FROM RESEARCH TO TEACHING:
AN INNOVATIVE APPROACH TO MODELING ENTREPRENEURIAL STUDIES
Josť R. Alonso
Swinburne University of Technology
Hawthorn, Victoria, 3122
William D. Bygrave
Babson Park, MA 02157
A syllabus, time schedule, and reference list for a doctoral level course on "Research Methods for Enterprise Innovation Studies" is presented (in the full paper) as taught for the first time in 1993. This seminar subject is the direct result of the doctoral dissertation research of one of the authors (Alonso), based on the application of both correlation and distance matrix based methods of analysis and visualization to survey data on motivation, resources and performance in very high technology (image analysis) industries.
The quantitative approach is complemented by parallel and in-context reviews of the most current literature on research methods for the social sciences. Continuous computer demonstration of many relevant data sets illustrate the many quantitative techniques using the CSS/Statistica Software package and computer projection technology. Students are encouraged to bring their own dissertation data sets, and perform with the lecturer during class preliminary analyses to discuss with the group of doctoral candidates.
Method and Data Base
The use of a comprehensive global statistical approach to the modeling of entrepreneurial processes was felt to be timely and necessary. Besides more conventional contingency table, regression and factor analysis techniques, the nature of concepts like innovation and motivation lend themselves to analyses using Euclidean and Mahalanobis distance matrices. Cluster analysis and multidimensional scaling provide a way of obtaining dimensions by variables, as well as by cases (transpose matrices) for future taxonomic and pattern recognition purposes. Implementation into an expert system for evaluation of company positioning and performance can also be explored. Image analysis techniques can be used to visualize applications of linear and non-linear experimental design explorations and histogram partitioning of multidimensional fields.
Commercial availability of new robust PC-based suites of statistical and image analysis computer programs and expert system shells made routine class demonstration of state-of-the-art statistical and mathematical techniques possible. It was decided to introduce these techniques to our doctoral students in seminar form, to expose them to the applicability of these techniques to their present research in the entrepreneurial field.
A one-semester (91 hour) 1994 subject for doctoral candidates, and for staff responsible with planning, implementation, evaluation and funding of programmes and courses with high innovative content.
At the end of this course, the participant will have acquired working familiarity with research methods for and statistical analysis of entrepreneurial management of innovative educational approaches and technologies, with special emphasis on methods of acquiring, visualizing and interpreting information. The equivalent of seven hours per week for one semester ensures that the areas are covered in a manner that equalizes differences in participant backgrounds. CSS STATISTICA and Microsoft EXCEL will be used as the major computer demonstration resources. References to other statistical packages (Statgraphics, Systat, SPSS X, SAS, Minitab, and others) will be made. Equal importance will be placed on quantitative, philosophical and financial methods of analysis.
The emphasis is on learning to design and evaluate research initiatives with very high innovation content. A hands-on case-study approach with continuous computer analyses is used. Inferences, opinions and conclusions from qualitative or quantitative data, collected using appropriate experimental or survey instruments, are made as the data yields its information to statistical or qualitative investigation methods, carried out in class by the participants in conjunction with the lecturer.
Participants must currently be approved post-graduate students, or authorized teaching or administrative staff members in any School of Swinburne University of Technology.
No formal assessment will be made during the first two trial years. Each participant will be encouraged to write a specific fully developed and costed proposal for a subject, research project of program initiative, to be discussed in class at different stages of development. Participants will also be encouraged to bring to class data sets of general interest which will also be computer analyzed and discussed as appropriate.
This paper describes a subject proposal for training staff and doctoral candidates in a multi-modal multi-sectoral University. Innovation research offers the promise of analysis and quantification of elusive criteria, which when applied to educational methods, permit the justification of evaluations of subject and course parameters in an innovative context.
This subject addresses the key teaching and learning issues concerning: the acquisition of the knowledge and skills necessary for the systematic application of innovation; the analysis and costing of existing and proposed infrastructures: technical, educational, marketing, financial and managerial, that underlie the success of any innovative program; the application of an innovative philosophy to course development programs; the evaluation, by systematic methods, of the performance, success or failure of particular initiatives.
The inter-disciplinary and inter-faculty subject has been offered in 1993 and 1994, by invitation, to selected groups of post graduate students and teaching and administrative staff from both TAFE and tertiary faculties. This subject updates, in a pedagogical context, the knowledge of the participants in current methods of evaluation of entrepreneurial performance data, with equal emphasis being given to philosophical and quantitative approaches.
The contents of the subject, incorporates relevant parts of the doctoral dissertation research of the lecturer and attempts to apply the methodology to specific evaluation of educational objectives achieved in innovative subjects and teaching methods. Particular emphasis will be placed on multi-modal teaching in multi-sectoral environments.
Teaching will be done using computer projection technology, with continuous reference to practical case studies that highlight the usefulness of particular statistical or mathematical methods of evaluation or visualization.
The complete paper will show the syllabus, schedule and list of references for the pilot subject taught in 1993 and 1994. A substantial commitment of time (one day a week of class contact for one term approximately) is required of the participants. This subject is complementary to the objectives of the Professional Development Program currently in effect at Swinburne University of Technology. This subject can also become a standard requirement for Post graduate students at Swinburne University of Technology, funded on a student per capita basis by all faculties, and opinions and help will be sought from all faculties during the present 1994 trial to ensure that all disparate educational needs are integrated into a creative synthesis.
The subject is also a test bed for a project evaluation expert system being developed by the lecturer. Input from the participants will be as valuable to the lecturer as the materials and philosophies taught will be to the participants. Innovation is born out of synergy.
D. Ray Bagby
Leslie E. Palich
Phil E. Stetz
Baugh Center for Entrepreneurship
Waco, TX 76798-8011
A previous study had showed that entrepreneurs and others differed in the way that they perceived information provided in a scenario concerning a firm. In general, the entrepreneurs perceived more strengths than weaknesses, more opportunities than threats, and greater potential for future improvement than others. At the same time, there was no observed difference between the groups on a risk propensity scale. This study sought additional data from a larger sample and additional demographic data on the respondents.
A random sample of 752 business owners was selected from a data base of Texas small firms. The slightly revised questionnaire from the earlier study was mailed to each. The same questionnaire was mailed to each of the owners of the firms identified in Forbes (11/8/93) as the best 200 publicly traded small companies in the world. Unfortunately, small response rats coupled with a wide variation in demographics within the entrepreneur group, and a lack of responses from a non-entrepreneur group made replication impossible. However, when comparing respondents some interesting implications for the operational definition of an entrepreneur emerged.
Many researchers use an operational definition of entrepreneur as an individual who has started a business. The data of this study indicate that such a definition may too broad to be useful, while at the same time excluding some people who are behaving entrepreneurially. Differences were found between entrepreneurs on goals concerning intention to grow rapidly (20% per year or higher), to create innovations, to provide a comfortable lifestyle for the family, to provide employment in the community, and to provide self-employment. Each of the findings support earlier contentions of differences between entrepreneurs and small business owners. Significant differences were found in sales growth and perceived level of firm performance between the two groups of entrepreneurs. There were also significant differences of age and experience of the individuals in each of the groups.
The results indicate that we should explore a taxonomy for distinguishing between various kinds of entrepreneurs. Certainly any research looking at performance measures needs to consider the possible differences within broadly defined samples. Further research is needed in order to verify these tentative conclusions.
Boulevard de Constance
F-77305 Fontainebleau Cedex
This paper examines conceptually the situation of a firm operating in two separate markets (a domestic, highly controlled market and a foreign, competitive market) and facing an uncertain demand for its products. Using contingent claims pricing theory, the optimal level of marketing expenditure to be incurred in the domestic market in order to minimize the effect of uncertainty is determined. The development is conducted within the real-life framework of a tools company in India but translates easily into other settings.
This paper studies conceptually the situation of a firm, operating in two separate markets (a domestic, highly controlled market and a foreign, competitive market) and facing an uncertain level of demand for its products, and determines, with the help of contingent claims pricing theory, the optimal marketing expenditures that the firm should undertake in order to minimize the effects of the price uncertainty prevailing in its two markets. The study is based on a real-option application of Black-Scholes model of option pricing, developed in both discrete and continuous time.
It is shown in the paper that the optimal domestic marketing expenditure can be seen as a put option on the underlying assets. The case entails truncating the payoff function in such a way that the value to the holder of the option is an increasing function of the variance of return on the underlying asset. A closed form solution to the marketing problem is obtained using variants of contingent claims models.
The model helps conceptualize the marketing decision faced by many industrialists in developing countries in a contingent claim framework. It also serves to highlight the hedging possibilities represented by expending of marketing costs in real situations where traditional hedging instruments are not available.
Lyon Graduate School of Business
Groupe ESC Lyon
23 av. Guy de Collongue, B.O. 174
69132 Ecully Cedex
Jocelyn J.-Y. Desroches
School of Administrative Studies
University of Quebec at Montreal
P.O.B. 6192, Branch "Centre Ville"
Montreal, (Quebec), H3C 4R2
The paper examines the role and contribution of selected actors/partners to the CEOs of fast growing companies planning to list their firms on the stock market, at two points in time: first, the decision to go public or not; and second, the writing of the prospectus and other pre-listing activities.
Method and Data Base
The analysis is based on data collected from a 1992 survey of French entrepreneurs in small and medium-sized businesses (SMBs) listed on the "Second Market". The Second Market was established by the French Stock Market authorities in 1983 to facilitate access by fast growing companies to equity capital. The data were collected in the Fall of 1993, thus allowing for a 10-year experience span. Specifically, the analysis assesses the patterns of influence and the relative importance of the CEO's immediate family members, his social friends, the firm's management and board, and financial consultants and partners outside the firm, on the decision to go public and on other activities at the pre-listing stage. The findings are also compared with those obtained from a similar study of similar firms listed on the Canadian Montreal and Toronto Stock Exchange in the late 1980's.
Banks, venture capital firms and other financial partners from outside the firm are found to be the most influential factor both at the decision and the pre-listing stages. The management team inside the firm ranks second. The influence and role of immediate family members is found to be significantly greater at the decision stage for firms not created by their current CEOs.
From a strictly practical point of view, if the number of new small firm capitalizations on the French stock market (and most likely on similar stock markets in England, Germany, The Netherlands, etc. in Europe, and in Canada), positive and active participation and support from bankers will first be required.
From a theoretical point of view, this study supports the asymmetrical information hypothesis of small firms and its impact on the pricing value of the stock.
The Enterprise Centre
The University of Nottingham
Nottingham NG7 2RD
Increasing emphasis upon the need for interpersonal skills and competencies in graduates from Higher Education (HE) in the UK led to the introduction of the Enterprise in Higher Education Initiative (EHEI). The objectives and design of this initiative are presented in SUMMARY form. The need for a more focused approach through the use of research to determine the match between the importance of different skills and competencies and the quality of these in the output of graduates from HE is considered in terms of alternative methodological approaches. The need for relatively large numbers drove the choice of methodology adopted. The returns from 410 matched pairs of graduates and their employers are examined to determine the similarity of results from four different universities. Given the high level of consistency between institutions, the aggregate results are examined in terms of the mismatch between the demand for and supply of different interpersonal skills and competencies with particular focus upon those which are most closely associated with entrepreneurial activity. There were also examined to observe differences between males and females and between those graduates who achieved 1st, 2i, 2ii, 3rd or pass degrees.
University Careers Advisory Services receive 'first destination returns' from their previous years' graduates indicating whether they are in employment and if so what form this takes. Typically around 85% of graduates respond. Questionnaires with full explanation were sent to those indicating that they were in full-time employment. Graduates from four universities were approached in order to increase sample size as well as observe the extent of similarities between their graduate output. Graduates were requested to complete a questionnaire which required them to indicate the importance of 25 interpersonal skills and competencies in the context of their present employment. They were then asked to consider their own quality in terms of these same set of interpersonal skills and competencies. They were asked to pass a copy of the same questionnaire to a representative of their employers who was familiar with their experience and performance when taking up employment. Employers representatives were asked to respond in like manner and return their questionnaires under separate cover.
Around half of the graduates approached returned their questionnaires in a usable form, and about 20% of those approached could be matched with a corresponding response from their employer representative. This represented a total sample of 410 matched pairs for the purposes of this analysis. There was a very high level of consistency between the self perceptions of the graduates and those of their employer representatives. There was also a very high level of similarity between the results from the four institutions involved. This inter-institutional similarity enabled an aggregate analysis of the 420 responses. Since the sample refers to employees rather than owner managers, it was surprising that some characteristics most strongly associated with entrepreneurship were absent both in terms of importance and quality. The clearest example of this referred to 'risk taking' and 'management skills'. There were interesting variations between many of the other characteristics associated with entrepreneurship such as initiative, independence, flexibility, tenacity, etc. Differences between males and females were also observable in a consistent manner between the graduates and their employers. Differences also emerged in the skills and competencies associated with different qualities of degree.
As the nature of graduate employment and employability changes, the onus of responsibility for negotiating an often flexible and variable career path will rest more and more with the graduate. There will also be greater emphasis upon self-employment and entrepreneurial activity both in terms of new and small businesses but also in the context of larger organizations. Increasing emphasis will be placed upon the acquisition by graduates of the skills and competencies required for these changing roles. The response to this survey suggests first that the methodology that is being tested is viable as a monitoring device for the output of higher education in general in order to inform those delivering the curriculum as to where a change in emphasis or delivery mechanism may be required. Second the sample, although small, is still sufficient to reveal considerable differences both in the acquisition of different interpersonal skills and competencies in general but also in the acquisition of these between males and females and also between graduates in terms of category of degree which they receive.
The similarity in the results between institution and so between employers and graduates suggests that the methodology may be appropriate for higher education as a whole. The increased sample size of a study involving a larger number of universities would enable an inter-disciplinary study to be made which could be used to inform individual departments and faculties. This information would be complimentary to that which is already emerging from the Enterprise in Higher Education Initiative and other sources in terms of the relative effectiveness of different teaching and learning methods for the acquisition of interpersonal skills and competencies.
Barbara J. Bird
The American University
Department of Management
4400 Massachusetts Avenue, N.W.
Washington, DC 20016
220 Wilson Boulevard. Ste. 400
Arlington, VA 22201-3301
A scale to measure entrepreneurs' attention to detail versus big picture is developed and psychometrics reported. Relationships between detail orientation, futurity (planning horizon), use of deadlines and organizational outcomes such as size, revenues, growth, and satisfaction are examined. In addition, entrepreneurs were asked to draw pictures of their ventures and these are assessed for content.
A sample of 194 firms featured in a metropolitan newspaper were surveyed by mail with a 30% return rate (n=58). The 8 page questionnaire included scales designed to assess the attention to detail, use of deadlines, futurity (Miller & Friesen, 1978), satisfaction and a number of other human resource areas as well as venture outcomes. Factor analysis, reliability and intercorrelation analysis of these scales and outcome measures are reported. Half the respondents (n=29) included drawings of their business. Content analysis of these pictures was performed by seven judges.
The attention to detail scale factored into two dimensions: Business Details and People. All scales had acceptable reliabilities. The total details scale was positively related (p.<.05) to use of deadlines, but the BUSINESS DETAILS subscale was not related to deadlines and PEOPLE subscale was (p.<.05), suggesting that deadlines are more an interpersonal issue than one having to do with sales, finance and operations. Neither details nor deadlines were related to outcome measures, although futurity was significantly and positively related to revenues and revenue growth and staff size (but not growth in staff). There are some significant results for gender (women-owned businesses have significantly lower revenues and higher employment rates than those owned by men) and for growth goals of the founder (e.g., growth goal is significantly related to salary of highest paid employee including the entrepreneur but shows no relations to use of bonuses). Content analysis of the pictures drawn shows that judges can reliably determine whether or not the entrepreneur and other people are in the picture but have marginal reliability in determining the presence of money or capital goods and lack reliable judgment on the positive, negative or neutral affect in the picture.
Future research may want to test the importance of vision versus details orientation of entrepreneurs however the results of this study suggest narrower focus. It seems that the human resources details have more significant relationships than business details. This study also points to the importance of futurity and deadlines on venture outcomes. Both concern for deadlines and strategic orientation have significant relationship with attention to human resources details of venture management, suggesting that it is through a well-managed human system that time resources are optimized and visions are realized.
Daniel F. Muzyka
The Management School
Imperial College of Science, Technology and Medicine
53 Prince Gate
London SW7 2PG
Locating new business has always been a problem. By their very nature, they do not appear in any listings until they are already established and have identified themselves as requiring a telephone, a credit rating, as employing others, or as registering for VAT or sales tax. Moreover, these listings are not always publicly available; they may be incomplete or out of date; or they may not list the firm by age or by size, making the task of isolating the new and small firm both long and laborious. Indeed, the potential errors in attempting to identify the population, and thus take a random or representative sample, may be so large as totally to negate the exercise [Birley 1984, Aldrich et al. 1989]. On the surface, however, this problem should not arise when attempting to find the more established firms and their founders. More particularly, it would seem intuitively obvious that the easiest population for researchers to identify would be that of the "high flyers", the entrepreneurs who own and manage the fast growing companies. After all, in the USA lists would appear to abound and to be published in journals such as INC or Venture, or through membership organizations such as Young Presidents. Unfortunately, these lists are not compiled through any rigorous research process, but rather through invitation to readers, subscribers, members and entrepreneurs to submit candidates. Whilst this may, indeed, be an effective and, possibly, accurate method, there is no evidence to this effect. In Europe, despite the advent of The Single European Market, the problem is even greater. This paper notes the trial and tribulations of one such search within the EEC.
Over a nine month period in 1992 the researchers undertook an apparently simple project - to identify a group of high growth, entrepreneurial companies which would form the base for the creation of the European equivalent of the American Business Conference [ABC]. The European project adopted the following general criteria:
* Turnover between ECU10m and ECU500m.
* Rapid growth in turnover and the creation of jobs.
* Activity in more than one EC country.
* Significant proportion of the equity in the hands of current management.
* A track record of innovation.
No data base provided this level of detail across the Community. Therefore, the research methodology proposed was as follows:
1. Identification of possible companies from either data bases or directories.
2. Mailing of Information Pack of introductory letter, questionnaire, ABC Fact Sheet
3. Where no response was obtained, entrepreneurs were telephoned by a researcher speaking in the language of the country and a follow-up mailing sent.
In short, the exercise was an unmitigated disaster. After 326 man days of work, and significant expense, 800 potential companies were identified. All were contacted at least once and over 700 of these were contacted twice by mail and at least once by telephone. By the time that the exercise was abandoned, 43 [5.4% response rate] had provided qualifying data and had agreed to participate further. This paper will report the individual country studies and document the lessons learned. Our overall conclusion is that obtaining a representative, Europe-wide list of successful entrepreneurs is virtually impossible, even with an inexhaustible supply of both time and money!
There is, clearly, a need to treat samples of this group of entrepreneurs with a good deal of suspicion. The chances of being able to assess how truly they represent the population are small.
Department of Management
University of Louisville
Louisville, KY 40292
This study empirically determines if a teleconferencing (TC) can serve as a vehicle to bring remote entrepreneurs and Vas together. We discovered if judgment differences concerning potential investment in a venture exists between virgin angles (Vas) attending both a remote presentation and face-to-face business plan presentation. The following questions are answered by the study:
(1) Can a teleconferencing business forum provide the necessary environment to stimulate informal investors (Vas) to initiate a funding process?
(2) Is there a difference in the perceptions of success on the part of an informal investor (VA) between a face-to-face and teleconference site in a business forum? and
(3) Will the type of medium influence informal investors (VA) with respect to commonly used criteria in funding a venture?
The business forum took place at the Telecommunications Research Center at the University of Louisville. This center employs state of the art telecommunications technology to support both product demonstrations and research. The facilities utilized consisted of two generic meeting rooms with full audio and video interaction capabilities. The video and audio signals employed in the study replicated that which would be available through a satellite teleconferencing uplink.
We enlisted the aid of a former president of a fledging high-tech corporation and asked him if he would be willing to present the company's business plan to the informal investors. Prior to this study the organization had received funding from an informal investor. The actual plan presented to that informal investor was employed at the simulated TC.
The New Venture Start-up Decision Making Exercise (NVSDME) (Clouse, 1990) was employed as a screening device. Ninety-two individuals completed the NVSDME. Only 78 demonstrated consistency and reliability and were invited to the simulated TC business forum. One week before the TC business forum each participant received an executive summary of the company's business plan.
After the TC took place all 78 were asked if they felt qualified from their education, business and personal background to make a decision in the role of the VA. Twenty-one of the participants felt they were not qualified and were eliminated from further participation.
The results of statistical analyses suggest the use of teleconfrenced business forums as mechanism to more efficiently link capital and entrepreneurial ventures, help identify key decision criteria for funding and support continued research using modern communication technologies.
The use of the TC business forum may assist entrepreneurs in their securing of vital financial resources for their firm. Through TC, a great deal more informal investors could potentially view the business idea of the entrepreneur. This in essence may lessen some of the geographic barriers present today. It may also allow the entrepreneur to expand his/her advisory base by bringing together investors from different regions who may have a common interest in the firm.
A TC may serve as a medium to reduce the perception of risk on the part of the informal investor. With TC, the informal investor has an opportunity to diversify risk because of an expanded marketplace to invest in. The informal investor may have the ability to pool with additional informal investors from other geographic regions to again spread investment capital risk. No doubt a major public policy issue in the U.S. is how federal, state and local government can foster the growth of entrepreneurial ventures. If a well-defined informal investment network is not present, the entrepreneur may leave the current location and move to a new region where informal investment capital is available.
David J. Brophy
Michael R. Haessler
School of Business Administration
University of Michigan
Ann Arbor, MI 48109
This paper demonstrates a pedagogical model which has been developed as a result of applied research in venture capital and entrepreneurship and is currently providing a framework for extended empirical research in venture capital. This model is based on many years of research in venture capital. The model has been used in the author's MBA course on venture capital for the past four years, and is a good example of how research in venture capital has led to development of a useful teaching tool.
The model uses probabilistic simulation to provide a user friendly mechanism whereby prospective general partners (GP) and limited partners (LP) of a venture capital limited partnership fund are able to evaluate alternative venture capital fund investment policies, structural terms, and real option contingencies of the fund ex ante. Investment strategy alternatives include the mix of investments to be pursued by the fund with respect to stage of invested development (e.g. startups, early stage investments, later stage or "mezzanine" investments, or a mixture of these types). Structural terms include such items as the GP's carried interest formula and management fee, the fund's gain and loss distribution policy, its use of a Small Business Investment Company subsidiary and its capital takedown schedule.
The model presented in the paper is based upon observed characteristics of the venture capital market reported in the finance, economics, and management science literature. The methodology employed permits partners in venture capital funds to estimate the relative values of investment policies and structural terms. The simulation model is particularly useful to practitioners as these terms may be traded off against each other in negotiations between prospective general and limited partners. The probabilistic aspect of the model enables negotiators to see the effects of alternative combinations of investment policies and structural terms on uncertainty and risk as well as on expected return.
In the example presented in this paper, negotiations involve the establishment of a $20 million venture capital fund. Based upon general background information concerning the venture capital industry, as well as upon information regarding the specific characteristics of the market opportunities currently facing the negotiators, the GP and LP groups of negotiators set forth and present to each other their prospectus and long-term plan for the fund as each group prefers to structure it. Differences between the GP and LP groups are identified by each group and negotiations then proceed on the basis of economic analyses of alternative expectations, structural terms and conditions. These can be analyzed quickly and comprehensively with the help of the model. Use of the model and the comprehensive analysis it permits in a "live" interactive setting brings excitement and insight to the study of what could be the somewhat dry "legalese" of investment structuring.
As a research tool, the model offers the researcher the opportunity to analyze the investment and structural policies of operating venture capital funds to gain insight on their intentions, governance and performance. It also permits the use of real option analysis in determining the valuation and pricing the fund and its investments. An important result of the development of this model is its application to the analysis of venture capital funds when they are in the process of formation as well as to the analysis of ongoing venture capital funds managed under "fund of funds" management arrangements.
The model is an extremely productive teaching tool, inasmuch as it permits students to study the investment policy-making and structural characteristics of venture capital funds as the interaction among three "players": the institutional investors who provide the ultimate funding, the venture capital investment firm which performs the intermediation function, and the entrepreneurial company which receives and employs the venture capital funds invested. The students approach the study of this set of relationships as a "game" in the formal sense of that term. Negotiations may be carried out through probabilistic simulation, with all four parameters of the resulting output distributions (mean, standard, deviation, skewness, kurtosis) available for analysis. This enables the student analyst to go well beyond the one-variable-at-a-time "what if" point estimate analysis typically used in planning studies and to realize the benefits of having developed probabilistic distributions of the variables under study.
Swedish University of Agricultural Sciences
S-750 07 Uppsala
The purpose of this paper is to provide an alternative framework for analyzing and understanding the process of change in new enterprises emerging from farmers who have diversified their original farm business. The theoretical problem dealt with is based on the observation that farmers who diversify into entirely new enterprises are faced with a very specific managerial situation: New enterprises are both new and different in the sense that they are established from within a traditional business logic (agriculture) and at the same time moving towards completely new areas of business where this logic may be seriously challenged. This is not the standard case of a new business being born. Instead, farmers enter into their new enterprise with a significant set of preconceptions grown out of their experiences from agriculture. Nor is it the standard case of a diversification scheme as described in strategic management theory. The case of farm diversification seems to fall between two chairs and deserves closer attention.
The emphasis of this work is to view the creation of a new enterprise as a process where ideas and skills develop over time. In order to understand this process, case studies have been used. Here, farmers have been interviewed about the course of events of their new enterprise. A set of nine interviews were conducted during the summer of 1991. A second set of interviews has been initiated during 1994. The sample was chosen for convenience rather than representativeness. After the interviews, farmers received a printed SUMMARY of the interview. The interviews took about 2-4 hours to conduct. Interviews from the first set have not been recorded on tape. Data has been analyzed in three steps; within case analysis, cross case analysis and comparison of findings with existing theory.
Major Findings Empirical observations show that the family's desire to stay in control of the business is seriously challenged by their own success. Some families have reached a stage where they must do something about their organizational structure and management routines. At the same time, they show great reluctancy to take action in terms of hiring a manager. Instead, they are thinking about scaling down their operation as a way to staff employees without the intervention of hired managers. Both kinds are illustrated in the empirical part of the paper.
Thus, depending heavily on family in the organization of management may not be without its problems. If every one in the family manage to walk in the same direction, they become an extremely efficient unit able to handle complex management tasks. Once the family can no longer deal with this complexity, frustration grows and the management structure falls apart. They begin to think about selling off parts of the business.
These observations indicate that business size depends upon the managerial competence of the family. As long as the family can handle the management tasks, growth per se poses a limited problem. When family cannot handle the management tasks, managers refrain from growing in terms of annual sales and number of employees. Instead, other dimensions of change emerge, e.g. changing the product line and the concept of one's business.
One implication from the empirical observations is that instead of defining a business by its number of employees and talking about small and large businesses, an attempt is made to define businesses by focusing upon differences in the organization of management, see figure 1. Here, a business is defined according to its management structure rather than its size. Management can be structured in three different ways;
(a) Ad hoc operations as in the synthetic organization.
(b) Within the family.
(c) Professionally through a board of directors.
Synthetic organizations lack an organized management structure entirely. Family operated businesses are managed from within a closed family structure and lack a formal board of directors. The basic idea here is that the organization of management tells us more about what kind of action we can expect from a certain business than does the distinction between small and large businesses. This framework is further developed in the theoretical part of the paper.
Figure 1 Describing the characteristics of the family operated business by using two contrasting perspectives based on distinct differences in the organization of management.
John F.S. Bunch
Department of Management
Kansas State University
Manhattan, KS 66506
To the extent possible in this rapidly evolving field, the bulletin boards and on-line discussion groups specifically designed to provide support and information to entrepreneurs were surveyed. The paper presents a general description of each board or discussion group identified, the level and type of activity on each board, general user characteristics, and access protocols. In addition samples of messages from a subset of seven such boards were collected and analyzed. The investigation focused on the following questions: What type of information is posted to each system? What questions are most frequently asked? And what is the quality of the responses to requests for information?
A literature review was conducted focusing on the topics of computer mediated communication, entrepreneurial support networks, and entrepreneur's use of information technology. On-line data bases were also searched for references to on-line discussion groups and BBS sources with a focus on entrepreneurship, small business, or economic development. For each of seven networks (DELPHI, THE WELL, FIDONET, AMERICAN ONLINE, MISC. ENTREPRENEURS, SBA ONLINE, and GENIE) samples of messages posted from two week periods during January or February were collected (one two week period for each board). The message topics from this data set were categorized and the messages content analyzed. The content information requested, the quality of the responses, and the attitudes, opinions, and important issues revealed therein.
This is the first study concerning how entrepreneurs are using a new information resource, namely electronic bulletin boards, to network and acquire information concerning the development and management of new business ventures. The analysis suggests ways that on-line resources can be used to facilitate both entrepreneurship education and research. The research also provides a summary of the available network resources useful to practitioners wanting to begin accessing these systems.
James W. Carland
Jo Ann C. Carland
Western Carolina University
College of Business
Cullowhee, NC 28723
University of Texas at El Paso
College of Business Administration
El Paso, TX 79968-0545
There has been a great deal of research on personality traits of entrepreneurs, but many researchers have expressed dissatisfaction with trait research because it fails to properly address the process issues of entrepreneurship: the creative act of starting the venture. This paper will focus on the act of entrepreneurship: the process of venture creation, management and growth.
Maslow's hierarchy of needs suggests that individuals advance from basic needs like food, shelter and comfort, to higher levels including social acceptance, self esteem and self actualization. The authors posit that entrepreneurial activity can become a lens for advancement through that hierarchy of needs; it can provide the financial means to achieve basic needs, but it can also provide a vehicle by which an individual can obtain social acceptance and self esteem; and even advance toward realizing self actualization.
The authors prepared a survey instrument which examined the strength of the entrepreneurial drive and investigated the perspective which entrepreneurs have of their creations. The perspective was measured in terms of the Maslow hierarchy by examining the role of the business in each individual's pursuit of basic needs, social acceptance, self esteem and self actualization. The survey was administered to 156 business owners. A correlation of the entrepreneurship index which measured the strength of the entrepreneurial drive and the four Maslow scales displayed a statistically significant relationship between the entrepreneurship index and role of the business in achieving self esteem and self actualization.
If the findings are sustained by future research, this research has the potential to lead to the establishment of a model of entrepreneurship which effectively links the role of individual initiative to the process of venture creation, management and growth. The results could end the debate between trait researchers and process researchers by providing a concrete and measurable link between the two. The results could explain the diversity of behavior which is observed among entrepreneurs and provide a vehicle for the more successful support and understanding of entrepreneurship in its various manifestations.
This research suggests that entrepreneurs initiate ventures, institute management processes and growth strategies, in direct proportion to the strength of their entrepreneurial drive. This relationship derives its power from the propensity of more highly driven entrepreneurs to view their businesses as vehicles for achieving self esteem and self actualization. Entrepreneurs with lower levels of drive are more apt to view life outside their businesses as vehicles for self esteem and self actualization, thereby relegating their businesses to a less important role in their lives.
2083 Lawrenceville Road
Lawrenceville, NJ 08648
Candida G. Brush
Department of Management
Boston, MA 02215
This study seeks to identify the linkages between environments, competitive strategies, and financial performance among independent non-high tech new ventures. Further, it seeks to compare and contrast the relationships between U.S. and Canadian new ventures. Two dimensions of perceived environment were examined: 1. intensity of competition faced in the firm's principal markets, and 2. industry growth or the rate of growth in market sales. Four types of competitive strategies were included: 1. low-cost emphasis which refers to achieving competitive costs and prices relative to rivals, 2. quality emphasis which seeks superiority over rivals on product quality, customer service, and image, 3. know-how emphasis, in which firms use proprietary methods pertaining to products or operations, and 4. focus strategy where the firm primarily sells locally and directly to customers. Two measures of performance were used: 1. profitability in return on assets, and 2. annual sales in dollars. All variables were assessed through self-reports of owner-CEO's of ventures.
Data in Canada was gathered by mailing a structured questionnaire to all of the 1200 small independent manufacturing firms in the province of Saskatchewan. Ninety nine among the 192 responding firms were new ventures. The U.S. sample consisted of 235 small businesses in Mercer County, New Jersey, whose owner-managers were interviewed in person with a structured questionnaire. Hundred and one of these were new ventures, with 28 being in manufacturing, and the remainder in retail and services. Canadian and U.S. new ventures showed non-significant differences in age and employment size, but Canadian new ventures had significantly lower sales and profits. ANCOVA and regression analysis were used to analysis were used to analyze the relationships.
U.S. new ventures experienced significantly more intense competition and their industry growth was significantly lower relative to Canadian new ventures. ANCOVAs controlling for firm age and employment size showed that U.S., compared to Canadian new ventures, placed significantly greater emphasis on focus strategy and their quality orientation was marginally higher. But differences were non-significant on know-how and low-cost strategies. Regressions for competitive strategies on environment, produced one significant result: competitive intensity positively influenced the choice of focus strategy. Variations in annual sales were analyzed controlling for firm age, employment, industry sector, and U.S. versus Canadian origin. Low-cost strategy was significantly and positively related to sales. Surprisingly, industry growth showed a significant negative effect on sales as well. Further, both growth and competition significantly modified the influence of strategy on sales performance. Industry growth interacted positively with know-how strategy, while competitive intensity interacted positively with cost leadership. U.S. versus Canadian origin did not have a significant impact on sales, either directly or as a modified for strategy. ROA variations were explained by different variables.
In this two country sample, Canadian new ventures operated in a more favorable environment with significantly higher industry growth and limited competition. While operating in less favorable environments, the New Jersey ventures still produced higher sales on average, evidently because the overall market size was larger in this state. Industry growth impacted sales negatively after controlling for the Canadian versus U.S. origin of the new ventures, indicating these new ventures could achieve high sales in spite of slow growth. Cost and price competitiveness helped sales performance overall. Further, different strategies helped sales under different competitive and growth conditions. High growth markets called for products with proprietary features, while firms in less competitive markets produced high sales by using low-cost strategy. But when operating in slow growth markets firms were hurt by proprietary types of products, very likely because this meant non-competitive costs and prices. New ventures facing limited competition did well competing on cost and price. Given the high growth and less competitive markets, Canadian new ventures prospered by the combination of cost competitiveness and proprietary features in products and services, while the more competitive and slower growth markets of the US new ventures called for simpler products as well as avoidance of outright price-and-cost competition.
Gaylen N. Chandler
Steven H. Hanks
Glenn M. McEvoy
Utah State University
Logan, Utah 84322-3555
A great deal of prescriptive research suggests that companies can achieve competitive advantage through focused improvements in core processes, implementing lean, just-in-time philosophies and systems, eliminating waste, and achieving zero defects, while continuously improving products and costs. In a sense, the emphasis on excellence in manufacturing flies in the face of Porter's (1980) approach to generic strategies that suggests that firms stuck in the middle may not perform as well as firms with one specific generic strategy. On the other hand, significant evidence suggests that those firms that perform best often pursue mixed strategies (Hill, 1988; Jones & Butler, 1988). In fact, the "world-class" approach to manufacturing by definition requires that world class manufacturers seek for the highest quality at the lowest cost (Robinson and Pearce, 1988).
This research investigates the implementation of "world-class" manufacturing procedures in emerging and more well established small firms. The purpose of this research is to seek to evaluate the correlation between compliance with "world-class" manufacturing principles and the survival and performance of emerging manufacturing firms. Is the application of such principles appropriate for emerging firms? Do the firms that most closely comply with these criteria perform better than non-complying firms?
The sample for the study comprises 99 small to medium sized manufacturing firms located in Utah in a variety of industries. The median age is 15 years and the median number of employees in 76. Sales range from $100,000.00 to $150,000.00. Data were gathered using a survey instrument modeled after the criteria used for awarding the Shingo Prize for Excellence in manufacturing. According to Fox (1993), the Shingo Prize does a better job than the more readily recognized Baldridge award, or ISO 9000 certification in identifying companies as productivity, and customer satisfaction.
Twenty two Shingo prize criteria factored into three measures of world class manufacturing:
(1) Focus on productivity improvement.
(2) Focus on waste elimination.
(3) Focus on customer satisfaction.
Respondents were asked to rate their emphasis on the development of procedures and measure that would focus on and document their use of world-class manufacturing practices. We then controlled for firm age and size to see it there were remaining relationships between our measures of "world-class" manufacturing and firm performance. Firm performance was measured by thirteen items that factored into four measures: (1) earnings
(4) response time/flexibility.
We then used moderated regression to look for relationships between the development of "world-class" systems and performance after controlling for the age and size of the firm.
Looking at bivariate correlations, firms espousing world-class manufacturing principles had higher levels of earnings and business volume. However, after controlling for business age and size there were no remaining significant relationships. This suggests that the development of formalized "world-class" procedures is largely a function of the age and size of the business. Our current data does not allow us to determine whether smaller companies compete by following principles informally or whether the niches they choose allow them to compete without gaining higher levels of productivity and quality.
Our data does not support the commonly held belief that companies espousing "world-class" manufacturing procedures perform better. On the other hand, we have not controlled for a number of industry factors. Anecdotal evidence suggests that some industries require the adoption of such policies and procedures, yet in others, firms remain competitive in spite of their defects and inventories. Clearly, additional research, perhaps of a case study nature, needs to be done to better understand the relationship between "world-class", lean manufacturing procedures and the eventual performance of the firm.
Marlow A. Christensen
Center for Entrepreneurship
Marriott School of Management
Brigham Young University
Provo, UT 84602-3009
The research on which this paper is based focused on eliciting and gathering feedback from teachers at the high school, community college, and university levels who are involved in enterprise education in Canada. The feedback which is relevant to the topic 'the influence of research on teaching in entrepreneurship and vice versa' is presented in this paper. In particular feedback concerning the following topics are reported: personal teaching objectives, useful teaching methods, elements of a successful enterprise class, major roadblocks that keep enterprise education from being more widely spread and better received, and finally, suggestions to better promote entrepreneurship education.
A nation-wide random sample of teachers of entrepreneurship at the high school, community college, and university levels were given a structured interview consisting of open-ended questions, over the telephone. To increase the likelihood of participation, the respondents called a toll-free 1-800 telephone number to be interviewed. The results of the interviews were entered into a data base for subsequent analysis. In total 196 interviews were entered into the data base. Of the 196 interviews, 49 were with university professors, 59 were with community college instructors, 71 were with high school teachers and 17 were not classified. The responses to the open-ended questions were grouped into themes and the frequency of these themes is reported and analyzed.
Major Findings & Implications
There is a difference in personal teaching objectives between the three levels of teachers. For the high school teachers the primary focus is on imparting an entrepreneurial perspective to the students. For the community college instructors the focus is equally split between imparting the entrepreneurial perspective and helping students to start their own business. For the university professors the focus is on delineating the start-up process and identifying common problems associated with the process. IMPLICATION: Teachers will respond differently to the three types of materials, the how-to, the theoretical, and the entrepreneurial-perspective. In the past the authors of textbooks have tried to incorporate all three into one. Perhaps the material would be more useable for teachers if these three purposes were focused on separately.
Regarding the most useful teaching method the overall favorite is guest speakers followed by case study. The use of lecturing, appears to be controversial, with as many educators being for it as against it. The community college teachers were almost alone in their use of the seminar/workshop style of instruction. Overall, the distribution of the various methods was surprisingly random. Some of the other methods identified as being useful were: exercises, projects, role playing, simulations, work experience, field studies, group work, and peer teaching and peer evaluation. IMPLICATION: It appears as though most entrepreneurial teachers have the freedom to attempt methods of instruction beyond the traditional lecture format. The great variety of methods suggest that there is no one best way to teach and that the choice of teaching method is more a function of the teacher him or herself and not a function of their education level. Thus, helping teachers to establish what teaching method works best for them would be a useful direction of study. Also, greater awareness of the teaching methods used by others might promote increased diversity and more entrepreneurial teaching among the teachers. This sharing should not be done on the basis of teaching level; high school teachers can learn from the influence equally the university professor and community college instructor.
In terms of the elements of successful class or course in entrepreneurship the variety of comments was great. So great that they could only be reliably categorized into the following groups: How to teach (n=139), What to teach (n=113), Teacher attributes (n=56), Resources (n=45), and Student attributes (n=35). 'How to teach' is a focus for the community college and the university teachers. For the high school teachers the difference in the focus of 'how to teach' versus 'what to teach' seems to be a function of the provincially set curriculum. In the east there is a definite focus on 'what to teach', while in the west there is a definite focus on 'how to teach.' IMPLICATIONS: It is significant that overall 'how the course' was taught is mentioned more frequently than 'what is taught'! Given the nature of the subject, and what has been theorized by entrepreneurship educators this is encouraging. It shows that the teachers recognize that entrepreneurship is not a subject, so much as it is an experience, or a process. However, this recognition is not universal. In particular high school teachers are not focusing on how to teach. Why is this? While there is consensus among the community college instructors and university professors that 'how to teach' is very important there is no consensus about the actual method. Likewise there is no consensus about what to teach to create or support entrepreneurial behavior. This issue needs to be resolved. These results suggest that a good starting place would be investigate whether 'how' entrepreneurship is taught has more impact than 'what' is taught.
The teachers were asked what they considered to be the major roadblocks that keep entrepreneurship education from being more widely spread and better received. Several issues were brought up in connection with this question. Overall it was found that the two biggest roadblocks were a lack of awareness about the subject (n=60) and traditionalist/non-progressive administrators (n=56). Lack of awareness refers to the low recognition and understanding of the word entrepreneur or entrepreneurship. This is a bigger issue for the high schools. The comment was made that students won't choose a course that they can't understand - let alone pronounce. The roadblock created by traditionalist administrators was not an issue at the community colleges. It seems that they recognized that this type of education is a money maker for them. In contrast, this type of administrator is a major problem to half of the high school teachers and university professors. Another significant roadblock for the high school teachers is that the best students are guided very forcefully into the academic stream, a stream which makes it almost impossible for students to take entrepreneurship courses because of the large number of academic credits the students need to get into university. Many teachers referred to this phenomena as "the credit crunch." IMPLICATION:
1) The word entrepreneur has a marketing problem - low word recognition. Is there some other word that could be used?
2) There seems to be significant political problems associated with getting support for entrepreneurship from administrators.
In spite of what the politicians are saying about the importance of entrepreneurship, the individual school administrators , the principals and department chairs, do not appear to be convinced. These administrators are dictators within their sphere, and can be a significant constraint. They must be brought on-side for entrepreneurship education to flourish in the high schools and universities. The reasons for the bureaucrats seeming reluctance would be a useful, but difficult, area of research.
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