Knowledge that Transforms

Research Summary There is growing consensus that exogenous environmental changes can affect entrepreneurship. The external enabler framework, which provides the structures and terminology to analyze these enabling effects, has typically focused on new venture creation. In an attempt to extend the external enabler framework to corporate entrepreneurship and innovation, our longitudinal multiple‐case study explores how environmental changes enable entrepreneurial initiatives in existing organizations. Our findings contribute to the external enabler framework, corporate entrepreneurship, and innovation literature by identifying new conceptual tools to understand the enabling effect of environmental change for the emergence, novelty, and persistence of entrepreneurial initiatives in existing organizations. Managerial Summary We studied how the Covid‐19 pandemic enabled the initiation and continuation of entrepreneurial activities. Our study of eight small US‐based news companies shows that some entrepreneurial initiatives emerged as these organizations redirected their course of action toward new initiatives enabled by the changes in the external environment. Notably, the entrepreneurial initiatives that were new‐to‐the‐industry originated from ideas that were already available in some form within the organization but were not in use until the pandemic gave them a second life. Furthermore, the continuation of these initiatives depended on the persistence of the changes in the environment and on the low maintenance requirements of these initiatives in terms of time, effort, and resources.

Strategic Entrepreneurship JournalEarly View CORRIGENDUMFree Access Huang P, Madhavan R. Dumb money or smart money? Meta-analytically unpacking corporate venture capital This article corrects the following: Dumb money or smart money? Meta-analytically unpacking corporate venture capital Peiyuan Huang, Ravi Madhavan, Volume 15Issue 3Strategic Entrepreneurship Journal pages: 403-429 First Published online: September 30, 2020 First published: 20 May 2022 https://doi.org/10.1002/sej.1425AboutSectionsPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat In Table 1, the citation Lorenzo & Van de Vrande, 2019 and Lorenzo & Corredoira, 2018 should read as Di Lorenzo & Van de Vrande, 2019 and Di Lorenzo & Corredoira, 2018. REFERENCE Huang P, Madhavan R. Dumb money or smart money? Meta-analytically unpacking corporate venture capital. Strategic Entrepreneurship Journal. 2021; 15: 403– 429. https://doi.org/https://doi.org/10.1002/sej.1369Wiley Online LibraryWeb of Science®Google Scholar Early ViewOnline Version of Record before inclusion in an issue ReferencesRelatedInformation

Research Summary Firms often succumb to a growth imperative, yet little is known about how congruence between various forms of growth affects firm value. We argue that the (in)congruence between net hiring rates (e.g., growth in the number of employees) and sales growth has significant implications for firm value, assessed via Tobin's Q. We further contend that R&D expenditures and industry dynamism—factors that influence a firm's ability to realize value creation—moderate the relationship between growth pattern and firm value. We use a sample of 1,181 firms that conducted their initial public offerings from 1996 to 2006 to test our conceptual model. Findings indicate that employee‐dominant growth is most strongly associated with firm value, and that high levels of R&D expenditures and industry dynamism intensify these relationships. Managerial Summary Growth is a goal and challenge for many firms, and navigating the various demands of growth represents a particularly promising opportunity for firms that recently went public. We study how firms can manage the growth process in a way that enhances firm value. Using a sample of 1,181 firms that conducted their initial public offerings from 1996 to 2006, we explore the interplay of employee and sales growth rates on value creation. We find that an employee‐dominant growth pattern was more strongly related to firm value than the other patterns. Our findings also suggest that managers, especially those in firms that invest in R&D and operating in dynamic industries, should avoid a strong focus on sales growth without also ensuring growth in employees.

Research Summary Oftentimes, social enterprises simultaneously pursue competing organizational goals. For example, this can mean having a social goal (e.g., integrating vulnerable populations into the labor market) and a commercial goal (e.g., being profitable). I propose a theory according to which for such social enterprises, how they are perceived depends on how their goals are presented and on the type of categorization process used by their evaluating audience. These two factors together impact a venture's legitimacy and expected value. I also show that these effects vary with the level of knowledgeability of the audience performing the evaluation. Taken together, the results of this paper have implications for the cognitive perspective on strategic entrepreneurship as well as the literature on categories in markets and on hybrid organizations. Managerial Summary I study the different category primings that influence the customer's perception of work integration social enterprises (WISEs). These social enterprises can either direct their customers' attention toward comparability with a category prototype (prototype‐based categorization), or toward a customer goal (goal‐based categorization). I find support for the idea that, depending on which organizational goal is emphasized first and foremost by a WISE (e.g., social or commercial), the activation of either category priming impacts the venture's capacity to create value. Ultimately, this work establishes the cognitive foundations of social enterprises' competitive advantage by showing the type of category priming (goal‐based vs. prototype‐based categorization) that positively impacts a WISE's expected value as a function of “who” the targeted customers (less vs. more knowledgeable customers) are.

Research Summary This study investigates whether there is a gender gap in the sale of patents by entrepreneurs and examines whether the personal wealth of female entrepreneurs can compensate for it. Using a sample of 107,697 independent inventors, we overcome the empirical challenge of measuring wealth through a novel approach that leverages Zillow data. We find strong evidence of a gender gap in patent sales, and find it poses a cruel irony for female entrepreneurs. While greater wealth of female entrepreneurs improves their likelihood of patent sale, increasing wealth simultaneously expands the gender gap, making female entrepreneurs increasingly worse off relative to male entrepreneurs except at high affluence. These results underscore the complexity of the challenges facing female entrepreneurs seeking to commercialize using patent sales. Managerial Summary Are female entrepreneurs disadvantaged in monetizing their inventions, relative to male entrepreneurs? Our study, which examines invention commercialization through selling patents, suggests the answer is yes. We begin by evidencing the gender gap in patent sales, showing that female inventors are 41.7% less likely to sell a patent than male inventors. We then investigate whether an entrepreneur′s personal wealth—a financial asset that also represents valuable intangible resources like network connections and competency signals—can help to close it. We find that wealth is a double‐edged sword. Although greater wealth of female entrepreneurs improves their likelihood of patent sale, it can concurrently widen the gap, making them increasingly worse off versus male entrepreneurs. We offer concrete recommendations for closing the gender gap in patent sales.

Research Summary This article introduces the concept of missed external enablement as a choice not to act on significant change in the business environment that later proves to be a meaningful accelerant for an entrepreneurial endeavor. There has been little consideration to date of such errors of omission. In response, we model the opacity and the agent intensity of enablement as fuel for inaction, leading to missed enablement. We then specify factors, such as magnitude of the miss, that strengthen or weaken the effect. As this unfolds, entrepreneurs consider how to best respond, and we model various response paths that may increase or decrease subsequent entrepreneurial action, where the path is again influenced by opacity and agent intensity. The theory generated exposes new facets of external enablement. Managerial Summary The effects of external change are shrouded in opacity. It is therefore difficult for entrepreneurs to discern whether change benefits one's endeavor and if it does, whether the effort, time, and resources are available to capitalize on it. Hence, it is rather easy to mistakenly choose entrepreneurial inaction. Our theory addresses the complexity and richness of these dynamics as they lead to missed external enablement, and our model outlines specific ways entrepreneurs might respond when they miss out on the benefits of external change. The insights we generate highlight the effects of entrepreneurs' exposure to many changes in the business environment over time, where the actions of others coupled with one's own past interpretations of the meaning of external changes influence what follows.

Research Summary Entrepreneurs often invest a large share of their personal wealth in their firms, exposing themselves to idiosyncratic risk. We propose a theoretical model showing how overconfidence and overoptimism may help to explain this evidence. We focus on overprecision, but we also consider overestimation and overplacement. Numerical examples show a more substantial role for overconfidence than overoptimism in determining entrepreneurs' portfolio allocations. We test the effect of the two latent variables—overconfidence and overoptimism—on small business owners' portfolio allocations. We use a unique dataset including private information on Italian small and medium enterprises and a structural equation modeling approach. A positive relationship between overconfidence and entrepreneurs' investments in their own companies is confirmed. Managerial Summary We propose a theoretical model showing how overconfidence and overoptimism explain the evidence that entrepreneurs invest a large share of their personal wealth in their firms, exposing themselves to specific risk. Overconfidence leads to underestimating risk, while overoptimism to overestimate expected returns. Using numerical examples, we show a more substantial role for overconfidence than overoptimism in determining entrepreneurs' portfolio allocations. Using a unique dataset including private information on Italian small and medium enterprises, we test our model and find a positive relationship between overconfidence and small business owners' investments in their own companies.

Research Summary This article studies the impacts of social insurance on the decisions of unemployed individuals to start businesses. Exploiting staggered changes in benefit generosity across U.S. states and over time, I find that higher unemployment insurance (UI) benefits both lower the probability that an unemployed person will become self‐employed, and also extend the length of time that passes before they make such a transition. The negative effects of UI benefits are concentrated on the formation of unincorporated businesses. Unincorporated businesses created by unemployed people in higher‐benefit state‐periods tend to be more successful, as measured by profit and survival rate, suggesting that higher benefits mainly screen out the entry of less productive firms. The negative effects are smaller during nonrecession periods and in states that offer a Self‐Employment Assistance program. Managerial Summary During the COVID‐19 pandemic, the share of new entrepreneurs who were initially unemployed reached the highest level (30%) recorded in 25 years. This article studies factors that impact the decision of unemployed people to start businesses. My empirical results show that higher unemployment insurance (UI) benefits deter unemployed people from forming unincorporated businesses, while those that do enter the marketplace perform better than others located in lower‐benefit state‐periods. These results suggest that higher UI benefits mainly screen out lower‐quality businesses due to the requirement that business profits have to be deducted from UI benefits. The disincentive effects are larger in states without Self‐Employment Assistance (SEA) program and during recessions, suggesting the need for widespread policies like the SEA program, especially during economic downturns.

Research Summary This study views corporate venture capital (CVC) investment as a form of inter‐firm rivalry. Adopting a competitive dynamics perspective, we argue that when a focal corporate investor invests in an entrepreneurial venture, that investment sends important competitive signals to its rivals, thereby increasing their likelihood of initiating a matching response. We theorize how three factors characterizing such investment—the amount of funding, industry relatedness between the corporate investor and the entrepreneurial venture, and the reputation of the corporate investor—can influence rivals' awareness of competitive threat, their motivation to respond, and therefore their likelihood of launching a matching counterattack. Our results demonstrate substantial support for our theoretical model. Managerial Summary This study views CVC investment as a form of competitive interaction, arguing that when a corporate investor participates in an investment round, it sends a competitive signal to its rival, motivating the latter to respond by also investing in CVC. Because of this counteraction, the competitive advantages of firms' CVC strategies may be temporary as rivals catch up and nullify the benefits of a CVC initiative. Thus, when planning strategy, CVC managers need to take potential rival counteractions into account and carefully assess the competitive implications of their CVC strategy, perhaps by avoiding harmful counteractions through initiatives more subtle in execution and orientation, and thus “under the radar” of rivals.

Research summary We investigate the effects of local market and government failure on the creation of social ventures in the context of post‐crisis recovery during the period following the dot‐com crisis and ending before the housing bubble burst across all Ohio counties. Drawing on social embeddedness theory, we posit that social venture creation rates vary across local contexts and are higher in communities characterized by market and government failures. Longitudinal contextual data from 88 Ohio counties indicates that situations characterized by failures of both types are especially conducive to the creation of local social enterprises. We address the shortage of longitudinal quantitative studies focused on the emergence of social entrepreneurship and identify conditions where the relationship between local context and social venture creation is important. Managerial summary The purpose of this article is to examine how local context affects the rate of social venture creation in the United States. We study these rates in every county in Ohio in the aftermath of a crisis and find that local government responses and local market conditions singly and in combination lead to increased rates of local social venture creation. Fewer social ventures emerge when transfer (welfare) payments are high. However, rates rise in response to high unemployment, even when welfare payments are high, and are greater when welfare payments are low. This means the extent and type of local market and government failures influence the rate of local social venture creation. Findings advance the study of domestic social entrepreneurship in the aftermath of crises.