Knowledge that Transforms

Endogenous growth theory suggests that technological knowledge stimulates growth, yet the micro‐foundations of this process remain obscure. Knowledge spillover theory posits that growth is contingent on the technology dependence of industries, forming the landscape for entrepreneurs to launch and grow ventures. We investigate these theoretical contingencies with two research questions using comprehensive employee‐employer data documenting the science and technology labor force in Sweden. First, do industries with a greater need for new technology‐based entrepreneurship grow disproportionately faster than other industries? Second, are the knowledge spillover effects fostering the growth of new technology‐based firms contingent on certain industry structures? Copyright © 2011 Strategic Management Society.

Research concerning diversification and specialization of venture capital funds typically does not consider how a VC's effort might influence performance of different portfolios. We develop a model that analyzes VC effort when there is the potential for cross‐sectional and/or serial knowledge spillover among projects. The model generates two implications concerning VC effort and performance. First, VC post‐investment effort is a nonmonotonic function of performance shocks, especially for diversified VCs. Second, greater cross‐sectional and serial knowledge spillovers improve the performance of specialization relative to diversification, and shape how the number of decision stages in a project affects portfolio choice. Copyright © 2011 Strategic Management Society.

Would an initial public offering (IPO) in a growing and uncertain industry have a positive or negative effect on directly competing incumbent firms in the industry? We assert that due to the risk and uncertainty inherent in a growing industry, a firm's IPO may send a positive market signal of growing industry demand. An IPO can send a signal to the investors of directly competing incumbents that the market is promising, and incumbent firms will enjoy a better future. If directly competing incumbent firms are capable of capturing these positive externalities, they will experience even greater positive results. In particular, an incumbent firm with a significant research and development investment may capture more of this increased demand in the industry. On the other hand, if a market segment is more concentrated, it is more likely that directly competing incumbents will suffer when another firm announces an IPO. We find supporting results for the various arguments of our initial question examining the computer‐related service industry. We also present discussion and implications for our results. Copyright © 2011 Strategic Management Society.

We contrast the performance consequences of intra‐family versus external ownership transfers. Investigating a sample of all private family firms in Sweden that went through ownership transfers during 10 years, we find that firms transferred to external owners outperform those transferred within the family, but that survival is higher among intra‐family transfers. We attribute these performance differences to the long‐term orientation of family firms passed on to the next generation and to the entrepreneurial willingness of acquirers to bear uncertainty. Based on distinct ownership transition routes and theoretical mechanisms explaining performance differences, we outline implications for family business and entrepreneurship research. Copyright © 2011 Strategic Management Society.

Entrepreneurship as a field of research has grown significantly since the publication of Lumpkin and Dess (), an article that addressed what it means to be entrepreneurial. The field has gained legitimacy in part through research that asks how phenomena such as market conditions, institutional environments, and strategic behaviors inform the entrepreneurship domain. New progress can be made by asking how phenomena unique to the domain of entrepreneurship help researchers understand decisions, actions, and environments outside of the domain. Ideas for using entrepreneurial knowledge to explain more general phenomena are presented. Copyright © 2011 Strategic Management Society.

Previous studies suggest that spin‐outs will locate in close proximity to the firm from which they spawn. As a result of this process, clusters of entrepreneurial activity tend to develop around a few strong parent firms. But do all spin‐outs really stay close to home? We demonstrate that spin‐out firms choose heterogeneous technological and market strategies, and we hypothesize that firms with more aggressive strategies have a greater need to maintain local relationships. We find supporting evidence of our theory by analyzing the location, technology, and market decisions of intraindustry spin‐outs in their first year in the disk drive industry. Copyright © 2011 Strategic Management Society.

In developed markets including the United States, family‐controlled firms, in particular founder‐controlled firms, have been associated with higher firm performance than their nonfamily counterparts. Such family‐controlled firms have concentrated ownership, which, according to agency theory, reduces agency costs and leads to superior firm value. Extant research, however, is not clear whether it is the family control or concentrated ownership that bestows the advantages that lead to enhanced firm performance. By examining different types of concentrated ownership, this study evaluates whether family ownership adds value beyond that provided by concentrated ownership. Based on analyses of panel data from the Indian corporate sector, we find that, in general, firms with concentrated ownership outperform firms with dispersed ownership. Surprisingly, and more importantly, however, we find there are no significant performance differences among family‐controlled firms and firms controlled by either foreign corporations or the state. This result is consistent with the notion that concentrated ownership, not family control, is a key determinant of firm performance. Copyright © 2011 Strategic Management Society.

Superior entrepreneurial creativity arises when teams are effective at both generating diverse alternatives and culling them to select the best solution. We develop theory about how the optimal group mood varies for the generation and selection stages of creativity. Using data from an entrepreneurial creativity task, we find that these stages require distinct collective moods. While an activated‐pleasant mood promotes variance generation, idea selection requires a very different mood. Findings suggest that some teams fail to make transitions to the appropriate mood. We conclude by discussing implications for promoting entrepreneurial creativity. Copyright © 2011 Strategic Management Society.

We examine the complementary effects of network range and tie strength on the performance of ventures in the context of the transnational entrepreneur (TE). Network range facilitates access to a broad set of knowledge and resources; however these resources may be activated only in the presence of strong ties. Alternatively, a network heavy in strong ties provides reliable connections, but a lack of range can lead to network closure. Using a sample of 452 TE ventures, we find that tie strength enhances venture performance, but network range does not have a significant effect. Furthermore, taken together, tie strength and network range significantly enhance TE venture performance. Supermodularity and linear restriction tests indicate asymmetric complementarity between network range and tie strength. Tie strength is a critical input and network range plays a supporting role in a TE's venture performance. Copyright © 2011 Strategic Management Society.