Entrepreneurial adaptation: Insights from existing literature and possibilities for new research.

Recent research shows that new ventures have great difficulties in defining a viable business model from the outset and that minor or major adaptations to this initial business model are needed as the venture evolves. Entrepreneurial adaptation or the entrepreneur's willingness and ability to make appropriate adjustments to the business concept become critical. If adaptation is so important for entrepreneurial companies, we need to ask ourselves a number of questions. (1) What causes this need for adaptation? (2a) What is the precise effect of adaptation on a start-up's performance or survival and (2b) is this effect similar for all start-ups? Also, (3) what do we know about the process of adaptation? And (4) what are factors enabling this adaptation process? Finally, we also need to determine (5) how the concept of adaptation in entrepreneurial companies is related to existing concepts of change and adaptation. The purpose of this paper is to give an overview of different literature streams that are specifically relevant to entrepreneurial adaptation and the questions listed above, and to point out gaps in the existing literature requiring further investigation. We look at whether and how the existing literature can provide insight into each of those five questions. In a final section, we point out directions for further research.Innovation; Research; Model; Companies; Performance; Startups; Processes; Factors;

The capital structure of business start-ups: policy implications.

Management; Economy; Structure; Startups; Policy; Implications;

Surveying Technology-Based Small Firms: A Perspective From Belgium

This paper details a survey methodology on technology-based small firms (TBSF) in Belgium. The survey's objective is to better understand the factors underlying the creation and development of firms with high growth potentials. In this respect it focuses on the socio-economic factors associated with the entrepreneurs, on the national framework conditions affecting entrepreneurship and on the financial architecture of the firms. The survey data of 103 TBSFs shows that 82 percent of entrepreneurs finance their firms with their own personal savings at seed stage. The debt-financing funds mostly in the form of government subsidies of all kind and commercial bank loans are the secondary source of finance and together constitute the biggest portion of total external finance. 26 percent of these firms had at start-up stage been recipient of venture capital funds and 20 percent of "angel" funds. There is also evidence that as firms get older the proportion of internal finance decreases while external finance first increases at start-up, peaks at early growth, and gradually decreases at later stages of development. Several strengths and weaknesses of the Belgian framework conditions for entrepreneurship are identified. The results also allow to better understand the key socio-cultural determinants of entrepreneurs themselves. 97 percent of technology-based small firm entrepreneurs are male. Over 80 percent of entrepreneurs in the survey have a university degree and 42 percent hold post-graduate degrees. We briefly discuss these findings in light of existing literature.technology-based small firms, entrepreneurship, start-up financing, survey data

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country’s Institutional Setting

A venture capitalist (VC) needs to trade off benefits and costs when attempting to mitigate agency problems in their investor-investee relationship. We argue that signals of ventures complement the VC’s capacity to screen and conduct a due diligence during the pre-investment phase, but its attractiveness may diminish in institutional settings supporting greater transparency. Similarly, whereas a VC may opt for contractual covenants to curb potential opportunism by ventures in the post-investment phase, this may only be effective in settings supportive of shareholder rights enforcement. Using an international sample of VC contracts, our study finds broad support for these conjectures. It delineates theoretical and practical implications for how investors can best deploy their capital in different institutional settings whilst nurturing their relationships with entrepreneurs

Innovation, new market and governance choices of entry : the internet brokerage market case

This paper investigates the case of market entry strategies following the introduction of a disruptive innovation. Recognizing that market entry strategies have been envisioned in the literature as a discrete phenomenon, we develop an empirical framework that portrays these strategies as a capability building process. These organizational modes are integrated into our model : acquisition, alliance, and market transaction. We compare the first two with the third one and we test our model in the setting of the online brokerage industry by using a sample of 897 moves made by 98 firms over a seven-year period (1994 to 2000). We built this dataset by collecting secondary data.By suggesting that the entry into a new industry is not a discrete phenomenon, our research should lead the path to additional research on this topic.innovation; market entry; capabilities; firm's boundaries

Innovation and venture capital exit performance

Venture capital is a potent source of R&D financing which contributes significantly to technological innovation output in the form of patented inventions. Scholars have argued that tighter protection of intellectual property rights reduces expropriation risks and encourages venture capitalists to invest in technology firms. Prior studies have showed that early stage technology investors give much weight to investment selection criteria related to innovation e.g. protection of intellectual property, platform and uniqueness. However, VC investors generally receive little on their investments until a liquidation event occurs – IPO and M&A (trade sale) exits define venture capital performance. A review of the literature indicates that few empirical studies have examined the influence of patented innovation on the exit performance of VC-backed technology firms. This paper seeks to address this specific knowledge gap in venture capital research and practice. It builds on resource-based view (RBV) theory which argues that technological innovation is an important strategic resource of the entrepreneurial firm that can attract VC investment, provide competitive advantage and produce superior performance. This study is based on matched data compiled from VentureXpertTM, DelphionTM and NBER/USPTO databases. The resulting unique and proprietary dataset consists of 1504 U.S. VC-backed exits across 7 technology sectors in the 20 years from 1980-2000, 961 IPOs and 543 M&As. The influence of technological innovation on the exit performance of VC-backed technology firms is examined. As predicted by RBV theory, technology firms engaged in patenting activity were found more likely to be associated with the more profitable IPO exit route, higher VC investment and exit value