Do strategy choices matter for nascent firms? A study on effectuation and causation impacts on new ventures outcomes

Principal Topic : Nascent entrepreneurship has drawn the attention of scholars in the last few years (Davidsson, 2006, Wagner, 2004). However, most studies have asked why firms are created focussing on questions such as what are the characteristics (Delmar and Davidsson, 2000) and motivations (Carter, Gartner, Shaver & Reynolds, 2004) of nascent entrepreneurs, or what are the success factors in venture creation (Davidsson & Honig; 2003; Delmar and Shane, 2004). In contrast, the question of how companies emerge is still in its infancy. On a theoretical side, effectuation, developed by Sarasvathy (2001) offers one view of the strategies that may be at work during the venture creation process. Causation, the theorized inverse to effectuation, may be described as a rational reasoning method to create a company. After a comprehensive market analysis to discover opportunities, the entrepreneur will select the alternative with the higher expected return and implement it through the use of a business plan. In contrast, effectuation suggests that the future entrepreneur will develop her new venture in a more iterative way by selecting possibilities through flexibility and interaction with the market, affordability of loss of resources and time invested, development of pre-commitments and alliances from stakeholders. Another contrasting point is that causation is ''goal driven'' while an effectual approach is ''mean driven'' (Sarasvathy, 2001) One of the predictions of effectuation theory is effectuation is more likely to be used by entrepreneurs early in the venture creation process (Sarasvathy, 2001). However, this temporal aspect and the impact of the effectuation strategy on the venture outcomes has so far not been systematically and empirically tested on large samples. The reason behind this research gap is twofold. Firstly, few studies collect longitudinal data on emerging ventures at an early enough stage of development to avoid severe survivor bias. Second, the studies that collect such data have not included validated measures of effectuation. The research we are conducting attempts to partially fill this gap by combining an empirical investigation on a large sample of nascent and young firms with the effectuation/causation continuum as a basis (Sarasvathy, 2001). The objectives are to understand the strategies used by the firms during the creation process and measure their impacts on the firm outcomes. Methodology/Key Propositions : This study draws its data from the first wave of the CAUSEE project where 28,383 Australian households were randomly contacted by phone using a specific methodology to capture emerging firms (Davidsson, Steffens, Gordon, Reynolds, 2008). This screening led to the identification of 594 nascent ventures (i.e., firms that are not operating yet) and 514 young firms (i.e., firms that have started operating from 2004) that were willing to participate in the study. Comprehensive phone interviews were conducted with these 1108 ventures. In a likewise comprehensive follow-up 12 months later, 80% of the eligible cases completed the interview. The questionnaire contains specific sections designed to distinguish effectual and causal processes, innovation, gestation activities, business idea changes and ventures outcomes. The effectuation questions are based on the components of effectuation strategy as described by Sarasvathy (2001) namely: flexibility, affordable loss and pre-commitment from stakeholders. Results from two rounds of pre-testing informed the design of the instrument included in the main survey. The first two waves of data have will be used to test and compare the use of effectuation in the venture creation process. To increase the robustness of the results, temporal use of effectuation will be tested both directly and indirectly. 1. By comparing the use of effectuation in nascent and young firms from wave 1 to 2, we will be able to find out how effectuation is affected by time over a 12-month duration and if the stage of venture development has an impact on its use. 2. By comparing nascent ventures early in the creation process versus nascent ventures late in the creation process. Early versus late can be determined with the help of time-stamped gestation activity questions included in the survey. This will help us to determine the change on a small time scale during the creation phase of the venture. 3. By comparing nascent firms to young (already operational) firms. 4. By comparing young firms becoming operational in 2006 with those first becoming operational in 2004. Results and Implications : Wave 1 and 2 data have been completed and wave 2 is currently being checked and 'cleaned'. Analysis work will commence in September, 2009. This paper is expected to contribute to the body of knowledge on effectuation by measuring quantitatively its use and impact on nascent and young firms activities at different stages of their development. In addition, this study will also increase the understanding of the venture creation process by comparing over time nascent and young firms from a large sample of randomly selected ventures. We acknowledge the results from this study will be preliminary and will have to be interpreted with caution as the changes identified may be due to several factors and may not only be attributed to the use/not use of effectuation. Meanwhile, we believe that this study is important to the field of entrepreneurship as it provides some much needed insights on the processes used by nascent and young firms during their creation and early operating stages.

The growth-profitability relationship : strategic orientations as moderator

Principal Topic: In this study we investigate how strategic orientation moderates the impact of growth on profitability for a sample of Danish high growth (Gazelle) firms. ---------- Firm growth has been an essential part of both management research and entrepreneurship research for decades (e.g. Penrose 1959, Birch 1987, Storey 1994). From a societal point of view, firm growth has been perceived as economic generator and job creator. In entrepreneurship research, growth has been an important part of the field (Davidsson, Delmar and Wiklund 2006), and many have used growth as a measure of success. In strategic management, growth has been seen as an approach to achieve competitive advantages and a way of becoming increasing profitable (e.g. Russo and Fouts 1997, Cho and Pucic 2005). However, although firm growth used to be perceived as a natural pathway to profitability recently more skepticism has emerged due to both new theoretical development and new empirical insights. Empirically, studies show inconsistent and inconclusive empirical evidence regarding the impact of growth on profitability. Our review reveals that some studies find a substantial positive relationship, some find a weak positive relationship, some find no relationship and further some find a negative relationship. Overall, two dominant yet divergent theoretical positions can be identified. The first position, mainly focusing on the environmental fit, argues that firms are likely to become more profitable if they enter a market quickly and on a larger scale due to first mover advantages and economic of scale. The second position, mainly focusing the internal fit, argues that growth may lead to a range of internal challenges and difficulties, including rapid change in structure, reward systems, decision making, communication and management style. The inconsistent empirical results together with two divergent theoretical positions call for further investigations into the circumstances by which growth generate profitability and into the circumstances by which growth do not generate profitability. In this project, we investigate how strategic orientations influence the impact of growth on profitability by asking the following research question: How is the impact of growth on profitability moderated by strategic orientation? Based on a literature review of how growth impacts profitability in areas such as entrepreneurship, strategic management and strategic entrepreneurship we develop three hypotheses regarding the growth-profitability relationship and strategic orientation as a potential moderator. ---------- Methodology/Key Propositions: The three hypotheses are tested on data collected in 2008. All firms in Denmark, including all listed and non-listed (VAT-registered) firms who experienced a 100 % growth and had a positive sales or gross profit over a four years period (2004-2007) were surveyed. In total 2,475 fulfilled the requirements. Among those 1,107 firms returned usable questionnaires satisfactory giving us a response rate on 45 %. The financial data together with data on number of employees were obtained from D&B (previously Dun & Bradstreet). The remaining data were obtained through the survey. Hierarchical regression models with ROA (return on assets) as the dependent variable were used to test the hypotheses. In the first model control variables including region, industry, firm age, CEO age, CEO gender, CEO education and number of employees were entered. In the second model, growth measured as growth in employees was entered. Then strategic orientation (differentiation, cost leadership, focus differentiation and focus cost leadership) and then interaction effects of strategic orientation and growth were entered in the model. ---------- Results and Implications: The results show a positive impact of firm growth on profitability and further that this impact is moderated by strategic orientation. Specifically, it was found that growth has a larger impact on profitability when firms do not pursue a focus strategy including both focus differentiation and focus cost leadership. Our preliminary interpretation of the results suggests that the value of growth depends on the circumstances and more specifically 'how much is left to fight for'. It seems like those firms who target towards a narrow segment are less likely to gain value of growth. The remaining market shares to fight for to these firms are not large enough to compensate for the cost of growing. Based on our findings, it therefore seems like growth has a more positive relationship with profitability for those who approach a broad market segment. Furthermore we argue that firms pursuing af Focus strategy will have more specialized assets that decreases the possibilities of further profitable expansion. For firms, CEOs, board of directors etc., the study shows that high growth is not necessarily something worth aiming for. It is a trade-off between the cost of growing and the value of growing. For many firms, there might be better ways of generating profitability in the long run. It depends on the strategic orientation of the firm. For advisors and consultants, the conditional value of growth implies that in-depth knowledge on their clients' situation is necessary before any advice can be given. And finally, for policy makers, it means they have to be careful when initiating new policies to promote firm growth. They need to take into consideration firm strategy and industry conditions.

How boards strategise : a strategy as practice view

While board involvement in strategy is seen as increasingly important, our understanding of how boards fulfil this role is limited. This article draws on indepth qualitative research with directors and senior managers to develop a Strategy as Practice view on how boards "do" strategy. Two different but complementary strategising practices - Procedural Strategising and Interactive Strategising - are identified and elaborated in terms of their underlying micro-activities. The internal boardroom factors that affect the relative emphasis on these strategies practices - the strategic stance of the board, board power and perceive legitimacy of each practice - are also identified and discussed. These findings are then integrated into a typology of board strategising. A key implication of this paper is that boards need to consciously choose the nature and extent of their involvement in strategy.

National Aboriginal and Torres Strait Islander women's health strategy

The Strategy presented in this report was developed through the Australian Women’s Health Network Talking Circle in 2009-2010. Over 400 Aboriginal and Torres Strait Islander women were involved in the consultations. The Action Areas and Recommendations presented in this Strategy were raised and discussed by the women who contributed to the Talking Circle. This Strategy is not intended to replace any other national or state/territory identified priorities or needs. Instead, this Strategy supplements other work. Aboriginal and Torres Strait Islander women experience extremely poor health outcomes. They have a right to determine for themselves what their health system will look like. This Strategy is part of that process. If Aboriginal and Torres Strait Islander women continue to have their sense of identity marginalised and eroded, they will continue to have the poorest health of any group of women in Australian society.

Porcine bone marrow stromal cell differentiation on heparin-adsorbed poly (e-caprolactone)-tricalcium phosphate-collagen scaffolds

We evaluate the potential of heparin as a substrate component for the fabrication of bone tissue engineering constructs using poly(e- caprolactone)–tricalcium phosphate–collagen type I (PCL–TCP–Col) three-dimensional (3-D) scaffolds. First we explored the ability of porcine bone marrow precursor cells (MPCs) to differentiate down both the adipogenic and osteogenic pathways within 2-D culture systems, with positive results confirmed by Oil-Red-O and Alizarin Red staining, respectively. Secondly, we examined the influence of heparin on the interaction and behaviour of MPCs when seeded onto PCL–TCP–Col 3-D scaffolds, followed by their induction into the osteogenic lineage. Our 3-D findings suggest that cell metabolism and proliferation increased between days 1 and 14, with deposition of extracellular matrix also observed up to 28 days. However, no noticeable difference could be detected in the extent of osteogenesis for PCL–TCP–Col scaffolds groups with the addition of heparin compared to identical control scaffolds without the addition of heparin.

The osteogenic differentiation of adipose tissue-derived precursor cells in A 3D scaffold/matrix environment

Abstract: This paper details an in-vitro study using human adipose tissue-derived precursor/stem cells (ADSCs) in three-dimensional (3D) tissue culture systems. ADSCs from 3 donors were seeded onto NaOH-treated medical grade polycaprolactone-tricalcium phosphate (mPCL-TCP) scaffolds with two different matrix components; fibrin glue and lyophilized collagen. ADSCs within these scaffolds were then induced to differentiate along the osteogenic lineage for a 28-day period and various assays and imaging techniques were performed at Day 1, 7, 14, 21 and 28 to assess and compare the ADSC’s adhesion, viability, proliferation, metabolism and differentiation along the osteogenic lineage when cultured in the different scaffold/matrix systems. The ADSC cells were proliferative in both collagen and fibrin mPCL-TCP scaffold systems with a consistently higher cell number (by comparing DNA amounts) in the induced group over the non-induced groups for both scaffold systems. In response to osteogenic induction, these ADSCs expressed elevated osteocalcin, alkaline phosphatase and osteonectin levels. Cells were able to proliferate within the pores of the scaffolds and form dense cellular networks after 28 days of culture and induction. The successful cultivation of osteogenic by FDM process manufactured ADSCs within a 3D matrix comprising fibrin glue or collagen, immobilized within a robust synthetic scaffold is a promising technique which should enhance their potential usage in the regenerative medicine arena, such as bone tissue engineering.

Effects of starting strategy on 5-min cycling time-trial performance

The importance of pacing for middle-distance performance is well recognized, yet previous research has produced equivocal results. Twenty-six trained male cyclists (O2peak 62.8 ± 5.9 ml · kg-1 · min-1; maximal aerobic power output 340 ± 43 W; mean ± s) performed three cycling time-trials where the total external work (102.7 ± 13.7 kJ) for each trial was identical to the best of two 5-min habituation trials. Markers of aerobic and anaerobic metabolism were assessed in 12 participants. Power output during the first quarter of the time-trials was fixed to control external mechanical work done (25.7 ± 3.4 kJ) and induce fast-, even-, and slow-starting strategies (60, 75, and 90 s, respectively). Finishing times for the fast-start time-trial (4:53 ± 0:11 min:s) were shorter than for the even-start (5:04 ± 0:11 min:s; 95% CI = 5 to 18 s, effect size = 0.65, P < 0.001) and slow-start time-trial (5:09 ± 0:11 min:s; 95% CI = 7 to 24 s, effect size = 1.00, P < 0.001). Mean O2 during the fast-start trials (4.31 ± 0.51 litres · min-1) was 0.18 ± 0.19 litres · min-1 (95% CI = 0.07 to 0.30 litres · min-1, effect size = 0.94, P = 0.003) higher than the even- and 0.18 ± 0.20 litres · min-1 (95% CI = 0.5 to 0.30 litres · min-1, effect size = 0.86, P = 0.007) higher than the slow-start time-trial. Oxygen deficit was greatest during the first quarter of the fast-start trial but was lower than the even- and slow-start trials during the second quarter of the trial. Blood lactate and pH were similar between the three trials. In conclusion, performance during a 5-min cycling time-trial was improved with the adoption of a fast- rather than an even- or slow-starting strategy.

The National Aboriginal and Torres Strait Islander Women's Health Strategy

The National Aboriginal and Torres Strait Islander Women’s Health Strategy was launched at the Australian Women’s Health Network (AWHN) National Conference in Hobart on the 19 May 2010. It is important to note that this Strategy does not replace other national or State and Territory documents which identify priorities and needs. The aim is to supplement existing work and contribute to the new National Women's Health Policy (NWHP) being developed. This article will outline the process of the Strategy’s development and its uses for the future.

Sphingosine-1-phosphate mediates proliferation maintaining the multipotency of human adult bone marrow and adipose tissue-derived stem cells

High renewal and maintenance of multipotency of human adult stem cells (hSCs), are a prerequisite for experimental analysis as well as for potential clinical usages. The most widely used strategy for hSC culture and proliferation is using serum. However, serum is poorly defined and has a considerable degree of inter-batch variation, which makes it difficult for large-scale mesenchymal stem cells (MSCs) expansion in homogeneous culture conditions. Moreover, it is often observed that cells grown in serum-containing media spontaneously differentiate into unknown and/or undesired phenotypes. Another way of maintaining hSC development is using cytokines and/or tissue-specific growth factors; this is a very expensive approach and can lead to early unwanted differentiation. In order to circumvent these issues, we investigated the role of sphingosine-1-phosphate (S1P), in the growth and multipotency maintenance of human bone marrow and adipose tissue-derived MSCs. We show that S1P induces growth, and in combination with reduced serum, or with the growth factors FGF and platelet-derived growth factor-AB, S1P has an enhancing effect on growth. We also show that the MSCs cultured in S1P-supplemented media are able to maintain their differentiation potential for at least as long as that for cells grown in the usual serum-containing media. This is shown by the ability of cells grown in S1P-containing media to be able to undergo osteogenic as well as adipogenic differentiation. This is of interest, since S1P is a relatively inexpensive natural product, which can be obtained in homogeneous high-purity batches: this will minimize costs and potentially reduce the unwanted side effects observed with serum. Taken together, S1P is able to induce proliferation while maintaining the multipotency of different human stem cells, suggesting a potential for S1P in developing serum-free or serum-reduced defined medium for adult stem cell cultures.

The National Aboriginal and Torres Strait Islander Women's Health Strategy on Talkin with Tiga Bayles, 98.9 AM National Indigenous Radio Service (NIRS), Wednesday 21 July 2010. (9.00 - 10.00am).

Radio Program. Talkin with Tiga Bayles, 98.9 AM National Indigenous Radio Service (NIRS), 9.00-10.00am, Wednesday 21 July 2010. (1 hour program).----- Bronwyn Fredericks discssed the National Aboriginal and Torres Strait Islander Women’s Health Strategy was launched at the Australian Women’s Health Network (AWHN) National Conference in Hobart on the 19 May 2010. Within this radio interview the background of the Strategy is discussed, funding, who did the consultations and the writing. In the interview Bronwyn Fredericks outlines the process of the Strategy’s development and its uses for the future.----- It is important to note that this Strategy does not replace other national or State and Territory documents which identify priorities and needs. The aim is to supplement existing work.

The effects of pore architecture in silk fibroin scaffolds on the growth and differentiation of mesenchymal stem cells expressing BMP7

The pore architecture of scaffolds is known to play a critical role in tissue engineering as it provides the vital framework for seeded cells to organize into a functioning tissue. In this report we have investigated the effects of different concentrations of silk fibroin protein on three-dimensional (3D) scaffold pore microstructure. Four pore size ranges of silk fibroin scaffolds were made by the freeze drying technique, with the pore sizes ranging from 50 to 300 lm. The pore sizes of the scaffolds decreased as the concentration of fibroin protein increased. Human bone marrow mesenchymal stromal cells (BMSC) transfected with the BMP7 gene were cultured in these scaffolds. A cell viability colorimetric assay, alkaline phosphatase assay and reverse transcription-polymerase chain reaction were performed to analyze the effect of pore size on cell growth, the secretion of extracellular matrix (ECM) and osteogenic differentiation. Cell migration in 3D scaffolds was confirmed by confocal microscopy. Calvarial defects in SCID mice were used to determine the bone forming ability of the silk fibroin scaffolds incorporating BMSC expressing BMP7. The results showed that BMSC expressing BMP7 preferred a pore size between 100 and 300 lm in silk fibroin protein fabricated scaffolds, with better cell proliferation and ECM production. Furthermore, in vivo transplantation of the silk fibroin scaffolds combined with BMSC expressing BMP7 induced new bone formation. This study has shown that an optimized pore architecture of silk fibroin scaffolds can modulate the bioactivity of BMP7-transfected BMSC in bone formation.