Peter B. Freier
Stephan Schrader 1
Ludwig Maximilian University in Munich
Ludwigstrasse 28/RG, 80539 Munich, Germany
A new framework for the structural development of newly-founded companies is proposed. Structure is defined in a very broad sense. In this process, newly-founded companies transform into established firms. Two constructs and one criterion describing this process are presented. Companies need to become independent from constituting elements after the founding stage. Several features of this establishment process based on two samples of high-technology companies are discussed.
With the help of a biological analogy, two constructs and one criterion are set up to develop terminology and logic of a new conceptual model. The constructs are operationalized and tested in two different settings: A cross-sectional survey of the US biotechnology industry and a longitudinal archival data analysis of newly founded companies in East Berlin are conducted.
The founding of a company is based on a specific resources-opportunity mix. This mix is called the nucleus of a company. Following the founding stage, the company builds structure around this nucleus in several dimensions such as people, products or clients. Through this structural development the company becomes an system on its own right and de-couples itself from initially determining factors. A company is defined to be fully established when it has become independent of all element of its former nucleus. It is shown how the concept can be operationalized, first evidence is give.
Contrary to conventional wisdom, many so-called established (in terms
of financial data) companies may be classified as being not fully established
in terms of their dependence level upon dimensional nuclei. Short
term financial health and becoming established may display a different
relationship. However, in terms of strategic venture planning, the
assessment of dependencies in all relevant dimensions is imperative in
order to prevent a company from developing in a wrong manner.