Frontiers of Entrepreneurship Research 1994

Frontiers of Entrepreneurship Research
1994 Edition

1994 Summaries and Abstracts (N-R by Author)

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    Juha M. Nasi
    Salme Nasi

    Department of Economics and Management
    University of Jyvaskyla
    Jyvaskyla, Finland

    McRae C. Banks

    School of Business Administration
    University of Tampere
    Tampere, Finland

    Michael D. Ensley

    Department of Management
    P.O. Drawer MG
    Mississippi State, MS 39762



    Principal Topics

    Two main topics are addressed in this study. First, we attempt to find if team driven firms tend to outperform firms that fail to utilize teams. Second, we attempt to come to some understanding of the varying use of teams given the dynamic nature of the firm's environments (s).


    Data from 200 Finnish firms were collected. Half of the firms were selected as high growth ventures. The other half were established firms with growth rates near "normal." Measures of performance were growth, profitability, and productivity. Growth was measured as a percentage of the previous year's sales. Profitability was measured in categorical ranges. Productivity was measured as sales and sales growth per employee. Team utilization was measured using Likert type scale in a questionnaire.

    Major Findings

    We found that high growth firms which utilized teams in the strategy and vision development process tended to outperform their non team counterparts. The team driven firms tended to be more profitable, have higher growth rates, and exhibit greater productivity. A surprising finding was that consensus had a negative impact on the performance of these same firms. The utilization of teams in those lower growth firms showed no impact on firm financial performance.


    The implications of this study are simple. First, teams tend to have a greater impact on the performance of the firms in which they are utilized if they are used in a more dynamic environment. Established firms would appear, from this study, not to benefit at all from the utilization and additional cost of a team.


    Brent D. Peterson
    W. Gibb Dyer, Jr.
    Rick C. Farr
    Marlow A. Christensen

    Center for Entrepreneurship
    Brigham Young University
    712 TNRB
    Provo, UT 84602-3009




    It is thought that if we can identify successful entrepreneurs, we can learn what it is that makes them such significant contributors to society. Once we know these things we can make an effort to teach them, or at least, promote them in society.

    While a great deal of work was been done in the area identifying the characteristics of entrepreneurs, the results have been equivocal. In contrast relatively little work has been conducted into the management practices of entrepreneurs. What little work has been done has focused on the life cycle of the business and the transition from founder management to 'professional management.' The bulk of this work amounts to theory building supported by selected cases.

    Recently, two articles have appeared which directly challenged the hypothesis generated by the organizational life cycle literature. Miller and Simmons (1992) examined the differences in Management Practices between founding and non-founding CEO's of human service organizations. After controlling for age, operating budget and number of employees, they found statistically significant differences between the two types of CEO in terms of:
    1) Span of control.
    2) Board size.
    3) Proportion of internal board members.
    4) Board involvement in long-term planning.
    They also found no significant differences between the frequency of employees reporting to the CEO, and the percent of oral communication which finding disproves the claims of Greiner (1972) and Quinn and Cameron (1983). In general, their results confirmed the predictions of Greiner (1972) and Tashakori (1980), that founders manage in ways that enable them to maintain more control over organizational affairs than do non-founders, i.e., they have a small span of control, et cetera. They conclude by suggesting that having shown differences in the management practices of the founders versus the non-founders, it is important to determine whether those differences have significant ramification of the organization.

    Willard, Krueger, and Feeser (1992) conducted a study of high-technology manufacturing firms taken for Inc. magazine's 100 fastest growing publicly held companies. They collected eleven different performance measures and found that only CEO equity was statistically significant. They conclude the article with an observation similar to Miller and Simmons, that is, they acknowledge that a more central question to ask would be "why do some founder-CEO firms perform well, while others stagnate, falter, of fail?"

    Research Question

    This exploratory research seeks to clarify issues which might prove significant in investigating entrepreneurship. In particular we ask what relationships exist between high and low performing companies and between founders and non-founders relative to management practices.


    In order to control for variance that might be a function of a particular industry, this research will focus exclusively on emerging high-technology companies. The sample was drawn from clients of the Utah Technology Finance Corporation; a state funded organization which currently provides seed capital to over 100 high technology companies operating in Utah. The study utilized multiple perspective or '360 Degree' feedback strategy. The companies were sent two versions of a management practices survey. The Principal's version was filled out by the CEO and the Associate's version was completed by up to five people who report directly to the CEO. The instrument was a 60-item self-report inventory of management practices that were answered using a 6-point Likert scale. The Principal's version was a self-report, while the associate's version asked the direct reports to assess the CEO's management practices using the same items. While we focus on management practices in general, most of the inventory items have to do with managing interpersonal relationships that exist within a business.

    Data Analysis

    The bulk of the analysis will conducted using MANOVA. In particular, discriminant analysis will be used to determine the management practices which best discriminate between the founders and the non-founders after controlling for performance, age of the company, board composition, et cetera. Univariate ANOVA and correlations will also be reported.


    If it can be shown that the management practices of founder-managers are significantly different than the practices of non-founder managers and correlate more highly with success then there are two significant implications for educators. The first is that existing programs that teach "big-business" management practices and skill to entrepreneurs, might be teaching the wrong things, and might need to be revamped. The second is that "Entrepreneurial Management" is a paradigm in its own right and deserves to be better understood. Perhaps, it is not the individual characteristics of entrepreneurs, but their social characteristics, which make them valuable contributors to our economy and society.


    This research is another step in the direction of legitimizing entrepreneurship as a field of academic study. The management practices identified in this study will, hopefully, be a point of departure for more meaningful and practical education and research in the field of entrepreneurship.


    Phillip H. Phan
    John E. Butler

    York University
    Faculty of Administrative Studies
    4700 Keele Street
    North York, ON M3J 1P3



    Principal Topics

    The performances of 160 entrepreneur-franchisees in the truck retailing industry were measured to determine if franchisees' attempts at resisting the business strategy imposed by franchisors had a significant impact. The model suggests that franchisors will systematically try to influence the strategy of franchisees toward that of maximizing sales. However, franchisees would prefer a strategy that maximizes profits, which may include minimizing franchise royalties paid on sales. While formal franchise contacts delineate the responsibilities and duties of both franchisor and franchisee, they cannot dictate how the franchisee will execute its strategy. A moral hazard problem exists because franchisors will invariably be limited to the rate of return set of the contract. Extra-normal returns are skimmed off by the franchisee. To combat this, we hypothesize that franchisors use a variety of non-contractual approaches to influence franchisee strategies, which may include regular site visits, daily telephone calls, periodic network-wide conferences, training programs and so on. We expect to find that franchisees actively participating and reciprocating in such activities will express a strategy advantageous to the franchisors' rate of return but not their own. The opposite occurs in cases where the entrepreneur-franchisee resists these attempts at suasion.


    A random sample of 700 truck retailing franchisees, representing two of North America's largest truck manufacturers, were surveyed. 160 surveys were returned, which represented a 23% response rate. Tests for non-response biases in terms of geographic location, size and manufacturer suggested no biases. Strategy was measured on 5 dimensions using a Likert scale. Operational Strategy was measured on 15 items using a Likert scale. Franchisor suasion tactics was measured on 10 items, again using a Likert scale. Performance was measured using franchisee profits and sales. The hypotheses were tested using moderator regression.

    Major Findings

    At least 30% of the variance was explained by our model. Initial findings suggest that strategies to increase sales were not congruent with profit maximization. In the matured truck retailing industry, the only way to increase sales was often at the expense of margins. There was some evidence that franchisors' attempts at suasion led to lower profits for the franchisee, but higher sales growth. The evidence suggests that franchisors do not do as good a job at increasing sales as they do at lowering profits.


    Entrepreneur-franchisees benefit from the learning and experience provided by the franchisor. However, it is clear that non-contractual contact between the parties go beyond the provision of information and advise. Franchisors cannot be expected to do less than attempt to maximize returns on their franchise contracts. Franchisees who are cognizant of this will do well to follow a strategy that they have determined to be best for the company -- often, this will be easier if the strategy is set out in a formal document such as a business plan.


    Courtney Price

    Institute of Entrepreneurship
    Metropolitan State College of Denver
    P.O. Box 173362
    Denver, CO 80217-3362


    Kathleen R. Allen

    Entrepreneur Program
    School of Business Administration
    BRI 6
    University of Southern California
    Los Angeles, CA 90089-1421



    Stuart Monroe

    Information Systems
    Metropolitan State College of Denver
    P.O. Box 173362
    Denver, CO 80217-3362



    Principal Topics

    Recognition of the value of acquiring entrepreneurial skills in the 90s can be seen in the number of new start-ups and in the tremendous proliferation of courses, workshops and programs at the university level, the community college level, in secondary schools and in community-based entrepreneurial training programs across the country. However, most of these programs have not tracked their students over time to determine the impact and success rate of their programs. One notable exception is the Premier FastTrac entrepreneurial training programs established in 1986 which, through longitudinal studies of participants in Colorado, was able to conclude that business owners who completed the program were significantly more successful than those who had not taken the course. The FastTrac II training program provides a 45 hour training course to help participants launch new businesses and expand their size and stability.

    The current study is a new study using a new database that consists of all participants in FastTrac programs in four states to initially study the effects of geographical and socio-economic differences on results achieved by participants and ultimately determine success rates in terms of growth in sales and number of full-time employees.


    The source of data for the study was the FastTrac participants in programs located in California, Missouri, Kansas and New York. These sites comprised a sample size of 161. Questionnaires consisted of comprehensive data collection questions given to participants when they finished the program. The questionnaires collected demographic information and established a baseline for following these regional participants over time to ascertain the effect of the entrepreneurial training. A control group had previously been established. It consisted of the Denver participants during the period 1987-92, and measured their business performance prior to undertaking the FastTrac training.

    While a previous study (Price & Monroe, 1993) focused on training of women and minorities, the current study for the first time examines the makeup of participants in various regions of the country with the goal of determining if the program in its current state can be replicated across varying geographic and socio-economic groups.

    The respondents in this study varied in terms of ethnicity across regions, with 86 percent being white in the Kansas/Missouri group; 26 percent white (67% black) in the California groups, and 18 percent white (63% black) in the New York group. Asians and Hispanics did not have a strong presence in any of the three groups (2-3%). The 1993 study displayed a much higher percentage of Hispanics (22%). This may be attributed to the fact that in previous FastTrac programs the emphasis was on recruiting women and minority participants. The current group of FT participants is not ethnically defined.

    Males dominated the Kansas/Missouri and New York groups, while females constituted the majority of participants in the California group and more closely paralleled the findings from the 1993 study. In all three regions, the majority of participants entered the program with existing businesses, although a small percentage had concepts for new start-ups.

    The average (and median) age of participants in the study was 41, which supports the Ulrich and Cross studies that found that older adults are more satisfied with non-traditional teaching methods and are motivated by the pragmatic and the need to apply a skill. The high incidence of black participants in FastTrac supports the Mann study regarding high response rates from blacks when courses were convenient, flexible, had a variety of written handouts and provided multiple opportunities for networking.

    Examination of the responses of the three regional groups to questions about their degree of satisfaction with the FastTrac program indicated that there was no difference in the level of satisfaction with the program across regions based on the value of the course and its various components, the level of creativity established, the degree of support, and the participants' desire to recommend the program. All the responses were uniformly positive. It can therefore be concluded that due to general consistency of responses across regions, the FastTrac program appears to be replicable successfully in its current form. The next phase of this study will look at the effects on training on diverse regional groups after a one year period. More specifically, we


    This long-term study has importance for both scholars and practitioners. Those who teach entrepreneurship, whether it be in the formal academic environment or a university or the pragmatic training environment of a community-based program, are continually seeking evidence that what they are teaching has a measurable impact on the behavior of entrepreneurs and their ventures' growth and performance. New programs also wish to determine if the curriculum and methodology employed in one geographic region or within one ethnic or socio-economic group can translate easily to another region of the country or a different demographic group. This study has indicated that replicability across geographic regions and ethnic/socio-economic groups is possible where you have a tested program with proven curriculum, specially designed materials, instructor certification and course evaluations.

    With consideration to the needs of practitioners, the results of the longitudinal study will also be a guide for potential entrepreneurs and small business owners who are looking for the most effective way to acquire the skills they need to successfully start and grow their businesses.


    Paul L. Reynolds
    John Day

    School of Business
    University of Huddersfield
    West Yorkshire HD1 3DH



    Principal Topics

    The discussion of a start up and growth model for the small business that purports that the firm has to face and overcome crisis periods and how this model could in general terms be operationalised for the benefit of small firms and their advisors. A review of a particular method based upon operational control techniques that both produces a forecast of a selected variable using an exponential smoothing forecasting technique and a tracking signal to monitor potential deviations from the preferred path.


    Initial validation of the original Cooper, Scott/Bruce growth model by casual empiricism on our small business training programmes; investigation of occurrence of crisis points for one particular industry - UK timber and joinery through a seventy company telephone interview accompanied by a secondary data analysis of 439 abbreviated company accounts published by ICC. For the tracking signal component the extension of existing cumulative probability tables for the smoothed error tracking signal and the development of four simulations based on the published accounts of local companies. The technique should be amenable to several types of financial and non financial data, at present we have limited ourselves to using monthly turnover both actual and adjusted for inflation. Our main criterion has been to see if the model can accurately predict and track this historical data and 'trip' as appropriate. The selection of companies was based upon them having a variable financial performance as measured by their published ICC Score - an index derived from several financial indicators.

    Major Findings

    That it is possible to identify crisis points in firms, or industry sectors, from either secondary data or interviews and that judgments can be made from the latter about managerial competence to handle the existing or next crisis phase. That Triggs Tracking Signal appears to offer a potential method of setting a tracking signal and 'trip' parameters.


    For small business advisors and others such as bank managers and consultants this can provide a 'management by exception' tool that allows them to concentrate effort only on those firms that actually need help. This should allow them to achieve a more efficient targeting of their scarce managerial resources. For the businesses themselves a method to forecast and control their business that is economical in both its data and computing requirements. Hence it is a method that they might be prepared to experiment with and use.


    Mark P. Rice
    John Wilkinson
    Phillip G. Wickham

    Center for Entrepreneurship of New Technological Ventures
    Lally Management Center
    Rensselaer Polytechnic Institute
    Troy, NY 12180



    Principal Topics

    With the continued rapid expansion of the business incubation industry, institutional sponsors, economic development officials and other stakeholders increasingly seek some means of judging the effectiveness of business incubators in supporting the startup, survival and growth of new ventures.


    From September through December 1991 a survey instrument was completed by sixty respondents out of the eighty-three ventures that have participated in the Rensselaer Incubator Program since it's inception 1980. Forty-four records were usable for testing models with regression analysis techniques. Information was gathered on the performance of the companies, their participation in the intervention activities of the incubator, and the assessment of the participating entrepreneurs of the value of those intervention activities to development of their companies.

    Major Findings

    All models tested were highly influenced by outlier, as expected, and no useful models emerged that would link financial performance of the incubator companies while they are in the incubator with the value of incubator manager intervention as perceived by the entrepreneurs, based on this data set and these variables. In fact the dominant mode of operation for forty out of the forty-four cases could be characterized as survival. Although regression techniques produced useful insights into the process of business incubation and into the nature of companies that participate in business incubation programs.

    1. Characteristics of Outliers

    The four outlier cases were among the five cases that rated most highly the value of counseling and network assistance provided by the incubator. Three of the four outliers are among the fourteen companies out of eighty-three who have achieved annual revenues in excess of $1 million. The fourth exited when technological advances in the general market for computer peripheral devices bypassed his product.

    2. Characteristics of the Remaining Forty Cases

    Twenty-two of the forty remaining cases are still in the incubator. The highest annual revenues achieved by any of the forty while in the incubator has been $550,000. In fact only eleven of the forty have achieved annual revenues while in the incubator in excess of $250,000. While in the incubator, these have been very small businesses. Approximately half of the cases recorded assistance points of less than 10% of the total possible score, an indication of limited participation in the counseling and networking capacities of the incubator.

    3. Survival Rate

    Of the eighty-three companies that have participated in the incubator program since its inception, the current status is known for seventy-eight.

    Therefore, the survival rate for companies founded over five years ago is between 77% and 82%, which compares favorably with the 50% average survival rate for new ventures five years after founding cited in the literature review. (Campbell, 1988, p. 6; Birch, 1987, p. 18)



    4. Success Rate

    Thirteen of the eighty-three companies have achieved annual revenues between $1 million and $10 million, and eleven of the thirteen are still in business. One of the eighty-three companies achieved revenues of approximately $25 million before merging with a larger company.


    5. Time to breakout (Breakout is defined as achieving annual revenues>$1 million)

    Of the fourteen firms that have broken out of the pack to achieve annual revenues in excess of $1 million, only three accomplished that feat in less than five years. None of the eighty-three incubator companies has yet achieved a level of success that would be considered adequate by a venture capitalist. However, one of the fourteen discussed above has recently received a $7 million equity investment from a major investment banking house and appears to be firmly ion the fast track at this point, although it took nine years to achieve breakout.


    Appropriate segmentation of incubator companies is important for both (1) the researcher attempting to evaluate the performance of incubators and their companies, and (2) the incubator managers who must make decisions regarding resource allocation. Both the sponsors and managers of business incubators need to establish realistic expectations regarding survival and success rates and the long time periods required for the maturation of "rookie" entrepreneurs and their ventures. This study indicates that incubators can have a favorable impact on survival rates for incubator firms compared with survival rates of firms in the general population of startups.



    Victor L. Rosenberg
    Richard James

    Northeastern University
    Hayden Hall
    Boston, MA 02115


    Principal Topics

    There is increasing concern over the practical value of management scholarship in general and entrepreneurship scholarship in particular. Research to improve the practical value (relevance or applicability) of scholarship is impeded by lack of an accepted framework clearly linking research standards to practitioner problems. This study is the third stage of continuing delphi research which uses traditional frameworks to contrast the scholarship that entrepreneurship scholars assert as practical or applicable with the logic these scholars' use to analyze practical problems, and examines how the frameworks help understand the accuracy or value of such logic and scholarship. The delphi format then allows us to examine scholars' receptivity to the future use of such frameworks to focus the practical value of future scholarship.


    Delphi method is a recursive method which combines theory creation, theory testing, and acceptability testing by mixing induction, contrast, and community critique. Respondents in this delphi were alternatively:
    1) Asked general questions about scholarship application.
    2) Asked to apply the scholarship in specific analysis.
    3) Asked specific questions about their approach to scholarship and application.
    4) Given an opportunity to see how their answers were interpreted, change these answers, and/or suggest better interpretation.

    The first two stages (Rosenberg & James, 1993) used one-hour, focused interviews with 50 entrepreneurship scholars to obtain perceptions on the nature of applicability and on particularly applicable scholarship. The same interviews asked respondents to solve specific practical problems and display their logic-in-use. In these interviews, respondents disagreed about abstract issues regarding the meaning and value of applicability as well as causes of non-applicable scholarship. They agreed over the choices of particularly applicable scholarship, yet differed widely in their descriptions of these common entrepreneurship theories. Differences in abstract answers and understanding of common theories did not effect analysis of specific problems, largely because few respondents used any theory to develop their analysis, and most of those who did limited their analysis to very general phenomena (the few who used specific theory produced the best analysis). In scholarship choice and use, respondents focused more on description than prescription or causality. Descriptions reflected common assumptions about entrepreneurial behavior, timing and motivation.

    In general delphi provides respondents with analysis of prior interviews to create informed response and this current delphi stage measures the level of agreement with the earlier open ended responses. This stage uses a 9 point scale to measure agreement with statements that include: definitions of applicability and of entrepreneurship, applicability of different types of research, practitioner reception to scholarship, transience of entrepreneurship problems, and the value two traditional frameworks for relating scholarship to application. Of the original 51 respondents, 37 participated in this stage.

    Major Findings

    The findings of this stage cover two areas:
    1) Respondent interpretation of the methodological assumptions which support applicable research.
    2) Respondent evaluation of three frameworks which focus the applicability of research.
    On the first subject, respondent scholars consistency and explicitly ignore applicability as a research design issue. They accept applicability as important, but do not consider it tied to research design issues. On the second subject, respondent scholars assume that poor research applicability is explained by problems in field definition, yet the study found minimal correlation between respondents' field definition and their assumptions, analytic method, or choice of good scholarship. Despite their intrinsic assumptions, respondents recognize the two traditional philosophic frameworks offered by the authors as clear and as highlighting problems between research method and applicability.

    Although 93% felt applicability was a research goal and 86% felt it could be judged, only 23% felt that there was an explicit way to make this judgment. Without an explicit test of applicability, respondents focused their complaints on other aspects of scholarship such as field definition, scope of subject, statistical validity, accuracy, or common-sense acceptability. Strong segments assume research must be applicable if academics reference it (29%), or follows a quality method (15%). Some even felt that all research is applicable by definition (7%). While scholars reject the need to explicitly link scholarship to applicability, they view our subject and audience (i.e., entrepreneurs), as so focused on this link that they are dangerously indifferent to other aspects of quality. Over 33% of respondents felt that entrepreneurs are not capable of learning from research.

    While this study found strong respondent belief that applicability of entrepreneurship scholarship is dependent on how scholars define entrepreneurship, the study discredits the belief. In this and prior stages respondents' definitions were concerned with:
    1) New starts of self employment (32% of respondents),
    2) The process of business or organizational innovation, whether in existing firms or new ones (48%), and 3) economic wealth generation rather than entrepreneurs, but presuming that this wealth creation is enhanced by certain practices which others call entrepreneurial (20%). In this and prior stages, definition seldom effected other responses.

    Although respondents began by asserting applicability is either not a priority of research method, or else not amenable to improved method, they support two traditional frameworks for evaluating this issue as clear and their implications as credible and significant. Mapping respondent's analysis according to Churchman's classification of analytic method - empirical theory, formal theory, contextual analysis, and metaphor - shows that respondents' apply metaphor and context over formal and empirical theory. Mapping these same responses into Aristotle's classification - concern for formal, final, material or efficient cause - shows respondents as abstractly concerned over formal cause, analytically informed about material cause, concerned but vague about final cause, and unconcerned about efficient cause. Respondent's considered the avoidance of theory and the lack of interest in efficient cause as a legitimate but manageable problem.

    Respondents chose empirical and formal theory as the most productive forms of analytic method, yet strong segments chose contextual analysis (26%) and even metaphor (7%). When shown prior delphi results (respondents avoid theory in analysis, yet context analysis and metaphor failed to support productive analysis) only 13% felt the observation was too subjective and 22% felt the examples atypical. Most concluded either that we have a general discomfiture with the concept of theory (55%), a literature not usable in analysis (50%), or non-analytical scholars (57%).

    Respondents agree that our scholarship seldom addresses efficient cause (the feature which causes one person to act differently than another). They recognize this as lamentable, but presume that the deficiency is accidental and that it will be corrected once one becames aware.


    There is a general concern over the applicability of entrepreneurship scholarship, but that concern does not drive more applicable scholarship. Rather it is mitigated by a presumption that the problems of applicability are diverse and will take care of themselves if other scholarship problems are addressed first.

    While this study presumes practitioners should benefit from good scholarship, many respondents consider fellow academics as the proper audience for scholarship and thus value rich description or simple reduction. Respondents report the lack of practitioner use of scholarship as a problem with how we disseminate scholarship, a problem with the practitioners themselves, or often a problem with the professionalism of our peers. There is very little interest in applicability as a problem that methodology should address and, of all the methodology issues, respondents are most interested in defining the scope of entrepreneurship, an issue which is discussed as though the definition was a fact, rather than as a choice or as a means to focus research on problem solution.

    The respondent position that the problems of entrepreneurship scholarship stem from nature of our subject or from the membership of our community may not suggest an entrenched barrier to explicitly applicable research, but only that scholars have not considered the possibilities of directly linking scholarship and applicability in the design of our methodology. Many respondents express strong interest in the two schemes for categorizing analytic applicability (by analytic approach and by choice of causal interest) and feel that these schemes are valuable methods for inventorying our scholarship. Such external evaluation of research applicability would be required to increase applicability since there is clearly no intrinsic pressure to build applicability into entrepreneurship scholarship.

    The next stage of this study will survey the opinions of entrepreneurs as to what kind of research would be valuable to them and contrast the practitioner positions with the scholars positions.

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