1. www.handels.gu.se Johan Brink 20110516 Entrepreneurship and New Business Development 2015-06-11

2. www.handels.gu.se New venture creation ‘organization creation involves those events before an organization becomes an organization that is, organization creation involves those factors that lead to and influence the process of starting a business’. Carter et al. (1996: 52) ‘... serious gaps in our knowledge remain about the events that occur before an independent organization is started’. Chrisman (1999: 99) 2015-06-11

3. www.handels.gu.se Emergent organizations What defines a ‘firm’? Intentions Resources Boundaries Exchanges (Katz and Gartner, 1988)

4. www.handels.gu.se New venture emergence 2015-06-11

5. www.handels.gu.se Barriers for Entrepreneurship 2015-06-11 BarrierNoPotentiallyIntendActual Business Risk3.68*3.12.652.58 Failure concerns3.26*2.522.472.15 Work stress3.3*2.312.192.48 Capital2.633.5*2.621.48* Awareness of regulations2.662.562.591.56 Economic conditions2.412.86*2.171.18* Low business income2.682.101.592.03 Find opportunity2.84*1.932.290.73* Know business skills2.13*1.241.490.84* Government policies discourage 1.95*1.691.300.67*

6. www.handels.gu.se New firms Limited: – financial – technological – human resources – unsophisticated governance models – fluid identities – little power over other actors – Liability of newness – No track record! – BOOTSTRAP! Use what you got Get operations quickly Sell something (anything!) 2015-06-11

7. www.handels.gu.se Capital requirements 2015-06-11 Capital at start (USD)% None24.7 -4.99932,1 5.000-9.99910.3 10.000-24.99911.9 25.000-49.9997 50.000-999.994.3 100.000 -4.1 Not reported5.6

8. www.handels.gu.se Sources of capital 2015-06-11 Source of Capital% Family8.1 Friends1.7 Personal credit (Home, card)3.2 Bank Loan16 Did not need66.8 Grants0.5

9. www.handels.gu.se GROWTH 2015-06-11

10. www.handels.gu.se Size distribution 2015-06-11 0-9 Employees 10-99 Employees 100-499 Employees 500+ Employees Denmark22371724 France28251433 Germany17281738 Greece5921119 Italy48241019 Spain363017 UK26211835 EU average % of Firms 29.6 93.2 25.1 6.3 15.8 0.4 29.5 0.1

11. www.handels.gu.se Survival rates 2015-06-11 AGE Employees0-67-2021-4546-9595+ 1-19402220170 20-49321411 16 50-993113101415 100-2492512117 250-4993213776 500-9992110655 1000+-13928

12. www.handels.gu.se Growth measurement Assets, Employment Market share, Physical output, Profits Sales. 2015-06-11

13. www.handels.gu.se Growth and size The original interpretation of Gibrat’s Law is that the size of units and measures of percentage growth are statistically independent (Gibrat 1931). In the context of the study of firm growth this means that growth rates should be independent of firm size (Sutton 1997). Some studies have indicated that – growth rates are independent of size, – other studies have indicated that Gibrat’s law is applicable only to large organizations (but not to small organizations), – and some studies find that growth rates diminish with increasing size (Dunne and Hughes, 1996; Evans, 1987; Storey, 1995; Sutton, 1997; Wagner, 1992) 2015-06-11

14. www.handels.gu.se Starting big? 2015-06-11

15. www.handels.gu.se Factors related to growth Human capital, educated individuals Specific human capital, such as – start-up experience, – management experience, and – experience of working in rapidly growing organizations – a founding team rather than solo entrepreneur – willingness to share equity – a multi-skilled management team, – marketing expertise But general work experience and age has no effect 2015-06-11

16. www.handels.gu.se Growth motivation Prior research has shown that many small business managers are reluctant to expand their firms (Davidsson, 1989b; Wiklund et al., 1997). – Personal independence – Expectations of changed work conditions – Aspiration levels for organizational size are founded on managerial beliefs that size affects organizational efficiency or legitimacy. 2015-06-11

17. www.handels.gu.se Growth aspiration 2015-06-11

18. www.handels.gu.se Growth aspiration 2015-06-11

19. www.handels.gu.se Growth aspiration 2015-06-11

20. www.handels.gu.se2015-06-11

21. www.handels.gu.se Growth and profit 2015-06-11

22. www.handels.gu.se Growth models: Life cycle 2015-06-11

23. www.handels.gu.se Greiner (1972)

24. www.handels.gu.se Proteome systems ltd

25. www.handels.gu.se Proteome systems ltd “We chose IBM as our technology partner because we believe IBM is the only IT company that has a real understanding of the challenges presented by proteomics.” Keith Williams 2001

26. www.handels.gu.se Proteome systems

27. www.handels.gu.se2015-06-11 Stages of Growth modelsDynamic states model AssumptionOrganizations grow as if they were organismsEach state represents management’s attempts to most efficiently/effectively match internal organizing capacity with the external market/customer demand Propositions: what Configuration of structural variables and management problems Configuration of structural variables and organizational activities (aspirations) Propositions: how A specific number of progressive stages Sequence and order is predictable Incremental and punctuated transitions Any number of states Sequence and order may be predictable depending on context Incremental and punctuated transitions, and emergence Propositions: why Immanent program of development Prefigured rules of development “Regulated” by environment Adaptive process of retaining the sustainability of a business model Interdependent rules for development Driven by market change and opportunity creation

28. www.handels.gu.se Growth challenge: Managerial transitions The founding entrepreneurs become less adept at managing the firm’s evolution Beyond their initial focus – Lower degree of diversification Across an expanding operation – Slower degree of professionalization May not be able to modify their personal management style to match the evolving firm’s needs – Weaker degree of termination – Give up ownership 2015-06-11

29. www.handels.gu.se Growth challenge: Path dependency 2015-06-11 Experience and skills (Time 2) Experience and skills (Time 2) Structure Experience & skills Structure (Time 2)

30. www.handels.gu.se Case discussions 1.Is Cynthia Riggs an entrepreneur or a small business owner? 2.Would you consider MIB a small business or an entrepreneurial venture? Is there a difference? 3.Is the company in trouble? What indicators do you have that the company is not doing well at this time? 4. What would Cynthia need to do differently to position her company for growth? 5. How can Cynthia build the management team she needs to bring her company to the next level? 6.What role should Cynthia take as the company changes and grows? 2015-06-11

31. www.handels.gu.se READINGS Growing profitable or growing from profits: Putting the horse in front of the cart? Davidsson et al, Journal of Business Venturing 24 (2009) 388–406 Gazelles as job creators: a survey and interpretation of the evidence, Magnus Henrekson & Dan Johansson, Small Bus Econ (2010) 35:227–244 Evolution and Revo- lution as Organizations Grow, Larry E. Greiner, Harvard Business ReviewJuly–August 1972. A Multidimensional model of Venture Growth, Baum et al, Academy of Management Journal, vol 44, no 2, 2001 2015-06-11