73 research outputs found
Selection Effects in Entrepreneurship
No full textMy work is positioned within an emerging trend in entrepreneurial research which revises prior work by considering the impact of selection effects. Prior research on the individual-level determinants of start-up size, performance, and exit has ignored that individuals select into entrepreneurship and this might seriously bias our understanding of the post-entry process. I'm particularly well positioned to investigate the nature, the extent, and the consequences of these selection effects because I could access extraordinary data on the Swedish population, which allows me to incorporate information on individuals who were at risk but did not enter entrepreneurship. Yet, the overall contribution of my dissertation goes beyond flagging a selection problem and developing a method to cope with it. It comes up with reexamining and even questioning some of the most prominent theoretical explanations to fundamental issues in entrepreneurship, such as the notion of initial size, the liability of smallness, and the interplay between entrepreneurial performance and firm exit.My work is positioned within an emerging trend in entrepreneurial research which revises prior work by considering the impact of selection effects. Prior research on the individual-level determinants of start-up size, performance, and exit has ignored that individuals select into entrepreneurship and this might seriously bias our understanding of the post-entry process. I'm particularly well positioned to investigate the nature, the extent, and the consequences of these selection effects because I could access extraordinary data on the Swedish population, which allows me to incorporate information on individuals who were at risk but did not enter entrepreneurship. Yet, the overall contribution of my dissertation goes beyond flagging a selection problem and developing a method to cope with it. It comes up with reexamining and even questioning some of the most prominent theoretical explanations to fundamental issues in entrepreneurship, such as the notion of initial size, the liability of smallness, and the interplay between entrepreneurial performance and firm exit.LUISS PhD Thesi
Venture capital increases a startup’s chances of issuing stocks or finding a buyer
No full textIn contrast, angel investors spur innovation, but not commercialisation, write Supradeep Dutta and Timothy B. Folt
Entry thresholds in the entrepreneurial process
No full textThe first essay builds upon economic theories of entrepreneurship that view the decision to engage in entrepreneurship as a career choice and contends that entry into the entrepreneurial process only occurs when expected performance exceeds an unobserved, individual-specific entry threshold. Using a sample drawn from the Panel Study of Entrepreneurial Dynamics, I theoretically extend the threshold perspective and apply an empirical approach new to the entrepreneurial entry literature to investigate the determinants of the choice to initially pursue an entrepreneurial opportunity. Prior work focusing on factors associated with the likelihood of entry can only indicate when expected performance exceeds the threshold (and what factors are associated with this condition). In contrast, by estimating the impact of human capital, financial capital, and motivations on both expected performance and the unobserved threshold, this research better indicates why thresholds are exceeded and entry occurs. The second essay investigates how the determinants of threshold-based decision making change during the evaluation stage of the entrepreneurial process. In contrast to much of the prior literature that views the decision to pursue an entrepreneurial opportunity as a one-time dichotomous choice, I contend that both performance expectations and perceptions of uncertainty, two key constituent elements of the decision, are likely to be revised as entrepreneurs investigate entrepreneurial opportunities. As such, this research provides a broader view of the evaluation stage of the entrepreneurial process, arguing that it consists of more than just the gathering of resources by fully committed entrepreneurs. Using the Panel Study of Entrepreneurial Dynamics, a nationally representative dataset of US adults working to start new businesses, I demonstrate that entrepreneurs\u27 expectations of financial performance and perceptions of environmental uncertainty undergo significant changes as they work to establish their new ventures, consistent with a learning view of the process. The degree of these changes is influenced by entrepreneurs\u27 information gathering activities. I find little evidence, however, that the main effect of information gathering activities is moderated by either ex ante novelty/uncertainty or the prior knowledge of the entrepreneur. The final essay examines the role of thresholds in the decision to exploit an entrepreneurial opportunity by launching a new venture. Applying the threshold model only to the initial entry decision leaves us with an incomplete picture of how threshold-based decision making affects the decision to engage in entrepreneurship. It is an empirical fact that not all of those who initially identify an opportunity will eventually launch a business. Some will achieve launch, others will give up on the opportunity, and some will remain stuck in the process. Thus, to more fully understand the determinants of entrepreneurial behavior, we need to examine both the determinants of initial entry as well as the determinants of launch. Using a sample drawn from the Panel Study of Entrepreneurial Dynamics II, I theoretically extend the threshold perspective and investigate the determinants of the choice of whether to exploit an entrepreneurial opportunity through the launch of a new venture. In contrast to approaches that relate potential determinants to the likelihood of launch, use of the threshold model provides a better understanding of why those determinants might have a relationship to launch probability. I examine how objective measures of opportunity risk, gestation tasks completed, and entrepreneurial motivations influence expected entrepreneurial performance and launch thresholds
Role of private equity investment in technology start-ups
No full textA central theme in entrepreneurial finance deals with the challenges imposed by the information asymmetry and technology uncertainty and how private equity investors alleviate information imperfections to facilitate entrepreneurial innovation and growth. The present thesis centered on the private equity industry offers three complementary essays interrelated issues that are under explored relating to managerial processes in the private equity industry. The first essay analyzes herd behavior in investment decisions made under uncertainty. Motivated by the real world context of private equity investments, the essay presents a theoretical model of sequential decision making to understand whether the true causality of herd behavior. Is herd behavior always Bayesian rational or does non-Bayesian conformance behavior equally promote herd effect. The theoretical prediction of the model is tested in a laboratory experiment. The experiment results are in line with the theory in most cases. Nevertheless, in modest number of observations decisions are non-Bayesian where subjects undermine private information and conform to the public information. Interestingly the intensity of non-Bayesian decisions becomes stronger when the distribution of heterogeneous rational agents is not uniform. The essay presents a stylized model to explain the shift in the rate of non-Bayesian herd behavior. The second essay examine whether venture capitalists\u27 positive impact on venture innovation declines over the finite life span of the private equity funds. The essay employs a two-arm bandit model to analyze the investment tradeoff between exploration of uncertain innovation that may generate higher innovation outcome and exploitation of known innovation. The empirical analysis based on VC-backed biotechnology ventures founded between 1985 and 2004 reveal a significant shift in the VC impact on innovation outcome of the portfolio ventures as the fund approaches its maturity. The third essay examines the possible influence of private equity investments, in particular angel groups and venture capital investments, in shaping the innovation outcome of technology ventures and in realizing successful exits. The essay considers the theoretical and empirical implications of angel group investment and VC investment and teases apart the separate influences of angels and VCs towards ventures\u27 innovation strategy and successful exit. Empirical analysis conducted on a novel dataset of 350 technology ventures reveals striking insights about the relative contribution of each. The methodologies employed econometrically control for identification issues in the dynamic multi-stage nature of external capital financing
Resource reconfiguration: learning from performance feedback
No full textResource reconfiguration enables firms to adapt in dynamic environments by supplementing, removing, recombining, or redeploying resources. Whereas prior research has underscored the merits of resource reconfiguration and the modes for implementing it, little is known about the antecedents of this practice. According to prior research, under given industry conditions, resource reconfiguration is prompted by a firm’s corporate strategy and by characteristics of its knowledge assets. We complement this research by identifying learning from performance feedback as a fundamental driver of resource reconfiguration. We claim that performance decline relative to aspiration motivates the firm’s investment in knowledge reconfiguration, and that this investment is reinforced by the munificence of complementary resources in its industry, although uncertainty
about the availability of such resources limits that investment. Testing our conjectures with a sample of 248 electronics firms during the period 1993-2001, we reveal a clear distinction between exploitative reconfiguration, which combines existing knowledge elements, and exploratory reconfiguration, which incorporates new knowledge elements. We demonstrate that performance decline relative to aspiration motivates a shift from exploitative reconfiguration to exploratory reconfiguration. Moreover, munificence of complementary resources mitigates the tradeoff between exploratory and exploitative reconfigurations, whereas uncertainty weakens the motivation to engage in both types of reconfiguration, despite the performance gap. Nevertheless, codeployment,
which extends the deployment of knowledge assets to additional domains, is more susceptible to uncertainty than redeployment, which withdraws those assets from their original domain and reallocates them to new domains. Our study contributes to emerging research on resource reconfiguration, extends the literature on learning from performance feedback, and advances research on balancing exploration and exploitation
Investigations into redeployability of corporate resources
No full textA central theme in corporate strategy is that firm value is enhanced when managers have discretion to deploy a firm\u27s resources in more than one market. Two ways in which having such discretion creates value have been specified in the literature. First, firms can contemporaneously share resources across multiple markets, thereby gaining economies of scope, or synergy. Second, firms can exploit redeployability – managerial discretion to withdraw firm resources from one market and reallocate them to another market over time. While contemporaneous sharing has received wide attention in corporate strategy literature, understanding of implications of redeployability remains limited. The present thesis offers five complementary essays that illuminate the underexplored implications of redeployability. The five essays contribute to understanding of corporate strategy in a number of ways. The first essay qualitatively examines cases of two companies deploying their resources in multiple industries and marshaling those industries. It provides a better understanding of distinct managerial considerations involved in contemporaneous sharing and redeployability. The second essay complements qualitative insights from the first essay with a formal model disentangling contemporaneous sharing and redeployability and scrutinizing how such benefits separately and jointly contribute to firm value. The third essay further elaborates upon the value effect of redeployability by relaxing a prevalent, yet untested, assumption that the most related markets have both the lowest switching costs and the highest inducements for redeployment. The introduced formal model illustrates the extent to which the existing view of redeployability fails to recognize the value of redeploying resources to a less related market having higher inducements. The model in the third essay also quantifies the bias in predicting value of redeployability while ignoring its path dependent quality. The fourth essay considers an additional critical factor associated with redeployability and formally models mispricing of redeployable resources by outsiders. Such an analysis highlights a paradox associated with redeployability – even though redeployability provides valuable flexibility, firms may not be able to capitalize on such flexibility because they cannot attain the capital to exercise deployment options. Finally, the fifth essay formally reexamines the key topic of why some firms persistently combine multiple businesses in their scope. I explain such persistence in multiple businesses based on resource redeployability and, thus, complement the existing explanation based on contemporaneous sharing
Hybrid Entrepreneurship
No full textIn contrast to previous efforts to model the individual’s movement from wage work into entrepreneurship, we consider that individuals might transition incrementally by retaining their wage job while entering into self-employment. We show that these hybrid entrepreneurs represent a significant share of all entrepreneurial activity. Theoretical arguments are proposed to suggest why hybrid entrants are distinct from self-employment entrants, and why hybrid entry may facilitate subsequent entry into full self-employment. We demonstrate that there are significant theoretical and empirical consequences for this group and our understanding of self-employment entry and labor market dynamics. Using matched employee-employer data over eight years, we test the model on a population of Swedish wage earners in the knowledge-intensive sector.Hybrid entrepreneurship; Self-employment; Labour market dynamics; Transition determinants; Employee-employer data
The dynamics of combining self-employment and employment
No full textThis study examines the extent to which wage-earning workers are simultaneously self-employed, a phenomenon not thoroughly investigated in earlier studies. We use matched employee-employer databases to present a detailed investigation of self-employment patterns within the post industrial sectors in Sweden from 1990 to 2002. We find that persons that combine self-employment with waged work constitute a majority of the total number of self-employed, and that most people enter self-employment by engaging first in combinatory work, indicating that the decision to move to self-employment is more complex than characterized in earlier research.Self-employment; income dynamics; entrepreneurship
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