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THEORY AND DERIVATION OF PROPOSITIONS

Research on the traits, characteristics and motivations for entrepreneurship suggests differences between contrasting types of entrepreneurs are to be expected.  During their study of novice and habitual firm founders, Kolvereid and Bullvåg (1993) noted that very few women become habitual entrepreneurs.  They also found habitual entrepreneurs were more likely to have obtained higher education qualifications.  As found elsewhere (Birley and Westhead, 1993), Kolvereid and Bullvåg (1993) noted habitual founders started their first business at a younger age than novice founders.  Although a priori it is difficult to identify potential differences between portfolio and serial founders on the grounds of qualifications and age, the greater complexities likely to emerge in managing a portfolio of businesses rather than in selling one and founding another, suggests that portfolio founders may have a background which has greater exposure to managerial issues.  The resources required to finance and the complexities involved in running and developing a portfolio of businesses suggests that these founders may require contributions from a greater number of partners than do serial or novice founders.  Although serial founders may have created wealth on exit and may seek to found larger businesses, these may not necessarily involve the level of complexity expected in a portfolio of businesses.  Hence:

P1a:  Novice founders were less likely to be as highly educated as habitual founders.
P1b:  Novice founders were more likely to be female than habitual founders.
P1c:  Novice founders were less likely to be drawn from a managerial and business orientated parental background than habitual founders.
P1d:  Portfolio founders were more likely than serial and novice founders to have a greater number of partners in their surveyed businesses.
P1e:  Novice founders were more likely to be older when starting their first venture than habitual founders.

The development of a portfolio of businesses suggests a need for greater managerial skills than might be expected in the case of novice and serial entrepreneurs.  Hence, it is expected that these entrepreneurs were more likely to have had a managerial or an executive position immediately prior to start-up (Donckels et al., 1987).  As intimated above, because habitual founders are drawn from more resourceful backgrounds they are more likely to have developed contacts and networks with potential partners and sources of resources.

Serial entrepreneurs generally place greater emphasis on achieving a particular goal and receiving recognition for it which is crystallized through the act of disposal.  As the serial entrepreneur is expected to grow businesses to a certain stage and then exit them, it is anticipated that such enterprises are likely to be smaller than those in which portfolio entrepreneurs are involved.  It may also be expected that serial founders have a work experience background involving employment in a larger number of organizations with periods of self-employment.  Notions that places of employment often act as incubators for individuals seeking to found a business suggest that novice founders are more likely to start a business in the same sector as their last employer.  Drawing upon their previous business founding experience, habitual entrepreneurs may be more likely to perceive opportunities and have the confidence to start businesses in sectors which are not related to the activities of their last employer.  Hence:
 
P2a: Novice founders were more likely to have worked for fewer organizations than portfolio and serial founders prior to the start-up of the surveyed business.
P2b: Serial founders were more likely to have worked in a smaller firm prior to founding their latest business than portfolio or novice founders.
P2c: Novice founders were more likely than portfolio and serial founders to have founded a business in the same industry as their last employer.
The initial reasons leading to the start-up of a new venture can, in part, influence the development trajectory of a business.  Entrepreneurs who desire to create a successful and large independent organization of their own, rather than pursuing a managerial career in a large organization owned by somebody else, may have motivational characteristics associated with a need for independence, a need for personal development and a perceived instrumentality of wealth (Birley and Westhead, 1994).  Portfolio entrepreneurs may establish a new business for a variety of reasons.  Some of these reasons may be concerned with circumventing legislation, which may only become effective above a certain size level.  Strategically, they may create a new business entity as a means of diversifying their activities.  Whilst independence is a strong reason for starting a first business a variety of other more materialistic reasons come to the fore when a founder establishes a subsequent business (Donckels et al., 1987).  Katz (1994) has also suggested that the prototypical autonomy-orientated individual will tend to emphasize freedom rather than financial or status achievement when starting a business.  Further, issues of market opportunity (exchange) or asset accumulation (resources) are less likely to be the main reasons leading to the start-up of a business.  Such a person, when employed by others, is less likely to change jobs to increase their level of autonomy.  When they own a business, they generally limit the size of the business and grow it to a psychologically comfortable level.  By adopting this strategy, the owner ensures that the venture can be personally managed and controlled.  Katz (1994) has suggested, if this type of individual has multiple episodes of self-employment, they are handled one-at-a-time.  This group of individuals are, therefore, more likely to be novice or serial founders.

Individuals who pursue entrepreneurial careers for greater pay and/or status are more likely to be opportunist entrepreneurs.  Further, this type of entrepreneur are more likely to be pulled into entrepreneurship by the external pressures of market (exchange) or wealth (resources) (Katz, 1994).  Opportunist entrepreneurs own businesses generally for the pursuit of growth and wealth creation and they are more likely to adopt legal structures which minimize growth constraints.  Because of the need for greater pay and/or status, opportunist entrepreneurs operate businesses with high levels of sales revenue and employment growth.  Katz (1994) has suggested, if this type of individual has multiple episodes of self-employment, they generally have more than one business going at the same time.  This latter group of individuals are, therefore, more likely to be portfolio founders.  Hence:

P3a: Novice founders were more likely to emphasize a need for independence when starting the surveyed business.
P3b: Portfolio founders were more likely to emphasize a perceived instrumentality of wealth when starting the surveyed business.
P3c: Portfolio founders were more likely to emphasize tax reduction and indirect benefits when starting the surveyed business.

Cultural values can influence the predisposition of individuals to become entrepreneurs.  Four underlying dimensions of culture can be identified as power distance (management of inequality between people), individualism (relationship between individuals and collectives), uncertainty avoidance (stance toward the future) and masculinity (allocation of roles between the sexes) (Hofstede, 1980).  Using these concepts, McGrath et al., (1992) were able to empirically discriminate between the cultural values of entrepreneurs and non-entrepreneurs.  This study, however, failed to distinguish between the cultural values of novice, portfolio and serial founders.

With regard to personal attitudes to entrepreneurship, Kolvereid and Bullvåg (1993) have argued that the creation of multiple businesses may arise where opportunities for growth in existing businesses are restricted.  Moreover, portfolio entrepreneurs may focus insufficient attention on each of their individual ventures and experience either uncontrolled or weaker growth.  Serial founders placing greater emphasis on achieving a particular goal may be seen as attempting to reduce uncertainty by crystallizing their gains through disposal.  Hence:

P4:  Serial founders may be more cautious in their approach to entrepreneurship, preferring to seek opportunities with lower degrees of uncertainty.

Different types of entrepreneurs may use contrasting sources of finance during the launch period.  As intimated above, habitual founders if successful may be expected to have greater access to funds than novice founders.  Serial founders who have successfully exited from their initial venture may have generated sufficient funds to use personal resources to finance their subsequent venture(s).  If serial founders are not successful in their first venture, they may still be able to raise funds as evidence suggests that venture capitalists seek evidence of an ability to succeed the next time around and not just previous experience per se (Wright et al., 1997).  Hence, we would expect novice founders without an established track record to rely upon personal savings, family and friends as a source of launch finance.  Portfolio founders who have not exited from their earlier venture(s) may be able to lever up resources from the existing business and may also make use of finance from existing customers and suppliers.

Habitual entrepreneurs may be expected to become involved in ventures the second time around which are larger than those begun by novices.  To achieve ownership of a larger business, serial entrepreneurs may purchase rather than start-up their second venture.  The entrepreneur may be able to leverage his/her personal wealth with funds from venture capitalists, whereas venture capitalists typically may have an aversion to funding start-ups.  Portfolio founders who by definition retain at least part of their trading activities may also be able to leverage funds from trading partners to develop new ventures.  In contrast, serial founders who have by definition sold their business currently have no trading partners to leverage-up.  Hence:
 
P5a: 
 
Serial founders, especially previously successful ones, were more likely to have utilized personal savings, family and friends as a source of start-up finance during the launch period of their present venture (which is subsequent to their first venture) than novice and portfolio founders.
P5b: 
 
Portfolio founders were more likely to have utilized banks and financial institutions as a source of start-up finance during the launch period of their present venture (which is subsequent to their first venture) than novice and serial founders.
P5c: 
 
 Portfolio founders were more likely to have utilized customers and suppliers  as a source of start-up finance during the launch period of their present venture (which is subsequent to their first venture) than novice and serial founders.
Entrepreneurial experience may lead to increased performance in subsequent ventures.  Experience may be expected to bring the skills required, to identify and serve market segments which both have growth potential and profit possibilities.  Experienced entrepreneurs founding a new business in the same sector as their previous/current venture are also likely to be in a relatively stronger position by virtue of that experience than novice founders.  In addition, they may be able to identify more clearly what is required to earn profits in the selected market(s).  However, Starr and Bygrave (1991) have suggested experience may bring liabilities as well as assets.  Subsequent ventures may, therefore, not perform better than the first business.  If they seek to found a new venture, serial entrepreneurs face the problems both of identifying another successful idea and may attempt to repeat actions which were successful in an earlier venture in new circumstances which are quite different.  Failure to find a suitable project the next time around is an important reason why experienced entrepreneurs may not be funded again by venture capitalists (Wright et al., 1997).  However, such entrepreneurs may fund further ventures themselves in the optimistic but mistaken belief (hubris) that they can repeat their success, yet may attempt to repeat previously successful actions in a changed environment.

Faster business growth and greater profitability may be associated with experienced entrepreneurs because, they are more likely to be opportunistic type entrepreneurs.  Supporting this viewpoint, Donckels et al., (1987) during their study of the first businesses started by novice and multiple business starters found businesses established by multiple business starters were markedly larger in employment size at start-up as well as at the time of the survey.  In market contrast, Kolvereid and Bullvåg (1993) were unable to identify performance differences between the two groups of independent firms.  Similarly, Birley and Westhead (1993) found no evidence that new independent businesses established by habitual founders were particularly advantaged compared to those established by novice founders.  Further, serial entrepreneurs may display heterogeneous characteristics and are not strongly growth or profit maximization oriented.  Nevertheless, the following tentative propositions are suggested:

P6:  Portfolio and serial founders were more growth orientated than novice  founders.
P7:  Surveyed firms owned by portfolio and serial founders had performed better than firms owned by novice founders.

 
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