Frontiers of Entrepreneurship Research 1994

Frontiers of Entrepreneurship Research


Abstracts from the 1994 Edition


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    DEVELOPING SYSTEMS THAT FACILITATE ORGANIZATIONAL LEARNING: EXAMPLES OF SUCCESSFUL NEW VENTURE DEVELOPMENT

    Brenda E. Joyner

    Department of Management
    University of Wollongong
    Northfields Avenue
    Wollongong NSW 2522 Australia

    Charles W. Hofer

    Terry College of Business
    Department of Management
    University of Georgia
    419 Brooks Hall
    Athens, Georgia 30602-6256

    Telephone
    706-542-3724

    Fax
    706-542-3743

    Principal Topics
    This study traces the development of Organizational learning processes within ten highly successful new ventures In particular, the development of processes for knowledge acquisition, information distribution, and information interpretation are identified and described. The transfer of organizational memory from key associated with the start-up phase of the venture to organizational information banks that can be accessed by many members of the organization during later high growth stages is also analyzed.

    Method
    Data were collected using semi-structured long interviews with ten founding entrepreneurs from successful ventures. Archival data from and about these ventures were also used for confirmation and elaboration of interview data. After the interview data had been transcribed and coded, the data pertaining to the development of decision processes and information systems were analyzed using content analysis and cognitive mapping, a computer- assisted form of content analysis which facilitates analysis of concepts and the relationships between them. Data resulting from these analyses were compared for similarities and differences among entrepreneurs.

    Major Findings
    The successful entrepreneurs examined in this study structured their organizations so that the lines of communication were multi-directional. While the lines of authority within the firm were clearly delineated to eliminate confusion, they did not act as barriers to information flow. The entrepreneurs encouraged employees at all levels to share information acquired from external stakeholders such as customers and suppliers and they sought opinions and information from employees about internal processes such as accounting procedures and production improvements. As actions were taken based on this information, employees throughout the firm were informed. Rewards and recognition were given to individuals who acquired and shared pertinent information for evaluation and action by the startup organization. With few employees during the startup phase, it was not difficult to get the information network in place. With rapid growth, support for ideas brought by employees was institutionalized in the form of annual public recognition or reward.

    The decision-making process originally initiated by each of the entrepreneurs in this study included seeking of ideas and opinions from employees at all- levels of the organization on proposed actions by the firm. With growth, this process was institutionalized, with key representatives from each level sought consultation, either formally or on an ad hoc basis.

    It is common for stories of the entrepreneur's exploits in the early days of the venture to be passed along to near employees. In these successful ventures, the stories of outstanding employees were also passed along. The contribution of the individual was celebrated and became a part of the culture of the growing firms. As a result the information system that facilitated learning within the organization was put in place as a part of the informal organization of the firm leading to the more formal part of the ever-evolving organization.

    In the startup venture, organizational memory is frequently found only in the minds of the individuals employed by the firm. With growth, much of this information must be transferred to systems that allow sharing with others within the organization. However all forms of organizational memory cannot be institutionalized. all the firms in this study recognized that those individuals who had been a of the startup phase of the business were essential, not only in developing computerized data banks such as accounting svstems and production Scheduling systems, but also in passing along the stories of the founding entrepreneur and first employees. They nurtured and retained individuals in order to foster both the culture and the spirit of theorganization.

    Implications
    Individuals who brought information to the attention of the organization were rewarded and those rewards were institutionalized as these firms grew. It was always the entrepreneur who instituted the reward for such behaviors. Employees had significant roles in development of all the component parts of the organizational learning processes in the businesses. The organizations developed computerized data banks to provide access throughout theorganization to information that comprised the organization's memory. These companies also retained and nurtured those individuals who were able to pass along those forms of organizational memory that could not be codified. While certain formsof the organizational learning processes were 'institutionalized over time and became policy for the formal organization, other forms of these processes were not. The informal organization allowed movement of information along lines other than those imposed by the formal organization.

    These findings indicate that development of organizational learning systems is dependent on the recognition and reward of individual behaviors that facilitate knowledge acquisition, information interpretation, information distribution, and organizational memory Institutionalization of these recognitions and rewards as the firm grows is essential if the learning process is to flourish. It is important that behaviors be rewarded, whether they originated in the formal or the informal organization. It is the task of the entrepreneur to establish recognition and reward for those behaviors that facilitate the organizational learning process. It is essential that the entrepreneur lead the process of transfer of organizational memory to data banks that allow access by many members of the organization as the firm grows. However, the entrepreneur must also nurture and retain those key individuals who carry forms of the organization's memory which cannot be codified.

    The results of this study were used to develop a list of propositions concerning the relationship of development of decision processes and information systems and the performance of the new venture. This provides a conceptual framework for further acadademic research on the new venture creation process . The study also provides a practical framework for use by individuals involved in startup of new vent:ures . By understanding the distinct behaviors that founding entrepreneurs practice in developing decision processes and information systems educators may be able to teach other individuals the behavioral skills necessary to successfully perform this key task during the creation and development of their own businesses


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