Knowledge that Transforms

This study explores the effects of defense agency funding of university research on regional new venture creation. We argue that ‘closed’ university research may constrain the direct flow of new knowledge into the entrepreneurial process, but does not restrict more tacit and indirect flows of university research. We find a negative (positive) effect of the defense share of university research funding on short‐term (long‐term) regional start‐up rates. This may indicate that while defense‐funded research may not seed start‐ups directly, the knowledge carried into the private sector through more indirect channels may contribute, albeit slowly, to regional entrepreneurial activity. Copyright © 2015 Strategic Management Society.

Research summary We review existing theoretical propositions on the equilibrating and disequilibrating effects of entrepreneurship in the market process. We then introduce a game theoretical model of the market process and employ computer simulation to analyze it through time. The formal analysis suggests that entrepreneurship as the creation of new opportunities may not always be disequilibrating, and entrepreneurship as the discovery and exploitation of existing opportunities may not always be equilibrating. We identify specific conditions that produce counterexamples to the generic equilibration and disequilibration propositions previously considered to be the central premises of entrepreneurship research. Managerial summary Many entrepreneurs advance society by building businesses around creative new ideas. Yet, other entrepreneurs start businesses by discovering opportunities to profit without necessarily innovative ideas. In reality, most entrepreneurship involves both creation and discovery. We run computer simulations of a small hypothetical economy to analyze the impact of creation and discovery actions on the extent to which the economy contains unexploited opportunities at any given time. Our results largely support previous ideas on how entrepreneurs help clear the markets by discovering opportunities or how innovations disrupt the market through creative destruction. Our results also highlight ways in which these ideas may be oversimplified and may have boundary conditions.

Research summary We examine how firms' relative emphasis on exploration and exploitation influence their human capital responses to recessions. We hypothesize and find that the higher the focus on exploration, the more firms invest in training, the more likely they are to hire, and the more likely they are to lay off employees during a recession. Finally, we also find that exploration‐oriented firms are more likely to combine the accumulation of human capital through training, with both hiring and firing. This indicates that firms focusing on exploration more actively pursue the opportunities created by increased labor market imperfections during recessions. These results contribute to the literature by highlighting how recessions affect firms' flow of human capital investments, and subsequently stocks, depending on their strategic orientations. Managerial summary We examine how firms' strategic orientations influence how they respond to recessions in terms of their human capital. We find that the higher the strategic focus on exploration of new opportunities, the more firms invest in training, the more likely they are to hire, and the more likely they are to lay off employees during a recession. The opposite is the case for firms with a higher focus on exploiting existing (cost) advantages. Finally, we find that exploration‐oriented firms are more likely to combine the three human capital responses. In sum, our findings indicate that firms emphasizing innovation and exploration of new opportunities more actively pursue the opportunities created in labor markets during recessions.

We study the causes and consequences of the replacement of founder‐ CEOs in a sample of 4,172 Danish start‐ups. We propose that founder‐ CEO replacement is driven in part by mismatches between business quality and founder ability. Our framework suggests that replacements are more likely among the worst‐ and best‐performing firms, with low (high)‐ability founders replaced by manager with higher (lower) ability. Replacement is not unambiguously associated with better subsequent performance. Firms that replaced the founder were much more likely to fail, but the surviving firms among them grew considerably faster. Our empirical results are consistent with these proposed predictions. Copyright © 2015 Strategic Management Society

Through analyzing in‐depth interview data obtained from representatives of U . K .‐based social enterprises, we explore how traditional third‐sector organizations acquire entrepreneurial knowledge via knowledge spillover and use this to transform themselves into more market‐driven, businesslike social enterprises. An integrated framework for knowledge spillover is developed to highlight the connection with organizational efforts at each stage of the knowledge spillover process; this framework assists organizations in collecting leaked knowledge and turning it into both organizational action and specific social and human capital that can play an important role in facilitating these connections. This research contributes toward our further understanding of the knowledge spillover phenomenon. Copyright © 2015 Strategic Management Society.

Research summary How do external venturing units effectively achieve external knowledge search and integration of their initiatives with mainstream organizational units? We investigate this largely unexplored question through an inductive study of 17 corporate venture capital units. We document a set of five novel practices that influence the efficacy of a unit's external search and internal integration and identify how these practices complement a broader set of practices used by all units. We highlight the entrepreneurial nature of managing an external venturing unit, often to overcome unfavorable corporate contexts, a perspective that prior research has largely overlooked. Our findings provide unique insights into why some corporate investors are better at learning from external start‐ups than others. Managerial summary External venturing involves strategic partnerships by established firms with entrepreneurial ventures. Top management usually tasks autonomous units with searching for willing and potentially valuable partners. These units must integrate their activities with the operations of parent firms to elicit cooperation from important business units. To understand how external venturing units implement search and integration in combination, we study corporate venture capital ( CVC ) units, which form external partnerships through minority investments in start‐ups. While all units adopted fundamental processes that are well established in the venture capital community, certain processes that are idiosyncratic to corporate investing helped units demonstrate superior performance in their strategic missions. These processes often required CVC unit managers to be entrepreneurial and politically savvy in building connections with relevant personnel in parent firms. Copyright © 2015 Strategic Management Society

The growing body of research on the creation view of opportunities suggests that social processes between potential entrepreneurs and interested parties often account for why many technically brilliant business ideas are abandoned sometime between conceptualization and market launch. Surprisingly though, few studies have comprehensively examined the different roles various categories of social resources play at different stages of the opportunity‐creation process. Hence, the present article fills this gap by outlining how the unique resources of social capital and social competence facilitate entrepreneurs' ability to guide imagined ideas through the multistage, path dependent, socially complex opportunity‐creation process. Copyright © 2015 Strategic Management Society.

Research summary We study returnee entrepreneurship through the lens of social influence. Contrary to the conventional view that treats returnee entrepreneurship as discrete decisions by individuals, we examine the transmission of entrepreneurship through important peer networks—university dorm peers and ethnic association networks. We propose enduring effects from peer influence funnelling entrepreneurship entry in distant locations by shaping career aspirations and facilitating resource and information transfer. Using a unique dataset of overseas alumni of a top I ndian university, we find strong evidence of the impact of peer influence on the likelihood of returnee entrepreneurship. However, the effect of university peer influence does not extend beyond immediate peer groups in the same cohort. Managerial summary The repatriation of highly skilled migrants has been viewed as important to the supply of entrepreneurial talent in emerging markets. Our study of the overseas alumni of a top Indian university points to the importance of peer influence in determining returnee entrepreneurship. We find that peer ties formed in the early years of university study play a significant role in subsequent career choices and entrepreneurship entry in the home country. We also find co‐ethnic professional networks facilitate engagement in returnee entrepreneurship. While policies to encourage returnee entrepreneurship have been geared largely toward promoting formal institutions and economic incentives, our work demonstrates a strong social amplification effect through networks and suggests that peer networks, especially those connecting alumni and ethnic professionals, are important channels to induce returnee entrepreneurship.

The subjective belief that an opportunity allows value generation is a key driver of entrepreneurial action. We advance research on opportunity evaluation by investigating how people may diverge in their views of what defines an attractive business opportunity; that is, we seek to understand heterogeneity among individuals' ‘opportunity templates.’ Using unique data from a conjoint experiment with 141 respondents (6,728 opportunity evaluations), our analysis reveals significant differences in the opportunity preferences of individuals with technological, management, and entrepreneurship experience. We also find that people with specialist experience (technology) emphasize fewer opportunity dimensions than people with generalist experience (management, entrepreneurship). Copyright © 2015 Strategic Management Society.