Knowledge that Transforms

Recent decades have witnessed a remarkable increase in interest in entrepreneurship research, practice, and policy. Since its founding in 2007, Strategic Entrepreneurship Journal (SEJ) has sought to contribute by publishing high‐quality papers on a range of themes relating to strategic entrepreneurship, broadly defined. The 10‐year anniversary of SEJ provides an opportunity both to reflect on the road travelled so far and to chart out future directions for the route ahead. We are pleased to do so in this special issue, which draws on themes of enduring and emerging interests to scholars at the interface of strategy and entrepreneurship.

Research summary E mployees performing everyday tasks frequently acquire valuable new ideas and knowledge. Our formal analysis studies how organizations can benefit from employee‐driven innovation by using incentives to overcome strategic risk from opportunism and governance. We use a game theory framework to analyze the strategic interactions involved and identify incentives under which valuable ideas will be revealed without appropriation (in equilibrium). Our analysis considers both the short run and the long run, where governance can be adjusted to maximize expected future innovation profits. Innovation value, frequency, governance quality, and employee contestation costs are shown to play a salient role in determining the innovation incentives and equilibrium. Overall, our analysis and results provide a number of insights on how organizations can overcome frictions from strategic innovation risks to more fully mobilize their innovation potential and knowledge‐based resources. Managerial summary I dea theft can occur in organizations when employees find it beneficial to present a valuable idea of another employee as theirs. If employees engaged in everyday tasks believe this will likely happen or that they will not be rewarded enough, they may not reveal them. We analyze the design of appropriate innovation rewards that will prevent stealing of innovative ideas and allow organizations to capture value from employee‐driven innovation. We show that governance quality, innovation value, and costs related to contestation play a salient role in determining appropriate innovation rewards and the organization's innovation capacity. “Flatter” organizations can deter idea theft more effectively and need to pay lower innovation rewards. In the long term, we show that all organizations can become more innovative by adjusting their governance quality and reducing employee contestation costs. Further, the ones with higher innovation potential and contestation costs will move toward higher quality governance and seek more entrepreneurial employees, as this raises long‐run innovation profits. Copyright © 2017 Strategic Management Society.

Research summary We investigate how board directors’ expertise influences post‐entry performance of start‐ups and diversifying entrants in an emerging market. Empirical analysis based on firms in the U.S. wireless communications service industry from 1983 to 1998 reveals that post‐entry growth increases with directors’ post‐entry firm‐specific board experience, but decreases with directors’ inherited pre‐entry firm‐specific board experience. In addition, outside directors’ intra‐industry managerial experience stimulates post‐entry growth while intra‐industry directorial experience reduces it. We also find that firms benefit from having true industry outsiders who are experienced in other—not the focal—industries. Taking this evidence together, boards with a mix of directors with post‐entry firm‐specific board expertise and complementary other industry expertise are most suitable for the governance of post‐entry venture growth. Managerial summary C areful board composition design can facilitate post‐entry performance of new entrants into an emerging industry. Specifically, entrants should retain some of the initial recruits to the board in order to steadily build firm‐specific board expertise. They should also introduce genuine industry outsiders (with no experience in the focal industry) to the board in order to inject fresh thinking into board governance, which is critical for renewal of the firm's growth strategy and market positioning over time. For diversifying entrants, if the new market entry is a strategic investment for the parent firm, it is worth setting up a separate board of directors where directors are not linked with the parent firm board, as a preexisting board is likely to be too deeply engaged with existing businesses. Copyright © 2017 Strategic Management Society.

Research Summary: We introduce a contagion model of self‐employment that relates regional cohort self‐employment to individuals’ preferences for and decisions toward engaging in entrepreneurial action. We test the predictions of our model via evidence from two studies. Study 1 uses cross‐sectional data from the U.S. General Social Survey (GSS) and examines the correlation between regional cohort self‐employment and individuals’ attitudes for self‐employment. Study 2 uses longitudinal data from the Household, Income, and Labour Dynamics in Australia (HILDA) survey and examines the likelihood of transitioning into self‐employment as a function of regional cohort entrepreneurship. Our results provide evidence that individuals who belong to regional cohorts with a greater proportion of entrepreneurs are more likely to express favorable attitudes toward self‐employment and to enter into self‐employment. Managerial Summary : A large literature in the social sciences indicates that people's preferences and actions are influenced by the behaviors of those around them. We find this is true when it comes to entrepreneurship. Specifically, we document that people who live in regions with higher proportions of entrepreneurs are more likely to express favorable attitudes toward self‐employment and are more likely to start new business ventures. This suggests that people embedded in environments where there is a lot of entrepreneurial activity are more likely to “catch the bug” of self‐employment, as they use already‐established entrepreneurs in the region as a roadmap for their own thinking and action.

Research Summary : We develop a two‐step selection model between entrepreneurial ventures and venture capital (VC) investors in a thin VC market. The model predicts that in a thin VC market, the availability of VC reduces the propensity of firms to self‐select into the market for VC (demand‐side selection) but not the probability that firms entering the market for VC will receive financing (supply‐side selection). We test these predictions using survey‐based data on 190 new technology‐based firms in Italy during the late 1990s and early 2000s. The empirical evidence supports the predictions of the model. Managerial Summary : Venture capital (VC) is an important ingredient of an environment that is conducive to the birth and the growth of entrepreneurial ventures, but VC markets are often highly local and thin in terms of participants. We show that the scarcity of VC supply may cause a drop in the demand for VC because entrepreneurs, anticipating that competition for VC money will be tough, will not seek VC in the first place. The more a market is thin, the more the demand‐side selection is likely to become more important than the supply‐side selection of VC investors. Demand‐side selection may involve a significant number of otherwise good targets for VC investment, which will not be in the radar of VC investors. In turn, this may deter new VC investors from entering the local market, thus creating a vicious cycle that raises concerns for both policy makers and VC general partners.

Research summary S ocial‐benefit markets, such as those for carbon trading, are becoming increasingly popular for combating complex social and environmental problems. However, their unique characteristics pose substantial challenges to market creation and require novel entrepreneurial approaches. Integrating the entrepreneurship literature with that of management information systems, we conceptualize social‐benefit markets as a new type of interorganizational arrangement and develop a model of social‐benefit market creation. First, we argue that a core entrepreneurial collective, comprising a plurality of actors from government, business, and social movements, is essential. Second, we elaborate a six‐phase process through which the interests of entrepreneurs are aligned and inscribed in a market artifact and the market is formed. The model is illustrated with reference to the W estern C limate I nitiative's carbon market creation efforts. Managerial summary C arbon markets have become a popular strategy for reducing greenhouse gas emissions, with similar market‐based solutions being proposed for other social and environmental challenges. We refer to these new structures as social‐benefit markets. Social‐benefit market creation is a complex undertaking that will require novel entrepreneurial approaches and new interorganizational information systems. In an effort to reduce some of this complexity, we propose a model to explain how entrepreneurs from government, business, and social movements must work collectively to build social‐benefit markets. We further elaborate a six‐phase process through which entrepreneurs are able to align their diverse interests and create a stable market artifact. For managers from all sectors, our work offers actionable guidance for forming collective ventures that deliver real social benefits. Copyright © 2017 Strategic Management Society