Complexity dynamics of nascent entrepreneurship
Section snippets
Executive summary
We apply ideas from complexity science to the study of new venture formation. One of these ideas suggests that systems will self-organize towards the emergence of a new state when there is “adaptive tension”, i.e. a perceived difference between the system's current and desired states. In the context of a nascent entrepreneur, adaptive tension is created through a perceived opportunity or by a personal aspiration to start a business. Adaptive tension is manifest as activities that strive to
Toward a complexity theory of organization emergence
The growing body of research from complexity science can provide a theoretical explanation for the emergence of new ventures. Recent complexity science studies have generated insights into the emergence of innovations and inventions (Fleming and Sorenson, 2001, Garud and Karnøe, 2003); emergent modes of entrepreneurial organizing (Lichtenstein, 2000, Lichtenstein et al., 2006); emergent strategic groups and teams (Carley, 1999); the emergence of innovative firms in a dynamic industry (Malerba
When does an organization “emerge”?
A variety of perspectives have been used to distinguish the point at which a nascent firm shifts from “gestation” or “start-up” to being “operational” (Gartner and Carter, 2003). Complexity provides a useful theoretical approach to this problem, drawing from over 100 years of philosophical analysis of emergent phenomenon (Goldstein, 1999, Klee, 1984, Lewes, 1877, Popper, 1926). Most of these scholars agree that emergence involves “qualitative novelty” — an emergent level enacts system-wide
PSED sample
The data for this research are from the Panel Study of Entrepreneurial Dynamics (PSED), a national survey of individuals who were in the process of starting businesses, but had not yet reached positive cash flow. Detailed descriptions of the methods and sampling used to generate the PSED can be found in Reynolds (2000) and Gartner, Shaver, Carter and Reynolds (2004b). During 1998 the first wave of sampling for the PSED was undertaken, which is known as the “Mixed Gender” sample: totaling 15,118
Organizing activities
The PSED includes questions on 27 organizing activities or start-up indicators that represent various aspects of firm emergence. The list of activities, presented in Table 1, was generated from prior theoretical and empirical studies on the relationship between start-up behavior and the creation of new ventures (Carter et al., 1996, Gatewood et al., 1995, Reynolds and Miller, 1992). Table 1 shows how activities have been added and modified over time in response to accumulating theory and
Results
Table 3 provides the summary statistics and correlations of our independent and dependent variables. From the mean values we can observe several things. First, the entrepreneur is almost twice as likely to perceive the creation of a new firm (0.54) than they are to experience positive cash flow (0.28). The two outcomes are significantly and positively correlated with one another (0.24), providing evidence of construct validity. The average rate of start-up activity is 0.70 events/month, meaning
Combined findings
Do the temporal dynamics of organizing activities affect the likelihood that a new venture will emerge? Yes they do. Our findings demonstrate that the ventures which emerged, compared with those that did not, pursued organizing activities at a faster rate, with a lower concentration, and with timing that was later in the process. A visual image of these combined findings is shown in Fig. 1.
Organization emergence requires a certain kind of momentum to be successful (Jansen, 2004). A useful
Conclusion
Using theoretical insights from complexity science we developed a model of emergence that explored dynamic processes within the system that might not depend on contingencies of the nascent entrepreneur, characteristics of the emerging venture, or the industry. Using a representative sample and longitudinal data from nascent entrepreneurs who were in the process of starting new ventures, we tested our propositions linking organization emergence to (1) a higher rate of organizing activities, (2)
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