1 Introduction
2 Theory and hypotheses development
2.1 Entrepreneur’s individual strategic orientations
2.2 Impact of prior work experience in established firms on strategic orientations
- H1a: Prior work experience in both small and large established firms increases a nascent entrepreneur’s focus on prediction orientation.
- H1b: Prior work experience in both small and large established firms increases a nascent entrepreneur’s focus on the upside opportunity rather than downside loss.
2.3 Impact of prior work experience in new firms on strategic orientations
- H2a: Prior work experience in form of the amount of time spent in new firms decreases a nascent entrepreneur’s prediction orientation.
- H3a: Prior work experience in form of number of newly started ventures increases a nascent entrepreneur’s prediction orientation.
- H2b: Prior work experience in form of the amount of time spent in a new firm increases a nascent entrepreneur’s focus on the downside loss rather than as upside opportunity.
- H3b: Prior work experience in form of number of newly started ventures increases a nascent entrepreneur’s focus on the upside opportunity rather than downside loss.
2.4 Impact of perceived environmental dynamism on strategic orientations
- H4a: Perceived environmental dynamism decreases a nascent entrepreneur’s prediction orientation.
- H4b: Perceived environmental dynamism increases a nascent entrepreneur’s focus on the downside loss instead of upside opportunity.
3 Methodology
3.1 Sample
3.2 Measures
3.2.1 Strategic orientation variables
- Prediction orientation. We began by carefully reviewing the definition of the prediction concept proposed by Sarasvathy (2001). Sample item includes the following: “In defining the target customers/markets (1) … the team concentrates on markets that it knows best or (6) … the team concentrates on getting more experience in ideal markets.” Cronbach’s alpha for the 4-item construct is 0.79.
- Risk orientation. We referred to both Janney and Dess’s (2006) definition of risk in entrepreneurial context as downside loss (i.e., hazard) versus upside opportunity (gain), as well as to Sarasvathy’s (2001) concept of affordable loss and return maximization. Sample item includes the following: “In defining the product volume/features, your team makes decisions primarily based on (6) the implementation costs in order to limit affordable losses or (1) …the expected return.” We used a reverse coded scale in the measurement but adjusted it for the analysis to make interpretation easier and in line with the labeling. A high score indicates the focus on risk of downside loss rather than upside potential. Cronbach’s alpha for the 4-item construct is 0.77.
Items | Factor | Cronbach’s alpha | |
---|---|---|---|
1 | 2 | ||
Prediction orientation | |||
1. In determining the product design, the team focuses on features (1) … according to the team’s own appraisal of what is necessary for the success of the product (6) … according to expert market forecasts of what is necessary for the success of the product | 0.675 | 0.297 | 0.787 |
2. In defining the target customers/markets, the team focuses on segments or markets (1) … that it expects to be attractive, but have not yet been analyzed in detail (6) … that have been determined as the best areas based on complex forecasts and analyses by the team and/or market experts | 0.792 | 0.197 | |
3. In defining the target customers/markets (1) … the team concentrates on markets that it knows best (6) … the team concentrates on getting more experience in ideal markets | 0.726 | 0.033 | |
4. In implementing the new business idea, the team puts emphasis on (1) … a quick process with known customers, investors, suppliers (6) … forecasts and analyses of ideal customers, investors, suppliers | 0.808 | 0.065 | |
Risk orientationa | |||
5. When making an investment decision your team focuses first on (6) … the potential maximum loss (1) … the potential maximum return | 0.247 | 0.774 | 0.772 |
6. In defining the production volume your team focuses on (6) … amounts that could be achieved with the available funds (1) … amounts that correspond to the ideal size of the company | 0.101 | 0.678 | |
7. In defining the product volume/features your team makes decisions primarily based on (6) … the implementation costs in order to limit affordable losses (1) … the expected return | − 0.009 | 0.837 | |
8. In implementing the new business idea your team prefers (6) … an applicable/pragmatic approach in order to limit losses possibly personally incurred (1) … a profit-maximizing approach irrespective of the financial demands during implementation | 0.217 | 0.737 |
3.2.2 Work experience
3.2.3 Perceived environmental dynamism
3.2.4 Control variables
- Innovativeness degree. In line with prior research (e.g., Dencker et al. 2009), we used a self-developed 3-value scale indicating the entrepreneur’s perception of the degree of innovativeness of her business idea as follows: 1 for less innovative, 2 for innovative, and 3 for radical innovative.
- Market-related innovativeness. Market-related innovativeness reflects the number of new market requirements and new customer groups to be addressed (Hauser et al. 2006). In other words, firms focusing on market-related innovativeness attempt to enter new markets and expand current customer groups by satisfying new needs with existing value propositions. In our study, this dummy variable indicates whether the innovativeness of the business idea is rather market-related (value 1) than product- and/or process-related (value 0).
- Own financial capital. This variable takes values between 0 and 3 indicating the amount of funding available from the founder’s own resources as follows: 0 for not available/not intended, 1 for available funds less than 25 thousand Euros, 2 for available funds between 25 and 50 thousand Euros, and 3 for available funds equal or exceeding 50 thousand Euros.
- Bank financial capital. Similar to the prior variable, this value indicates the amount of venture funding available from bank capital. Also, this variable takes values between 0 and 3 as follows: 0 for not available/not intended, 1 for available funds less than 25 thousand Euros, 2 for available funds between 25 and 50 thousand Euros, and 3 for available funds equal or exceeding 50 thousand Euros.
- Technical venture. This dummy variable indicates whether the focus of the new venture’s activities lies on technology-related products or services (value 1) or not (value 0).
- Service venture. This dummy variable indicates whether the intended offering is a service (value 1) or product (value 0).
- Team founding. We additionally controlled for confounding effects of teams. Hence, we introduced a dummy variable distinguishing between single entrepreneurs (value 0) and team-based venture (value 1).
- Founder’s age. Given that the existing professional experience of the entrepreneurs is measured by the number of years of prior work employment, it is useful to control for the age of the entrepreneur.
- Founder’s gender. Gender-related entrepreneurship research suggests existence of differences between male and female with respect to the entrepreneurial process (e.g., Carter et al. 1996). To control for such differences, we introduced a dummy variable with value 1 to denote female entrepreneurs and value 0 for male entrepreneurs.
Mean | Std. dev | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | ||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | Team founding | 0.62 | 0.49 | 1 | ||||||||||||||
2 | Founder age | 35.57 | 9.64 | − 0.308** | ||||||||||||||
3 | Founder gender | 0.32 | 0.47 | − 0.156* | 0.078 | |||||||||||||
4 | Technical venture | 0.43 | 0.50 | 0.262** | − 0.114 | − 0.311** | ||||||||||||
5 | Service | 0.78 | 0.41 | − 0.175** | 0.162* | 0.067 | − 0.235** | |||||||||||
6 | Degree of innovation | 2.00 | 0.54 | 0.114 | 0.04 | − 0.118 | 0.313** | − 0.160* | ||||||||||
7 | Market innovativeness | 0.27 | 0.45 | 0.05 | − 0.014 | 0.208** | − 0.250** | − 0.009 | − 0.157* | |||||||||
8 | Own financial resources | 0.80 | 0.91 | − 0.016 | − 0.159* | − 0.138* | 0.035 | 0.058 | 0.093 | − 0.088 | ||||||||
9 | Bank financial resources | 0.23 | 0.72 | − 0.037 | 0.035 | − 0.038 | − 0.106 | 0.033 | 0.019 | − 0.018 | 0.231** | |||||||
10 | Work experience small firms | 5.69 | 6.92 | − 0.08 | 0.457** | 0.029 | − 0.05 | 0.097 | 0.087 | 0.057 | 0.104 | 0.037 | ||||||
11 | Work experience large firms | 4.40 | 6.66 | − 0.158* | 0.516** | − 0.046 | − 0.107 | 0.121 | 0.004 | − 0.034 | 0.130* | − 0.033 | − 0.113 | |||||
12 | Founding experience (years) | 1.65 | 4.88 | 0.032 | 0.291** | − 0.162* | 0.014 | 0.008 | 0.073 | 0.031 | 0.115 | 0.081 | 0.414** | 0.008 | ||||
13 | Founding experience (firms) | 0.17 | 0.38 | 0.09 | 0.219** | − 0.239** | 0.001 | 0.03 | 0.057 | − 0.008 | 0.182** | 0.05 | 0.380** | 0.009 | 0.539** | |||
14 | Market dynamism | 3.56 | 1.25 | − 0.018 | − 0.106 | 0.051 | 0.063 | − 0.058 | − 0.145* | − 0.016 | − 0.101 | 0.01 | − 0.105 | − 0.079 | − 0.07 | − 0.129* | ||
15 | Prediction orientation | 3.05 | 0.85 | 0.061 | 0.026 | 0.049 | 0.025 | − 0.08 | 0.131* | − 0.133* | 0.019 | 0.12 | 0.078 | − 0.112 | 0.077 | 0.11 | − 0.170** | |
16 | Risk orientation | 3.52 | 1.08 | − 0.05 | − 0.104 | 0.102 | − 0.049 | 0.006 | − 0.107 | − 0.029 | 0.019 | − 0.072 | − 0.055 | − 0.069 | − 0.035 | − 0.112 | 0.321** | − 0.257** |
3.3 Methods
Prediction orientation | Risk orientation | |||||||
---|---|---|---|---|---|---|---|---|
Model 1 | Model 2 | Model 3 | Model 4 | |||||
Control only | VIF | Full model | VIF | Control only | VIF | Full model | VIF | |
Technical venture | − 0.073 | 1.297 | − 0.037 | 1.375 | 0.203 | 1.297 | 0.041 | 1.375 |
Service team founding | − 0.182 | 1.438 | − 0.187 | 1.561 | 0.306 | 1.438 | 0.523* | 1.561 |
0.178 | 1.296 | 0.154 | 1.325 | − 0.081 | 1.296 | 0.214 | 1.325 | |
Founder age | 0.005 | 1.089 | 0.010 | 2.747 | − 0.022+ | 1.089 | 0.022 | 2.747 |
Founder gender | 0.212 | 1.289 | 0.266+ | 1.562 | 0.413 | 1.289 | 0.239 | 1.562 |
Own financial capital | − 0.021 | 1.212 | − 0.046 | 1.389 | − 0.115 | 1.212 | 0.015 | 1.389 |
Bank financial capital | 0.173+ | 1.180 | 0.178* | 1.306 | − 0.037 | 1.180 | − 0.023 | 1.306 |
Innovativeness degree | 0.200 | 1.297 | 0.136 | 1.600 | 0.158 | 1.297 | 0.229 | 1.600 |
Market-related innovativeness | − 0.338+ | 1.146 | − 0.376* | 1.311 | − 0.187 | 1.146 | − 0.110 | 1.311 |
Employed work experience (small firms) | − 0.005 | 2.474 | − 0.048* | 2.474 | ||||
Employed work experience (large firms) | − 0.023+ | 2.136 | − 0.068** | 2.136 | ||||
Self-employed experience (years) | − 0.008 | 2.071 | 0.054+ | 2.071 | ||||
Self-employed experience (no. of ventures started) | 0.110+ | 2.351 | − 0.720* | 2.351 | ||||
Perceived environmental dynamism | − 0.175** | 1.468 | 0.205+ | 1.468 | ||||
Overall regression values | ||||||||
R2 | 0.065 | 0.125 | 0.155 | 0.377 | ||||
Adjusted R2 | 0.029 | 0.072 | 0.032 | 0.223 | ||||
F-statistic | 1.828 | 2.378 | 1.260 | 2.459 | ||||
Significance | 0.064 | 0.004 | 0.277 | 0.009 |
4 Findings
Hypothesis | Content of the hypothesis | Outcome |
---|---|---|
H1a + | Prior work experience in both small and large established firms increases a nascent entrepreneur’s focus on prediction orientation. | Not supported |
H1b − | Prior work experience in both small and large established firms increases a nascent entrepreneur’s focus on the upside opportunity rather than downside loss. | Supported |
H2a − | Prior work experience in form of the amount of time spent in new firms decreases a nascent entrepreneur’s prediction orientation. | Not supported |
H2b + | Prior work experience in form of the amount of time spent in a new firm increases a nascent entrepreneur’s focus on the downside loss rather than as upside opportunity. | Not supported |
H3a + | Prior work experience in form of number of newly started ventures increases a nascent entrepreneur’s prediction orientation. | Not supported |
H3b − | Prior work experience in form of number of newly started ventures increases a nascent entrepreneur’s focus on the upside opportunity rather than downside loss | Supported |
H4a − | Perceived environmental dynamism decreases a nascent entrepreneur’s prediction orientation. | Supported |
H4b + | Perceived environmental dynamism increases a nascent entrepreneur’s focus on the downside loss instead of upside opportunity. | Not supported |