Emergence of New VenturesLife Cycle vs. Punctuated Change
Much of the study of new venture development is based on the lifecycle perspective of change (e.g. Greiner, 1972; Hanks, Watson, Jansen & Chandler, 1994). This paradigm argues that a company's life can be distinguished as a number of sequential stages, following a now familiar pattern of startup, growth, formalization, and so on (e.g. Quinn & Cameron, 1983). Empirical evidence suggests that managers do think in terms of the stage of their company (Eggers, Leahy & Churchill, 1994), and a recent taxonomy found distinct configurations of structural variables that correspond to four theoretically defined stages (Hanks, et. al,, 1994). Each stage lasts approximately 4 years in length (calculated as the average difference of the mean ages of the four stages), thus only the first two stages are generally reached during the first seven years of growth.
In contrast to the image of incremental growth that is
assumed in the lifecycle theory (Van de Ven & Poole,
1995: 524), several entrepreneurial scholars have argued that
organizational emergence happens in spurts, i.e. in
very rapid punctuations that transform the company in
discontinuous ways (Schumpeter, 1934/1955; Stevenson
& Harmeling, 1990; Bygrave & Hofer, 1991).
Following earlier work on punctuated equilibrium (Tushman &
Romanelli, 1985; Gersick, 1988), Katz developed such a punctuated
model of entrepreneurial emergence (1993). The model argues
that each organizational stage can be seen as a
combination of four properties of emerging organizations (from
Gartner, 1985), where a trigger creates a revolution or shift in
the content of these properties, resulting in a new combination
remains stable for a relatively stable period: This movement [is] more of a disjoint, chaotic process than an orderly one (Katz, 1993: 99; c.f. Bygrave, 1989).
This method of punctuated change can be easily integrated with the RBT to generate a theory of punctuated growth of a firm. In this synthetic model, each unique combination of properties is a unique bundle of resources that generates firmspecific capabilities over time. Theoretically at each stage the task of the entrepreneur is to optimally leverage the resources within the firm to expand the firms productive capacity; this expanded productive capacity provides more leverage to acquire more resources, to further expand productive opportunity, and so on (Penrose, 1959/1995). Again, theoretically, each cycle of expansion would depend on the right leveraging of resources through recombination or reconfiguration of human, social, physical, organizational and/or financial capital. A model of this process is given in Exhibit #1.
What are the catalysts for change? Internally these
could be temporal or event milestones (Block & MacMilian,
1991), signifying the completion of specific goals set up by the
entrepreneur, or drop dead dates set up by the
entrepreneur or the ventures board of directors (Gersick,
1994; Brush & Greene, 1996) or resource providers (Stone
& Brush, 1996). Externally these could be determined by
structural factors of resource dependence (Bruno & Tyebjee,
1982), or industrybased sources of support (Brush &
Greene, 1996; Stone & Brush, 1996). Thus we suggest
that organizational punctuated equilibrium (Gersick, 1988; Katz,
1993) offers a useful model to examine resources changes in
growing ventures. Further, this model can be well
integrated with the ResourceBased Theory of the firm, by
suggesting that each stage of organizational growth can be
represented as a distinct bundle of resources which
serves to increase the capacity and strategic advantage of the
firm at that point in its development.
© 1997 Babson College All Rights Reserved
Last Updated 06/01/98