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... The determinants were related to the entrepreneur, the firm, strategy and industry specific factors (Storey, 1994;Davidsson & Delmar, 1997;Orser, Hogarth-Scott, & Riding, 2000;Smallbone & Wyer, 2000;Delmar, Davidsson, & Gartner, 2003;Barringer, Jones, & Neubaum, 2005;Dobbs & Hamilton, 2007). Taking into account that business growth is a multidimensional phenomenon (Delmar et al., 2003;Davidsson, Achtenhagen, & Naldi, 2005;Federico, Kantis, & Rabetino, 2009), where the growth speed is closely related to the market environment of its industry (Greiner, 1998), the growth rates of SMTAs is certainly determined by different determinants and effects (Murphy, Tailer, & Hill, 1996;Delmar et al., 2003). ...
... attempted to capture aspects of small business growth. Taking into account that business growth is a multidimensional phenomenon (Delmar et al., 2003;Davidsson et al., 2005;Federico et al., 2009) defined by different determinants and effects (Delmar et al., 2003), thus, it needs different theoretical explanations (Davidsson & Wiklund, 2000). More recently, Dobbs and Hamilton (2007) identified the theoretical frameworks under six broad groups namely; stochastic, descriptive, evolutionary, resource-based, learning and deterministic. ...
... Despite many theoretical frameworks were already developed, a generally accepted theory to explain business growth does not exist (Dobbs & Hamilton, 2007;Federico et al., 2009), possibly due to the complexity of the topics. Hence, Davidsson and Wiklund (1999) suggested combining aspects from existing theories than developing a radically new theory in order to investigate and better understand the business growth phenomenon. ...
Thesis
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Small and medium-sized tourism accommodations (SMTAs) are the backbone of the accommodation sector in Malaysia. Despite of its importance, SMTAs possess a history of business failure. To this thesis, the failure rates could be reduced provided that failure symptoms are recognised prior to business failure. To address this situation, this thesis investigates the determinant factors of SMTAs’ business survival in Langkawi Island, Malaysia. A self-administered questionnaire was distributed to 99 Malaysian entrepreneurs to elicit information on their entrepreneurial characteristics, business characteristics and business strategies. The data was analysed using survival analysis. The results showed that older and larger SMTAs demonstrated higher business survival rates than younger and smaller firms, while partnership firms possess higher survival rates than sole proprietorship or private limited firms. Conversely, entrepreneur characteristics and business strategies provided no effect to the business survival of SMTAs. The results also discovered that entrepreneur’s motivation and business location are the two factors that indicated the greatest impact on the survival of SMTAs in Langkawi Island. In particular, entrepreneurs who are encouraged by negative motivation and SMTAs located in Kedawang area were found to have higher survival rates compared to their counterparts. Results of this thesis contribute to an added value pertaining to SMTAs growth and survival within the context of island destinations in Malaysia, and the results should be of interest to the government, related agencies, investors and entrepreneurs in comprehending the reasons why some businesses survive while others not. In addition, this thesis suggests an alternative approach for assessing factors that influence business survival by using survival analysis technique instead of common approach namely multiple discriminant analysis and logistic regression.
... One among the categories of human capital effects on firms' competitiveness is allocative effect. This effect is related to owner-managers' education, in that those with a relatively higher level of education have a greater ability to efficiently allocate resources to more productive lines of business and to select profit maximizing inputs/combinations (Federico et al.,2008). Qureshi et al., (2012), emphasize the role of entrepreneurial/business education in the growth/performance of the firm. ...
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The research study evaluated the business characteristics with a view to identify business characteristics that result in fast growth of MSE. Primary data, through structured questionnaire, were collected from the samples of 99 MSEs randomly selected from Addis ketema and Areda sub city. Data were analyzed using both descriptive and inferential statistics with the help of SPSS. By using this software, analysis of variance was carried out to examine the variation in the growth of MSEs related to the variation in each of the independent variables. As two dependent variables were used to measure growth in this study, the result of this software shows different statistical result for both of them. The ANOVA and t-test result indicates, there is a significant variation on the growth of MSEs in relation to the variations of type of business, legal status, formal record and competition level if growth is measured using asset growth. If growth is measured using employment growth, the deference in types of business and having formal recording practice brings difference in growth. But the ANOVA and t-test result shows there is no significant difference in growth with respect to the difference in registration with MSE office and age of business whether it is measured with asset or employment growth.
... Younger individuals may be more willing to assume risks and grow their business [5,6]. That means a younger individual may have a higher need for additional income. ...
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Over the years, some of the MSE have grown extremely large and profitable and on the other hand, many others have failed or have not been as successful as they might have been. Even if their enormous contribution to economic development and employment is undeniable, government’s policy still fail to identify the determinants that are responsible for the growth and failure of MSE. So the research study was undertaken with the intension of identifying those factors responsible for success and failure. Data was collected from MSE in Ambo and the regression result shows that only Age of business, record and borrowing were seen as significant in predicting the business success with p values less than 0.01.
... Algunos trabajos sostienen la idea de que las empresas involucradas en actividades en red incrementarán, por estos motivos, sus probabilidades de sobrevivir y crecer (Brüderl y Preisendörfer, 2000;Dubini y Aldrich, 1991;Jarrillo, 1989). Federico et al. (2009) sugieren que condiciones de negocios menos favorables pueden forzar a los emprendedores a apoyarse en fuentes externas para acceder a recursos adicionales y que, en este sentido, la presencia de redes puede contribuir positivamente al posterior crecimiento de la empresa. ...
... In fact, Chile and to a lesser extent Brazil and Argentina have recently raised some concerns about the behaviour and quality of the services provided by these intermediate institutions and have been more proactive when it comes to implementing incentives aimed at aligning these institutions' behaviour with the programme expectations. Empirical evidence shows that the quality of business advisers working with entrepreneurs is crucial to attracting the most dynamic entrepreneurs, who are not only scarce but also reluctant to request services from institutions whose reputation and levels of sophistication do not always suit their needs (Federico et al., 2011;Kantis and Drucaroff, 2011). Nevertheless, this continues to be a critical area of debate. ...
Article
RÉSUMÉ La multiplication des activités par les détenteurs de micro-entreprises est un phénomène qui ne cesse de prendre de l’ampleur dans les pays en développement, notamment en République du Congo. A cet égard, l’objet de ce papier est de mettre en évidence les déterminants de ce phénomène tout en en montrant les différences entre hommes et femmes. L’analyse économétrique réalisée à partir de l’enquête de transition pour la vie active suggère que, d’une part, que la durée de l’activité, le capital social et l’accès aux ressources financières sont les principaux déterminants de la multiplication des activités. D’autre part, la multiplication des activités est à la fois un révélateur de similitudes et une expression de différences entre les femmes et les hommes. Les similitudes portent sur le capital social, la durée de vie du micro-business et les difficultés d’accès au financement. Les différences, quant à elle, portent sur le profit de l’activité et l’exercice des micro-business dans le secteur tertiaire notamment des services. Ces résultats ont donné lieu à des implications de politique économique.
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This study examined nascent entrepreneurship by comparing individuals engaged in nascent activities (n = 452), after screening a sample from the general population (n=30,427). Due to the large sample size and the utilization of a control group of non-entrepreneurs (n=608), the findings of this study present a new approach to the relationship between human capital, social capital and entrepreneurship. Our primary objective was to help close the significant research gap regarding the sociological characteristics of nascent entrepreneurs, as well as to examine the comparative importance of various contributions and factors, such as personal networks and business classes. Having friends in business and being encouraged by them was a strong predictor regarding who among the general population eventually engaged in nascent activity. The study fails to support the role of formal education in predicting either nascent entrepreneurship or comparative success, when success is measured in terms of the three defined activities — creating a business plan, registering the business, or obtaining the first sale. Of particular note was that attending business classes specifically designed to promote entrepreneurship failed to be associated with successful business paths. This research suggests that national governments considering intervention activities might be wiser to focus on structural relationships than on programs specifically targeted to promote certain entrepreneurial activities. The facilitation of entrepreneurial social capital should be more successful if agencies filter their assistance through previous existing social networks. In addition, our findings suggest that countries that lack a very highly educated population may not be at a particular disadvantage regarding entrepreneurial activities.
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Strategy has been defined as “the match an ovganization makes between its internal resources and skills … and the opportunities and risks created by its external environment.” 1 During the 1980s, the principal developments in strategy analysis focussed upon the link between strategy and the external environment. Prominent examples of this focus are Michael Porter's analysis of industry structure and competitive positioning and the empirical studies undertaken by the PIMS project. 2 By contrast, the link between strategy and the firm's resources and skills has suffered comparative neglect. Most research into the strategic implications of the firm's internal environment has been concerned with issues of strategy implementation and analysis of the organizational processes through which strategies emerge. 3
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We review and discuss the literature on small firm growth with an intention to provide a useful vantage point for new research studies regarding this important phenomenon. We first discuss conceptual and methodological issues that represent critical choices for those who research growth and which make it challenging to compare results from previous studies. The substantial review of past research is organized into four sections representing two smaller and two larger literatures. The first of the latter focuses on internal and external drivers of small firm growth. Here we find that much has been learnt and that many valuable generalizations can be made. However, we also conclude that more research of the same kind is unlikely to yield much. While interactive and non-linear effects may be worth pursuing it is unlikely that any new and important growth drivers or strong, linear main effects would be found. The second 'large' literature deals with organizational life-cycles or stages of development. While deservedly criticized for unwarranted determinism and weak empirics this type of approach addresses problems of high practical and also theoretical relevance, and should not be shunned by researchers. We argue that with a change in the fundamental assumptions and improved empirical design, research on the organizational and managerial consequences of growth is an important line of inquiry. With this, we overlap with one of the 'smaller' literatures, namely studies focusing on the effects of growth. We argue that studies too often assume that growth equals success. We advocate instead the use of growth as an intermediary variable that influences more fundamental goals in ways that should be carefully examined rather than assumed. The second 'small' literature distinguishes between different modes or forms of growth, including, e.g., organic vs. acquisition-based growth, and international expansion. We note that modes of growth is an important topic that has been under-studied in the growth literature, whereas in other branches of research aspects of it may have been studied intensely, but not primarily from a growth perspective. In the final section we elaborate on ways forward for research on small firm growth. We point at rich opportunities for researchers who look beyond drivers of growth, where growth is viewed as a homogenous phenomenon assumed to unambiguously reflect success, and instead focus on growth as a process and a multi-dimensional phenomenon, as well as on how growth relates to more fundamental outcomes.
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Constructs an analytical framework for a resource-based approach to strategy formulation. There are five stages in this framework: analyze resources, appraise capabilities, analyze competitive advantage, select strategy, and identify resource gaps. The concepts of this framework are illustrated by reference to existing U.S. firms such as IBM, Xerox, Harley-Davidson, and 3M. This framework uses resources and capabilities as the foundation for a firm's long-term strategy because they provide direction for firm strategy and serve as the primary source of firm profit. Resources are defined as the inputs into the production process and include items of capital equipment and skills of individual employees. Capabilities are defined as the capacity for a team of resources to perform some task or activity. When analyzing the competitive advantage of a firm, durability, transparency, transferability, and replicability are considered important factors. To be successful, firms must develop strategies which utilize their unique characteristics. (SRD)
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The model developed here explains why some firms survive while other firms with equal economic performance do not. We argue that organizational survival is not strictly a function of economic performance but also depends on a firm's own threshold of performance. We apply this threshold model to the study of new venture survival, in which the threshold is determined by the entrepreneur's human capital characteristics, such as alternative employment opportunities, psychic income from entrepreneurship, and cost of switching to other occupations. Using a sample of 1,547 entrepreneurs of new businesses in the U.S., we find strong support for the model. The findings suggest that firms with low thresholds may choose to continue or survive despite comparatively low performance.
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An integrated framework is not available for studying the environmental conditions conducive for entrepreneurship despite their importance for the emergence and growth of enterprises in a country. This paper develops such a framework consisting of five dimensions of entrepreneurial environments and links these dimensions to the core elements of the new venture creation process. Specific emphasis is given to the role of environmental conditions in developing opportunities and in enhancing entrepreneurs' propensity and ability to enterprise. The paper outlines some propositions and research implications of the integrated model and offers initial guidelines for formulating public policies to develop entrepreneurial environments
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This report presents the results of a comparative study of entrepreneurship in Latin America and East Asia. It focuses on the process of creation of new companies. That process is analyzed at three different stages: inception of the entrepreneurial venture, company start-up, and its early development. From the initial motivation to become an entrepreneur to the contacts needed to help solve problems as the business gets underway and grows, a number of factors affect the behavior of potential entrepreneurs. This study aims to identify the leading factors that stimulate or limit entrepreneurship at each stage of the entrepreneurial process in Latin America and East Asia. These leading factors are analyzed, a number of conclusions are drawn, and policy recommendations are reached for promoting entrepreneurship in different socio-economic contexts.
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This research focuses on creating a theory of the "organizational advantage," a new concept identified within business and management. Using social capital research as a foundation for this theory, three of the study's objectives are identified: 1) incorporate different aspects of social capital to identify three common dimensions; 2) explain the role of each dimension in the process of creating and exchanging knowledge; and 3) maintain the belief that organizations are capable of creating extraordinary amounts of social capital on all three dimensions. Additionally, the relationship between social capital and intellectual capital is explored, as is the impact of this relationship upon a firm's perceived organizational advantage. In order for exchange and combination of resources to occur as a means of creating value, the research identifies three necessary conditions, including the opportunity for exchange and combination to occur, the expectation that exchange and combination generates value, and the motivation that exchange and combination in some way will be productive. This research further identifies a fourth condition, combination capability, as a significant factor in value creation. Due to social capital's influence upon the conditions needed for exchange and combination, social capital aids in the creation of intellectual capital. The research further hypothesizes that a firm's ability to create and utilize social capital contributes to performance differences among firms. Several limitations are identified, including omission of the negative impact of social capital upon a firm and the costs associated with creating and preserving a firm's social capital. The findings of the study are generalized to other institutional situations, and areas for future research are identified. (AKP)
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Examines the networking strategies of entrepreneurs, including their use of personal and extended organizational networks. Although models of entrepreneurial networking usually do not make distinctions between individuals, organizations, and networks, this analysis considers the impact of social networks of individual entrepreneurs and the extended networks of organizations on the success of entrepreneurs and their companies. The social or personal networks of entrepreneurs can prove to be a cost-effective means of obtaining information that is valuable to the business. Networking of this type involves expanding one's circle of trust. These personal networks are made up of weak and strong ties that together must provide access to diverse information sources. Moving from the personal networks to the extended networks allows entrepreneurs to use indirect ties to expand their access to information and resources. Using these two concepts of networks, two hypotheses are presented. The first proposes that effective entrepreneurs are more likely to systematically plan and monitor network activities while the second proposes that effective entrepreneurs are more likely to undertake actions that increase network density and diversity. With respect to the first hypothesis, those entrepreneurs that are effective are believed to be able to chart their present network, to view effective networks as a crucial aspect of success, and to be able to stabilize and maintain networks. A better understanding of personal networks will help in determining how extended networks are created and in turn strengthened over time. (SRD)
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An integrated model of venture growth isdeveloped based on management theory, organizational behavior theory,organization theory, and entrepreneurship models. The model is tested by gathering responses from 307 companies from the architectural wood working industry. Five research domains are identified as antecedents to venture performance: personality traits and general motives, personal competencies, situationally specific motivation, competitive strategies, and the business environment. Goals of the research are: (1) to test whether a multi-level model that sampled relevant concepts from individual, organizational, and environmental domains would predict firm performance successfully; (2) to test whether each domainwould contribute something to the prediction, and (3) to explore alternativeforms of the relationship among the domains and performance. Findings indicate that individual, organizational, and environmental research domains predict venture growth better when the connection of complex indirect relationships among them is included than when only multiple simultaneous direct effects are studied. In addition, it is found that all the domains enter into the prediction of venture growth when these total effects are considered, indicating that venture growth cannot be adequately explained from a single perspective. (JSD)
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Uses human capital theory and organizational ecology to explore the success of newly formed firms. Human capital focuses on the firm's founder and his/her background whereas organizational ecology considers the characteristics of the organization and its environmental conditions. Data used in the analysis were collected from 1,849 firm founders in Germany whose firms were formed in 1985-1986. Variables used were survival time, general and specific human capital of the founder, newness of the firm, initial size, organizational strategies, location, branch of industry, and market conditions. Of the firms considered, almost one-fourth had failed in the first two years, and 37% had failed within five years. The firms with founders who had more work experience and schooling improved their chances of survival. Those businesses that were novel were more likely to survive than those firms that were considered followers. Overall, the results show that all human capital variables considered have strong selection effects. (SRD)
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Examines how achieved and attributed characteristicsof entrepreneurs affect the composition of founding teams, and how thesecharacteristics are affected by the social context of the entrepreneurialenterprise. Limitations of previous studies are identified: their lack ofgeneralizable findings and their "success bias." To avoid theselimitations, the present study tracks entrepreneurs from the first steps atfirm founding. To avoid success bias a methodological innovation that considersall possible combinations of group members (not just those in a given sample)is used. Structural event analysis is used to generate possible teams, and tocompare chance expectations with empirical teams. The sociological literature identified five mechanisms of group composition:homophily, functionality, status expectations, network constraint, andecological constraint. Sample was 816 teams drawn from the Panel Study ofEntrepreneurial Dynamics (PSED) compiled between 1998 and 2000. Analyzed werethe compositional properties of organizational founding teams. Found thathomophily (respecting both attributed and achieved characteristics) stronglyinfluences group composition. Found that influence of "strong" ties(romantic or family relations) was pronounced; but "weak" ties (such asbusiness acquaintances) imposed no significant network constraint. Ecologicalconstraint leads to disproportionate isolation of minorities such as women andblue-collar workers, but segregation by industry does not strongly affect teamhomophily.(TNM)
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The "network approach to entrepreneurship" is a prominent theoretical perspective within the literature on entrepreneurship. This literature assumes that network resources, networking activities and network support are heavily used to establish new firms (network founding hypothesis). Further, those entrepreneurs, who can refer to a broad and diverse social network and who receive much support from their network are more successful (network success hypothesis). Based on a study of 1,700 new business ventures in Upper Bavaria (Germany), the article gives an empirical test of the network success hypothesis. It is argued that one reason, why previous studies did not consistently find positive network effects, may be that social capital (network support) is used to compensate shortfalls of other types of capital (human capital and financial capital). This compensation hypothesis, however, does not find empirical confirmation. On the other hand, however, the network success hypothesis proves to be valid in our analyses, i.e. network support increases the probability of survival and growth of newly founded businesses.
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This paper focuses on initial team size and membership change of new venture teams in two studies: (1) a panel study of 408 emerging ventures, and (2) a cross-sectional study of 124 new ventures. The findings suggest that larger initial team size provides an advantage for new organizations, and that the benefits of adding and dropping team members are contingent on the stage of development of the organization and the dynamism of the environment. Both external environment and team composition factors are associated with turnover in venture teams.
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DR. PAUL WESTHEAD IS WITH THE Centre for Small and Medium- sized Enterprises, Warwick Business School, University of Warwick, United Kingdom, and Professor Sue Birley is with The Management School, Imperial College of Science, Technology and Medicine, London, United Kingdom. This study explores employment change in 408 independent, owner-managed new firms in Great Britain which had received their first order between 1986 and 1990. In order to unravel the factors associated with standardised employment change in new independent firms exploratory bivariate correlation analysis was used. Eighty-eight variables were identified from the literature and they relate to the ‘internal’ characteristics of the principal owner-manager and the business as well as a range of variables which capture various aspects of the ‘external’ environment. Bivariate correlation analysis results are presented for separate sub-samples of ‘manufacturing’ and ‘service’ firms. Moreover, in order to identify the combination of factors associated with employment change in surveyed new firms the data were further subjected to multiple correlation and regression analysis.
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Many elderly people are facing income problems in Kenya. Until recently the extended family system was the old person’s ‘pension security’ but the widely acknowledged weakening of the family system, due largely to migration, has caused concern to individuals and agencies alike.
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Based upon a series of case studies, this article explores the role of the venture capitalist in management. In addition to money, venture capitalists provide a variety of inputs to the firms in which they invest, such as operating services, discipline, general business knowledge, image, networks, and moral support. Venture capitalists have three sources of power over management—money, personal relationships, and formal power. They attempt to influence managers to follow their "dominant logic," which generally stresses formal planning, a profit orientation, organizational development, patience, and strategic focus.
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Although the literature contains an impressive volume of studies attempting to identify determinants of organizational growth, researchers have recently noted important inconsistencies in findings. They may be explained, in part, by the variety of approaches used to measure growth. Our study provides a critical review of the literature to identify issues regarding the measurement of growth. We examine alternative approaches in order to assess the consequences of using inappropriate measures. Consequently, we consider three concepts as well as three different measurement formulas. Based on comprehensive data from 193 firms in 48 industries for 20 periods, results from comparative regression analyses reveal that the significance of relationships between determinants and organizational growth, as well as amount of explained variance, depend on the specific approaches used to measure growth. Finally, we provide some guidelines to help researchers select appropriate techniques for measuring organizational growth.
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JOSEPH SZARKA IS A LECTURERE IN FRENCH and managment at the university of Bath, England. His paper reviews the mangment literature on networking and puts forward and thery small firm development in terms of network formation. this model holds that it is insfficient to consider the small firm in isolation: the small firm is particulary dependent on the nature and quality of its relations with otehr firms and with the external world. these relations can be conceived in terms of exchange networks, commmunication networks and social networks. goods and services, inforamtion, ideas and values are mediated by those networks and sociocial network. Good and services information ideas and values are mediated by those networks. depending on the likages between firms, network constitutions can be based on relations of control, co-ordination or co-operation. Network constitution is shown to influenc the viability and development paths of member firms. Factors encourging network formation and development are analyssed The key issue of economic effectivness and efficiency are related to questions of concetnraion and market condition. the paper concluded by emphasising the role of network formation for the expansion of the small firm sector.
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Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
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This article argues that new venture formation is a speciai case of strategic management theory. Thus, Sandberg & Hofer's (1987) model of new venture performance, which states that new venture performance is a function of industry structure, venture strategy, and the founding entrepreneur, must be extended to Inciude the resources and the organizational structure, processes, and systems developed by the venture to implement its strategy and achieve its objectives. The key assumptions underlying this model are presented, and spe- cific propositions concerning how resources and organizational structure, processes, and systems affect new venture performance are developed.
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DR. PAUL WESTHEAD IS WITH THE Centre for Small and Medium- sized Enterprises, Warwick Business School, University of Warwick, United Kingdom, and Professor Sue Birley is with The Management School, Imperial College of Science, Technology and Medicine, London, United Kingdom. This study explores employment change in 408 independent, owner-managed new firms in Great Britain which had received their first order between 1986 and 1990. In order to unravel the factors associated with standardised employment change in new independent firms exploratory bivariate correlation analysis was used. Eighty-eight variables were identified from the literature and they relate to the 'internal' characteristics of the principal owner-manager and the business as well as a range of variables which capture various aspects of the 'external' environment. Bivariate correlation analysis results are presented for separate sub-samples of 'manufacturing' and 'service' firms. Moreover, in order to identify the combination of factors associated with employment change in surveyed new firms the data were further subjected to multiple correlation and regression analysis.
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Based on an empirical investigation of the development of a group of manufacturing SMEs comparing the characteristics and strategies of firms achieving high growth between 1979-90 with the weaker performing companies. Shows that high growth can be achieved by firms with a variety of size, sector and age characteristics; such firms are distinguished more by the strategies and actions of managers than by their profile characteristics. The clearest differences between fast growth firms and other firms are with respect to their approach to product and market development. While high growth firms were above average investors they were not production-led; instead they were characterized by an ability to make changes in production to complement an active market development strategy. To grow successfully over ten years, firms also needed to develop their internal organizational structure in ways that enabled the leader of the firm to delegate responsibility for operational tasks to become more focused on strategic level functions. Job generation was particularly concentrated in the high growth firms which also demonstrated an ability to increase labour productivity at the same time as they were increasing employment.
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The importance of exports for achieving business growth and superior financial performance is widely recognized in the literature. Consequently, researchers have sought to identify the variables that influence a company's export performance. Accumulated research findings highlight a need to document the effect of the domestic competitive environment on a firm's export performance. Adopting a multidimensional view of export performance, this study of 121 U.S. telecommunication new ventures concludes that dynamism, hostility, and heterogeneity in a firm's domestic environment are significantly associated with higher export performance. Further, while a venture's age, formal export planning, and technological sophistication are conducive to high export performance, the impact of the venture's size and past financial performance on export performance are insignificant.
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Although knowledge accumulation is dependent upon relationships among constructs being robust across different measurement and sampling decisions, scholars have not sufficiently established such robustness for the construct of firm growth. Focusing on this construct, we conduct analyses on all Swedish firms incorporated during the 1994 to 1998 period (68,830 firms) and track their growth (or demise) over their first 6 years of existence. Although we typically find low shared variance between different growth measures, there is variability such that some measures demonstrate high and/or moderate concurrent validity. These findings have implications for how we delineate the boundaries of firm growth research and accumulate knowledge when we are comparing apples with apples and when we are comparing apples with oranges.
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Previous research suggests that people tend to discover the same opportunities in a given technological change. Austrian economics challenges these assumptions and, since the accuracy of these assumptions is important to the development of entrepreneurship theory, they are explored further. The following propositions are presented: (1) all individuals are not equally likely to recognize a given entrepreneurial opportunity; (2) people can and will discover entrepreneurial opportunities without actively searching for them; (3a) people's prior knowledge about markets will influence their discovery of which markets to enter to exploit a new technology; (3b) people's prior knowledge about how to serve markets will influence their discovery of how to use a new technology to serve a market; and (3c) people's prior knowledge of customer problems will influence their discovery of products and services to exploit a new technology. Data were collected from interviews with entrepreneurs, investors, and others involved in the evaluation or exploitation of eight new venture opportunities which utilized the three-dimensional printing (3DPTM) process invented in 1989 at MIT. Findings demonstrate that, although many people were exposed to information regarding the invention of the 3DPTM process, not many people identified entrepreneurial opportunities to exploit the technology. Also, each of the entrepreneurs interviewed indicated that he or she was not searching for an opportunity prior to its discovery. In fact, all respondents said that they recognized the opportunity almost by accident and seemed surprised by its discovery. Finally, it was shown that prior knowledge comes from many different sources, including work experience, personal events, and education. (SFL)
Article
The study analyzes the formation, development, contribution and management of small firms in the United Kingdom. It explores the differences that smaller firms and larger companies face in the business environment, and studies how far their success or failure depends on the wider economic climate. The analysis also examines different locations and the effect of small businesses on the outside community. The study of the internal organization of small companies includes discussions of employment, entrepreneurship, management strategies, organizational cultures, finance and the variety of challenges the small business owner faces in all these areas. Identifies five reasons for undertaking long-term research on small firms: 1) the small business sector plays an important role in employment creation, in innovation, and in the economy in general, which means that small business policy must be a part of social and employment policy, which requires long-term research; 2) the interests of the small business owner and those of society do not always coincide, and wider social and economic considerations need to be examined; 3) it is reasonable to devote a lot of time to research because reaching a judgment on policy requires careful assessment of high-quality evidence, and because reading historical accounts about small business reveals that many issues remain similar over long periods of time; 4) long-term research can provide an antidote to the ‘knee-jerk' policy making which characterized the small firm environment in the UK during the 1980s; and 5) researchers need to have an opportunity to make theoretical as well as empirical contributions. This analysis offers an overview of the small firm sector in developed countries. It discusses the problem of defining small firms and concludes that, no matter how they are defined, they constitute at least 95 percent of businesses in the European Community. The study examines the reasons for that - such as increasing unemployment and the lowering of the unemployment benefit - and the likelihood of the continuation of this trend in the future. Also examines facotrs influencing the birth rate, growth and death of small firms, their job creation potential, and financing concerns. Discusses the role of governments in promoting the small enterprise sector and in locating small firms within a wider economic and social framework. It articulates a need for a statement about objectives and targets for small firm public policy in the form of a government White Paper, so that targets can be identified and measured. The key findings are laid out to provide a basis for further action by small firms themselves, by financiers, and by governments. (AT)
Article
The main purpose of this paper is to present an empirical analysis of the sequence relating the performance of the firm to its behavior, which in turn depends upon the origin and personal characteristics of the entrepreneurs. The data are drawn from new Spanish firms. A typology of new entrepreneurs is constructed, based on their basic work aspirations. Each type of entrepreneur is then examined, in terms of the origin and personal characteristics of the members of the class. The results of the study show that significant differences exist among the entrepreneurs and firms of each type, especially in terms of the size of the firm (number of employees) and its evolution over time. The implications of these results, for the theory of entrepreneurship and for the design of policies towards the creation of new firms, are then derived.
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The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
Article
We discuss and explore the effects of internationalization, an entrepreneurial strategy employed by small and medium-sized enterprises (SMEs), on firm performance. Using concepts derived from the international business and entrepreneurship literatures, we develop four hypotheses that relate the extent of foreign direct investment (FDI) and exporting activity, and the relative use of alliances, to the corporate performance of internationalizing SMEs. Using a sample of 164 Japanese SMEs to test these hypotheses, we find that the positive impact of internationalization on performance extends primarily from the extent of a firm's FDI activity. We also find evidence consistent with the perspective that firms face a liability of foreignness. When firms first begin FDI activity, profitability declines, but greater levels of FDI are associated with higher performance. Exporting moderates the relationship FDI has with performance, as pursuing a strategy of high exporting concurrent with high FDI is less profitable than one that involves lower levels of exports when FDI levels are high. Finally, we find that alliances with partners with local knowledge can be an effective strategy to overcome the deficiencies SMEs face in resources and capabilities, when they expand into international markets. Copyright © 2001 John Wiley & Sons, Ltd.
Article
We study network activities of entrepreneurs through three phases of establishing a firm in four countries. Entrepreneurs access people in their networks to discuss aspects of establishing and running a business. We find that entrepreneurs build networks that systematically vary by the phase of entrepreneurship, analyzing number of their discussion partners, and the time spent networking. Entrepreneurs talk with more people during the planning than other phases. Family members are present in their networks in all phases, particularly among those who took over an existing firm. However, women use their kin to a larger extent than men, and even more than men when they take over an existing firm. Experienced entrepreneurs have the same networking patterns as novices. Moreover, these networking patterns are the same in all countries. However, there are country differences in size of discussion networks and time spent networking.
Article
This paper studies the interrelationships in the strategic profile of a sample of small firms, and, by using cross-sectional analysis, attempts to identify any evidence to support the ‘stages of growth’ theories. Three surrogates for comparative growth were used in the analysis: number of employees, sales turnover, and profitability. A cluster analysis identified eight different ‘types’ of small firms characterized by ‘internal’ variables of ownership, management, and product structure; and by ‘external’ variables of product/market positioning. Analysis of variance tests found no significant differences between the clusters with regard to size. The results suggest that firms do change, but not necessarily in any prescribed sequence. Indeed, the evidence presented in this paper suggests that future research should be focused on developing theories which better describe the heterogeneity of the sector by analyzing the development within clusters of firms rather than seeking generalized overarching theories.
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The article reflects on the diffusion of the ‘resource-based view of the firm’ into academic and practitioner thought. The contributions of many people are noted. In closing, I offer some speculations about the future use of these ideas.
Article
This study examined the influence of internal capabilities and external networks on firm performance by using data from 137 Korean technological start-up companies. Internal capabilities were operationalized by entrepreneurial orientation, technological capabilities, and financial resources invested during the development period. External networks were captured by partnership- and sponsorship-based linkages. Partnership-based linkages were measured by strategic alliances with other enterprises and venture capitalists, collaboration with universities or research institutes, and participation in venture associations. Sponsorship-based linkages consisted of financial and nonfinancial support from commercial banks and the Korean government. Sales growth indicated the start-up's performance. Regression results showed that the three indicators of internal capabilities are important predictors of a start-up's performance. Among external networks, only the linkages to venture capital companies predicted the start-up's performance. Several interaction terms between internal capabilities and partnership-based linkages have a statistically significant influence on performance. Sponsorship-based linkages do not have individual effects on performance but linkage with financial institutions has a multiplicative effect with technological capabilities and financial resources invested on a start-up's performance. Implications and directions for future research were discussed. Copyright © 2001 John Wiley & Sons, Ltd.
Article
New ventures are increasingly playing an important role in Latin American economies. However, little is known about the determinants of new firm growth in this context. The purpose of this study is to gain an understanding of the factors influencing new firm growth in Argentina, Brazil, Mexico and Peru. Individual, organizational and environmental factors are included in an empirical model, which is tested using data collected by face-to-face interviews with 582 entrepreneurs. Different specifications of employment growth and regression approaches are employed. Results suggest that growth strongly depends on the characteristics of the entrepreneur. National environment and firm-related factors are also important factors in determining growth.
Article
Several recent studies have examined the causes of success and failure in new ventures. From these a three-level analysis has evolved, which considers the management, the venture's strategy, and its competitive environment. Empirical testing is still at an early stage, but results have generally supported the three-level approach. However, the findings are not very strong.This study considers only high potential, technology based new ventures—the companies on which venture capitalists concentrate. It suggests that such firms face unusual time pressures and uncertainty, and that their responses to these forces are major determinants of success or failure. We propose 11 easily measured qualities—describing management, the firm's strategy, and its environment—which should influence how quickly the venture can act. These should predict a new venture's performance.The 11 attributes are tested on 36 new ventures, representing essentially all of the startup investments of a major venture capital firm between 1974 and 1982. The data are taken from the firms' original business plans. Performance is measured from the subsequent financial history, using the compound rate of return to all shareholders (founders, employees, and investors).The ventures in this sample are primarily based on electronic or information technologies. They are highly successful as a group, with an average compound rate of return of 98% per year. They are also very risky; the standard deviation of returns is 171% per year, and in 11 of 36 cases the shareholders lost on their investments.Results from a single sample must always be treated cautiously. However, several findings are strong enough to merit further study and to be incorporated as a part of a process for evaluating new ventures: 1.1. A set of four measures—representing all three areas—explains 57% of the variance. The four—completeness of the founding team, technical superiority of the product, expected time for product development, and buyer concentration—all behave as expected. The first two have a positive effect; the latter two have an inverted U-shaped relationship with an optimum development time of 12 months and an optimum number of customers of approximately 60. Three other measures—prior shared experience of the founders, competitive conditions, and projected market share—show an influence when management, strategy, and environment are examined one area at a time.2.2. These relatively simple measures predict success well, probably at least as well as any other study has done using more subtle measures.3.3. The measures used in this study, though they have strong predictive power, apparently did not influence the young capitalists. Otherwise the relationships should have been different when the return to venture capital investors was used in place of the total return; in fact they were the same. This suggests that the venture capital investors did not give sufficient weight to the qualities that we consider, and could make better choices by giving greater attention to those measures.4.4. Prospective entrepreneurs and investors should benefit from using our model aspart of their screening processes. Specifically, they might calculate a predicted rate of return. If it is low—say, below 30% per year—they should examine the reason for the low score and consider whether circumstances exist which outweigh or invalidate that apparent weakness.5.5. An “additive” model seems realistic. That is, one can combine dissimilar qualities (with appropriate weighting for relative importance) to arrive at an overall figure of merit with strong predictive power. The specific parameters imply that a company must have a complete management team and score well on two of the remaining three measures in order to be an attractive opportunity. More generally, the model allows a practitioner to make a rough assessment of the tradeoffs among management, product, and industry. This is important because few, if any, new companies have all the qualities an investor may desire.6.6. Although individual qualities of the founders are no doubt important, this remains a difficult matter to demonstrate statistically.7.7. Firms exist in an ever changing competitive environment. To the extent that these findings are valid beyond this sample, they may have been recognized and incorporated in more recent new ventures. If so this may change the nature of competition, and alter the key determinants of success or failure.
Article
What decision criteria do venture capitalists (VCs) use to make their investment decisions? This question has received much attention within entrepreneurship literature (i.e.,Wells 1974; Poindexter 1976; Tyebjee and Bruno 1984; MacMillan, Seigel, and Subba Narasimha 1985; MacMillan, Zeman, and Subba Narasimha 1987; Robinson 1987; Timmons et al. 1987; Sandberg, Schweiger, and Hofer 1988; Hall and Hofer 1993; Zacharakis and Meyer 1995) for a number of reasons. First, VC-backed ventures achieve a higher survival rate than non-VC-backed businesses (Kunkel and Hofer 1990; Sandberg 1986; Timmons 1994). Second, a better understanding of the decision process may lead to even better survival rates. Finally, entrepreneurs seeking venture funding benefit if they understand what factors are most important to the VC.
Article
This paper seeks to enhance understanding of the internationalization of small- and medium-sized enterprises (SMEs). The study focuses upon the following issues: Can the characteristics of principal founders, businesses, and the external environment at one point in time be used to `explain' at a later date whether a firm is still an exporter or a nonexporter, whether exporting firms are larger in size than nonexporting firms, whether exporting firms report superior performance than nonexporting firms, and whether exporting firms are more likely to survive than nonexporting firms? To address these questions, this study draws upon a sample of 621 manufacturing, construction, and services businesses located in twelve contrasting environments in Great Britain surveyed first in 1990/91 and then re-interviewed in 1997.
Article
This article examines the determinants of new venture performance. Specifically, it rejects the traditional academic model of new venture performance, which argues that success is based solely on the characteristics of the entrepreneur, i.e., NVP = f(E); and supports instead the broader model of venture capitalists, which claims that success depends not only on the characteristics of the entrepreneur, but also on the structure of the industry entered and the strategy of the venture involved, i.e., NVP = f(E,IS,S).
Article
In this paper, we analyze empirically the relation between the growth of new technology-based firms and the human capital of founders, with the aim of teasing out the “wealth” and “capability” effects of human capital. For this purpose, we take advantage of a new data set relating to a sample composed of 506 Italian young firms that operate in high-tech industries in both manufacturing and services. In accordance with competence-based theories, the econometric estimates show that the nature of the education and of the prior work experience of founders exerts a key influence on growth. In fact, founders’ years of university education in economic and managerial fields and to a lesser extent in scientific and technical fields positively affect growth while education in other fields does not. Similarly prior work experience in the same industry of the new firm is positively associated with growth while prior work experience in other industries is not. Furthermore, it is the technical work experience of founders as opposed to their commercial work experience that determines growth. The fact that within the founding team there are individuals with prior entrepreneurial experiences also results in superior growth. Lastly, we provide evidence that there are synergistic gains from the combination of the complementary capabilities of founders relating to (i) economic-managerial and scientific-technical education and (ii) technical and commercial industry-specific work experiences. We conclude that the human capital of founders of new technology-based firms is not just a proxy for personal wealth.