Killing our darling: why we need to let go of the entrepreneurial opportunity construct

We support Shane and Venkataraman’s (2000) basic idea of an “entrepreneurship nexus” where characteristics of the actor as well as those of the “opportunity” they work on influence action and outcomes in the creation of new economic activities. However, a review of the literature reveals that minimal progress has been made on the core issues pertaining to the nexus idea. We argue that this is rooted in fundamental and insurmountable problems with the “opportunity” construct itself, and demonstrate the state of confusion in the literature caused by inconsistent use of the construct within and across works and authors. As an alternative, we suggest the admittedly subjective notion of New Venture as a more workable alternative. We provide a comprehensive definition and explanation of this construct, and take steps towards improved conceptualization and operationalization of its subdimensions. With some further work on these conceptualizations and operationalizations it will be possible to implement a comprehensive research program that can finally deliver on the promise outlined by Shane and Venkataraman (2000).

Business planning, innovation and performance in nascent firms

Debate about the relationships between business planning and performance has been active for decades (Bhidé, 2000; Mintzberg, 1994). While results have been inconclusive, this topic still strongly divides the research community (Brinckmann et al., 2010; Chwolka & Raith, 2011; Delmar & Shane, 2004; Frese, 2009; Gruber, 2007; Honig & Karlsson, 2004). Previous research explored the relationships between innovation and the venture creation process (Amason et al., 2006, Dewar & Dutton, 1986; Jennings et al., 2009). However, the relationships between business planning and innovation have mostly been invoked indirectly in the strategy and entrepreneurship literatures through the notion of uncertainty surrounding the development of innovation. Some posited that planning may be irrelevant due to the iterative process, the numerous changes innovation development entails and the need to be flexible (Brews & Hunt, 1999). Others suggested that planning may facilitate the achievement of goals and overcoming of obstacles (Locke and Latham, 2000), guide the venture in its allocation of resources (Delmar and Shane, 2003) and help to foster the communication about the innovation being developed (Liao & Welsh, 2008). However, the nature and extents of the relationships between business planning, innovation and performance are still largely unknown. Moreover, if the reasons why ventures should engage (Frese, 2009) –or not- (Honig, 2004) in business planning have been investigated quite extensively (Brinckmann et al., 2010), the specific value of business planning for nascent firms developing innovation is still unclear. The objective of this paper is to shed some light on these important aspects by investigating the two following questions on a large sample of random nascent firms: 1) how is business planning use over time by new ventures developing different types and degrees of innovation? 2) how do business planning and innovation impact the performance of the nascent firms? Methods & Key propositions This PSED-type study draws its data from the first three waves of the CAUSEE project where 30,105 Australian households were randomly contacted by phone using a methodology to capture emerging firms (Davidsson, Steffens, Gordon, Reynolds, 2008). This screening led to the identification of 594 nascent ventures (i.e., firms that were not operating yet at the time of the identification) that were willing to participate in the study. Comprehensive phone interviews were conducted with these 594 ventures. Likewise, two comprehensive follow-ups were organised 12 months and 24 months later where 80% of the eligible cases of the previous wave completed the interview. The questionnaire contains specific sections investigating business plans such as: presence or absence, degree of formality and updates of the plan. Four types of innovation are measured along three degrees of intensity to produce a comprehensive continuous measure ranging from 0 to 12 (Dahlqvist & Wiklund, 2011). Other sections informing on the gestation activities, industry and different types of experiences will be used as controls to measure the relationships and the impacts of business planning and innovation on the performance of nascent firms overtime. Results from two rounds of pre-testing informed the design of the instrument included in the main survey. The three waves of data are used to first test and compare the use of planning amongst nascent firms by their degrees of innovation and then to examine their impact on performance overtime through regression analyses. Results and Implications Three waves of data collection have been completed. Preliminary results show that on average, innovative firms are more likely to have a business plans than their low innovative counterpart. They are also most likely to update their plan suggesting a more continuous use of the plan over time than previously thought. Further analyses regarding the relationships between business planning, innovation and performance are undergoing. This paper is expected to contribute to the literature on business planning and innovation by measuring quantitatively their impact on nascent firms activities and performance at different stages of their development. In addition, this study will shed a new light on the business planning-performance relationship by disentangling plans, types of nascent firms regarding their innovation degres and their performance over time. Finally, we expect to increase the understanding of the venture creation process by analysing those questions on nascent firms from a large longitudinal 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 business planning-performance is not a straightforward relationship (Brinckmann et al., 2010). 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 firms during their creation and early operating stages.

Introduction

The issue of firm growth - how it is achieved and managed, and what consequences it has for different stakeholders - is both theoretically interesting and practically important. It is also an area of scholarly enquiry that has expanded very significantly since we started doing research on it in the 1980s and 1990s. In this volume we present and comment upon the most recent contributions we have made to this field of inquiry - separately, jointly and with various colleagues (who are included in the 'we/us article authors' used in the remainder of this introduction). While the chapters have been published before in various places, we think it valuable to gather them in one easily accessible place, which also allows space for our reflective commentary across the individual chapters. We hope readers will find the work a useful and worthwhile addition to the extant body of knowledge about firm growth. We also hope they will find that it- as its title suggests- brings new•/ perspectives on firm growth and its study, and that it can inspire future contributions by other researchers. This is important, because despite the growing volume of research on firm growth, many important questions still lack satisfactory answers. The current volume may be regarded as a follow-up of a previous collection where we- and Frederic Delmar- presented and commented on eight articles on (mostly small) firm growth that we had jointly or separately published up until that time (Davidsson et al., 2006). In that volume we organised the works under three broad themes: the conceptual and empirical complexity of the firm growth phenomenon; growth aspirations and motivations; and patterns and determinants of actual growth The current volume builds on and extends these themes. Only one of the chapters in the previous volume directly addressed the issue of drivers of actual growth. We add three more in this book, two of which expand on the (aspirations and motivations' theme by relating growth aspirations and motivations (or lack thereof) of the owner-manager to the actual growth achieved in the subsequent period.

Asset specificity and behavioral uncertainty as moderators of the sales growth-employment growth relationship in emerging ventures

New venture growth is a central topic in entrepreneurship research. Although sales growth is emerging as the most commonly used measure of growth for emerging ventures, employment growth has also been used frequently. However, empirical research demonstrates that there are only very low to moderately sized correlations between the two (Delmar et aL, 2003; Weinzimmer, et al., 1998). In addition) sales growth and employment growth respond differently to a wide variety of criteria (Baum et al., 2001; Delmar et al., 2003). In this study we use transaction cost economics (Williamson, 1996) as a theoretical base to examine transaction cost influences on the addition of new employees as emerging ventures experience sales growth. \\le theorize that transaction cost economics variables will moderate the relationship between sales growth and employment growth. W'e develop and test hypotheses related to asset specificity, behavioral uncertainty, and the influence of resource munificence on the strength of the sales growth/ employment growth relationship. Asset specificity is theorized to be a positive moderator of the relationship between sales growth and employment growth. When the behavioral uncertainty associated with adding new employees is greater than that of outsourcing or subcontracting, it is hypothesized to be a negative moderator of the sales growth/employment growth relationship. We also hypothesize that resource scarcity will strengthen those relationships.

Towards an integrative framework for future research on small firm growth

Our review has demonstrated that small firm growth is a complex phenomenon. The concept ‘growth’ denotes both a change in amount and the process by which that change is attained. Further, the growth can be achieved in different ways and with varying degrees of regularity, and it manifests itself along several different dimensions such as sales, employment, and accumulation of assets. This complexity has naturally led researchers to adopt different approaches to studying growth and to use different measures to assess it. Further, although our review shows that it can fruitfully be regarded as a growth issue, the research on small firms' internationalization has largely developed as a separate stream. Similarly, other relatively separate literatures have evolved, which effectively focus on different modes of growth although mostly without regarding the studies first and foremost as growth studies. This goes for topics such as mergers and acquisitions, diversification, and integration - research streams which have largely ignored the particularities of small firms and which in turn have been largely ignored among researchers focusing on small firm growth.

Growing profitable or growing from profits : putting the horse in front of the cart?

Top lists of and praise for the economy's fastest growing firms abound in business media around the world. Similarly, in academic research there has been a tendency to equate firm growth with business success. This tendency appears to be particularly pronounced in-but not confined to­ entrepreneurship research. In this study we critically examine this tendency to portray firm growth as more or less universally favorable. While several theories suggest that growth drives profitability we first show that the available empirical evidence does not support the existence of a general, positive relation­ ship between growth and profitability. Using the theoretical lens of the Resource-Based View (RBV) we then argue that sound growth usually starts with achieving sufficient levels of profitability. In summary, our theoretical argument is as follows: In a population of SMEs, superior profitability is likely to be indicative of having built a resource-based competitive advantage. Building such a valuable and hard to-copy advantage may at first constrain growth. However, the underlying advantage itself and the financial resources generated through high profitability make it possible for firms in this situation to now achieve sound and sustainable growth - which may require building a series of temporary advantages- without having to sacrifice profitability. By contrast, when firms strive for high growth starting from low profitability, the latter often indicates lack of competitive advantage. Therefore growth must be achieved in head-to-head competition with equally attractive alternatives, leading to profitability deterioration rather than improvement. In addition, these low profitability firms are unlikely to be able to finance strategies toward building valuable and difficult-to-imitate advantages while growing.

Organic and acquisitive growth : re-examining, testing and extending Penrose’s growth theory

The Theory of the Growth of The Firm by Edith Penrose, first published in 1959, is a seminal contribution to the field of management. Penrose's intention was to create a theory of firm growth which was logically consistent and empirically tractable (Buckley and Casson, 2007). Much attention, however, has been focused on her unintended contribution to the resource-based view (henceforth RBV) (e.g. Kor and Mahoney, 2004; Lockett and Thompson, 2004) rather than her firm growth theory. We feel that this is unfortunate because despite a rapidly growing body of empirical work, conceptual advancement in growth studies has been limited (Davidsson and Wiklund, 2000; Davidsson et ai., 2006; Delmar, 1997; Storey, 1994). The growth literature frequently references Penrose's work, but little explicit testing of her ideas has been undertaken. This is surprising given that Penrose's work remains the most comprehensive theory of growth to date. One explanation is that she did not formality present her arguments, favouring verbal exposition over formalized models (Lockett, 2005; Lockett and Thompson, 2004). However, the central propositions and conclusions of her theory can be operationalized and empirically tested.

Performance configurations over time: implications for growth-and profit-oriented strategies

Entrepreneurship research and practice places emphasis on company growth as a measure of entrepreneurial success. In many cases, there has been a tendency to give growth a very central role, with some researchers even seeing growth as the very essence of entrepreneurship (Cole, 1949; Sexton, 1997; Stevenson & Gumpert, 1991). A large number of empirical studies of the performance of young and/or small firms use growth as the dependent variable (see reviews by Ardishvili, Cardozo, Harmon, & Vadakath, 1998; Delmar, 1997; Wiklund, 1998). By contrast, the two most prominent views of strategic management – strategic positioning (Porter, 1980) and the resource-based view (Barney, 1991; Wernerfelt, 1984) – are both concerned with achieving competitive advantage and regard achieving economic rents and profitability relative to other competitors as the central measures of firm performance. Strategic entrepreneurship integrates these two perspectives and is simultaneously concerned with opportunity seeking and advantage seeking (Hitt, Ireland, Camp, & Sexton, 2002; Ireland, Hitt, & Sirmon, 2003). Consequently, both company growth and relative profitability are together relevant measures of firm performance in the domain of strategic entrepreneurship.

Escalation of conflict in large private family businesses

This study investigates escalation of intra-familial conflicts in family top management teams. Using a Critical Incident Technique approach, this study uses interviews to collect data from 23 family and non-family individuals and groups within six large-scale privately-held family businesses in Indonesia. The study develops a theoretical model to explain why family business conflicts escalate and become destructive. An inductive content analysis found that the use of a dominating strategy by both parties in dealing with conflict, the expression of negative emotions, and the involvement of non-family employees are more likely to cause escalation. This study contributes to the theory of family business conflict to help family business more satisfying and productive.

L’internationalisation des jeunes entreprises de hautes technologies : Le rôle des compétences internationales des fondateurs [The internationalization of new technology based firms : the role of the international skills of founding teams]

Extending recent research on the importance of specific resources and skills for the internationalization of start-ups, this article tests a negative binomial model on a sample of 520 recently created high technology firms from the UK and Germany. The results show that previous international experience of entrepreneurs facilitates the rapid penetration of foreign markets, especially when the company features a clear and deliberate strategic intent of internationalization from the outset. This research provides one of the first empirical studies linking the influence of entrepreneurial teams to a high probability of success in the internationalization of high-technology ventures.

Where do entrepreneurial skills come from?

Applying Lazear's jack-of-all-trades theory, we investigate the formation of entrepreneurial skills in two data sets on innovative new firms. Our results suggest that traditional human capital indicators individually have little or no influence on entrepreneurial skills. However, consistent with Lazear's theory, those entrepreneurs who exhibit a varied set of work experience have higher entrepreneurial skills relevant for starting and growing a firm. This supports the notion that a varied set of work experiences rather than depth of any particular type of experience or education is important for the development of entrepreneurial skills.

Micro-credit is not sufficient for the success of micro-enterprises at the bottom of the pyramid

This study examines the factors affecting the successful provision of micro-credit to people at the bottom of the pyramid and discusses the activities required to support entrepreneurial activities in a peri-urban African setting. The findings enable us to better understand why micro-credit, though useful, is only part of the solution, in a setting characterized by extreme resource constraints with an institutional fabric lacking the infrastructure that assists market development. We depict the crafting of new entrepreneurial activity as an ongoing process and present an emerging research agenda for future developments.

Determinants of regional innovation capacity in China

Since the 1980s, when the concept of innovation systems(IS) was first presented(Freeman, 2004), a large body of work has been done on IS. IS is a framework that consists of elements related to innovation activities, such as innovation actors,institutional environments, and the relationship between those elements (Lundvall,1992; Nelson, 1993). Studies on NIS/RIS aim to understand the structures and dynamics of IS (Lundvall, 1992; Nelson, 1993), mainly through case studies and comparative case studies(Archibugi, 1996; MacDowall, 1984; Mowery, 1998;Radosevic, 2000). Research on IS has extended from the national level (NIS) to the regional level (RIS) (Cooke, Uranga, & Etxebarria, 1997; Cooke, Uranga, & Etxebarria, 1998), and from developed economies to developing economies. RIS is vital, especially for a large and diverse countries(Edquist, 2004) like China. More recently, based on the literature of NIS, Furman, Porter and Scott (2002)introduced the framework of national innovation capacity (NIC), which employs a quantitative approach to understanding to what degree elements of NIS impact on innovation capacity. Regional innovation capacity (RIC) is the adaption of NIC at the regional level. Although regional level research is important there is limited work done on RIC and there is even less in transitional economies, which are different to developed countries. To better understand RIC in transitional countries this thesis conducted a study of 30 administrative regions in Mainland China between 1991 and 2005. To establish the key factors driving RIC in China the study explored the impact of three elements in the innovation system;(a) innovation actors, (b) innovation inputs, and (c)international and domestic innovation system interactions.

Challenging the female underperformance hypothesis

Purpose – The question of whether female-owned firms underperform male-owned firms has triggered much research and discussion. Klapper and Parker's review concluded that the majority of prior research suggests that female-owned firms underperform relative to male-owned firms. However, using performance measures that control for size and risk (and after controlling for demographic differences such as industry, experience and hours worked) Robb and Watson found no gender performance difference in their sample of newly established US firms. The aim of this study, therefore, is to replicate Robb and Watson's study to determine whether their findings can be generalized to another geographical location, Australia. Design/methodology/approach – The authors test the female underperformance hypothesis using data from the CAUSEE project, a panel study which follows young firms over four years. They use three outcome variables: survival rates, return on assets and the Sharpe ratio. Findings – Consistent with Robb and Watson the results indicate that female-owned firms do not underperform male-owned firms. Originality/value – While replication studies are rare in entrepreneurship, they are an important tool for accumulating generalizable knowledge. The results suggest that while female-owned firms differ from male-owned firms in terms of many control variables (such as industry, owners' previous experience and hours worked) they are no less successful. This outcome should help dispel the female underperformance myth; which if left unchallenged could result in inappropriate policy decisions and, more importantly, could discourage women from establishing new ventures.

Collaborative governance and innovation in social enterprises

While social enterprises have gained increasing policy attention as vehicles for generating innovative responses to complex social and environmental problems, surprisingly little is known about them. In particular, the social innovation produced by social enterprises (Mulgan, Tucker, Ali, & Sander, 2007) has been presumed rather than demonstrated, and remains under-investigated in the literature. While social enterprises are held to be inherently innovative as they seek to response to social needs (Nicholls, 2010), there has been conjecture that the collaborative governance arrangements typical in social enterprises may be conducive to innovation (Lumpkin, Moss, Gras, Kato, & Amezcua, In press), as members and volunteers provide a source of creative ideas and are unfettered in such thinking by responsibility to deliver organisational outcomes (Hendry, 2004). However this is complicated by the sheer array of governance arrangements which exist in social enterprises, which range from flat participatory democratic structures through to hierarchical arrangements. In continental Europe, there has been a stronger focus on democratic participation as a characteristic of Social Enterprises than, for example, the USA. In response to this gap in knowledge, a research project was undertaken to identify the population of social enterprises in Australia. The size, composition and the social innovations initiated by these enterprises has been reported elsewhere (see Barraket, 2010). The purpose of this paper is to undertake a closer examination of innovation in social enterprises – particularly how the collaborative governance of social enterprises might influence innovation. Given the pre-paradigmatic state of social entrepreneurship research (Nicholls, 2010), and the importance of drawing draw on established theories in order to advance theory (Short, Moss, & Lumpkin, 2009), a number of conceptual steps are needed in order to examine how collaborative governance might influence by social enterprises. In this paper, we commence by advancing a definition as to what a social enterprise is. In light of our focus on the potential role of collaborative governance in social innovation amongst social enterprises, we go on to consider the collaborative forms of governance prevalent in the Third Sector. Then, collaborative innovation is explored. Drawing on this information and our research data, we finally consider how collaborative governance might affect innovation amongst social enterprises.