Knowledge that Transforms

Legal rules and the economic environment play an important role in the decision to become an entrepreneur. Many studies examine the effect of such institutions at the national or state level. The metropolitan area may be a more appropriate geography to examine, since entrepreneurs often serve a more localized market and there is wide variation in both the environment for and incidence of proprietorship among metropolitan areas. We find that proprietorship increases with home equity, intangible wealth, unemployment, relative earnings of proprietors, and population. It decreases with higher state income tax rates and minimum wages.

This interview and commentary addresses key issues in entrepreneurship by highlighting William Baumol's contributions and his personal insights. We emphasize the multilevel approach that entrepreneurship research should adopt, and that assumptions underlying the research are too often unstated, rendering comparison between studies difficult. Baumol argues for more experimentation and government support of research on ways to improve the teaching of innovative entrepreneurship, since there is little evidence on what works and what does not. The discussion stresses that entrepreneurship is a multifaceted phenomenon that varies depending on context, the level of innovation, and its impact on society. Consequently, entrepreneurship research requires the development of an encompassing paradigm, appropriate educational methods, and study of the institutions that provide the most desirable incentives.

Although previous research shows that corporate spin–offs contribute to economic growth, few studies link growth to the type of corporate spin–off. We distinguish between three types of corporate spin–offs: incumbent–backed, opportunity, and necessity spin–offs. Using empirical data on 46 corporate spin–offs in Flanders, we find that opportunity spin–offs outperform the other two types. By identifying the type of corporate spin–offs, this study aims to add to our knowledge on the relationship between spin–off type and firm growth.

This paper reports the findings of the first academic study in Latin America, and one of the few in any emerging economy, to explore entrepreneurial perceptions and activity in peripheral geographic locations. A survey of experts included 139 respondents from three peripheral regions and two core regions in Chile. A key finding is that those located at the periphery perceived critical entrepreneurial resources and access to markets less favorably than their counterparts at the core, but surprisingly, they perceived greater business opportunity in their area. A further survey of 2,200 respondents concerning actual entrepreneurial activities among the total adult population revealed no differences between peripheral and core regions. This study revives the debate about specific regional policies for fostering the growth of local business, and the entrepreneurial framework conditions required at the regional level in emerging economies.

We examine the dynamics of the positive sorting in the venture capital industry. Our findings indicate that switching lead venture capitalists (VCs) is not uncommon during the course of entrepreneurial firms’ development. Companies with upwardly revised perceived quality are more likely to switch to more reputable VCs. Further, companies that switch lead VCs obtain larger capital infusion and higher pre–money valuation. However, companies that switch to more reputable VCs accept smaller investment size and lower pre–money valuation in follow–on rounds. In addition, it takes significantly more time for switchers with downwardly revised perceived quality to obtain subsequent financing.

Drawing on the capability–based view, we provide new theoretical arguments related to innovation capabilities rather than realized innovation output in firms with family involvement. We focus on technology–based product innovation capabilities and use data from a sample of 119 German manufacturing firms to show that family involvement is positively related to dynamic innovation capabilities. Specifically, the degree of family involvement, which describes the owner family's ability to influence firm behavior, is positively related to sensing innovation opportunities and to transforming a firm's innovation processes, while it is insignificantly related to seizing innovation opportunities. The findings suggest that dynamic innovation capabilities are an important characteristic that differs between firms with varying levels of family involvement.

We develop and extend fledgling literature on procedural justice climate and succession processes in family firms by focusing on the impact of family vision and exchange systems on procedural justice climate among nonfamily managers. Drawing upon social exchange theory, we argue that family involvement accompanied by a weak family vision will be associated with restricted exchanges in dominant coalitions, which will have a negative impact on procedural justice climate among nonfamily managers. Conversely, we suggest that family involvement with a strong family vision will be accompanied by generalized exchange, which should positively impact the procedural justice climate among nonfamily managers. We expect that the extent to which nonfamily managers work to support or hinder intra–family succession will be influenced by their collective perception of a positive or negative procedural justice climate.

New venture teams (NVT) often comprise idea–conceiving founders and equity–based investors. These subgroups represent a faultline whose magnitude influences the quality of business opportunities. We propose that the faultline strength formed between founders and investors is influenced by structural factors (ownership equity, membership change, preexisting tie strength) and cognitive factor (mental models of the venture). Finally, we address how the faultline strength impacts interaction processes (relationship conflict, task conflict, knowledge exchange) and their subsequent impact on the quality of entrepreneurial opportunities. Our theoretical model provides insight into how informational resources inherent in new venture teams can be more effectively leveraged.

This article investigates how prior corporate venture capital (CVC) relationships between two firms affect the likelihood of their subsequently entering a strategic alliance. Creating a portfolio of CVC investments provides the investing firm with a set of opportunities that can be pursued once the technological and market uncertainty have been reduced. If the technology appears to be promising, a follow–on investment, such as a strategic alliance, is made to ensure the transfer of the technological knowledge. This article shows that prior CVC investments can play a role in the formation of strategic alliances and investigates the conditions under which they are most likely to do so.

This study conceptualizes founding team human capital with three multi–item scales that are related to critical functional areas in new service ventures: marketing capabilities, market–linking capabilities, and service design capabilities. We develop and empirically test a theoretical framework linking founding team capabilities to service venture performance through two strategic positional advantages: scalability and protectability. Our results provide insight into previous inconsistent findings regarding founding teams’ impact on new venture performance, offer important managerial implications, and point to future research directions.