New Frontiers in Entrepreneurship

Moving from the received state of the art, this book presents and discusses a variety of attractive recent developments and achievements in entrepreneurship research. In more detail, it makes a systematic analysis of both theory and practice associated with the current evolving contours of “strategic entrepreneurship” intended as a new tradition in management and a field of study per se. This book intentionally encompasses four distinct domains: the nurturing of governance mechanisms and arrangements, the mobilization of capital, the activation of learning and innovation loops, and the role of open innovation in new entrepreneurial organizations.

Research on entrepreneurship and entrepreneurial processes has met greatest success at the dawn of this new millennium, stretching its frontiers from a peripheral subfield of management studies into one of the most relevant spheres of strategic management. Coined roughly a decade ago, the term “strategic entrepreneurship” joins together the insights of both entrepreneurship and strategic management and explores the overlap between the two (Hitt et al. 2001).

While the process of pursuing an initial public offering (IPO) provides new capital with which new ventures might pursue significant opportunities, research suggests that many IPO firms decrease in value subsequent to the new offering. Using an agency perspective, we argue that the IPO process itself may not only raise direct governance costs (due to increased monitoring and bonding), but may also create a distraction for managers who need to remain focused on the ­strategy to effectively use a large infusion of capital from the IPO. Likewise, we argue that ­governance participants, especially board members, will be distracted by the work necessary to take the firm public and, as such, may not be focused on the strategic ­monitoring necessary for continued firm’s viability. This lack of monitoring may also allow managerial opportunism to be more prevalent, especially given the large amount of capital available to managers once the IPO is completed. Accordingly, we argue that excessive governance costs (both direct and indirect) may be associated with the IPO process and subsequent IPO firm performance.

We integrate resource-based-view, transaction-cost economics, and institutional theory to model how collaboration efforts among SMEs immersed in weak infrastructure and institutional environments help them achieve a host of collective efficiencies and greater access to global markets. Using a survey database from 232 Argentine furniture SMEs, we find that while vertical ties yield manufacturing productivity along the supply chain, horizontal ties enable the access to collective resources and joint product innovation. These collective efficiencies, in turn, serve as competitive currencies for SMEs to access global markets. We discuss implications for theory and practice.

Drawing on institutional economics, this article addresses how institutional congruence between capital and labor markets influences corporate governance systems, which, in turn, create differences in national corporate innovation and entrepreneurship systems and subsequently global competitiveness. We argue that such institutional congruence cultivates two ideal corporate governance systems. The first ideal type is the market-based system with transactional capital and external labor markets. This corporate governance system facilitates more explorative and revolutionary innovations. The second ideal type is the relationship-based governance system with relational capital and internal labor markets. This system facilitates more exploitative and evolutionary innovations. We wrap up by discussing how institutional adjustments are being pursued for each governance system because each type has advantages and disadvantages that require adjustments. Finally, we present implications that our congruence model suggests for global competitiveness, high-tech management, and public policy regarding national innovation systems.

This chapter explains why and how entrepreneurship has emerged as a driving force for economic growht, job creation and competitiveness. A framework is provided for understanding entrepreneurship in the global economy and why entrepreneurship policy has emerged as a bonafide instrument for growth and development.

Despite the important role recognized to outside equity in financing and fostering innovative entrepreneurial firms (i.e., entrepreneurial start-ups), relatively little is known about the key characteristics of the different fund-providers involved either in a temporal perspective (diverse stage of the early firm’s life) or in an industry perspective (specialized equity investors). While business angels and venture capitalists are relatively common and welcome companions of entrepreneurs, various kinds of circumstances need to be accomplished and coordinated in order to establish and govern these relationships in a way that is really beneficial to all the parties. This chapter aims to discuss various aspects of the multifaceted relation between entrepreneurs seeking for finance to their early stage projects and business angels providing equity. In particular, we underscore the rationale for the emergence of the business angel networks in order to optimize search costs and the good match between supply and demand for funds. While business angel networks have found the way for their admittance in many European countries, in the USA, angel groups (or spontaneous investor associations) are far more developed. On the ground of a 5-year panel data extracted from the European Business Angel Network (EBAN), we explore in depth the intricacies and inefficiencies related to the action of the business angels networks in Europe and briefly juxtapose them to the Anglo-Saxon experience.

The financial literature claims that venture capital (VC) financing spurs the growth of new technology-based firms (NTBFs). First, VC investors allegedly have superior scouting capabilities, so they provide great hidden value firms with the financing they would otherwise be unable to obtain. Second, they also provide monitoring and coaching services to portfolio companies. Third, VC financing has a “certification” effect, making easier for portfolio firms obtaining support from third parties. The aim of the paper is to test whether VC financing has a positive effect on the subsequent growth of sales and employment of portfolio companies by taking into account the actual willingness of the NTBF to receive equity financing. We consider a 10 year long longitudinal dataset composed of 215 Italian NTBFs, most of which are privately held. The sample includes both VC-backed and non VC-backed firms. In order to capture the effects of VC financing on the subsequent growth of firms, we estimate an augmented Gibrat-law type dynamic panel data model. We resort to GMM-system estimation to control for the potentially endogenous nature of VC financing. The results strongly support the view that VC financing spurs firm growth. Moreover once controlled for self-selection, the effect of VC on firm growth is even larger.

Corporate venture capital (CVC), direct minority equity investments made by established companies in privately held start-ups, has become an important strategic tool for many large companies. In particular, firms often pursue CVC investing as a way to learn about novel technologies. Although CVC investments are inherently exploratory and have been found to enhance investing firm’s innovation, research has yet to establish whether CVC investing leads to the development of exploratory innovations (i.e., innovations that embody knowledge that differs from knowledge used by the firm in prior innovation efforts). In this paper, we explore the conditions under which CVC investments lead to the creation of exploratory knowledge by corporate investors. Building on insights from the recombinatory search and interorganizational learning literatures, we argue that three characteristics of an investing firm’s portfolio of start-ups will enhance its creation of exploratory knowledge. Using longitudinal data on a panel of 40 telecommunications equipment manufacturers, we find that investing firms produce more exploratory knowledge when their portfolios include start-ups that are moderately diverse, mature, and possess codified technological knowledge.

The dynamic resource based view introduces the concept of capability lifecycles. Applying this theory to new and adolescent technology ventures, we propose and test a model of the sources of heterogeneous knowledge capabilities that impact innovation. We suggest that the characteristics of the top management of these ventures impacts business-university alliance formation – a critical knowledge capability that affects innovation. Building on prior research, we also examine the source of firm specific knowledge through geographical munificence. Our results suggest that there are paths to knowledge capability development and innovation and that people are critical to the building of collaborative relationships, not merely being in the right location.

This paper studies the emergence of entrepreneurs and their skill profile in the open source software (OSS) community. We test the hypothesis that entrepreneurs, carrying out complex, multitask activities, have more balanced skill sets compared with individuals who are less involved in project management activities.Our empirical analysis employs the SourceForge dataset containing information on 77,039 individuals working in 54,229 OSS projects. We estimate logit and ordered logit models to explore the likelihood that an individual is a project founder or manager. Our main regressors include individual attributes like skill level and diversity, and project-level controls. Results support our hypothesis.

Using economics and strategic management literature, we analyze how the phenomenon of open innovation and its associated intellectual communities have an impact on traditional income streams derived from monopoly, Ricardian, and entrepreneurial rents. In doing so, we find that our existing models of property rights, barriers to competition, organizational cost structures, and innovation capacity require adjustment to account for these phenomena. Open innovation modifies the sources of rents. Traditional entry, distribution and capital barriers decline with declining property rights, as do market power and scale effects. Switching costs will remain unchanged. However, rents from knowledge, experience effects, and more perfect differentiation are expected to increase. Importantly, capturing rents may be more difficult because the source of the innovation remains outside the firm’s control.