Knowledge that Transforms

A steady supply of entrepreneurs who will build the growth firms of the future has always been seen as fundamental to the economic health of a country. However, as companies have grown to the point where many have balance sheets larger than many countries, the role of the Top Management Team in managing these corporate giants has also received more prominence. Unfortunately, research into the two groups of current entreprenurs and large corporation managers has been both sparse, and has followed different, though parallel, paths. This research examines their backgrounds and asks the question whether the basic assumption that they are, in fact, different is correct—who are the high flying entrepreneurs, and are they any different from successful corporate leaders? Data was drawn from three sources. A questionnaire was sent to the 167 founders listed in the July 1984 edition of Venture Magazine as the “Venture 100”—“the nation's top entrepreneurs who run the companies they founded in the past ten years”. Sixty-seven useable replies were received from 40% of the founders and 52% of the companies. Comparative data was extracted from the “Korn Ferry's International Executive Profile: A Survey of Corporate Leaders” which surveyed five senior executives from each of the Fortune 500 companies. A response rate of 47% was received from a survey of 3640 executives. Further comparative analysis was extracted from the characteristics of senior executives of all firms in five selected industries (Dairy, Mobile Homes, Tires, Footwear, and Machine Tools) as listed in Duns Reference Book of Corporate Management 1983/1984. Data was collected on personal characteristics (age, family background, and education), previous employment experience, managerial style, and work patterns. The null hypothesis of there being no significant difference between high flying entreprenurs and their counterparts in the largest U.S. corporations was not sustained. Whereas certain characteristics showed similar patterning—previous employment experience, managerial success traits—the remaining variables demonstrated significant differences. The entrepreneurs were younger, better educated, had more international experience, and worked harder than their corporate colleagues. If replicated elsewhere, the results of this study have particuloar implications for the type of educational and employment experience necessary to affect the supply of the entrepreneurs of the future.

Venture capital is a primary and unique source of funding for small firms because these firms (with sales and/or assets under $5 million) have very limited access to traditional capital markets. Venture capital is a substitute, but not a perfect substitute, for trade credit, bank credit, and other forms of financing for small firms. Small businesses are not likely to be successful in attracting venture capital unless the firms have the potential to provide extraordinary returns to the venture capitalist. This study provides an analysis of a survey of venture capital firms that participate in small business financing. The survey participants are venture capital firms that were 1986 members of the National Venture Capital Association (NVCA), the largest venture capital association in the United States. The average size of the venture capital firms responding to the survey is $92 million dollars in assets, with a range from $600 thousand to $500 million. Twenty-three percent of the respondents have total assets below $20 million, and 27% have assets above $100 million. The venture capitalists' investment (assets held) in small firms delineate the supply of venture capital to small firms. Sixty-three of the 92 venture capitalists' have more than 70% of their assets invested in small firms. The venture capitalists were asked how their investment plans might change with changes in the tax law that were projected in the spring of 1986. Fifty-four percent expected to increase their investments in small firms, and 38% did not expect to change these activities. Venture capitalists are very selective in allocating their resources. The average number of annual requests that a venture capitalist receives is 652, and the median number is 500: only 11.5 of the respondents receive more than 1,000 proposals per year.

This article examines the relationship between entrepreneurial and marketing orientations of a firm. It is hypothesized that more entrepreneurial firms will also be more marketing oriented. Both orientations represent strategic responses to the turbulent environments faced by firms today. Further, marketing provides an effective vehicle for achieving entrepreneurship within the corporation. As some have argued, marketing is the home for the entrepreneurial process. As a process, a firm's entrepreneurial orientation has three key dimensions: innovativeness, risk taking, and proactiveness. As such, it does not just apply to start-up ventures, but is an orientation that is applicable to organizations of any size. A firm's marketing orientation, on the other hand, refers to the size and consistency of its investment in marketing activities and people, and includes the firm's adoption of the marketing concept (i.e., a customer orientation). An exploratory survey was developed in order to test the research hypothesis. A mail questionnaire was used to elicit responses from the chief operating officers in a random sample of 116 companies in Central Florida. The questionnaire consisted primarily of a 13-item summated scale to measure a firm's entrepreneurial orientation, and 22 separate items concerned with the firm's structure and policies in the marketing area, the sources of customer feedback it relies upon, and attitudes/perceptions regarding the impact of the marketing department. The results provide support for the research hypothesis. Entrepreneurial scores for firms, determined by summing the 13-item scale, were higher for firms in which there was a formal marketing department, in which marketing professionals were in senior executive positions, in which marketing research is a regular activity, and where marketing is felt to play a major role in innovation and the strategic direction of the firm. Based on these results, managers concerned about rekindling or maintaining the entrepreneurial spirit within the corporation may find it appropriate to begin by examining the firm's marketing orientation and operations. To what extent is the company structure, its reward systems, and the way in which its resources are allocated, reflective of an emphasis on marketing activities and customer satisfaction? Is the marketing function held accountable for the creation and management of innovative product/market opportunities? Suggestions are also made for further research, and the study's limitations are denoted. Researchers are encouraged to devote efforts towards identifying whether the relationship between marketing and entrepreneurial orientations is causal, and in which direction. What variables may modify the nature of this relationship? Also, it is important to determine how a company's marketing and entrepreneurial orientations jointly and separately impact on bottom-line performance.

Little is known about what really makes ventures succeed or fail and therefore, what one should consider when deciding whether or not to back a corporate venture. What is required are many more systematic studies of the venturing process. In this study we look at one small part of the process; the way in which managers go about evaluating a venture and what importance they attach to the various criteria they use to assess corporate ventures as they decide whether or not to support them. The other issue of interest is whether, with venture decision-making experience, there is a shift in the importance of criteria. Do managers inexperienced in venturing, start off with one set of weightings on criteria and then learn by experience to weigh criteria differently? Nearly every venture decision will be reviewed or have to pass some form of limited approval by, or get logistical support from, at least some managers who may be inexperienced. The degree of their support and approval will depend on the inexperienced managers' model of what constitutes an appropriate venture. Therefore, it is important to study both the novice and the experienced venture manager. This study used conjoint measurement procedures to quantify the importance of several factors to managers making go/no-go decisions as to whether they would support a series of hypothetical corporate ventures. The results indicate that there is a very high correlation between the judgements of inexperienced managers and those that have had some involvement in venture decision making. In virtually every case the direction of the preference for levels is identical. The effect of experience is not to change the model that the manager uses, but rather to crystallize the preferences and tradeoffs involved. The most interesting result was the overriding importance attached to corporate fit. The message is clear: do not expect support from any managers, inexperienced or otherwise, if there is no perceived fit between the firm and the venture. There were also relatively high levels of importance attached to seven other variables: size of investment, presence of an experienced venture champion, corporate experience with product, low threat of competition, utilization of proprietary technology, rate of return, and gross margin. For the sample in this study an optimal venture proposal can be described via the following criteria: •High corporate fit•Low initial investment•Experienced venture champion•Experience with product/service•Low competitive threat•Proprietory technology•High gross margin•High rate of return