Frontiers of Entrepreneurship Research 1994

Frontiers of Entrepreneurship Research


Abstracts from the 1994 Edition


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    DETERMINANTS OF NEW VENTURES' OBJECTIVES

    Pieter A. VanderWerf

    Boston University School of Management
    621 Commonwealth Avenue
    Boston, MA 02215

    Telephone
    617-353-2032

    Fax
    617-353-2564

    Principal Topics
    The variability of the objectives of new venture founders is recognized as an obstacle to predicting venture behavior (Cooper 1992). There is some encouraging progress at predicting behavior once the objectives are known (Cooper, Folta, Gimenco-Gascon & Woo 1992). No study yet, however, focuses on how and why ventures adopt the objectives they do. This exploratory study reports patterns in the objectives of new ventures entering several high-potential markets. It investigates how factors including personal preference, organization, and nature of the market influence and correlate with the objectives chosen.

    Method and Data Base
    The author employed the oretical sampling (Glaser and Strauss 1967) to select six high-potential new product markets of diverse characteristics. For each market the author located all ventures planning to enter (eleven in total), and applied structured interviews and written questionnaires to the top management team of each venture. This procedure has been repeated each year for two years to gather longitudinal data on each venture from early planning stages. The data cover venture objectives, venture characteristics, and descriptive information. The use of six different markets allows isolating the influence of industry factors, while the existence of several competitors within each industry allows pairwise comparisons within industry that isolate differences in management and organization. Key differences were uncovered using qualitative research techniques (Strauss 1987, Eisenhardt 1989).

    Results
    Two key results emerged. First, objectives varied reliably with the extent to which a single individual dominated the policy of the venture. Those ventures whose policies reflected the influence of many different individuals nearly always held the attainment of a particular market share as their supreme objective. Ventures dominated by one individual held objectives that were some combination of 1) profit, particularly for the benefit of top management, and 2) contributions to greater society. The second key result was that the objectives of a venture tended to change over time so that they moved closer to actual performance. This phenomenon most often appeared when the management of a venture falling short of its original objectives scaled back their definition of venture success.

    Implications
    One implication of interest to both practitioners and theoreticians is that the behavior of ventures dominated by individuals will likely be different from that of more "corporate" ventures. In particular, they will be more directed toward individual gain and/or social contribution, and less directed at short-term market domination. Strategies and exit thresholds will differ in kind and in degree accordingly. For theoreticians the research also casts doubt on the convention of measuring venture performance on a one-dimensional scale such as growth or profitability. Ventures holding objectives not reflected on the scale may consider themselves successful despite achieving a low measured performance. In addition, the one-dimensional scale assumes a rank ordering to new venture performance. But since they have potentially orthogonal objectives, many or all ventures of an industry may consider themselves more successful than their competitors.


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