Frontiers of Entrepreneurship Research 1994

Frontiers of Entrepreneurship Research
1994 Edition

1994 Summaries and Abstracts (S-Z by Author)

Navigational Aids

  • Frontiers of Entrepreneurship Research Topical Index
  • Babson-Kauffman Entrepreneurship Research Conference (BKERC)
  • Entrepreneurial Research at Babson College
  • Center for Entrepreneurial Studies Homepage

    Order hard copy editions of Frontiers of Entrepreneurship Research by mail



    Harry J. Sapienza
    M. Audrey Korsgaard

    College of Business Administration
    University of South Carolina
    Columbia, SC 29209




    Principal Topics

    This paper examined how entrepreneurs sustain or manage their relationships with investors. The purpose of the study was to determine whether the manner in which entrepreneurs share information with investors materially affects their relationships with investors. Drawing from the framework of procedural justice theory, we examined how the entrepreneurs' style of information sharing affects investors' propensity to monitor the entrepreneurs' decisions, the continued investment in the venture, and their attitudes toward the entrepreneurs. The main proposition of this study was that providing timely feedback on venture performance will promote a more trusting relationship between investors and entrepreneurs, even when investors have little control or influence over the venture. It was hypothesized that both feedback and influence result in greater investing in the venture, less monitoring of the entrepreneur, and more favorable attitudes toward the entrepreneur. It was further hypothesized that the negative impact that a lack of investor influence has on these outcomes is mitigated by timely feedback.


    Two factors were examined: the investor's influence over the entrepreneur's decision making, and the timeliness of venture feedback to the investor. Forty participants were drawn from four graduate professional programs (business administration, international business, human resource management, health management) at the University of South Carolina. Participants worked on a computer-based business simulation in which they served as investors managing a portfolio of four ventures. Each of these ventures represented a different condition (e.g., timely feedback/high influence, timely feedback/low influence, etc.), so that subjects were exposed to all four conditions simultaneously. The simulation, which was designed by the researchers and based on the extant literature on investor-investee relations, consisted of three blocks of five decision trials.

    Two investor behaviors were measured:
    (1) the amount of money invested in the venture after each block
    (2) the frequency with which investors monitored the ventures.

    In addition, the investors' perceptions of
    (3) fairness,
    (4) trust in the entrepreneur, and
    (5) commitment to venture decisions were measured.
    Results were analyzed in a series of repeated measures MANOVAs.

    Major Findings

    Investors were likely to investor more, monitor less, and have more favorable attitudes toward the entrepreneur when they received timely feedback than when they did not receive feedback. Investors also reported more favorable attitudes toward entrepreneurs when they influence the entrepreneurs' decision strategy than when they did not influence the entrepreneur. Surprisingly, investors' ability to influence entrepreneurs did not affect investing or monitoring. Feedback and influence interacted to affect investing and some attitudes. Analysis of the pattern of interactions suggested that influence had little or no effect on investing, trust, and commitment when investors received timely feedback. That is, investors were not concerned with direct influence when they received timely feedback on venture performance.


    The findings of this study suggest that, although investors value the ability to influence the venture, the way entrepreneurs share information may be a strong determinant of the quality of investor-entrepreneur relations. More importantly, the interaction findings suggest that the way entrepreneurs share information can improve the quality of their relationships with investors without compromising the entrepreneur's autonomy. This conclusion has important practical implications for the management of investor-investee relations, for it suggests that investors' desire for information and entrepreneurs' desire for control may be mutually achieved. Further, the results of this study contribute to scholarly understanding of the meaning of control and information sharing in the venture building process.


    Robert G. Schwartz

    Stetson School of Business,
    Mercer University,
    Atlanta, Georgia



    Richard D. Teach

    School of Management,
    Ivan Allen College,
    Georgia Institute of Technology,
    Atlanta, Georgia



    Fred A. Tarpley, Jr.

    School of Economics,
    Ivan College,
    Georgia Institute of Technology,
    Atlanta, Georgia


    Principal Topics

    Prior research has shown that an entrepreneur's initial concept of a new product opportunity becomes tempered by practical product development and by marketplace realities. As firms matured, there were changes in the overall strategic planning process, but the initial product orientation of the founders was still in evidence. In this study, business planning was primarily the result of a search for funds and not so much a result of a structured focus on sound management principles. This work explored technology based entrepreneurial firms and the changing nature of their product development and business planning processes. The focus group participants' comments regarding "success" and "entrepreneurship" are included.

    Method and Data Base

    The data reported resulted from four focus groups with twenty-six Atlanta based firms represented. Participants ranged from mature, publicly traded firms, to entrepreneurial start-ups (1-3 years old). The average age of the firms was approximately eight years. The participants wee officer/owners of technology based firms: software/hardware, biomedical, electronic equipment, and communications firms. All participants (CEOs, founders, and owners) considered themselves to be entrepreneurs and their firms to be entrepreneurial. The firms ranged in age from early start-ups to mature, fifteen year old firms. Firm size ranged from $100,000 to $200 million in sales.

    The participants were personally invited to attend a reception prior to the interviews. Approximately two-thirds of the participants were given a list of subject areas which would be covered in the focus groups. The remaining one-third were supplied the topic areas but not the specific questions. The topics included: New Product Development Strategic Marketing, Business Planning, Definitions of Business Success, Forecasting and Entrepreneurship.

    Major Findings

    Results were contrary to the "text book" approach to product development which recommends a highly structured process, e.g., first, Opportunity Identification, followed by Design, Testing and Introduction. Life-cycle management then becomes an on-going activity. While to a professor this result may be disconcerting, there was no clear evidence that a more structured process resulted in more successful products.

    While the firms evidenced a strong production orientation, there was significant emphasis on customer driven product development. This seeming paradox likely occurred because of poor internal communications, even in small firms. As one participant lamented, "It took us three years to recover from a technologist knowing that the product was going to be a success."

    The participating firms represented diverse segments of the high-technology industry. In this sample set, while the number of firms was small, there was a wide range in age (1 year to 15 years) and size ($100,000 to $200,000,000 in sales). Formal planning was found to be primarily confined to the search for capital, whether from venture or public sources.

    Success was not measured in revenue, profits, or in the increase in net worth of the firm, but in the firms' ability to develop quality new products. The entrepreneurs wanted their firms to be recognized as a dominant source of high quality products and services with attendant inelastic pricing.

    The entrepreneur was defined as "one who sees the future, moves to meet it, supplies the cash and takes the risk." Either financial reward was implicit in this definition or the entrepreneurs need for control overshadowed their need for financial reward. The latter interpretation was supported by other authors, who reported that non-economic goals were central in many new firm start-ups.

    Major Implications

    In the past, the authors reported that as high-tech firms matured, their primary focus was on their product offerings and not on the marketplace. The current results indicated a more pronounced marketing orientation. Thus, while it had been difficult to change a "Techie's" orientation, it appeared to be changing as they and their firms age. The implication is that the entrepreneur is learning from the process.

    Academic researchers should not overestimate the importance of formality in the planning process, nor underestimate the stochastic nature of success.

    The entrepreneur should not underestimate the value of a more formal planning process, nor overestimate the value of "smart persistence."

    Some technology based entrepreneurs saw their opportunity as technology driven, while others, as market driven. These strategies are not mutually exclusive. While either strategy alone is not sufficient for success, but both taken together are not necessary for success. But both strategies, taken together, appear to enhance success.


    Michael G. Scott
    Alistair R. Anderson

    University of Stirling
    Stirling FK9 4LA
    Scotland, UK

    44 (786) 467333

    44 (786) 450201

    Principal Topics

    This paper arises from continuing research into rural entrepreneurship in Scotland, and is a response to our search for ways of ordering and making sense of the diverse experiences of "entrepreneurs" whom we have studied. In searching for a common theme to explain this diversity, we have concluded that entrepreneurship is a socially defined phenomenon whose key characteristic is the extraction of value from an environment. The paper is in three parts: firstly, a brief exploration of the implications of dealing with phenomena that are socially constructed and defined, taking crime and leisure as parallel examples; secondly, an exploration of the processes by which values (variously defined) are extracted, manipulated, changed and exchanged; and finally, a description of illustrative cases drawn from qualitative field work.


    Using a grounded theory approach, the research is based on longitudinal case studies of entrepreneurs in a rural context (West Scotland). The research instrument is principally a semi-structured interview, supplemented by desk research on the economic and social context. Data analysis on the basis of a theoretical approach is presently incomplete, but has produced extensive evidence for the parameters discussed in the paper, i.e. value creation and extraction.

    The Findings

    The paper is a preliminary attempt to understand why certain actions are, in a taken-for-granted fashion, described as 'entrepreneurial', and what is the essence of such actions. This requires firstly an appreciation of the nature of 'socially defined' phenomena, which crucially depend for their interpretation on the context in which the action takes place. (For purposes of illustration, parallel examples are taken from the socially defined phenomena 'crime' and 'leisure'). Analysis of the cases suggests that actions typically described as entrepreneurial have as their essence the extraction of value from environments.

    The paper explores, by reference especially to the work of the social anthropologist Frederick Barth, the way in which 'value' is created, stored and transferred in societies. The importance of the 'niche' or resource environment is stressed. For Barth, the existence of different 'sheres of value' in a society given the opportunity for the extraction of value (profit) at the boundary interchange. The Scottish case studies we are working on provide rich date on the creation and transfer of value. A key concept for value creation in the rural environment is the process of commodification of the countryside, i.e. the creation of objects which can be sold at a profit.

    Finally, some short indicative extracts from the case studies are given to illustrate the main points of the paper's argument.


    Scott A. Shane

    Strategic Management
    Georgia Institute of Technology
    Atlanta, GA 30332-0520



    Principal Topics

    This paper examines the impact of individuals and institutions on research in entrepreneurship for the period since the Academy of Management accorded division status to entrepreneurship in 1987. It includes research in publications rated "appropriate," "significant," or "outstanding" quality as entrepreneurship research outlets by MacMillan's (1993) survey. Nineteen different publications, containing 378 entrepreneurship articles, were reviewed. Rankings adjusted and unadjusted for journal quality are presented.


    All 5044 non-invited, refereed articles and research notes in "appropriate, "significant," or "outstanding" quality entrepreneurship publication outlets were reviewed by three coders to determine if they constituted entrepreneurship research. The coders used the Academy of Management definition of entrepreneurship to make their evaluations. 98.04% of the articles were coded the same way by all coders. For the 1.96% of the articles for which there was a discrepancy, the articles were classified as entrepreneurship if that classification was made by 2 of the 3 coders. The resulting 378 articles and research notes constituted the population of noninvited, refereed research during the period.

    Individuals and institutions were ranked on the basis of their impact on this body of research. Rankings were based on total number of appearances, number of appearances adjusted for authorship, number of appearances weighted by journal quality, and number of appearances weighted by journal quality and adjusted for authorship.

    Major Findings

    On the measure of appearances weighted by journal quality and adjusted for authorship, the top five scholars were:
    (1) I. MacMillan,
    (2) J. Covin,
    (3) W. Bygrave,
    (4) S. Birley,
    (5) P. Reynolds.
    On the measure of number of appearances weighed by journal quality and adjusted for authorship, the top five institutions were:
    (1) University of Pennsylvania,
    (2) University of South Carolina,
    (3) Babson College,
    (4) Harvard University,
    (5) Purdue University. Spearman rank correlations indicated convergent validity between the measures.


    This paper provides an alternative to measurement of entrepreneurship programs through surveys of students and employers who focus on variables other than scholarly research in their evaluation of program quality. The paper also provides an alternative to subjective interpretations of individual external reviewers in the evaluation of the scholarly impact of individuals in promotion and tenure decisions.


    Stephen Spinelli, Jr.
    Babson College
    Babson Park, MA 02157



    Sue Birley

    The Management School
    Imperial College
    53 Princes Gate
    London SW7 2AZ

    44-71 589-5111

    44-71 876-8234

    Principal Topics

    A pilot study has been conducted, as a part of a larger research program, to analyze the fanchisor-franchisee relationship from the perspective of the franchisee. Grounded in Transaction-cost economics, we investigated franchisee and franchisee firm characteristics, relational goals, exit costs, and franchisor provided services. Our goal was to measure and rationalize franchisee satisfaction levels.


    Our pilot is concerned with one business format franchise, consisting of 177 franchisees, of which 52 franchisees responded. A five part questionnaire consisting of 81 variables was used. Cluster analysis and Chi-square Automatic Interaction Detector (CHAID) were employed to build a model of franchisee satisfaction levels. The dependent conflict variable (consisting of four questions) is a construct taken from the literature. The survey was endorsed by the franchisor.

    Major Findings

    Three distinct segments emerged from the cluster analysis and were validated by subjective rankings of the conflict construct scores, which we labeled satisfaction (59%), ambivalence (29%), and anger (14%). Further segmentation revealed statistically significant interaction between and among independent variables and with the conflict construct. Twelve levels of segmentation and sub-groupings are displayed in the form of tree diagrams to model the predictor value having the lowest probability value (p value < .05).


    Franchisors are well advised to manage the relationship with their franchisees on the basis of a number of levels, as modeled by the CHAID tree diagram. Informal and definable "tolerance zones" within the governance structures emerged. However, the long term implications are that after seven years in the franchise, franchisee satisfaction significantly declines. This may define the optimal term of the contract.


    Timothy M. Stearns
    Paul D. Reynolds

    College of Business Administration
    Marquette University
    Milwaukee, WI 53233



    Principal Topics

    New technology or high technology represents the products and processes that will become the basis of tomorrow's economy. Regions with a strong capacity to generate new or high technology industries -- represented by the emergence of new or high technology firms -- will be well positioned to compete in the future. new and high technology firms may : (1) Enhance the competitive posture of existing industries.
    (2) Attract and support a highly skilled labor force.
    (3) Provide significant direct economic benefits through substantial out-of-state exports.
    Several aspects of the process by which high technology firms achieve success are not well understood. There aspects include the incentives for establishing high technology firms in an area, the effect of the local context on the founding of high technology firms, and the extent of high technology firm contributions to local economies. These issues are analyzed and compared with low technology new firms.


    A 1993 random sample of over 500 new firms less than six years of age in the state of Wisconsin are studied. Over fifty of the firms are high technology. Information was obtained by questionnaire. High technology firms were determined by a set of questions that identify the extent to which the new firms develop, apply, or replicate high technology processes or products. Comparisons are made between high tech and low tech new firms on dimensions of revenue growth and employment growth. Contextual features of each firm are examined such as capital investment, access to critical resources, strategic focus, and internal development of firm infrastructure such as planning systems, marketing, and production.

    Major Findings

    High technology new firms require greater capitalization than low technology new firms. However, both revenue and employee growth is much greater for high technology new firms. Successful high technology new firms are those that have access to critical resources, maintain a narrow strategic focus, and establish a capable firm infrastructure.


    High technology plays an important role in the economy of a locale or region. However, high technology new firms require different resources and methods of development than low technology new firms. Both private and public institutions can formulate policies to encourage potential high technology entrepreneurs in the founding of new firms.


    Stephen A. Stumpf
    Britt Shirley

    The University of Tampa
    401 W. Kennedy Blvd. Box 65F
    Tampa, FL 33606



    Principal Topics

    As part of an ongoing study of entrepreneurs and new venture managers, participants were asked how and when they learned the skills necessary to lead their new businesses. The perceived value of B-school and entrepreneurship courses was explored.


    The 66 interviews conducted suggested that after a successful start-up, many new venture managers were less clear about their business's direction than they were pre-startup, and most are ill-prepared for the challenges of rapid growth. Specific research questions include: Now that your business is a viable enterprise, what are your key challenges in attaining rapid growth? Why do you think this? What models or ideas from your formal education do you use? Are you aware of any research studies or projects that might provide you with useful ideas for running your business? How have you prepared yourself and the business of rapid growth?

    Major Findings

    Preliminary results suggest that the transfer of knowledge and skills from the research arena to the classroom to the field is minimal for those attempting to lead their post-startup venture to rapid growth. What does appear to transfer is an understanding of field research methodologies and heuristic discovery processes. Specific recollections of what was or is currently being researched, or what was or is being taught in higher education classes are minimal.

    In contrast to their pre-startup situation, most new venture managers are not interested in applying the concepts and models learned in school to their dynamic business situation. Few are aware of any systematic research on entrepreneurship (other than failure rates), nor do they express the expectation that such research would have relevance to their post-startup situation. Yet most have become action researches as well as being entrepreneurs, and most have assumed educator roles relative to their new employees as well as doer/leader roles for the enterprise.


    The value of entrepreneurship research and education appears to be indirect -- the greatest benefits accrue to those entrepreneurs who have develop a disciplined inquiry process and have learned how to synthesize useful knowledge from their experiences. This seems to assist in the development of their intuition with respect to their business situation. This intuition is then substituted for the more rigorously developed models and teachings of academics, and researchers. This raises some interesting questions, "Are we researching and teaching the right stuff? Might we accelerate the entrepreneur educational process by focusing on action research skills and intuition development?"


    Sydney Scott Tyler

    Cornell University
    Box One
    Syracuse, NY 13201


    Principal Topics

    This research builds on this investigator's previous work on entrepreneurship. Available educational services were identified and a pre-product development needs assessment to determine the activities considered essential for starting a business was completed. Educational products were explored for this investigation.

    Educational services and goods, are products that are intended to change a learner's knowledge, skills, or attitudes. Services include courses, consulting, and counseling, while goods are tangible items, media such as books, audio tapes, videotapes, and software. These products are available from business and industry companies, educational institutions, government agencies, and not-for-profit organizations.

    The services available cannot respond to the size of the market. Educational institutions are not prepared to provide a sufficient number of credit or not-for-credit courses to meet the needs and wants of entrepreneurs. Government agencies cannot provide the services. Not-for-profit organizations typically respond more to the needs of members than to the educational needs of new start up stage businesses. Business and industry companies are profit based and may include professionals, accountants, lawyers, or bankers. The professionals are trained, however not as entrepreneurship generalists or specialists, so may not be meeting the needs of the market. These companies may also sell mass-produced materials such as books and tapes.

    Goods may be the only option available for learning about entrepreneurship and business for those individuals without the time or finances for courses, mentors, or established networks.


    This investigation identified and described products available on entrepreneurship. These products may be purchased at a store, ordered through a magazine, or borrowed from a library. The exploratory study reviewed the industry offering educational products, different markets to serve, differentiation of products available, direct and indirect competitors, and possible distribution channels.

    The sample was bounded to include only print and electronic media, specifically books, audio tapes, videotapes, and computer software. Three commercial databases, "Books in Print," "AV On Line," and "Ulrich's International Periodical Guide" were each searched with the same search strategies to identify the total sample. Magazines (Inc., Success, Entrepreneur) were reviewed to identify print and electronic media for sale. Because the research was exploratory, a controlled treatment was not part of this ex post facto study. After the sample had been identified and documents on the products obtained, a document analysis was completed. Coding of attributes was based on current theories and research on learning.

    In exploratory research, since specific variables are not identifies, isolated, controlled, or treated, it is important to link the evidence to existing theories and past research. For this investigation, the variables were product attributes. Identified were: attributes that describe the media (e.g., publisher, author, binding, length, cost); attributes that describe the industry (e.g., competitors, market, and distributors); and attributes that relate to learning (e.g., perception, memory), education (e.g., curricula, topics), and instruction (e.g., content, examples, practice exercises, and feedback).

    For the data collection, after the on-line database searches were completed, abstracts on the goods were secured. To secure the maximum number of citations, the following broad strategies were used: entrepreneur?, new()venture?, and start up or start()up. The abstracts were sorted to exclude media: out-of-print; specific to an industry, business, and geographical location; and media not available until 1994. Data analysis included an analysis of the full abstracts to identify and describe the products and the industry, and an analysis of products to identify educational attributes.

    Major Findings

    Sample Product Attributes A summary of the sample's basic product attributes for print and electronic media available on new ventures and start up businesses follows. For entrepreneur? there were 1312 citations from "Books in Print" and 26 from "AV On-line." The total print media citations from "Books in Print" included 46 on new venture and 96 on start up or startup. Following is a summary of the usable print media products available on new ventures and start ups: 18 books on new ventures and 53 books on start ups. The publication dates ranged from 1983 to 1993. The number of pages range from 100 to 811. The prices ranged from $7.95 to $149.50. The total electronic media citations from "AV On-line" included 6 on new venture and 46 fir startup or start up. Following is a summary of the products available on new ventures and start ups: 0 audio tapes, 8 videotapes, 0 educational computer software, and no other media. The publication dates started in 1983. The prices ranged up to $6000 for a 453 minute video.

    Context - Business & Management Attributes The industry offering educational resources, included primarily small book publishers. The different market segments to serve included educators, students, libraries, professionals assisting business owners, and business owners from different industries and different stages of development. The number of products for sale on entrepreneurship, specifically bring media and electronic media on new ventures and start ups was very small in comparison to the size of the market. Competitors initially appear to be small for-profit publishers. Distributors of the media included stores selling, magazines offering, and libraries lending books and tapes.

    Theory Base - Learning, Educational, and Instructional Attributes Learning, the only naturally occurring human phenomena related to education, includes interactions of motivations, perceptions, and memory. The knowledge and skills identified as prerequisite and different perceptual modes were identified and discussed. Education is an institutionalized process with curricula priorities primarily focusing on the sequence of topics to cover and the behaviors which should result from the interventions. A summary of the findings as they related to a pre-product needs assessments, curricula priorities, and topics are identified and discussed. Instruction, the linking process between the learner and education, may include anything from a planned presentation with handout materials to a mass-produced media package. The analysis of instructional attributes included: expected results or objectives, subject matter content covered, sequence of the content, message and methods of the instruction, examples, practice exercises, and feedback. These are identified and discussed. Additional parts of the instructional package identified and described include: author experiences, table of contents, glossary, references, bibliography, index, and appendices. The relation of the specific instructional attributes to the different market segments is identified.


    Knowing the products available for use by entrepreneurs to learn about starting a new venture is at the core of both educating them to succeed and understanding why they fail. Limits exist to how money can replace knowledge, skills, and attitudes to start and operate a business. Products are the stimulus sent. Whether or not the behaviorists are supported, learning results from a stimulus-response-reinforcement interaction. This leaning event occurs when the stimulus package sent (a combination of the teacher, student, and instruction) is channeled to a receiver, the learner. The sender then reinforces the receiver's responses. People learn knowledge (information they can use), skills (actions they can do), and attitudes (feelings they can share) depending on what is contained in the package, what is practiced, and what is reinforced. What are we sending? What are we reinforcing? What are entrepreneurs learning? What should we be teaching them? This investigation is an initial attempt to identify and study those issues.

    Learning has to build on what the learner already knows (prerequisite knowledge), but occurs when content is followed by practice and feedback. When no educator participates in the learning event to address these issues, it is critical the products uses include them. By not addressing these issues, information may only be held in short term memory for twenty seconds. Education is a plan with priorities for outcomes and sequence for topics. Instruction is a packaged link between the learner and educator (Dewey). How these instructional packages support learning the topics considered essential by education is another area requiring investigation.

    These attributes to be investigated in depth serve as a first step in this exploratory investigation. For educators with a limited background in learning psychology, education, curricula, or instruction, these identified attributes provide a basis to evaluate products for use with classes on entrepreneurship. For researchers recognizing the potential power of the educational process as a treatment, these identified attributes provide variables for their research. For business owners who only want to know what to do now, these variables provided criteria for them to use when evaluating products to purchase.



    Sydney Scott Tyler

    Cornell University
    Box One
    Syracuse, NY 13201


    Principal Topics

    This paper presents initial findings form a pre-product development needs assessment undertaken as the basis for future curricula decisions. It builds on this researcher's previous work examining the services available on entrepreneurship. The needs assessment also addresses recent research challenges by Bygrave, Katz, Hofer, and Cooper.

    Educational curricula bases its priorities on the authority of subject matter experts. A university senate approves syllabi recommended by faculty within a discipline. For schools, approval is by consensus of community groups and subject matter experts. This investigation looked at topics to cover in a curricula for teaching entrepreneurship.

    The field of entrepreneurship, less than 30 years old and holistic, chaotic, and complex by nature, currently is led by specialists perceptive enough to recognize the importance of entrepreneurship to the economy, and by risk takers offering new courses within traditional curricula. This investigation identified the infrastructure activities in the entrepreneurship event which could serve as the basis for courses and materials.

    Previous research in entrepreneurship has focused on quantifiable variables, such as financials and demographics, and unquantifiable phenomena (and unteachable activities) such as personality characteristics. The limited previous research combining education and entrepreneurship issues (mainly located in dissertations) included opinions or mail surveys of student or small samples in specific regions, specific industries, and inconsistent and nonspecific variables. The limits of self-reports, non-isolated variables, and activities as embedded parts of another investigation opened a "window of opportunity" for research on teaching and entrepreneurship.

    This research explored the activities necessary for the start up process as the basis for planning educational materials, content of courses, and potentially tracking of results from an educational intervention.


    Products often fail because the customer was not part of the product development process. Needs assessments are an important component of pre-product development as they determine customer needs and wants (Crawford). According to Scriven a need is essential to survival, context dependent, and uncontroversial value statement, and performance based.

    This exploratory field study attempted to identify activities essential to include when starting a business, the entrepreneurial event. The activities actually link to principles of organizational theory (not organizational behavior) as the theory addresses complexity, centralization, and formalization (Hall). These activities are to serve as the as is for curricula and educational materials. Stakeholders were asked to rate how important they believed each activity was to include when starting a business.

    The variable for this research was an activity rather than a behavior, ability, function, attribute, skill, trait, action, knowledge, content area of knowledge, skills area of knowledge, personality factor, mentality factor, or task. Activities may be completed by an owner, employee, outside professional, or today even a computer. A systems analysis identified superordinate and subordinate activities in a business. Face validity for the activities was obtained from over 300 business owners and business professionals. Activities that were industry specific (e.g., production lines or merchandise), basic human skills (e.g., communication or decision making), or management skills (e.g., leadership or motivation) were excluded. The business activities (e.g., technical or conceptual knowledge and skills) rated may be taught, produce a measurable product, and have an identifiable cost to complete.

    Eight hundred and forty-four individuals were identified and invited to focus group sessions. Three hundred eighteen attended, and one hundred thirty nine more expressed interest. The purposive sample, drawn from eight metropolitan and rural counties, included business owners representing manufacturing, services, wholesale, and retail firms. Separate sessions included high technology, exporting and agriculture firms. Professionals represented all the major public and private business programs and professions supporting entrepreneurship. Community leaders included decision makers concerned with local economic development.

    The investigation was ex post facto. All individuals attending participated in a focus group with the same agenda. The session included an orientation to the resources supporting entrepreneurship, the completion of instruments, and an open discussion of what options to consider.

    Two instruments were used to measure the opinions of participants: open-ended questions and rating scales. The first instrument asked two open-ended questions related to starting a business. The second instrument asked participants to rate 99 activities for their importance when starting a business.

    Data were collected over a twelve-month period through interviews, focus groups, and questionnaires. Twenty-eight focus group sessions at nine sites in an industrial northeastern state were held. Two of the twenty-eight sessions served as pilots. In eight counties, four metropolitan and four rural, sessions were held separately for business owners, business professionals working with business owners, and community leaders in order to limit contaminating the discussions. The two-to-three hour sessions were held at local businesses or business organizations associated with small business, and at times convenient to each group. A content analysis of the open-ended survey and descriptive statistics from the questionnaire rating the 99 activities were completed for the data analysis.

    Major Findings

    These preliminary research findings triangulate the results of the rating scales, opened-ended questionnaire, and discussions. Statistical results are descriptive and means are compared. The rating scales were skewed with 97 of the 99 activities consistently rated as essential. The qualitative data results supported the results of the rating scale and verified that there was not depth or breadth in the detail of the activities identified by participants.

    Activities identified as essential by all stakeholders included: organizing finances, anticipating cash-flow requirements, business planning, and identifying important market conditions. Important activities identified by business owners show an orientation to concrete tasks of daily work and included: scheduling work, developing policies and procedures, organizing the flow of work, organizing inventory, setting goals for services, planning cost controls. Although the research question focused on starting a business, owners currently in business requested they also be provided assistance. In the open-ended questionnaire, owners identified financing and cash flow as essential. During these discussions owners suggested a priority may be to talk people out of starting a business.

    Important activities identified by business professionals may be patterns missed by the owners. Activities included describing the competition and establishing credit and collection policies. In the open-ended questionnaire, professionals identified market research and securing financing as important. Professionals not directly responsible for funding didn't see the need for materials, whether or not the current materials they distributed were adequate. Professionals responsible for funding had the best rate of attendance and expressed the most interest and support for materials on entrepreneurship.

    Important activities identified by community leaders who often must assess organizations with little information included: designing the orientation, assuring a positive return-on-investment, and organizing strategic marketing. In the open-ended questionnaire, community leaders identified capital issues as essential.


    Initial research results confirmed the importance of financial issues and business planning, but as one very successful businessman stated while completing the rating scale, all of these activities are essential. Each sample group generally agreed on the top and bottom activities.

    Random sampling of different target populations (e.g., consumer groups, stages of business development, ); identifying which activities owners should complete versus those that may be delegated; and how activities differ by industry may each produce useful information for business owners, educators, and professionals working with them. For educating entrepreneurs, there are teachable activities with measurable outcomes and ways to trace economic impact of investments into important human capital, our business owners.


    Stefan Wally
    J. Robert Baum

    College of Business and Management
    University of Maryland
    College Park, Md. 20742



    Principal Topics

    Drawing upon several research domains, a growing community of entrepreneurship researchers has proposed integrated theories about the causes of entrepreneurship performance during early venture growth stages. Using views from the contemporary theories, we articulated and tested and integrated entrepreneurship performance model. The research questions were:
    1) What concepts appear in research about organizational performance that have consistent theoretical and empirical support?
    2) What configuration of the concepts describes likely causal paths to entrepreneurship performance?
    3) Are the concepts ad the configuration supported with data from a field study?

    We reviewed organizational behavior, strategic management, and entrepreneurship research about traits/motives, competency, vision, motivation, strategy, and industry structure and identified 31 likely performance antecedents. Interviews with 31 entrepreneurs added 6 antecedents to the array and guided selection of 23 measurable, practitioner-supported antecedents.

    The 23 antecedents are shown on the attached figure with direct and mediation paths to entrepreneurship performance. Antecedents that have received little attention from entrepreneurship researchers are included: passion, positive mood, money-seeking, decision competency, and cognitive ability. Industry and technical knowledge received special attention in the study, and vision and goal theory concepts were included. Contemporary entrepreneurship studies, entrepreneur/interviewees, and Miles and Snow's strategy typology guided formation of several strategy concepts, including "personal marketing". Although a single industry was studied, local industry structure was included as a focal concept.


    An introductory letter was sent to 1042 architectural wood work industry CEO's; 422 agreed to complete a questionnaire. In addition, associates of the CEOs from 217 firms agreed to help validate the CEO responses. The CEO questionnaire included a 19 question ability test and space for the respondent's vision statement (if any). The respondents self-reported actual performance, growth goals, and goal achievement confidence. All other antecedents were measured with 123 agree/disagree Likert response format statements, 10 point scales, or forced choice items. Entrepreneurs will be identified among the CEOs.

    LISREL confirmatory factor analysis of data from 38 early respondents indicates that, with the exception of two competency antecedents and one strategy antecedent, measurement reliability and convergent validity will be achieved. LISREL structural equation analysis will be used to develop indicators of the relative importance of the antecedents for entrepreneurship performance and to test for support of the mediation configuration.

    Major Findings

    A correlation matrix was developed with data from 38 early responses. The measure of performance shows strong correlation with industry specific and company-specific antecedents: supplier, customer and competitor power; innovation, personal marketing, and production focus strategies; growth goal setting and self-efficacy; and vision. Cognitive ability relates with performance, as do the specific competencies, industry knowledge, and technical knowledge. The more general antecedents (traits/motive and competencies) have weak direct associations with performance. However, traits/motives (tenacity, goal-striving, passion for work) and competencies (organization, decision, and opportunity skill) relate significantly with motivation and strategy antecedents.


    Although questionnaire data is incomplete, this study has identified 23 likely antecedents of entrepreneurship performance through a review of organizational behavior, strategic management, and entrepreneurship research and interviews with 31 entrepreneurs. Many of the antecedents are new to entrepreneurship research. Preliminary results from 38 entrepreneurs support propositions that vision, motivation, strategy, and local industry structure categories of performance antecedents are important direct determinants of entrepreneurship performance. It may be that the relations between entrepreneurship performance and general traits/motives and general competencies are mediated by more powerful direct antecedents of entrepreneurship performance.


    Heather I. M. Wilson

    Department of Marketing and International Business
    The University of Auckland
    Private Bag 92019
    New Zealand

    (64+9)373-7599 Ext. 7860

    (64+9) 373-7444

    Principal Topics

    The selection of study firms in Scotland and the South East of England is designed to determine whether differences exist in the type of start-up and early-stage funding amongst small high technology and manufacturing firms, since any spatial clustering of provision in the South East of England will have significant implications for industrial development in other areas and for the operation of the 'matching principle' theory. Therefore, this research aimed to determine whether differences exist between the two samples of firms in terms of the sources of start-up and early-stage capital, the amounts available from these sources and the effects on the growth of the survey companies. In addition, the validity of the matching principle theory was investigated by relating the source and type of finance to the financial need of the survey firms.


    Empirical information is cited from a personal interview survey involving 83 small high technology manufacturing firms in the scientific instruments and electronics industries and operating in Scotland or the South East of England. The original remit of this research was a detailed investigation of venture capital funding in the UK, and this is reflected in the research design. The supplementary information on company background and financial history is the focus of this particular study. Specifically, the paper concentrates on the following research questions: are there differences in the sources and amounts of start-up funding between the two study regions; are there differences in the sources and amounts of early-stage capital between the two study regions; if there are regional differences, what effect do these have on the growth of the survey firms; and how valid is the matching principle theory in relation to the study firms?

    Major Findings

    There were no regional differences in terms of sources and amounts of start-up funding. However, the investigation of early-stage capital revealed a strong reliance on bank funding in the South East of England compared with government sources of funding amongst the Scottish sub-sample. In addition, the amount of early-stage funding varied by region, although this result was not significant. The source and amount of funding, both start-up and early-stage, did not appear to have any effect on the growth of the survey firms in both regions. Finally, beyond the start-up stage, few firms obtained the most appropriate type of capital for their identified need, indicating either a 'take it where you can get it attitude' or lack of awareness on the part of the survey firms and the financiers.


    The reduction in public sector regional and financial assistance and the investment parochialism of the UK financial community has strong implications for the Scottish sub-sample. Both government funding in Scotland and bank funding in the South East had similar conditions attached to the investment. This would imply that there is no particular advantage associated with government funding, and the survey firms might be relying on the public sector because of the difficulty of obtaining bank finance. In addition, certain underlying assumptions of the matching principle theory can be challenged. As already demonstrated, the availability of finance is not ubiquitous, and investors and investees do not act rationally in terms of matching needs with finance.


    Nicholas Wilson
    Sandra Hogarth-Scott
    Kathryn J. Watson

    University of Bradford Management Centre
    Emm Lane Bradford
    West Yorkshire BD9 4JL



    Principal Topics

    A cohort of new small businesses sponsored by the Bradford & District Training and Enterprise Council {the TEC} in the West Yorkshire area were studied. Supported new businesses receive an Enterprise Allowance for a period of up to 12 months under the TEC's Business Launch initiative.

    The aim of the study is to examine the characteristics of the new small businesses and their founders. The study specifically addresses the founders' reasons for start-up, their personal background, education, employment history and experience, problems encountered in operating the business, training and advice received from support agencies, their aims, objectives and expectations for the future of their business and changes in plans since start-up. Data relating to the performance of the business was obtained together with basic business data such as industry sector, ownership structure, employment, period of trading and capital employed.

    Comparisons are made between those businesses which are still trading and those which have ceased trading and between those with high and low growth expectations. Also, the reasons why some businesses have ceased trading are examined.

    This empirical study is exploratory in nature in that it investigates the characteristics of a cohort of very small or micro businesses set up during a period of economic recession by research which is currently being carried out concerning the skills of the founders, relationships with customers and others in the business infrastructure.


    A random sample of 504 supported new businesses taken from the TEC database were surveyed by a postal questionnaire. The questions used included dichotomous, multi-choice, semantic differential and attitudinal scaled questions covering background details of the business; details about the founder; the start-up period of the business; details about the business now and future prospects (completed by those still trading); and problems experienced and reasons for discontinuance (completed by those who had ceased trading).

    A reminder letter was sent to all sample units who had not returned the questionnaire after 1 week and a telephone call was made to all those who had not returned the questionnaire after 2 weeks. A total of 166 {33%} survey questionnaires were returned completed. If the "gone aways" are taken into account the response rate achieved was 35.5%.

    Statistical data analysis was performed on the survey responses using SPSS PC= and LIMDEP computer packages. Manual analysis was carried out on a small number of open ended questions. The statistical tests used range from basic descriptive statistics to T-tests, factor analysis, discriminant analysis and logistic regression. The focus of this analysis was to examine the characteristics of the survivors in relation to failures (i.e. those business which had ceased trading).

    Major Findings

    At the time of the survey 123 respondents (74%) were still trading. Of the total sample of businesses 70% were sole proprietorships and 67% were operated from the home of the respondent.

    T-tests used to identify significant differences between those still trading and those who had ceased trading revealed differences between the two groups concerning gender; type, status and length of previous employment; serving apprenticeships; unemployment history; reasons for start up; reason for choice of product or service sold in the business; advice and training received and problems experienced in the running of the business.

    A comparison based on whether respondents had high or low growth expectations reinforced the results obtained from the first comparison referred to above. However, we now see variables reflecting the more ambitious characteristics of business owners emerging as being important differences between the two sub-groups. For example, the sub-group with high growth expectations have ambitions to introduce new products, increase customers and be better than the competition. Financial variables are more important for this sub-group, for example, increasing turnover and profit and reducing costs and they are more likely to have obtained additional finance since starting up the business. They are more likely to have received advice in leadership and motivation and staff training/recruitment.

    Respondents were asked to indicate the importance they attached to various reasons, from a list of eleven, for starting up their business. Factor analysis reduced the data to four patterns of responses which were labeled as follows: Entrepreneurial Factor, Personal Opportunistic Factor, Market Opportunistic Factor and Financial Needs Factor. T-tests of factor scores revealed that those still trading were more likely to score highly on Factor 1 (Entrepreneurial Factor ) whilst the ceased trading sub-group were more likely to score highly on Factor 3 (Market Opportunistic Factor)

    Discriminant analysis was used to isolate combinations of business characteristics that appear to be related to business failure or survival. The model was able to discriminate between two sub-groups of those who had ceased trading and those who were still trading to an accuracy of 87%. Logistic regression was used to obtain an estimate of the probability of failure based on respondents' characteristics. The resulting logit model would be 90% accurate as a forecasting tool. It should be noted that these models are in the early stages of development in relation to TEC supported businesses. However, they have raised many interesting issues which are currently being investigated.


    A vibrant small firms' sector is seen as a determinant and an indicator of a healthy economy. Also, small businesses have an important role to play in job creation. However, new small businesses are considered to be especially vulnerable in the infancy period following start-up and the failure rates of small businesses gives concern to both the small business community and public policy makers.

    An understanding of the determinants of success and failure in new small businesses has important policy implications for support agencies, such as the Training and Enterprise Councils, in the areas of selection, training and continuing support levels. For example, researchers have suggested that efforts should be made to target the limited resources at the disposal of support agencies upon those ventures with the greatest potential for long term success (Jennings & Beaver, 1993; Storey and Johnson, 1987). Also, a greater understanding of the differences between successful and unsuccessful small businesses, in particular the founders' background and experience and the problems experienced in running the business, should enable support agencies to identify gaps in the training and support provisions for certain new start business founders and design more effective programmes to address the needs of these new businesses.

    The research findings contribute to the growing literature on small business success and failure. Also, they address and area which has not been widely research, namely the characteristics and issues relating to very small or micro businesses.

    The findings of this study have aided the design of furthermore detailed research comparing TEC supported businesses and non-TEC supported businesses which we would be delighted to have the opportunity to present at a future conference.


    Elena Ai-Yuan Yang

    Department of Management
    The Wharton School
    University of Pennsylvania
    Steinberg Hall-Dietrich Hall, Suite 2000
    Philadelphia, PA 19104-6370



    Principal Topics

    Instead of using the conventional individualistic perspective of examining entrepreneurial behavior, I propose to use a more dynamic networking process lens. By networking process, I mean the establishing and maintaining of inter personal relationships. Part of the advantage of networking perspective is its flexibility in which I can capture both individualistic expressions and forces of collective community. This then would also help understand the ethnic business operations which tend to be portrayed an a collective perspective. Related, I want to explore both cross-cultural differences and similarities between mainstream and ethnic business owners. Perhaps, under certain circumstances, business concerns override cultural differences. Through the design of my study, I also hope to explore and understand some principles of cross-cultural interactions.


    This is an exploratory study relying heavily on field work of lengthy interviews, observations, shadowing owners, and interviewing/surveying on networking ties. I also rely on principles of "clinical perspectives" of conducting my fieldwork in which I need to constantly examine myself and my relationship with the researched as another data source. I plan to choose cases by comparing American and first-generation Chinese across both established industry, such as garment or computer hardware, characterized by low entry costs, low uncertainty, and relatively high competition, and emergent industry, such as multimedia or biotech, characterized by high entry costs, high uncertainty, and relatively low competition. There is a fifth in-between case, a Chines investment company--generally thought to be established but for Chinese, and emergent industry. Phase I of investigation entailed several general interviews with Chinese small business owners across a wide range of industries. Phase II was pilot study testing interview and survey questions; this included 2 American restaurants and 1 failed entry into a Chinese restaurant.


    On Methodology

    There are "embeddedness" features in this field work. One concerns culture and the other concerns my role in the networking process with the business owners. On culture, in order to study cross-cultural issues, it is necessary to build in cross-cultural elements in the methodologies; to do so there has to be some a priori working knowledge about the studied cultures. The break of this seemingly circular logic lies in me, the researcher. I am the perfect embodiment of both cultures; I have resided in and been immersed in each culture for roughly equal times of my life thus far. I have been fascinated and intrigued by cross-cultural phenomena, and have paid close attention to some of the issues. My living experience is therefore my working knowledge which has helped me understand how to approach the people whom I will research.

    The second aspect concerns my role in the networking process. The clinical perspective requires me to attempt and establish relationships with the business owners. In so doing, I have inadvertently put each of these relationships into the respective networks with every owner. Therefore, I am the tool, and my relationship is the vehicle by which I will have access to understand the patterns of networking process and inter-cultural interactions. In essence, to study network of relationships, I have to build some relationships.

    In Western perspective, comparative study assumes that we must use comparable methods to get comparable stories. In my first attempt to gain entry into a Chinese restaurant, using the same methods that I used to approach an American brought some disastrous results. Although I managed to salvage from that experience some valuable lessons, I basically never made the entry. Therefore, perhaps, the moral is that I have to alter my methods in order to get "comparable" stories. For instance, in Chinese case of multiple owners, I may need to rely on group settings, i.e. group discussions, more often. In addition, instead of relying on semi-structured interview questions, I must share with them stories, either of my own experience or others' experience. Of course, there have to be some common threads connecting the incomparable methods, and they are some a priori chosen dimensions, such as perspective on time, holism vs. analysis, being vs. doing and ends vs. means, against which to orient the interviews.

    On Cross-Cultural Comparisons

    With Chinese, the foundation of entry process rests on some connections, however remote they are. Without such introduction, as I have been told time and again, they would hardly consider spending time with me. While the only two Americans that I have approached thus far were both based on cold calls, I was warmly received immediately with full cooperation promised (and thus far fulfilled).

    A high proportion of Chinese's initial response to my desire to study with them is "There is really nothing much new about what I do; it's the same old story like everyone else." The Americans' response has been "Do I have some stories to tell you!" or "I don't really know much about what others do, but I suspect I am very different from them."

    My association with Wharton Business School seems to impress the Americans but not the Chinese. Most Chinese business owners themselves and their children have gone to prestigious schools; that is as we ought to. Therefore, my Wharton status means little to them. Americans mentioned it is interesting to be studied. Chinese sometimes make me feel that I have been studied or scrutinized.

    Chinese, especially the first generation immigrants of age 45 or above, typically are not hesitant to make suggestions to me on how I should go about conducting this study or how I can improve (without necessarily hearing my side of the story), while Americans typically try to elicit my "knowledge" about running business and what I may advise them.

    Both Chinese and Americans rely on spousal support, from daily operational, major decision-making, to financial partnership. However, Chinese are more willing to admit to this support than Americans do.


    In an increasingly globalized environment, paradoxically, there is an increasing need to take an intense examination of cross-cultural issues at micro level and at deeper lever.

    Return to Babson College
    Main Home Page
    Table of
    1996 Babson College. All rights reserved.
    Last updated November 11, 1996 by Frank Lafleur