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This research analyzed new venture start-up activities undertaken by 71 nascent entrepreneurs. Nascent entrepreneurs are individuals who were identified as taking steps to found a new business but who had not yet succeeded in making the transition to new business ownership. Longitudinal data for the study comes from a secondary data analysis of two representative samples, one of 683 adult residents in Wisconsin (Reynolds and White 1993) and the other of 1016 adult residents of the United States (Curtin 1982). These surveys were conducted between 1992 and 1993, and the nascent entrepreneurs were reinterviewed six to 18 months after their initial interview.
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ELSEVIER
EXPLORING
START-UP EVENT
SEQUENCES
NANCY
M. CARTER
Marquette Universiry
WILLIAM B. GARTNER
San Francisco State Universiry
PAUL D. REYNOLDS
Babson College
This research analyzed nev, venture start-up activities undenaken by 7l
tu$cent entrepreneurs. Nascent entrepreneurs are individuals who were
identifed as mking steps to found a nen- business
but who had not yet
succeeded
in making the tansition to new business ownership. I-ongitudinal
datafor the
study comes
from a secondary
data analysis
of rw,o
representative
samples,
one of 683 adult residents in Wisconsin
(Reynolds
and Wite I993)
and the other of I0l6 adult residents
of the United States (Cunin i,982). These surneys
were conducted
between 1992 and I993, and the nascent
entrepreneurs were reinterviewed six to I8 months
after their
initial interviev'.
Three broad questions v,ere addressed: (l ) What activities do nascent entrepreneurs initiate in
attempting to establish
a new business?
Q) Hov'trumy activities do nascent
entrepreneurs initiate during
the gestation of the stan-up? and (3) Wen are particul"ar activities initiated or completed?
Between
thefirst and second interview,,48% of the ntscent entrepreneurs reported
the.t had set
up a business in operation. Over 20% had given up and were no longer actively trying to establish a
business. Almost a third of the respondents
reponed they were still trying to establish a firm.
As a war to summarize
the results
and as a springboard toward some insights
into the implications
of this research
for practice and future research, we developed the follov,ing activirJ-
profiles of the
three trnpes of nascent
entepreneurs studied. These
profiIes are ofered as a combinotion of bothfact
and some intuition about the
fndings.
STARTED A BUSINESS. Nascent entrepreneurs who were able to $an a business were more
aggressive in making their businesses real. They
undertook
activities that made
their businesses
tangible
to others: the.v lookedforfacilities and equipment,
sought
and gotfinancial suppon,formed a legal
efiin',organizedateam,boughtfacilitiesandequipment,anddevotedfulltimetothebusiness.lndividuals
who vaned businesses
seemed
to act v,ith a greater level of intensim^. Thet,
undenook more activities
than those individuals who did not san a business. The
pattern of activities seem to indicate that
individuals who smnedfirms put themselves into the da),-to-dat*
process of running an ongoing business
as quickly as thel could and that these
activities resulted in staning firms that generated sales
(94%
Address
correspondence
to Nancy M. Carter. Schoolof
Business
Administration.
Marquette University,
6O6
Norrh l3th St.. Milwaukee, WI 53233.
EXECUTIVE
ST.iMMARY
Journal
of Business
Venturing
ll.
e 1996
Elsevier Science
Inc.
655 Avenue of the Americas. New
t5r-r66
York, NY 10010 08E3-9026/96/$r
5.00
ssDr 0883-9026(95)00
I 29-8
I
152 N.M. cARTER
ET AL.
of the entrepreneurs) and positive cash
flow (50% of the entrepreneurs). What is not known is how
successful
or profitable these new firms will be over time. For example, 50Vo
of the firms that were
started had not reached positive cash
flow and these
firns nny have been started by individuals who
were
foolhardy and rushed into operation of a business
that wouW not be sustainable.
GAVE UP. The panern of activities
for the group of entepreneurs who gave up seem
to indicate
that these
entrepreneurs
discovered that their initial ideafor their businesses
would not lead to success.
The
finding that the activity of developing a model or protot.lt)pe
diferentiated individunls who Save
up
from those who were still trying would suggest
that those who gave up had lested" their ideas out and
found that they would not work according to their expectations.
Nascent entrepreneurs who Save up
seemed
to be similar in their activiry pafterns compared with those who staned their firms, that is,
individuals who gave up pursued the activities of creating a business
in an aSSressive
mnnner at the
beginning of the process. But as the business
unfolded over time, these entrepreneurs
decreased
their
activities
and then ceased
start-up activities. This group of individuals might be seen
as either having
the wisdom to test their ideas out before jumping into something that might lead to failure or lacking
the
fexibitity tc find more creative ways to solve the problems that they were confronted with.
STILL TRYING. It would seem
that those who are still trying are not putting enough efort into
the stan-up process in order to find out whether they should start the business or give up. Those
still trying had undenaken fewer activities than individuals in the other two groups. The still trying
entrepreneurs
were devoting their shon-term efons bward activities internal to the start-up process
(e.g.
, saving money and preparing a plan) and less efon toward activities that would mnke the business
real to others. The still trying entrepreneurs
moy be all talk and little action. Or these still trying
entrepreneurs
might be involved in developing
businesses
that take
longerfor these
particular opportuni-
ties to unfold. (lt should be noted that there was no industry efect across the three groups.)
Our advice to individuals considering business start-up is th"at
the resuhs seem
to provide evidence
that nascent entrepreneurs should aggressively
pursue opponunities in the shon-term, because
they
will quickly learn that these opponunities will either reveal themselves
as wonhy of stan-up or as
poor
choices that should be abandoned. Individuals who do not devote
the time and efon rc undenaking the
activities necessary
for starting a business nny fnd themselves
perennially still trying, rather than
succeeding or failing.
Wat entepreneurs do in their day-to-day activities nutters. The kinds of activities th.at
nascent
entrepreneurs
undenake
, the number of activities, and the sequence
of these activities hnve a significant
influence on the abiliry of nascent entrepreneurs
to successfully
create
new ventures. This studt- suggests
that the behaviors
of nascent entrepreneurs
who have successfuUy
staned a new venture can be identified
and dffirentiated from the behaviors of nascent entepreneurs who
failed. We
believe
that
future studies
will more precisely ident{y the kinds of behaviors appropriate for cenain new venture conditions. If
such contingency information can be generated, entrepreneurship
research is likely to have significant
benefits
for entrepreneurship practice, education, and public polict".
INTRODUCTION
This study
focused on nascent entrepreneurs
and the process
of organization
creation.
Other
terms for this perid of time are: organizational emergence
(Gartner,
Bird, and Starr 1992);
the
preorganization
(Katz and
Gartner 1988;
Hansen 1990),
the organization
in vitro (Hansen
and
Wortman 1989),
prelaunch
(McMullan and Long 1990),
gestation
(Reynolds
and Miller
1992;
Whetten 1987), and start-up
(Van de Ven, Angle, and Poole 1989; Vesper 1990).
Organization creation involves those
events
before an organization becomes
an organization,
that is, organization creation involves those factors that lead to and influence the process
of
starting a business.
Reynolds
(1994) estimates that nearly 4% of working age adults in the United States
are, at any one time, actively involved in the process of starting
a business.
He found that
nearly l|Vo of the nascent entrepreneurs
in his study
reported
a new firm in place within 12
EXPLORTNC
START_UP
EVENT
SEQUENCES
153
to l8 months
of initial contact,
whereas
it took, on average,
over two years
before
nascent
entrepreneurs
indicated
they had
given up on efforts
to start
a business.
Coupled
with Birch's
(1987)
findings
that, on average,
over one
million businesses
are founded
in the United
Smtes
each year, substantial
efforts are undertaken
and resources
utilized (both successfully
and
unsuccessfully)
to create
new organizations.
This study
explored
the
activities
undertaken
by nascent
entrepreneurs
during
the
organi-
zation
creation
process.
Three
broad questions
were
addressed:
(liwhat activities
do nascent
entrepreneurs
initiate in attempting
to establish
a new business?
(2) How many activities
do
nascent
entrepreneurs
initiate
during the
gestation
of the
start-up?
and
(3) Whenare
particular
activities
initiated
or completed?
LITERATURE REVIEW
A number
of scholars
have
offered
frameworks
for exploring
the
characteristics
of the
organiza-
tion creation
process.
Gartner (1985)
outlined
a framework
of four dimensions
that
should
be
accounted
for when
studying
new
ventures:
the
individuals
involved
in the
creation
of the
new venture, the activities
undertaken
by those
individuals
during the new venture
creation
process,
the organizational
structure
and strategy
of the new u.ntur., and
the environmental
context
of the new venture.
Van de Ven et al. (1989)
suggested
that
researchers
explore
the
business
creation
process
by looking
at
" (1) how a business
idea
(or strategy)
emerges
over
time. (2) when and how different
functional
competencies
are created
to develop
anJ market
the
first proprietary product, (3) when
and
how these
functional
competencies
are
redeployed
to develop
subsequent
new products
in a family of products
believedto result
in a sustainable
business,
and (4) how these
business
development
efforts
both influence
and are
constrained
by organization and industry contexts' (pp. 224-225). vesper (1990) argued thar a new
company
is composed
of five
key ingredients:
(
I ) technical
know-how,
(2)
a
pioduct or service
idea' (3) personal
contacts,
(4) physical resources,
and (5) customer
orders, and he offers
some
insights
into various
start-up
sequences
that
occur
among
the
five key ingredients.
Katz
and
Gartner
( 1988)
explored
the
organization
theory
and
entrepieneurship
literarure
to identify
a
theoretical
and
empirically
based
framework
for identifying
tir. prop..ties that would indicate
an organization in the process
of creation. Their literature
review found that most theories
on organizations
assume
complex
properties
that
occur
only after
organizations
achieve
some
particular
size
(e.g., Mintzberg 1979;
March
and
Simon
l95g; Milei t9g0), rather
than
some
minimal set of characteristics
that might differentiate
an emerging
organization
from other
types
of social situations.
Katz and Gartner (1988) suggested
foui emirgent properries
that
would be indicators
that an organization
is in the process
of coming into existe
nce:
intention
to create an organization, assembling
resource.r
to create
an organization,
developing
an
organizationalboundary@.8.,
incorporation),
andexchangesofres6ur..racrosstheboundary
(e.g.,
sales).
Subsequent
empirical explorations (Reynolds and Mille
r 1992;
Reynolds and white
1993, Reynolds 1994)
of the Katz and Gartner (19s8) framework have found that no one
pattern or sequence
of events
is common to all emerging
organizations.
Whereas
the most
comlnon
first event
in the
creation
of an organization
is a
personal
commitment
by individuals
involved in the new venture (five out of six new firms), some
emerging
organizations
(trvo
in five) reported
the first event
as
having sales,
whereas
others
Uegan
lvittr hiring or financial
support
(one in four). The most common last events
in the creation
of an organization
were
likely to be hiring first employees
and first sales
income
(one-half
of new ventures),
financial
suPPort
(two in five), and a major personal
commitment to the venture (one in four new
t
154 N.M.
cARTER
ET
AL.
ventures).
In general, the average
time a firm was in the
process
of emergence
was one
year,
though 20% completed
gestation
within one month, and 90% completed
gestation
within
three
years.
In contrast,
Van de Ven et al. (1989)
in a study
of high-technology
ventures
found that entrepreneurs
engaged
in a set
of activities for nearly four years before
business
initiation.
We sought
to reexamine
the literarure
on entrepreneurial
behaviors
and
develop
linkages
between certain
cogent entrepreneurial
behaviors
and
their efficacy
for organization
creation.
The theoretical and empirical
literature
on entrepreneurial
behaviors
is very diverse,
and
few
efforts
have
been undertaken
to identify and
validate a set
of comprehensive
and
parsimonious
behaviors
necessary
to create
new
businesses
(Gatewood,
Shaver.
and
Gartner
1995;
Gartner
and Starr
1993).
As discussed
in the methodology
section.
we had available
for analysis
l4
activitv
measures taken
from two previous studies
of nascent
entrepreneurs
(see
Table l).
The theoretical
basis for our exploration
is grounded
in Weick's theory
of organizing
(Weick
lg1,g).In
Weick's
view,
an
organization
is
an ongoing
process of interactions
among
individu-
als.
We see
the
process
of organization
formation
as analogous
to
Weick's
process of "enact-
ment"-the generation of specific
patterns of interlocked
behaviors
among
individuals.
In
general.
one would expect
that some
behaviors
would be more effective
in enacting
an
organization
compared
to others.
For example,
Aldrich and
Fiol (
1994)
suggest
that
entrepre-
neurs seek
to gain cognitive
legitimacy
tor their organizations
by developing
trust
among
those
involved
in
the
start-up.
In broad
terrns,
a
view of organization
formation
as
"enactment"
would
assume that
entrepreneurs
who
were
involved
in behaviors
that
demonstrated
to others
that
the emerging
business
was
"real"
would be more
likely to
create
an organization
(Gartner.
Bird, and Starr |gg2,p. l7). For
example,
a
behavior
such
as buying
facilities
and equipment
might be a more
significant
indicator
to others
that
a nascent
business
is real than
undertaking
a behavior such
as planning. Buying facilities
may show
others
that the entrepreneur
has
made a significant
commitment
to creating a new business
compared
to what might be a
less
public
demonstration
of commitment
like planning.
A fully developed
logic for linking
theoretical
ideas
about
organizing
with specific
hypotheses
and
measures
awaits
development.
Our primary objective
was to explore the three
questions listed
earlier: What activities
were undertaken?
How many activities
were undertaken?
When were these
activities
under-
taken? It was our assumption
that nascent
entrepreneurs
who were able to get a business
up and running
undertook
different behaviors
(or sequences
of behaviors)
in starting
their
businesses
than those
nascent
entrepreneurs
who failed to start a business.
What specific
behaviors
or sequences
of behaviors
would result
in the successful
creation
of a business
would be discovered
through exploration
of the survey responses.
METHODOLOGY
Source
of Data
Longitudinal
data
for the study
comes
from a secondary
data
analysis
of two representative
samples,
one
of 683 adult residents
in Wisconsin
(Reynolds
and
White 1993)
and the other
of 1016 adult residents
of the United Srates
(Curtin 1982).
Data
had been
collected
in these
two studies
through
a procedure
that starts
with a random selection
of households,
followed
by a random selection
of an adult member of the household.
During the course
of a phone
interview these
randomly selected
adults were asked:
*Are you, alone or with others, now
trying to start
a business?'
If they answered
yes, they were asked
if they had *given serious
thought
to the new business'
and whether a number of different activities associated
with
T I
EXPLORTNG
START-UP
EVENT SEQUENCES
155
starting a new firm had been
initiated or completed.
They were also asked
the month and
year all reported actions were initiated. Those that reported two or more firm gestation
behaviors
were considered
nascent
entrepreneurs.
Follow-up interviews were completed
on
both samples.
When the follow-up sample was restricted
to autonomous
start-ups
and fran-
chises,
data were
available
for 7l nascent
entrepreneurs.
Subsidiaries, branches,
or purchases
of another
business were excluded
from the studv.
Measures
Precursor
Activities
During the phone
interviews
the nascent
entrepreneurs
were
asked
about
a series
of activities
associated
with the gestation
process.
For each
activity respondents
indicated
whether
the
activity
was:
(1)
notyet
initiated;
(2)
initiated;
(3)
complete;
or (4)
not relevanr.
If the behavior
had been
initiated or completed
they were asked
to indicate
the month and
year of initiation
and/or completion.
The entrepreneurs
also were
asked
if the new business
was included
in
any of the standard
lists of businesses:
Dun and Bradstreet
files, unemployment
insurance
files, social
security
files, or the federal
tax return listing. At the time of the second interview
the respondents
were again
asked
to indicate
the status
of the start-up
activities
and whether
they were
included
on
the various
standard
lists
of businesses. We
classified
14 of the activities
as precursor behaviors
that entrepreneurs
commonly undertake
to establish
a new business
(e.9., develop
a business plan,
look for facilities
or equipment
or location,
ask for funding).
The activities and their intercorrelations
are displayed
in Table 1.
Using the dates
associated
with when the activities were initiated, a time frame of firm
development
was
constructed.
An activity was
considered
initiated
if the
entrepreneur
reported
in either of the two interviews
that they had initiated
or completed
the activity. Each
acrivify
was categorized
according
to the length
of time separating
its initiation or completion from
thatof the earliest
reported
activity. The time scale was separated
into categories
beginning
with the first month of activity and
progressing
by quarter
through the fourth year. Thus, for
example,
a value of I corresponded
to activities
that were initiated during the first month of
the firm's development,
a value
of 2 to activities
within the first quarter, and 3 to activities
undertaken
during the 2 quarter,
etc.
A value
of 17
accordingly,
represented
activities
initiated
in the fourth quarter
of the fourth year and 18 represented
activities
corresponding
to the 5th
year of activity. All activities commencing
in the fifth year were grouped together. This
measure
was used
to examine
the sequencing
of the start-up
activities.
We created three measures
from the time scale.
First, each activiry was
dummy coded
to designate
whether
the respondent
reported
initiating or completing
the behavior
(1 : yes;
0 : no). This information was used to examine what activities entrepreneurs
engaged
in
during their firms' development.
Second,
a count was made
of the total number
of activities
initiated
(range
possible;
0 : 14). This
measure
was
used
to assess
the rate
of activiry initiation.
Third, each category
of the time scale was assigned
a value designating
the time period in
which the action was initiated. Values ranged
from I (corresponding
to activities initiated
within a month of the first behavior)
to l8 (corresponding
to the 5th year of activity). Thus,
for example, a value
of 3 signified
activities
that were initiated during the second
quarter
of
the first year of the firm's development"
whereas
a value
of l6 represented
activities
initiated
in the third quarter of the fourth year. This measure
was
used
to examine
the sequencing
of
start-up
activities.
e
a. a.
156 N.M.
CARTER Er AL.
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EXPLORTNG
START-UP
EVENT
SEQUENCES 157
Stan-up Indicators
During the second
interview, the respondents
were asked
a self-perception
measure
of the
current status
of the development
of their firm: (l) still working on putting the business
in
place; (2) given up, do not expect
to start
that
business; (3) the business
is now in operation,
up and running. Responses
to this
question
were used
to group the entrepreneurs
into one
of
three outcome
categories
that we refer to as *outcome
status.'Additionally, several
other
start-up
indicators
were assessed.
Using the same
scale
as
that used
to assess
the precursor
behaviors,
respondents
were asked
to indicate
whether
their business was included
on four
standard
business
listings
(i.e., Dun
and Bradstreet
files,
unemployment
insurance
files,
social
security files, or the federal
tax return listing), whether
they had received
any money
from
the
sales
of goods
or services,
and
if they
had
achieved
a
positive
cash
flow (monthly
revenues
exceeded
the monthly expenses).
If they responded
'Jles," they were asked
to indicate
the
date when the start-up
indicator
first happened.
Analytical Techniques
Discriminant analysis
and
one-way
analysis
of variance
were
used
to test
whether
there
were
significant
differences
among
the three
outcome
categories.
Additionally, descriptive
statistics
were displayed
to illustrate
sequencing
of the start-up
activities.
The discriminant
variables
(precursor
activities)
were
entered
stepwise
according
to the
Wilks'lambda
criterion.
Stepwise
analysis
was
appropriate,
because
the relationship
between
the
discriminant
variables
and
the
status
outcomes
was not known from previous research.
The functions
were rotated
using
varimax rotation to aid in the interpretation of the functions' meanings.
RESULTS
Table 2 shows
the outcome
status
of the gestation
efforts. Between
the first and the second
interview, 48Vo
of the
nascent
entrepreneurs
reported
they
had
put a business
into operation,
up and running. Over 20% had given up and were no longer actively trying to establish
the
new venture. Almost a third of the respondents
reported
they were still trying to establish
a
firm.Table 3 reports
the results
of a forward stepwise
discriminant
analysis
used
to examine
whether the kinds of activities
nascent
entrepreneurs
initiate varies by outcome
status.
The
discriminant
analysis
revealed
that
the
first discriminant
function
had
an eigenvalu
e of 0.279
accounting
for 62.7% of the variance,
with a canonical
correlation of 0.467. The second
discriminant
function
had
an
eigenvalue
of 0. 166,
accountin
g far 37 .3
percent
of the variance.
Wilks' lambdas
prior to extraction
of each
function were 0.67 and
0.86. Both lamMas were
significant
at .005 or less.
The first function, which explained
the most variance,
differentiated
the entrepreneurs
who were still actively trying to start businesses
from the other two groups. These
nascent
entrepreneurs
were least likely to get financial support or to buy facilities or equipment. In
TABLE 2 Outcome
Status
at Time of Second
Interview
Fledgling new firm, startcd
Still actively trying to establish firm
Not actively trying-Gave up
Total
34
(48Vo)
2t (30vo)
t6 (22Vo)
7l
t
a
158 N.M. cARTER
ET AL.
TABLE 3 Results
of Discriminant Analysis: Activities Initiated within Five Years of First Behavior
Variable Function IFunction
2
Canonical
discriminant funcitons evaluated
at group means
(centroids)
Started businesses
Gave up. not actively trying
Still actively trying
Rotated
standardized
discriminant
function coefficients
Bought
facilities/equipment
Got financial support
Developed
models
Correctly classified
63
%
.658
*.084
-.720
.658
.ffi
-.000
-.497
.739
-.254
-.498
.555
.789
contrast.
nascent
entrepreneurs who had
started
businesses
were
most
likely to have
bought
facilities
or equipment
and to have obtained
financial
support.
The second function separated
entrepreneurs who gave
up and were no longer actively
trying to establish
a new business
from the other
two groups.
Those who gave
up were more likely to get financial
support and
to have
developed
models or prototypes.
Table
4 provides
further insight into the kinds of activities nascent
entrepreneurs
in the
three outcome
status
groups
initiated.
A review
of the
precursor
activities that
did not
statisti-
cally discriminate
the groups indicates
that a substantial
percentage
of all entrepreneurs in
the study reported
having saved and invested
their own money
in the start-up,
having looked
for equipment
or facilities, and having organized a start-up team.
A review of the start-up
indicators
shows that over 9O% of the entrepreneurs
who had
TABLE 4 Percentage
of Activities
Initiated
within
Five Years of First Behavior
Started
(n : 34) Gave Up
1n
= 16) Still Trying
(n : 2ll Total
(n = 7l)
Discriminating
activities
Bought facilities.
equipment
Got financial support
Developed
models/prototype
s
Other precursor activities
Organized
start-up team
Devoted full time
Asked for funding
Invested own money
Looked for facilities/equipment
Applied licenseipatent
Saved money to invest
Prepared plan
Formed legal entity
Hired employees
Rented facilities. equipment
Start-Up indicators
Sales
Positive
cash flow
D&B credit listing
Unemployment insurance
FICA
Filed federal tax
85
t1
r5
68
1'7
53
9l
82
'tl
68
53
49
32
24
94
50
6
24
41
7l
50
44
4
56
38
4
8l
8l
56
56
56
45
6
l9
50
l9
6
0
0
6
43
5
t4
48
t4
l0
67
52
38
67
43
36
l0
l9
48
l9
5
0
0
l9
65
34
2l
59
35
38
82
73
58
65
5l
28
20
2l
70
34
5
ll
22
4l
EXPLORTNG
START-UP
EVENT
SEQUENCES 159
TABLE 5 Summary of Analysis of Variance for Total Number of Activities Initiated
Source df MS
Outcome status
Error 9.75
a business
in operation
at the time of the second
interview
had sales
from goods
or services,
7l% had filed federal income tax returns, and
50Vo
reported having a positive cash
flow.
These
rates
far exceed
those
of the other two groups.
We used
a
one-way
analysis
of variance
to examine
whether
the
total number
of activities
entrepreneurs
initiate varies
across
the outcome
status
groups.
The results
reported
in Table
5 indicate
a statistical
difference.
Pairwise
comparisons
of the means
revealed
that
the
average
total number
of precursor
activities
initiated by entrepreneurs
who have
a business
operating
(mean
- 8.00) are significantly
greater
than
the number
initiated
by entrepreneurs
who gave
up (mean
: 6.56), or rhose
who are still trying (mean
_ 5.05).
Figure I plots the initiation of activities
across
the time scale.
The trends
indicate
that
entrepreneurs
who started
businesses
initiated more activities
at all time periods
measured.
Entrepreneurs
who eventually
gave
up were similar in their rate of activity to those who got
a business
started
through the first year. However, after the first year, the rate
of initiation
by those who eventually
gave
up began
to taper
off. Those
who reported
they were
still trying
to establish
a business
initiated
significantly
fewer
activities
across
all time periods
than
either
of the other two groups.
To further analyzethe
trends
we
recalculated
the
scores
plotted
in Figure I as
a
percentage
of total activities
initiated
by their group. The results
indicate
that
by the
end
of the firsr
year,
almost two-thirds of all activities that would be initiated
by each
of the groups
already
had
been
undeftaken-
We then sought
to determine
whether
the kinds of activities
initiated
early
in the developmental
process
varied by outcome
status.
The analytic techniques
that could be employed
to address
this issue
were limited. The
number of activities initiated early in the process
resulted
in the time scale
variable being
highly skewed
to the left. We relied
on median
values
to examine
the sequencing
of activities
initiated
during the first year. The resulrs
are displayed
in Table 6.
The results
from this analysis provide further insight
into the
apparent passive
approach
of entrepreneurs
still in the gestation
process.
During the first six months
of start-up,
ttt.tt
entrepreneurs
focused
on saving
money
to invest
in the business,
preparing
a business
plan,
and
organizing
a start-up
team.
[n contrast,
entrepreneurs
who got u buiin.tr operating
looked
for and bought facilities or equipment,
invested
their own money, prepared
i businels plan,
asked
for and got financial support, organized
a start-up
team, formed a legal entiry, and
devoted
full time to the
business.
Table
7 displays
additional
information
about
the sequincing
panerns.
The data indicates
that six months
after initiating their first start-up
activity
, 50Vo
of the
entrepreneurs
who reported
staring
a business
had
reciived money
from sales.
Entrepre-
neurs
who had given up and were no longer actively trying to establish
a busines upp.u, to
be somewhat
less aggressive
than those who started
operations.
Those who gave up *.r.
distinct in their early efforts by developing
models
or prototypes.
By the sixth monrh, only
25Vo
of this latter group had money from sales.
It should also be noted that we conducted
analyses
to determine whether the results
were affected
by industry. There was no industry effect
among
the three groups
of nascent
entrepreneurs (i.e., started, gave up, trying to start). For example, developing
a model or
prototype is an activity that differentiates
those
nascent
entrepreneurs
who guu. op from those
2
68 r 14.35
398.89
e
160 N.M.
cARTER
ET AL.
T
I
I
I
I
4y 5y
+ STARTED s TRyINc -o-
qUIT
FIGURE I Number
of activities initiated
since
first start-up
behavior.
nascent
entrepreneurs
who continued
to try and, therefore, it seemed plausible that those
entrepreneurs
who had
developed
a model and
gave
up would likely be in industries
that
are
in manufacturing
or other types
of industries
that might be more capital intensive than service
industries.
Yet, of the 14 nascent
entrepreneurs
who indicated
they
had initiated
or completed
models
or prototypes, nearly seven
of these
individuals were in the gave up category in such
industries
as:
one in nondurable
manufacturing,
one
in restaurants/bars/clubs,
two in consumer
services,
and three in business
services.
DISCUSSIOI{
As
wayto summarize
the resuls andas
a springboard
towardsome
insights
into the implications
of this research
for practice and future research,
we developed
the following activity profiles
I
I
I
I
EXPLORTNG
START-UP
EVENT SEQUENCES 161
TABLE 6 Sequencing
of Starnrp Activitief,,t
Year IStarted
(n = 34) Gave up
(z = 16) Still Trying
(n : 2l)
lst month I-ookedforF+E
Invested own money
Asked for funding
Got financial support
Prepared plan
Formed legal entity
Organized team
Bought F + E
Devoted full time
Hired employees
Saved money
Rented F + E
Applied for L/P
Asked for funding
Developed models
Saved money to invest
Organized start-up team
Invested own money
Got financial suppon
Prepared plan
Bought F + E
LookedforF+E
Devoted full time
Applied for L/P
Saved
money to invest
Prepared plan
Organized team
Invested
own money
LookedforF+E
Applied for L/P
Bought F + E
lst quarter
2nd quarter
3rd quarter
4th quarter
; :T:":T*.P Ylll -:. .:f those
.who-had
in
itiated
the
activity
'Median values reported only if more than fi;.;;;;;;;;r;';;s."up had initiated activiw.
olthe three
tyPes
of nascent
entrepreneurs
studied.
These
profiles
are
offered
as
a
combination
of both fact and some
intuition ubout
the findings.
hofiles of Types
of Nascent
Entrepreneurs
Staned
A Business
Nascent
entrepreneurs
who were able to start a business
were more aggressive
in making
their businesses
real, that is, they undertook
activities
that
made
their businesses
tangible
to
others: they looked for facilities and-
eq-uipment,
sought and got financial support, formed a
legal entity, organized
a tqlm, bought
i*iliti., and equipment,
and devoted
full time to the
business'
Individuals who started
businesses
seemed
to act with a greater
level of intensity.
They undertook
more
activities
than
those
individuals
who did not start
their businesses.
The
panern
of activities listed in Table 5 seem
to indicate
that individuals who started
firms put
themselves
into the day-to-day
prTess of running an ongoing business
as quickly as they
could and that these
activities resulted
_in
startini nm, that generated
sales (g4% of the
enFepreneurs)
and positive
cash
flow (50% of the
Lnt.rpren.urs). what is not known is how
successful
or profitable these
new firms will be over time. For example, the 50vo ofthe firms
started
that have
not reached
positive cash
flow may be firms startediy individuals who were
foolhardy and rushed into operation of a business
that could not be sustained.
&ve Up
The pattern of activities for the group of entrepreneurs
who gave up seems
to indicate
that
these
entrepreneurs
discovered
that their initiai idea for theiibusin.rr* would not lead ro
,
L62 N.M. cARTER
ET AL.
TABLE 7 Percentage of Entrepreneurs
Behavior Initiating Activity within the First Year of Initial Start-Up
Started Gave Up Still
Trying
lmo 3mo 6mo l2mo lmo 3mo 6mo l2mo lmo 3mo 6mo l2mo
Discriminating
activities
Bought
facilities.
equip. 32
Developed models 0
Got financial
support 2l
Other precursor
activities
Organized
start-up team 24 32
Devoted
full time 15 18
Asked for funding 24 27
Invested own money 41 53
Looked for facilities M 17
Applied license/patent 12 15
Saved
money to invest 18 24
Prepared
plan 18 27
Formed legal entity 6 9
Hired employees 3 6
Rented facilities, equip. 9 9
38 53 59
066
24 27 32
44 56
29 29
41 44
68 7l
59 65
27 35
32 4l
32 38
2t 27
92r
t2 t2
l9
25
l9
31 31 3l
0619
25 38 44
31 44 56
13 19 38
6t319
3838M
25 25 38
666
000
666
13 19 25
6613
666
000
000
066
25 25
31 3E
25 38
3l t4 14 14 24
3800010
380000
38
l9
4
63
63
JI
50
M
t3
0
l3
19 24 24 33
l0 l0 l0 l0
00010
24 ?4 29 38
l0 t4 19 33
l0 l0 14 24
29 33 38 48
19 19 24 33
051014
0000
5555
Start-up indicators
Sales
Positive
cashflow
D&B credit listing
Unemployment
insur.
FICA
Filed federal
tax
29 35 50
15 t5 2l
003
33r?
15 t2 27
15 15 21
65
32
6
l5
32
4l
3r l0 14 14 19
135101010
6s5s5
00000
00000
65510t4
success. The finding that the activity
ofdeveloping
a model orprototype
differentiated
individu-
als who gave
up from those
who were still trying would suggest
that those
who gave
up had
tested their ideas out and found that they would not work according
to their expectations.
Nascent
entrepreneurs
who gave
up seemed
to be similar in their activity patterns compared
with those
who started
their firms, that is, individuals who gave
up pursued
the activities
of
creating a
business in an aggressive
manner at the
beginning
of the
process.
But
as the business
unfolded
over time, these
entrepreneurs
decreased
their activities
and then ceased
start-up
activities.
This group of individuals might be seen as either having the wisdom to test
their
ideas out before
jumping into something that might lead to failure or lacking the flexibiliry
to find more creative
ways to solve
the problems
that they were confronted
with.
Still Trying
It would seem
that those
who are still trying are not putting enough effort into the start-up
process
in order to find out whether they should
start the business,
or give up. The still trying
had undertaken fewer activities than individuals in the other two groups. The still trying
entrepreneurs
were devoting
their short-term
efforts toward activities
internal
to the start-up
process
(e.g., saving
money and preparing
a plan) and less effiort
toward activities
that
would
make the business real to others. The still trying entrepreneurs
may be all talk and
little action.
Or, these still trying entrepreneurs might be
involved in developing
businesses
that take
longer
EXPLORTNG
START-UP
EVENT SEQUENCES
163
for these particular oppornrnities
to unfold. (Yet, as noted earlier, there was no industry
effect.)
Implications
for Practice
In terms
of advice
to individuals
considering
starting
a business,
it would seem
that
the results
provide evidence
that nascent
entrepreneurs
should
aggressively
pursue
oppornrnities
in the
short-term,
because
they
will quickly learn
that
these
opportunities
will either
reveal
themselves
as worthy of start-up
or as poor choices
that should
be abandoned.
Individuals who do not
devote
the time and effort to undertaking
the activities
necessary
for starting
a business
may
find themselves
perennially
still trying, rather
than
succeeding
or failing. It would seem
that
a certain level of effort and
activity is necessary
to determine
success
or failure in starting
a
business.
Consultants,
advisors.
and
investors
involved
in helping
nascent
enrepreneurs
may
find
in these
results
evidence
that
entrepreneurs
are
action
oriented
rather
than
passive.
Individuals
who do not begin
a business
or reach
a decision
to abandon
efforts
to start
a business within
a year are likely to remain
in a constant
state of abeyance,
thereby
wasting
the valuable
time
and resources
of advisors that could be devoted to helping individuals who will actually
undertake
the activities
to discover
whether
they
can
start
a business.
These
findings
may
lead
to
a better
diagnostic
to help
nascent
entrepreneurs
and
entrepre-
neurship
advisors
determine
whether
these
nascent
entrepreneurs
should
abandon
their
efforts
at start-up
sooner,
change
their activities,
or continue
their efforts.
The
analytical
results
may
also be useful for the development
of a set
of indicator variables
for use in identifying those
nascent
entrePreneurs
who are
likely to develop ventures
that have
the
potential
for substantial
growth in sales
and
employment.
Implications and Directions for Research
Given that this study was based
on an analysis
of secondary
data,
the measures
available
for
analysis
were
not as
comprehensive
or as
specific
as we
would
have
liked.
In future
longitudinal
studies
of nascent
entrepreneurs,
the measures
in these
studies
should capture
additional
information about various factors and behaviors that might influence
the venture
start-up
process. For example, it would be valuable to explore the expectations
of these
nascent
entrepreneurs
regarding their perceptions
of the future success
of their ventures
and their
subsequent
activities. It would also be valuable to explore whether nascenr
entrepreneurs
expect
to start their firms quickly (i.e., in less
than
six months)
compared
with other
nascent
entrepreneurs
that may expect the start-up process
to take longer. One reason
that some
firms may take
longer
to create
may involve
acquiring
substantial
financial
resources
or the
procurement
of government
licenses
or regulatory
approval.
Some
nascent
entrepreneurs
may
also
expect
to start firms that
grow more rapidly compared
with other
nascent
entrepreneurs.
A number
of start-up
behaviors
(e.g., gathering
marketing
information
on competitors
and customers,
acquiring know-how
or expertise,
seeking
advice
from mentors
and advisors,
and the activities involved with selling, marketing, and distribution) were not explored
in
this research
and might have
a significant
influence
on the outcome
of the start-up
process.
It might also be appropriate
to develop
measures
of the activities
that reflect
estimates
of the
number of hours the nascent
entrepreneur
devoted
to a particular activity between
the date
of inception
and its completion.
It would also be of value to collect
additional information on the types
of ventures
that
t
l& N.M.
cARTER
ET
AL.
nascent
en*epreneurs are planning to create. characteristics of these emerging ventures
that would be appropriate
to study would include: strategy
(e.g., pricing policy, perceived
distinctive
competence)
and
industry
characteristics
(e.g., growth rates,
technological
change'
competition,
power
of suppliers
and
buyers,
and
barriers
to entry). In addition,
the firms that
were started
should be stuiied to find out if they were successful
in the long run'
A larger effort at identifying and tracking nascent
entrepreneurs
is critical to generating
a sample
size sufficient for the statistical
power necessary
to identify the nuances
inherent in
the
business
start-up
process.
with u ,u.plt of size
of 71 cases,
a division of these
cases
into
even a few groups
quickly eriminates
the use of many statistical
and analytical tools. we
believe there ur. ,uny factors that are rikery to have a significant moderating affect on
the activities of nascent
entrepreneurs
(e.g., previous experience
and background of the
entrepreneur,
the venture's
strategy,
ttre uentuie's
industry) that will likely surface
when a
larger sample
size
is available
for analysis'
Finally, we offer some
speculations
for future research
based
on the three
profrles
that
were generated
from the quantitative
analyses
of the data.
The differences
in the number
of
activities
initiated
among
the three
groups
istarteo
a business,
gave
up, and
still trying) might
suggest
that
*enacting'an
organization,
that is, taking
venture
creation
actions
that are
visible
to others
(e.g., buyirig
faciliiies and
equipment,
forming a legal
entity) is more
likely to result
in an ongoing
business.
we believe
that future empirical research
on nascent
entrepreneurs
could lead
to an operationalization
of the actions
involved in enactment.
Empirical research
on entrepreneurship
could therefore
inform Weick's theory on organizing' The finding that
the *still trying' gioup undertakes fewer activities might suggest
that a critical factor for
differentiating
individuals
who get
into business
from those
that do not involves
action
rather
than
planning,
or *doing' rather
than "thinking about it.'It might be useful to explore
how
nascent
enrepreneuru
u-nd.rt ke planning andwhether entrepreneurs
who get into business
use
planning
as
a
springboard
for action,
compared
to
those
"still trying'who may
use
planning
as a form of prociastination.
The finding that those
individuals who "gave up" undertook
a
similar number
of activities
in the
first yeir compared
with those
who got into business
should
be
explored
through
case
studies
and
in-depth
interviews.
It would
be
very valuable
to uncover
how entrepreneurs
make
judgments aboutihe potential success
of a new venture, and whether
those
who *gave
up" werernor. discerning
in their ability to spot
fatal flaws
in a new
business,
or whether
those
*io .gave
up" were
less
creative
in surmounting
perceived
potential
problems
'
If, as Gartner, Bird, and Starr (L99z) suggest,
entrepreneurial action transforms equivocal
events
into nonequivocal
interpretations and interactions, the impact of circumstance
on the
process and outctmes of business
formation is important and deserves
careful study' For
example,
MacMillan and Katz (lgg2) point out that entrepreneurial
events
are often idiosyn-
cratic, obscure,
and infrequent.
tn-depth longitudinal case
studies
are necessary
to explore
the effects
of chance
occurrencrr, ,u.h as how the sharing of a limousine ride to the airport
with a stranger leads
to the formation of a tea company (Ziegler, Rosenzweig' and Ziegler
lggl) on the process
of organization formation'
CONCLUSIONS
what entrepreneurs
do in their day-today activities matters. The kinds of activities that
nascent
enrepreneurs
undertake,
the numbir of activities, and
the sequence
of these
activities
have a significant influence
on the ability of nascent
entrePreneurs
to successfully
create
new
ventures.
This snrdy
suggests
that
the
behaviors
of nascent
entrepreneurs
who have
successfully
EXPLORING
START-UP
EVENT
SEQUENCES
165
started a new venture can be identified and differentiated from the behaviors of nascent
entrepreneurs
who failed.
We believe that future
studies
will more
precisely
identif the
kinds
of behaviors
appropriate
for certain new vennJre conditions.
If such
contingency
information
can
be generated, entrepreneurship
research is likely to have
significant
benefits
for entrepre-
neurship
practice, education,
and public policy.
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... (2) La phase de gestation de la nouvelle entreprise se poursuit à mesure que l'entrepreneur tend vers l'exploitation de l'entreprise, ou quand il cesse ses efforts en vue de l'émergence. Dans cette phase, le fondateur ou l'équipe des fondateurs conduiront une série d'activités en vue de l'émergence de la nouvelle organisation (Alsos & Kolvereid, 1998;Carter et al., 1996;Edelman & Yli-Renko, 2010;Manolova, Edelman, Brush, & Rotefoss, 2012). Dans cette phase, le ou les fondateurs n'exploitent pas encore l'entreprise, mais ils en préparent l'exploitation. ...
... De la même manière, Carter, Gartner & Reynolds (1996), dans leur article sur les séquences d'actions des entrepreneurs lors de la phase de gestation des nouvelles entreprises, ne font aucune mention des clients, ni des interactions avec l'environnement, comme si ces interactions n'existaient pas du tout avant le démarrage de l'exploitation. Si des articles ont déjà étudié le développement du réseau de soutien (Newbert & Tornikoski, 2012), ou le développement des échanges (Wang et al., 2014), l'approche Lean Startup va plus loin en mettant en avant l'importance du contenu de l'échange entre les clients et la nouvelle entreprise, en vue de valider le modèle économique. ...
... Il ne s'agit pas d'un modèle exhaustif, ni des étapes indispensables à toutes les entreprises, mais ce modèle présente les principaux éléments et les principales étapes précédant l'émergence des nouvelles organisations, comme proposés le plus souvent dans la littérature. Plusieurs études (Carter et al., 1996;Coviello & Joseph, 2012) ont montré que les différentes activités du processus de création avaient souvent lieu de manière concomitante, en particulier pour les entreprises ayant le plus de chances de succès. Ainsi, les différentes parties du processus se chevauchent souvent : l'exploitation de l'opportunité peut débuter alors que l'entreprise est encore en formation. ...
Thesis
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... Prior research shows that a greater number of entrepreneurial actions increase the likelihood of venture creation (Carter, Gartner, & Reynolds, 1996;Samuelsson, 2001). Recent studies further indicate that the rate of entrepreneurial actions, as measured by the number of startup activities over a period of time, positively associates with new venture emergence (Lichtenstein et al., 2007;Capelleras & Greene, 2008). ...
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... Those nascent entrepreneurs that succeed, take a more aggressive approach in order to accomplish their dream and take action to present their business as a tangible concept to others. These actions may include looking for facilities and equipment, seeking and acquiring financial support, organising a team, and most importantly, devoting their time to the business (Carter, Gartner and Reynolds, 1996). In 2020, 804.398 companies were created in the US alone (Statista, 2021). ...
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