportive social ties that are
geographically localized,
51
they are likely to start new companies in close prox-
imity to their homes and to their current employers.
52
For example, a study of
Portuguese manufacturing plants found that Portuguese entrepreneurs were
willing to accept labor costs three times higher than in alternative locations to
locate the new business in their current geographic area.
53
Spatial distribution
studies, then, demonstrate that the companies that are likely to be founded in a
given community are largely dependent upon the organizations that are already
located in the community.
Revisiting the Most Famous Garages
The notion of entrepreneurs as organizational products implies that
entrepreneurs typically come from within the industry (or from related indus-
tries) and acquire confidence, information, knowledge, and social connections
at local organizations. If this notion is accurate, then one should expect to find
some correspondence with the entrepreneurs-as-organizational products story
and the stories of famous entrepreneurs. Therefore, we reexamine the two most
prominent entrepreneurial garage stories: the HP garage in Palo Alto (the “birth-
place of Silicon Valley”) and the Jobs’ family garage in Cupertino. We rely pri-
marily upon two texts that detail the companies’ respective histories: The HP
Way and Apple Confidential 2.0.
54
The Hewlett-Packard Story
In 1930, HP co-founders William Hewlett and David Packard met as
freshman at Stanford University. While at Stanford, Hewlett and Packard took
Frederick Terman’s graduate course in radio engineering. Although the two dis-
cussed the possibility of starting a company, this was the era of the Great Depres-
sion and after graduation Terman encouraged Hewlett to continue with graduate
coursework and Packard to accept a job offer from General Electric (GE). In
1935, Packard started work at GE in Schenectady, New York, and Hewlett
enrolled in a graduate program at the Massachusetts Institute of Technology
(MIT). Of his time at GE, Packard writes, “I was able to learn many things that
later proved helpful when we started our own business, and I also developed
close friendships with some individuals who would later make their own mark
in electronics.”
55
Those GE friends included John Cage who would later, as a
professor at Purdue University, refer promising graduates to HP for jobs and
would, in 1956, organize and manage Hewlett-Packard Ltd., HP’s British sub-
sidiary.
56
In 1937, Hewlett and Packard met in Palo Alto to discuss “tentative
organization plans and a tentative work program for a proposed business
venture.”
57
Then, in the summer of 1938, Terman arranged a Stanford fellowship for
Packard, enabling Packard to take a one-year leave of absence from GE and to
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200514
move back to Palo Alto. Terman had previously arranged for Hewlett to move
back to Palo Alto from Cambridge, Massachusetts, to work with a San Francisco
doctor on the development of some medical equipment. As part of the fellow-
ship, Packard worked with Stanford inventor Russ Varian on the modification
of vacuum tubes to operate at higher frequencies. The two worked primarily at
Charlie Litton’s Litton Engineering Laboratories in Redwood City, California. In
September of 1938, Hewlett and Packard began working in the garage at 367
Addison Avenue in Palo Alto, building custom devices for local customers. It is
true that much of the pair’s work was done in the garage during this time. As
Terman states, “I knew that if Packard’s car was in the garage, it meant they
had no orders.”
58
However, many of these early devices were built in Litton’s
foundry because the garage lacked the necessary space and equipment. As
Packard writes, “having Charlie Litton and his equipment there made an impor-
tant difference during a period when time and money were very tight” and “I
learned a lot about running a business from those conversations [with Litton
and others at Litton Engineering Laboratories].”
59
In addition, Packard took
business law and management accounting classes at Stanford during this time.
Of these two courses, Packard writes “the first taught me enough about partner-
ships, contracts, and incorporation so that for the next few years we rarely
required the services of lawyers; and the second helped me set up the books.”
60
HP’s first real product was the Model 200A audio oscillator. Hewlett
developed the first version of this oscillator in Terman’s lab in the spring of
1938 and presented an early version at an Institute of Radio Engineers confer-
ence in Portland, Oregon, in November of 1938. At this conference, Bud
Hawkins, chief sound engineer at The Walt Disney Company, saw Hewlett’s
presentation of the oscillator. Disney ordered eight Model 200B oscillators from
Hewlett and Packard. Additional orders followed. On January 1, 1939, Hewlett-
Packard was formed with a formal partnership agreement between the two co-
founders. By the fall of 1939, HP outgrew the Addison Avenue garage and
moved to an office in Palo Alto. The garage served as Hewlett and Packard’s
workshop for approximately one year.
The HP founding story confirms that much of the founders’ early busi-
ness was indeed conducted in the garage. However, it appears that Litton Engi-
neering Laboratories and Terman’s lab were also important workshops for the
co-founders. Furthermore, the story also supports several important elements
of the “entrepreneurs as organizational products” story. Consider the evidence
demonstrating the role of prior organizations in providing Hewlett and Packard
with confidence, exposure to information, knowledge of the business, and access
to key social contacts. Packard gained confidence in his ability to handle the
legal and business matters of the young company from his courses at Stanford
and his mastery experiences at GE. Hewlett developed the company’s first prod-
uct based on specific information acquired while working in Terman’s lab. From
Litton and GE, Packard gained knowledge of how to run a business. Last, but
certainly not least, consider the important social ties formed during the pair’s
employment experiences at Stanford, GE, and MIT. The two met and first
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 15
discussed the idea of starting a company at Stanford. Terman was instrumental
in introducing the two to potential customers and suppliers and in arranging for
fellowships and jobs to pay for the co-founders’ living expenses. Litton provided
space and equipment for the production of many of Hewlett and Packard’s early
orders. Almost 20 years after he left GE, Packard called upon former GE col-
league Cage to run HP’s British subsidiary. While there are several organizations
that can reasonably lay a partial claim to “producing” these two entrepreneurs,
Hewlett and Packard clearly acquired resources critical to their entrepreneurial
success from exposure to pre-existing organizations. Therefore, the “Birthplace
of Silicon Valley” seems a rather overstated moniker for the garage at 367
Addison Avenue.
The Apple Computer Story
In 1967, a twelve-year-old student working on a class project called Bill
Hewlett at home and asked for some parts to build a frequency counter. That
twelve-year old was Steve Jobs and Hewlett was so impressed that he gave Jobs
a summer job at HP assembling frequency counters. Of that experience, Jobs
remarked “What I learned there [HP] was the blueprint we used for Apple.”
61
Jobs was introduced to Steve Wozniak by a mutual friend in the summer of
1971. By that fall, the two started their first commercial venture selling illegal
“blue boxes” that enabled phone calls to be made free of charge by emulating
signals used by the phone company. In 1973, Wozniak took a job with HP’s
Advanced Products Division and Jobs became Employee Number 40 at Atari,
which had been founded in 1972. While working the night shift at Atari, Jobs
would let Wozniak into the building to play free video games and help Jobs
solve technical problems. At some point, Atari founder Nolan Bushnell offered
Jobs $700 if Jobs could design the Atari video game Breakout using less than 50
chips and $1,000 if Jobs used less than 40 chips. Jobs recruited Wozniak to help
and, after four all-nighters in a row, the pair produced the game using 42 chips.
Wozniak stated, “I was so proud of designing a product like that.”
62
In 1975, Wozniak and Jobs started attending meetings of the Homebrew
Computer Club in Gordon French’s Menlo Park, California, garage (meetings
were moved to the Stanford Linear Accelerator Center as the group quickly
grew from a few dozen to a several hundred). Wozniak introduced his computer
(what would later become the Apple I), whose interpreter was tested on a com-
puter at HP, to the Homebrew Computer Club in March of 1976. Wozniak
approached his bosses at HP and Jobs did the same at Atari, but neither com-
pany was interested in producing microcomputers at that point in time. Of the
rejection, Wozniak inferred that “it was obvious it [the computer] didn’t have
a place at HP.”
63
Denied, Jobs recruited Atari colleague Ronald Wayne and with
Wozniak the three co-founded Apple Computer in April of 1976. Both Wozniak
and Wayne kept their day jobs at HP and Atari, respectively.
64
In May of 1976,
Wozniak was granted a legal release from HP to produce the Apple I.
The first order for Apple came from Paul Jay Terrell, operator of retail
computer store chain The ByteShop, whom Jobs met at a Homebrew Computer
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200516
Club meeting. Terrell wanted 50 assembled computers. So, Jobs recruited his
sister Patti and a college friend to assemble the computers in a bedroom of the
Jobs’ house in Los Altos, California. The computers were delivered on time and
Apple made $8,000 in profit. Of these early days, Jobs states, “We were real
small-time operators, kind of like somebody who sold arts and crafts on the
side.”
65
When the bedroom became too crowded, the operation moved to the
garage, then out of the garage and into a Cupertino office building by the end
of 1977.
After the profitable ByteShop deal, Jobs began trying to raise money to
expand the business. Bushnell introduced Jobs to Sequoia Capital’s Don Valen-
tine. Valentine was not interested but did refer Jobs to Mike Markkula, who had
worked for Valentine at Fairchild Semiconductor before retiring in his early 30s.
By the fall of 1976, Wozniak was designing the Apple II while Jobs was in dis-
cussions to sell the company to Commodore Business Machines. However, Com-
modore founder Jack Tramiel “thought it was ridiculous to acquire two guys
working out of a garage.”
66
That month, Wozniak quit his job at HP to work full-
time with Apple. Then, in November of 1976, Markkula came out of retirement
to help Jobs and Wozniak write the Apple business plan, contributing $92,000 in
working capital and securing a $250,000 line of credit at Bank of America. The
three incorporated Apple Computer in January of 1977. In February, Markkulla
recruited a former co-worker from his Fairchild Semiconductor days, Michael
Scott, to be Apple’s first President. The Apple II was introduced in April of 1977
and Apple was cash flow positive by August of that year.
Similar to HP, the Apple founding story confirms that the garage was
an important part of the story, but that the history of Apple also supports the
“entrepreneurs as organizational products” story. First, the co-founders had
previously existing, strong social ties. Jobs and Wozniak met approximately
five years prior to Apple’s first order and even ran a business (the illegal “blue
boxes”) together prior to starting Apple. Second, the entrepreneurs worked in
related industries prior to founding Apple, Wozniak at HP and Jobs at Atari (and
at HP as a 12-year-old kid). Third, local organizations such as HP, Atari, and the
Homebrew Computer Club could all reasonably claim to have been strong influ-
ences on the Apple founders.
Again, consider the role of prior organizations in providing Jobs and Woz-
niak with confidence, exposure to fine-grained information, knowledge of the
business, and access to key social ties. Jobs has a reputation as a highly confident
man. For example, Jobs founded NeXT in 1988 expecting to “change the world
of computing.”
67
When questioned on the delayed launch date of the company’s
primary product, Jobs responded, “Late? This computer is five years ahead of its
time.”
68
Such confidence may be attributed, at least partially, to Jobs’ mastery
experiences at Apple and Atari. Moreover, being Employee Number 40 at Atari
and working closely with founder Nolan Bushnell is a prime example of vicari-
ously learning how to become an entrepreneur. From the Homebrew Computer
Club, the two gained fine-grained information on the computer preferences of
the hobbyists who would be Apple’s first customers. Selling the “blue boxes”
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 17
helped Jobs hone his salesmanship. Work experiences at HP and Atari provided
Wozniak and Jobs with extensive knowledge of the business—Jobs even
described his experience at HP as a 12-year-old as “the blueprint” for Apple.
69
The social ties formed during prior experiences were instrumental in Apple’s
success. Through Bushnell’s contacts, Jobs met Markkula, who designed the
business plan, provided the capital to produce the Apple II, and recruited Apple’s
first President (Scott). Through the Homebrew Computer Club Jobs and Woz-
niak met their first customer (Terrell). While there are several organizations (i.e.,
HP, Atari, and the Homebrew Computer Club) that can reasonably lay a partial
claim to these two entrepreneurs, Jobs and Wozniak are also organizational
products. In light of this realization, the Apple garage does not seem nearly as
central to the story. Based on a reexamination of the founding stories of HP and
Apple, it seems the garages are not nearly as central to the story as the famous
anecdotes suggest.
Why Is the Garage so Popular? Why Does It Persist?
What is so appealing about the garage entrepreneur? Why does the belief
persist despite the substantial evidence that the entrepreneurs as organizational
products story is more accurate than tales of the entrepreneurial garage? Appar-
ently the garage has reached the status of a contemporary legend, a story told as
true by people in modern society.
70
As the legend goes, it is quite common for
entrepreneurs to start companies in garages, basements, dorm rooms, and
kitchens; but, careful examination of the available evidence contradicts the leg-
end. A legend may persist despite inaccuracies if it evokes common emotions in
people and causes those people to share the legend with others. In this case, the
garage evokes common, positive images of entrepreneurship—hard work, inge-
nuity, independence, and innovation—that appeal to many people, especially
Americans.
A recent article in Fortune Small Business begins, “For as long as the Cali-
fornia garage has housed convertibles, is has also fostered a different type of
vehicle: innovation.”
71
According to Guy Kawasaki, the garage “is a state of
mind” and “a rejection of the status quo.”
72
Steve Jobs describes Apple’s early
days as “kind of like somebody who sold arts and crafts on the side.”
73
In his
book, Michael Dell details his father’s efforts to get him to “get his priorities
straight” (focus on his courses instead of selling computers from his dorm room)
and Dell’s response that he did not want to attend classes as much as he wanted
“to compete with IBM.”
74
An article in a magazine for entrepreneurs begins
with, “For many entrepreneurs, working out of a garage allows them to save
money as they follow their dreams.”
75
The corporate web site of UPS describes
the first basement location of founders Jim Casey and Claude Ryan as “a humble
office located under the sidewalk.”
76
In these quotes, one discerns the positive
emotional elements associated with entrepreneurship: big dreams and humble
beginnings, hard work, creativity, rags-to-riches success, a rejection of the status
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200518
quo, success in the face of doubters, and freedom from the bureaucratic con-
straints of employers.
In the contemporary legend of the garage, one senses the enduring appeal
of the American Dream, the idea that “through hard work, courage, and determi-
nation one can achieve prosperity.”
77
The American Dream is implicitly about
the opportunities for upward social mobility and great fortune that may be
afforded to individuals who exert persistent effort. In the U.S., rewards are
expected to come to those who “keep their nose to the grindstone.” Offering a
vision of the “new” American Dream, Florida argues that the American Dream
is no longer about better pay, a nicer house, or a higher standard of living.
78
Rather, Florida suggests that the “new American Dream is to maintain a reason-
able living standard while doing work that we enjoy doing” and that “creativ-
ity—the ability to come up with and implement a new idea” is central to the
new American Dream. In our view, both the traditional (hard work and material
rewards) and new (creativity and intrinsic rewards) conceptions of the American
Dream are consistent with the emotional appeal of the garage.
This legend resonates with many Americans because of the garage’s asso-
ciation with ideas of the U.S. as the land of opportunity, a meritocracy where
people get their due, and as a place where all are created equal. These associa-
tions enable the legend to persist, absent extensive scrutiny of the details under-
lying the stories that contribute most to the legend (i.e., HP and Apple). Recall
the success of the best-selling book The Millionaire Next Door, which offered seven
simple rules to follow in order to become a millionaire.
79
This book’s success is
based on many of the same reasons that the garage legend persists. Both the
book and the garage promote the notion that anyone in the U.S. can become
rich through hard work, sound decision making, and persistence.
Implications
By providing an inaccurate portrayal of the process by which many indi-
viduals become entrepreneurs, the legend of the garage entrepreneur offers the
wrong lessons. Perhaps the greatest danger is that the legend inculcates an
undersocialized view of the entrepreneurial process. The legend of the entrepre-
neur’s garage evokes the image of the lone individual who relies primarily on
his/her extraordinary efforts and talent to overcome the difficulties inherent in
creating a new organization. In contrast, the process of creating new organiza-
tions is eminently social. Social relations help would-be entrepreneurs not only
to garner the support needed to form the new business, but also to identify the
entrepreneurial opportunities on which new businesses can be built.
Individuals, companies, policy makers, and business schools might derive
more useful implications from research that portrays entrepreneurs as organiza-
tional products than from the notion of the garage entrepreneur. First, some
organizations are more conducive than others to preparing employees for entre-
preneurship, as evidenced by the rate at which employees leave the organization
to form new companies.
80
A key question, then, for would-be entrepreneurs is:
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 19
“What kinds of organizations and what kinds of positions within organizations
tend to provide the best access to the resources that entrepreneurs need?” The
literature on entrepreneurs as organizational products suggests that four condi-
tions of employment are conducive to launching an entrepreneurial career:
bEmployees are exposed to information that may signal the existence of
entrepreneurial opportunities (e.g., new technologies, unmet customer
needs) around which a new organization may be built;
bemployees have opportunities to fulfill a broad number of roles crucial to
the operations of entrepreneurial organizations so that they can build
confidence in their ability to create a new organization;
bemployees have opportunities for close contact with colleagues in other
functional areas with whom they might form founding teams; and
bemployees have direct access to key resource providers such as suppliers,
customers, or investors who might be willing to support the new venture.
Organizational research suggests that small and young firms are more
likely than old and large organizations to offer jobs that meet these four condi-
tions. However, what is most crucial to an individual’s ability to acquire the
resources needed to become an entrepreneur is not the organization as a whole
but, rather, the individual’s position within the organization.
81
Individuals would
be wise to consider not only a potential employing organization’s track history of
producing entrepreneurs, but also which particular groups, offices, or positions
have produced entrepreneurs in the past.
Second, the implication for established companies is that, willingly or
unwillingly, they are natural incubators for the entrepreneurial ideas of employ-
ees. Rather than passively witnessing employee departures and the subsequent
foundings of spin-off firms that appropriate some of the company’s less-tangible
assets (i.e., market knowledge), companies can take specific actions to benefit
from their natural incubator tendencies. By many accounts, the typical company
does not face a dearth of innovative ideas. For example, Intel’s Gordon Moore
states, “We have too many ideas.”
82
Further, an R&D Manager at HP states, “All
of the time, we have more ideas than we can use.”
83
While some organizations
are particularly adept at encouraging and absorbing ideas, organizational prac-
tices vary widely. Companies might reconsider the criteria by which they assess
these ideas and try to support the most promising entrepreneurial ideas of
employees. This entails nurturing individuals that identify possible entrepren-
eurial opportunities (i.e., offering these individuals time to pursue nascent ideas)
because the degree to which these individuals are frustrated with the company’s
lack of support for new ideas is often a key factor in the decision to leave. Rather
than bemoaning the loss of good people that pursue entrepreneurial ideas that
lie outside their core lines of business, companies should capitalize on their
incubator role by sponsoring, either internally or externally, the most promising
new venture ideas. If the parent company serves as a source of startup capital
or simply as an endorser with key resource providers, the new firm might be
brought smoothly into being and the parent firm might benefit (i.e., return on
an equity investment, preferred pricing in future transactions). In the long-term,
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200520
a company that takes an active role in supporting new ventures benefits from
attracting individuals with entrepreneurial ambitions.
Third, deemphasizing the legend of the entrepreneurial garage and
embracing the notion of entrepreneurs as organizational products may provide
valuable insights for policy makers, too. Because entrepreneurs gain many of
the resources necessary for entrepreneurship from existing organizations and
because entrepreneurs’ networks geographically constrain their options for start-
ing new companies, the companies already doing business within a given com-
munity are likely the best source of new entrepreneurs and, by extension, new
companies. Many community development efforts focus on building research
parks, funding incubators, or providing local investment incentives to generate
local entrepreneurial activity. Such efforts tend to produce mixed results. Focus-
ing on existing organizations as sources of entrepreneurial opportunities may
offer a more promising avenue for promoting local entrepreneurship. With so
many good ideas falling prey to the inherent limitations of corporate resource
allocation processes and organizational politics, surely there exists an opportu-
nity for communities to capitalize on some of the ideas that slip through the
cracks.
Fourth, the notion of entrepreneurs as organizational products suggests
that business schools should give, at the least, equal emphasis to prior work
experience in the entrepreneurial process as is currently given to analytical
skills. Nearly every top U.S. business school offers at least one course focused
solely on developing a business plan for a new company. Implicit in these
courses is the idea that entrepreneurship can be fostered with training in partic-
ular analytical skills (i.e., cash flow modeling, market research) and seed fund-
ing. Moreover, business plan competitions are becoming increasingly popular
ways for business schools to bring entrepreneurs, university scientists, engineers,
and venture capitalists together. Most of these business plan competitions offer
some prize money and several offer fairly large sums. For example, the MOOT
CORP Competition
84
at the University of Texas at Austin awards equity funding
of up to $100,000 and offers other prizes totaling over $180,000. The competi-
tion at MIT—“designed to encourage students and researchers in the MIT com-
munity to act on their talent, ideas, and energy to produce tomorrow’s leading
firms”
85
—offers $30,000 to the top team and $10,000 each to the top two run-
ners-up. Many students find these competitions to be valuable experiences and
some competitions have launched successful startup companies.
86
However, one
inherent risk in these competitions is that the focus on planning understates the
importance of prior experience and social connections in the entrepreneurial
process.
Conclusion
Although the garage legend contributes to the preservation of the Ameri-
can ideals of opportunity and upward social mobility, this belief offers misleading
insights to would-be entrepreneurs because it suggests an undersocialized view
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 21
of the entrepreneurial process. Individuals, company employees, policy makers,
and business school administrators will benefit from recasting the garage belief
as a contemporary legend and, in turn, focusing instead on the implications of
the growing body of academic research on entrepreneurs as organizational
products.
APPENDIX
Key Dates in the Legend of the Entrepreneur’s Garage (timeline)
October 1923: Walt and Roy Disney rent a Hollywood, CA garage to use
as an office in which the two produce animated cartoons.
Shortly thereafter, the brothers moved into an office.
1930: Stanford University freshmen William Hewlett and David
Packard meet.
Spring 1933: Frederick Terman invites Stanford undergraduate Packard
to enroll in Terman’s graduate course in radio engineering.
Hewlett is also enrolled in the class.
1933-1934: Hewlett, Packard, Ed Porter, and Barney Oliver discuss the
possibility of starting a company after graduation from
Stanford.
Spring 1934: In the midst of the Great Depression, Terman encourages
Packard to accept a job offer from General Electric and
Hewlett to take graduate courses.
February 1935: Packard starts work at General Electric in Schenectady, NY.
1935-1936: Hewlett receives a Master’s degree from MIT. Terman
arranges a job for Hewlett back in California.
August 1937: Hewlett and Packard meet in Palo Alto to discuss “tentative
organization plans and a tentative work program for a
proposed business venture.”
Spring 1938: Hewlett develops a resistance-stabilized audio oscillator
while working with a group of students in Terman’s labo-
ratory.
Summer 1938: Frederick Terman arranges a Stanford fellowship for
Packard.
September 1938: Hewlett and Packard begin work in the garage at 367 Addi-
son in Palo Alto.
November 1938: Bud Hawkins, chief sound engineer at The Walt Disney
Company, sees Hewlett present the oscillator at a confer-
ence in Portland, OR. Soon thereafter, Disney orders eight
Model 200B oscillators from Hewlett and Packard.
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200522
January 1, 1939: Hewlett-Packard (HP) is officially formed. Charlie Litton
provides HP access to his foundry so HP can produce oscil-
lators, which could not be produced in the garage, for cus-
tomer orders.
Fall 1939: HP outgrows the garage and rents a building for the busi-
ness.
1945: Elliott and Ruth Handler and Harold Matson launch toy
company Mattel from a garage workshop in Los Angeles,
California.
1948: Richard Knerr and Arthur Melin, the founders of toy com-
pany Wham-O, begin working on a slingshot in a
Pasadena, CA garage. The company would later invent the
Hula Hoop, the Frisbee, and the hacky sack.
1948: Mattel is incorporated with headquarters in Hawthorne,
California.
1957: Wham-O introduces the Hula Hoop and makes $45 million
in profits over the next 2 years on the product.
November 1957: HP’s IPO
1959: Mattel introduces the Barbie doll to the world.
Summer 1971: Steve Jobs and Steve Wozniak meet.
Fall 1971: Jobs and Wozniak sell illegal “blue boxes” that enabled free
phone calls to be made by emulating signals used by the
phone company.
February 1973: Wozniak starts work in HP’s Advanced Products Division.
1973: Jobs starts work at Atari. Wozniak helps Jobs design the
game Breakout during Jobs’ night shifts.
March 1975: The first meeting of the Amateur Computer Users Group
(Homebrew Computer Club) is held in a Menlo Park
garage (meetings were quickly moved to the Stanford Lin-
ear Accelerator Center when the group became too large
for the garage).
July 1975: Bill Gates and Paul Allen found Microsoft in Albuquerque,
NM.
March 1976: Wozniak builds the Apple I, a computer that uses a key-
board and can connect to a television. Wozniak pitches his
bosses at HP about making microcomputers; Jobs pitches
his bosses at Atari. Both are denied.
April 1976: Jobs recruits his Atari co-worker, Ronald Wayne, and Jobs,
Wayne and Wozniak found Apple Computer. Wayne keeps
his day job at Atari and Wozniak continues to work at HP.
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 23
Wayne sells his 10% share in Apple less than two weeks
later for $800.
May 1976: Wozniak is granted a release by HP to produce the Apple I.
Production begins in a bedroom in Jobs’ parents Los Altos,
CA home. Eventually, production moves to the garage.
October 1976: Commodore considers but declines buying a company that
operates out of a garage. Wozniak quits his job at HP, at
Jobs’ insistence.
January 1977: Apple Computer is incorporated.
January 1978: Apple moves to an office building in Cupertino, CA.
December 1980: Apple’s IPO
Fall 1983: Michael Dell starts selling upgraded PCs and add-on com-
ponents from his University of Texas dorm room.
January 1984: Dell registers PC’s Limited with the State of Texas and,
shortly thereafter, moves his business to a two-bedroom
apartment.
May 1984: Dell leaves the University of Texas, registers his business as
Dell Computer Corporation, and moves the company to a
small business office in North Austin.
February 1985: Wozniak and Jobs receive the National Technology Medal
from President Reagan at the White House.
1985: The HP garage is named a Category I City landmark by the
Palo Alto Historic Resources Board.
March 1986: Microsoft’s IPO
June 1988: Dell’s IPO
1989: The HP garage is officially dedicated as California Historic
landmark No. 976 with a plaque “Birthplace of Silicon
Valley.”
October 1997: Garage.com (now Garage Technology Ventures) is started
in San Francisco, CA.
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CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 200524
Notes
1. John H. Freeman, “Entrepreneurs as Organizational Products: Semiconductor Firms and
Venture Capital Firms,” Advances in the Study of Entrepreneurship, Innovation, and Economic
Growth, 1 (1986): 33-52. For a review of this literature, see Pino G. Audia and Chris I. Rider,
“Entrepreneurs as Organizational Products: Revisited,” in Robert Baum, Michael Frese, and
Robert Baron, eds., The Psychology of Entrepreneurship (Lawrence Erlbaum Associates, 2005).
2. M. Overfelt, “Start-Me-Up,” Fortune Small Business, 13/7 (September 2003): 118.
3. Ibid.
4. PRNewswire, “Garage Technology Ventures Enter 2005 with New Investments and Success-
ful Exits,” January 28, 2005.
5. Ibid.
6. Courtney Purrington and K.E. Bettcher, “From the Garage to the Boardroom: The Entrepre-
neurial Roots of America’s Largest Corporations,” National Commission on Entrepreneur-
ship, August 2001.
7. “The Alchemist of Paper,” The Economist, April 14, 2005.
8. Throughout this article, we refer to “the garage” and acknowledge that basements, dorm
rooms, and kitchens may easily substitute for “garage” in our arguments.
9. The venture capital investment data was obtained from the MoneyTree Survey, a quarterly
data source jointly published by PriceWaterhouseCoopers, Thompson Venture Economics,
and the National Venture Capital Association, and from Gompers and Lerner, who compiled
data from various issues of the Venture Capital Journal. P. Gompers and J. Lerner, “The Ven-
ture Capital Revolution,” Journal of Economic Perspectives, 15/2 (Spring 2001): 145-168.
10. The data source was Thompson Venture Economics VentureXpert database which, in coop-
eration with U.S. venture capital firms, tracks U.S. venture capital investment activity. Each
company was contacted by phone and then by e-mail if the phone attempt was unsuccess-
ful. Research assistants explained that they were students conducting research on entrepre-
neurship in the U.S. and then asked to speak to an employee familiar with the company’s
history (i.e., the founder or a public relations or marketing employee). If no one was avail-
able to field the call, the research assistants asked the person who answered the phone if
they were familiar with the company’s history. Once someone with the company’s history
was on the phone, research assistants asked: where the founders got the idea for the busi-
ness; how the founders knew each other; if the startup was related to the founders’ previous
employment; and if the company started in a garage, basement, or dorm room.
11. For the remaining companies, we were unable to discuss the founding story for a variety of
reasons, including dissolved businesses, disconnected phone numbers, a lack of knowledge-
able employees to answer our questions, and an unwillingness of employees to answer our
questions. Although the response rate is lower than we would like (39%), we did speak to a
fairly large number of young startup companies about their founding story and it is unlikely
that companies that did or did not start in a garage were more or less likely to discuss the
company’s history with us. Therefore, the sample is sufficiently large and representative for
our research questions.
12. Only one of the eight actually started in a garage.
13. For example, Freeman, op. cit.; Elaine Romanelli, “Organization Birth and Population Vari-
ety: A Community Perspective on Origins,” Research in Organizational Behavior, 11 (1989):
211-246; Howard E. Aldrich and Gabriele Wiedenmayer, “From Traits to Rates: An Ecologi-
cal Perspective on Organizational Foundings,” Advances in Entrepreneurship, Firm Emergence,
and Growth, 1(1993): 145-195; Olav Sorenson and Pino G. Audia, “The Social Structure of
Entrepreneurial Activity: Geographic Concentration of Footwear Production in the United
States, 1940-1989,” American Journal of Sociology, 106/2 (2000): 424-462.
14. Freeman, op. cit.
15. We use the general term “organizations” here rather than “companies” because many
entrepreneurs (including those in our random sample) start companies based upon prior
experiences in organizations like research labs, educational institutions, and non-profit
organizations. These experiences are often just as important to entrepreneurs as company
experiences are.
16. Sorenson and Audia, op. cit.
17. Freeman, op. cit.; Romanelli, op. cit.
A Garage and an Idea: What More Does an Entrepreneur Need?
CALIFORNIA MANAGEMENT REVIEW VOL. 48, NO. 1 FALL 2005 25
18. Freeman, op. cit.; Howard E. Aldrich and Catherine Zimmer, “Entrepreneurship Through
Social Networks,” in Donald Sexton and Raymond Smilor, eds., The Art and Science of Entre-
preneurship (New York, NY: Ballinger, 1986), pp. 3-23.
19. F. Knight, Risk, Uncertainty and Profit (New York, NY: Augustus Kelley, 1964), p. 268.
20. Nancy M. Carter, W.B. Gartner, and P.D. Reynolds, “Exploring Start-Up Event Sequences,”
Journal of Business Venturing, 11 (1996): 151-166.
21. Albert Bandura, Social Foundations of Thought and Action: A Social Cognitive Theory (Englewood
Cliffs, NJ: Prentice Hall, 1986).
22. Arnold C. Cooper, C. Woo, and W.C. Dunkelberg, “Entrepreneurs’ Perceived Chances of
Success,” Journal of Business Venturing, 3 (1988): 97-108.
23. Colin Camerer and Dan Lovallo, “Overconfidence and Excess Entry: An Experimental
Approach,” The American Economic Review, 89/1 (1999): 306-318.
24. Albert Bandura, “Self-Efficacy,” in V.S. Ramachaudran, ed., Encyclopedia of Human Behavior,
Vol. 4 (New York, NY: Academic Press, 1994), pp. 71-81.
25. Bandura (1986), op. cit.
26. AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128
(Cambridge, MA: Harvard University Press, 1994), p. 19.
27. Arthur L. Stinchcombe, “Social Structure and Organizations,” in J.G. March, ed., The Hand-
book of Organizational Behavior (Chicago, IL: Rand McNally, 1965), pp. 142-193, Chapter 4; R.
Burt, Structural Holes: The Social Structure of Competition (Cambridge, MA: Harvard University
Press, 1992); S. Venkataraman, “The Distinctive Domain of Entrepreneurship Research: An
Editor’s Perspective,” in J. Katz and R. Brockhaus, eds., Advances in Entrepreneurship, Firm
Emergence, and Growth. Vol. 3 (Greenwich, CT: JAI Press, 1997), pp. 119-138.; Scott Shane,
“Prior Knowledge and the Discovery of Entrepreneurial Opportunities,” Organization Science,
11/4 (July/August 2000): 448-469.
28. Candida Brush, Patricia G. Greene, and Myra M. Hart, “From Initial Idea to Unique Advan-
tage: The Entrepreneurial Challenge of Constructing a Resource Base,” Academy of Manage-
ment Executive, 15/1 (February 2001): 64-80.
29. Romanelli, op. cit.
30. Michael T. Hannan and John H. Freeman, “The Population Ecology of Organizations,” Amer-
ican Journal of Sociology, 82 (1977): 829-64.
31. Sorenson and Audia, op. cit.; Scott Shane and Rakesh Khurana, “Bringing Individuals Back
In: The Effects of Career Experience on New Firm Founding,” Industrial and Corporate Change,
12/3 (2003): 519-543.
32. Cooper, Woo, and Dunkelberg, op. cit.
33. Amar V. Bhide, “How Entrepreneurs Craft Strategies that Work,” Harvard Business Review,
72/2 (March/April 1994): 150-161; Amar V. Bhide, The Origin and Evolution of New Businesses
(Oxford: Oxford University Press, 2000).
34. Freeman, op. cit.; Aldrich and Zimmer, op. cit.; Burt, op. cit.
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California Management Review
University of California F501 Haas School of Business #1900 Berkeley, CA 94720-1900
(510) 642-7159 fax: (510) 642-1318 e-mail: cmr@haas.berkeley.edu web site: www.haas.berkeley.edu/cmr/
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84. <www.mootcorp.org/index.asp>
85. <http://50k.mit.edu/about/index.php>
86. For example, ZipRealty, a public firm with a market capitalization of almost $300 million as
of May 2005, was a finalist in the 1999 University of California, Berkeley Business Plan
Competition.
A Garage and an Idea: What More Does an Entrepreneur Need?
