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Information Asymmetry and New Venture Emergence: Any Mediation?
Abstract
New Venture Emergence is very critical for alleviating the serious global challenge of youth unemployment. The concept of New Venture Emergence is understood to involve those activities and events that are undertaken before an enterprise becomes an enterprise. It is still not clear though if Need for Achievement mediates the relationship of Information Asymmetry and New Venture Emergence. This paper however, seeks to determine if entrepreneur"s need for achievement mediate in the relationship between information asymmetry of an entrepreneur and new venture emergence. In this paper, Need for Achievement is characterized by; desire to undertake challenging tasks, pursuit of excellence, desire to succeed in competition, and commitment to overcoming difficulties. On the other hand, Information Asymmetry includes Prior Knowledge of Markets and Prior Knowledge of Customer Problems, while New Venture Emergence is constituted by seeking startup funding, hiring employees, developing new products and services, and setting up an enterprise. Quantitative data is used to establish that, Need for Achievement does not mediate the relationship of Information Asymmetry and New Venture Emergence. Accordingly, recommendations are suggested to improve youth entrepreneurship policy development planning.
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Before we can act on opportunities we must first identify those opportunities. Understanding what promotes or inhibits entrepreneurial activity thus requires understanding how we construct perceived opportunities. Seeing a prospective course of action as a credible opportunity reflects an intentions–driven process driven by known critical antecedents. Based on well–developed theory and robust empirical evidence, we propose an intentions-based model of the cognitive infrastructure that supports or inhibits how we perceive opportunities. We discuss how this model both integrates past findings and guides future research. We also show the practical diagnostic power this model offers to managers.
This study explores the label ‘opportunity’ in the strategic issue literature as a point of departure for offering an attributional framework for categorizing opportunities entrepreneurs offer as they undertake efforts to start businesses. The strategic issue literature broadly labels opportunities as being positive and controllable and involving potential gain. We demonstrate that this is similar to an attribution theory approach. In preparing this article, the authors analyzed open-ended questions from the Panel Study of Entrepreneurial Dynamics (PSED). Entrepreneurs were more likely to offer attributions about their opportunities that can be categorized as dependent on their abilities (internal and stable attributions) and efforts (internal and variable attributions). Copyright © 2009 Strategic Management Society.
The nature and source of entrepreneurial opportunity are important issues for understanding how markets function and come into being. In addition to describing the forum held on the topic and summarizing the contributions of the articles that appear in the special issue, this article shares a number of lessons learned during the workshop and the editorial process. We explore three of the most important reasons for confusion about the opportunity construct: (1) the “objectivity” of opportunity, (2) the perceived importance of one particular individual in determining the direction of the social world and (3) what distinguishes the sub-class of “entrepreneurial” opportunity from the broader category of opportunity in general. Finally, we offer some directions for future research by illuminating important issues that emerged from the workshop but that remain largely unanswered by the papers of this special issue. Copyright Springer Science+Business Media, LLC 2007
This model applies theories of organizational socialization to characterize the aspiring entrepreneur's journey from neophyte to firm founder and to Identify factors that may Influence the transition from a pre-organization to the formation of a new organization. The model distinguishes two identifiable stages which shape organization formation—Anticipatory Socialization and New Entrepreneur Socialization. Anticipatory Socialization characterizes the predisposing characteristics and experiences that precede the cognitive choice to become an entrepreneur. New Entrepreneur Socialization specifies the critical variables that Influence the new recruit once the decision Is made to start a firm. Three factors determine the transition into the entrepreneurial role: Motivational Bases for Adaptation, Socializing Agents and the Structural Context of the Entrepreneurial Setting. The eventual outcome of entrepreneurial socialization, Organization Formation, Is the survival or discontinuance of the venture. A model of entrepreneurial socialization focuses attention on the adaptive Intra-personal and Inter-personal processes that shape the new venture creation process.
The role of information technology is often debated in the context of economic development of the developing countries. In order to understand the role technology plays in the structural change of the economy, the chapter analyses the case of India, which, according to many researchers has experienced an “idiosyncratic” pattern of structural changes since its independence compared to many countries. This is evident from the fact that growth of Indian economy has been driven by the services sector rather than manufacturing which prompted many researches to conclude that India has leapfrogged the phase of industrialization. This chapter examines the impact of services-led growth and the role of Information Technology in India through a comparative analysis of manufacturing versus services in export performance and employment scenario. The study concludes that the India needs a more broad based policy of technology adoption, not only to sustain its services led growth but also to boost its manufacturing sector as well as make the economic development more inclusive.
'This ambitious book draws upon a wide variety of literature in developing a comprehensive theory of entrepreneurship, ranging from the discovery of entrepreneurial activities, to industry differences in entrepreneurial activity, to the organizing process. It represents a major contribution to the field.' - Arnold C. Cooper, Purdue University, US. 'Professor Scott Shane provides a deep and comprehensive discussion of the individual-opportunity nexus in entrepreneurship. Eschewing the usual approaches of either focusing exclusively on the individuals and their motivations and actions or focusing exclusively, almost always ex-post, on the economic potential of opportunities, Scott Shane fixes his gaze squarely on the nexus of the individual and the opportunity. It is this nexus that I believe is the building block for a better understanding of the entrepreneurial phenomenon.' - From the foreword by Sankaran Venkataraman. In the first exhaustive treatment of the field in 20 years, Scott Shane extends the analysis of entrepreneurship by offering an overarching conceptual framework that explains the different parts of the entrepreneurial process - the opportunities, the people who pursue them, the skills and strategies used to organize and exploit opportunities, and the environmental conditions favorable to them - in a coherent way.
Existing studies of entrepreneurship development are inadequate in measuring the scale of entrepreneurial activity, or analysing its determinants in China. The purpose of this paper is, therefore, to provide an analytical framework to better define and measure entrepreneurship in a systematic way, enabling benchmarking with other nations.
Systematic knowledge of entrepreneurship has evolved since the 1980s. In this study we will pay particular attention to the "knowledge producers" who have shaped the field over time but also to the "knowledge users" who have employed the core works in entrepreneurship in order to develop our knowledge of the phenomenon of entrepreneurship. A unique database consisting of all references in twelve "handbooks" (or state-of-the-art books) in entrepreneurship has been developed. The chapters in these handbooks are written by experts within the field, and it can be assumed that their references represent "core knowledge" with relevance to entrepreneurship research. In the study we conclude that a group of core knowledge producers seem to emerge over time. Still the field relies on old theoretical frameworks imported from mainstream disciplines. However, over the last decade sign could be seen of a stronger knowledge-base of its own in entrepreneurship research is emerging. Our analysis of the knowledge users in entrepreneurship research shows that the field is heavily anchored in "business" and "management". On the other hand, the core works in entrepreneurship are included in a large number of studies within many different fields of research – creating a "long tail" of users. We will argue that to successfully develop entrepreneurship research in the future, we need to relate new research opportunities to earlier knowledge within the field, which calls for a stronger "knowledge-based" focus. In the future we would also like to see a stronger integration between the fields of entrepreneurship and innovation studies.
The role of the entrepreneur is the most fundamental issue addressed by the modern theory of the firm.Coordination, an improvement in the allocation of resources, in a volatile economy depends on the continuing synthesis of new information.Processing this information requires a division of labor between and among observers and synthesizers. The synthesis of information about changes in persistent factors requires the judgment of the entrepreneur. Using their firms as a legal shell, entrepreneurs implement their coordination projects by borrowing money and using it to buy or rent productive resources. In negotiating for these resources, entrepreneurs are careful not to give away crucial information on which their synthesis is based. Entrepreneurs are also organizers in that they must internalize the market and the design of organizational structures since they cannot patent their own ideas. Finally, entrepreneurs must create trust through moral values in order to enforce business contracts and to create an environment in which risky coordination products can take place.Entrepreneurship therefore requires a degree of consensus on moral issues. (SAA)
Two theories of entrepreneurial action - Discovery Theory and Creation Theory - are discussed. While Discovery Theory and its assumptions have been addressed in the literature, neither the assumptions of Creation Theory nor how they are related to the assumptions of Discovery Theory have yet been discussed. The empirical implications of these two theories for research on entrepreneurial action, generally, and for three specific entrepreneurial actions - entrepreneurial decision making, business planning, and new venture financing - in particular, are then discussed. It is shown that these two theories will often make contradictory predictions about the effects of entrepreneurial actions on the ability of entrepreneurs to produce new products or services.
This article discusses how many entrepreneurs create multiple ventures, and thereby apparently lengthen the duration of their entrepreneurial careers. A new concept, called the Corridor Principle, is proposed as a possible explanation of the multiple venture phenomenon. The Corridor Principle states that the mere act of starting a venture enables entrepreneurs to see other venture opportunities they could neither see nor take advantage of until they had started their initial venture.The Corridor Principle presents an alternative model to the linear single venture career model, embodied by such celebrity entrepreneurs as Ray Kroc of MacDonald' s and Kenneth Olsen of Digital Equipment Corp. Six hypotheses test expectations about the timing and duration of entrepreneurial careers, as well as the relationship between entrepreneurial career length and the creation of multiple ventures.The findings strongly support: • the position that entrepreneurship is a dynamic, multi-venture process for a great many entrepreneurs the rule, rather than the exception. • the existence of a positive correlation between finding at least a second venture and realizing a longer entrepreneurial career. Though there are a variety of explanations for this, and the patterns include both sequential and overlapping ventures, the net effect of creating multiple ventures appears to produce a longer entrepreneurial career. • the position that significant numbers of entrepreneurs create their second venture very early in their entrepreneurial careers especially when contrasted to the group of ex-entrepreneurs, who create multiple ventures (if at all) at a slower rate and later in their careers.Overall, these observations reinforce the notion of the Corridor Principle. Though who can and cannot take advantage of the Corridor Principle is not entirely revealed by the data, some indication exists that an entrepreneurs ability to use Corridor Principle strategy to prolong his or her career is related both to age at startup, and to conscious anticipation and preparation for an entrepreneurial career.The main implications for entrepreneurship practitioners, advisors, researchers, teachers and students are these: Whether studying the entrepreneurial process or planning to start an entrepreneurial career, a long-term view should be taken, one that includes the likely possibility of multiple ventures. The minimum economic returns of earlier ventures can be lower than previously thought if these ventures provide entry to subsequent ventures that possess higher (more acceptable) returns to the entrepreneur. The evidence thus far available indicates that the creation of subsequent ventures occurs relatively quickly when corridors of opportunity become visible and attainable after earlier ventures are established. The likelihood of career failure, as opposed to venture failure, may be lowered if one selects earlier ventures based on their potential to reveal follow-on-venture opportunities that the entrepreneur can investigate and possibly pursue.
This article examines the prevalence of five psychological attributes in a sample of established entrepreneurs. These attributes are need for achievement, locus of control, risk-taking propensity, tolerance of ambiguity, and Type A behavior. These characteristics are widely regarded as hallmarks of the entrepreneurial personality.The focus of the study is twofold: 1) Do these attributes distinguish entrepreneurs (founders) from small business managers (nonfounders)? 2) Does the presence of these “entrepreneurial” attributes relate to the financial performance of the firm?Survey questionnaires were completed by 239 members of the Smaller Business Association of New England. Founders in this sample score significantly higher than nonfounders for three of the five dimensions: need for achievement, risk-taking propensity, and tolerance of ambiguity. Both groups manifest an internal locus of control: that is, they share a perception that they can influence events in their lives and are thereby free from external forces such as destiny or luck. In terms of Type A behavior, founders and nonfounders alike score 60% above the midpoint on the Type A scale. Such Type A persons tend to be competitive, restless strivers who constantly struggle against the limitations of time.The relationships between psychological attributes and financial performance are few, but suggestive. Among founders, internal locus of control relates to a low liquidity ratio. Among non- founders, high tolerance of ambiguity associates with high return on assets (ROA), and high need for achievement associates with a high liquidity ratio. A test for curvilinearity reveals a “threshold effect” : in three instances, a psychological attribute associates with corporate performance only to a certain point. Beyond this optimal level, the psychological pattern appears to become dysfunctional and financial returns falter. In the founders, for example, moderate risk-taking is associated with increased ROA. However, the ROA of these firms decreases when risk-taking becomes excessive. In similar fashion, founders may see their firms' ROA flourish if this attribute is present to a moderate extent. When too pronounced, the profitability of the firm may decline. The same pattern exists between tolerance of ambiguity and growth rate in the nonfounder group. Excessive ambiguity tolerance may lead to a lack of response mechanisms for dealing with environmental change. In assessing the leadership of established ventures, it might be prudent for bankers, investors, and entrepreneurs themselves to pay heed to the mix of these characteristics
The present research draws on Ajzen's theory of planned behaviour and extends Keeney's work on understanding internet purchasing behaviour. This study uses SEM-based analysis to provide a rich set of contexts to understand e-commerce while building upon earlier analysis of customers' attitude and behaviour toward internet purchasing. Earlier approaches have emphasised the needs for decision makers to know more about what customers fundamentally value and need in order to make informed decisions about the products and services to be offered on the internet. The development of SEM-based theoretical and empirical analyses in this study has research and practical implications.
This paper applies the techniques of stochastic optimal control to the problem of price-taking agents choosing the optimal balance between self-employment and paid employment. The two principal innovations are the development of an intertemporal optimizing model for heterogeneous agents under conditions of uncertainty, and the application of multivariate maximum likelihood cointegration techniques to test the model and to obtain estimates of the long-run and short-run determinants of self-employment. Both risk and expected returns are found to affect the numbers in self-employment in the long run; there is also evidence that the interest rate acts as a barrier to entry in reducing self-employment in the short run and the long run. Copyright 1996 by The London School of Economics and Political Science.
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