Time and complexity of competitive action repertoires in new ventures: early evolutionary patterns and growth implications

Programa de Doctorado en Administración y Dirección de EmpresasLínea de Investigación: Innovación, Emprendimiento y Empresa FamiliarClave Programa: DAECódigo Línea: 104Entrepreneurship and new venture (NV) creation are an essential source of job creation and economic wealth (Gilbert, Mcdougall and Audretsch, 2006; Dencker, Gruber and Shah, 2009). NVs (firms in their early years of activities) are important for introducing innovations that move the economy forward (Schumpeter, 1942; McKelvie, Wiklund and Brattström, 2018) and giving solutions to social and environmental problems (Shepherd, Souitaris and Gruber, 2020). A contemporary example calling for entrepreneurship and innovation is the European Green Deal, which opens up new market opportunities related to more sustainable solutions for the planet, society and the economy (COM, 2019). To reap these benefits, NVs have to survive and grow (Shane, 2009). In so doing, NVs must implement competitive actions seeking to learn and move from an early start-up stage -having a small size, limited resources, and faced with the liability of newness (Stinchcombe, 1965)- to a growth stage in profits and customers, which will be accompanied by the hiring of new employees and thus job creation. In this dissertation, we put the focus on the overall set of competitive actions NVs going public soon after creation deploy to explain variations in their growth in the number of employees, accounting for the role of time. When entering a market, NVs can deploy different competitive actions such as introducing a new product, a marketing campaign, developing new technology, enhancing their productive capacity, or setting a strategic alliance. Altogether, these actions constitute the competitive repertoire of the NV. This repertoire can be complex (or varied) if it includes a wide and balanced range of different action types such as R&D, marketing, operations, product, internationalization, or networking related actions, among others, or simple if it includes only a few types of competitive actions. For instance, it uses only marketing moves and new product launches (Miller and Chen, 1996b; Connelly et al., 2017). Because resources are scarce in NVs, conflicts between complexity and simplicity arise due to the competing demand for resources. Despite these limited resources and the liability of newness (i.e. lack of established capabilities and legitimacy) affecting NVs (Stinchcombe, 1965), some of them start competing comprehensively, using a wide variety of competitive action types, while others concentrate on one or two types of action (Miller et al., 1996). Importantly, the complexity in the orchestration of the repertoire of competitive actions (use of resources) reflects the breadth of the underlying competences and capabilities being developed and accumulated by the firm that constitutes a key element to be recognised and developed by managers to generate sustained competitive advantages (Ferrier, Smith and Grimm, 1999; Carnes et al., 2019). However, several authors stress that the generation of competences and capabilities is a time-dependent process (Dierickx and Cool, 1989; Teece, Pisano and Shuen, 1997) and hence the importance of creating dynamic capabilities (Teece, Pisano and Shuen, 1997; Teece, 2007). Moreover, recent empirical findings suggest different performance implications of the complexity of the competitive repertoire in the short- (negative) versus the long-term (positive) (Connelly et al., 2017). In the context of NVs, this trade-off may imply the significant dilemma for the entrepreneur of choosing between exploiting the available capabilities to survive (short-term/efficient) or develop (explore) capabilities for future growth (dynamic/flexible) (Sinha, 2015; Dai et al., 2017). This is, however, not a one-time dilemma, as not all strategy choices are planned and deliberate, but some emerge (Mintzberg, 1987). Especially, as NVs learn from previous results and the competitive landscape, they can fine-tune the complexity of the repertoire. Yet, as the competition unfolds, the level of the variety of the implemented actions will be closely related in a recursive way to the extent of the capabilities and skills that are being developed and made available to the NV (Ndofor, Sirmon and He, 2011), which limits the plasticity or flexibility of subsequent competitive behaviours. Once created, capabilities cannot be changed so easily (it takes time and possibly disruption), thus establishing a dependency between subsequent and previous competitive actions that parallels the path-dependent development of the NV capabilities with possible implications for subsequent growth (Hastie, 2001; Davidsson, 2006; McMullen, 2015). It appears that over time as NVs learn, feedback effects and path dependence play an important role in the evolution of the repertoire complexity and related capabilities, and the sequence with which (action-based) information is acquired matters as it affects not only the ease or difficulty of making use of it but also what can be created from it. NVs choices differentiate them and may translate into different trajectories in terms of the variety of their actions and associated capabilities. And yet, time and sequence are often absent from empirical research on entrepreneurship (McMullen and Dimov, 2013). Most research on the evolution of the complexity of the repertoire of competitive actions refers to established firms and the competence trap (Miller, 1992b). It results from the reinforcing mechanism of the learning process that subsequently favours the selection and retention of previously successful actions leading to a pattern of simplification (Miller and Chen, 1996b; Connelly et al., 2017) that may hinder exploration and future adaptation. However, what is missing in this perspective, is the case of NVs, which lack operating history and associated inertia, where alternative patterns driven by the aspirations and exploratory nature of entrepreneurs and founding teams may be possible (Aldrich, 1999; Ben-Oz and Greve, 2015). Focusing on such complexity of NVs competitive repertoires and time (entrepreneurship as a journey, taking place over time), this dissertation particularly seeks to explore two things. First, it explores the inter-temporal change of the complexity of the competitive repertoires of NVs during their early years of operations after entering the Alternative Investment Market of the London Stock Exchange (AIM). Our interest thereby is not the repertoire of NV¿s competitive moves at points in time but the sequence of competitive moves over a period of time, capturing how the current scope or variety of choices affect the following decisions (Ferrier, 2001; Rindova, Ferrier and Wiltbank, 2010). In particular, we seek to explore the existence of typical early patterns in the complexity of the competitive repertoires of NVs. Second, it explores how NV growth is affected by the patterns of the complexity of their competitive repertoires during their early years of operations. When assessing these effects, we look at short-term growth rates versus long-term growth trends in employees over the course of several years as a measure of NV performance and an important indication of the rate of job creation by NVs. When developing our theoretical arguments, we build on organizational learning and dynamic capabilities approaches from strategic management research in general and the Awareness-Motivation-Capability framework from competitive dynamics research in particular. Furthermore, we build on insights from the literature of NV growth that highlights the importance of exploring the process of (sequence of actions leading to) NV growth to explain the amount or quantity of different growth indicators (Davidsson, Delmar and Wiklund, 2006; Davidsson, Achtenhagen and Naldi, 2010; McKelvie and Wiklund, 2010). We test our predictions drawing on a unique purposely created database on a sample of NVs that operate in various service industries tracked during their early years of operations and go public soon after creation. The research relies on data collected using a content analysis research design applied to the letter of the Chairman or CEO to the NV stakeholders included in their annual reports, combined with time-series clustering and econometric analysis. We find evidence of the existence of four different patterns in the complexity of the competitive repertoires of NVs, two stable at either low or high levels of complexity and two changing to either lower or higher levels of complexity. We find as well that the stable versus changing patterns vary in their short-term growth rates and long-term growth trend, indicating the existence of a trade-off in terms of growth between stable and changing patterns. Our findings have important implications for research on competitive dynamics and entrepreneurship and for practice.Universidad Pablo de Olavide de Sevilla. Departamento de Organización de Empresas y Marketin

A quality approach to real-time smartphone and citizen-driven food market price data: The case of Food Price Crowdsourcing Africa (FPCA) in Nigeria

Timely and reliable monitoring of commodity food prices is an essential requirement for the assessment of market and food security risks and the establishment of early warning systems, especially in developing economies. However, data from regional or national systems for tracking changes of food prices in sub-Saharan Africa lacks the temporal or spatial richness and is often insufficient to inform targeted interventions. In addition to limited opportunity for [near-]real-time assessment of food prices, various stages in the commodity supply chain are mostly unrepresented, thereby limiting insights on stage-related price evolution. Yet, governments and market stakeholders rely on commodity price data to make decisions on appropriate interventions or commodity-focused investments. Recent rapid technological development indicates that digital devices and connectivity services are becoming affordable for many, including in remote areas of developing economies. This offers a great opportunity both for the harvesting of price data (via new data collection methodologies, such as crowdsourcing/crowdsensing — i.e. citizen-generated data — using mobile apps/devices), and for disseminating it (via web dashboards or other means) to provide real-time data that can support decisions at various levels and related policy-making processes. However, market information that aims at improving the functioning of markets and supply chains requires a continuous data flow as well as quality, accessibility and trust. More data does not necessarily translate into better information. Citizen-based data-generation systems are often confronted by challenges related to data quality and citizen participation, which may be further complicated by the volume of data generated compared to traditional approaches. Following the food price hikes during the first noughties of the 21st century, the European Commission's Directorate General for International Cooperation and Development (DG DEVCO) started collaborating with the European Commission’s Joint Research Centre (JRC) on innovative methodologies for real-time food price data collection and analysis in developing countries. The work carried out so far includes a pilot initiative to crowdsource data from selected markets across several African countries, two workshops (with relevant stakeholders and experts), and the development of a spatial statistical quality methodology to facilitate the best possible exploitation of geo-located data. Based on the latter, the JRC designed the Food Price Crowdsourcing Africa (FPCA) project and implemented it within two states in Northern Nigeria. The FPCA is a credible methodology, based on the voluntary provision of data by a crowd (people living in urban, suburban, and rural areas) using a mobile app, leveraging monetary and non-monetary incentives to enhance contribution, which makes it possible to collect, analyse and validate, and disseminate staple food price data in real time across market segments.JRC.D.4-Economics of Agricultur

Using web and mobile phone technologies to collect food market prices in Africa. Approaching real-time data and use of crowdsourcing, 2013 - 2016

Large agricultural commodity price swings observed in recent years have made the importance of accessible, timely, accurate and frequently updated price data more obvious. This study investigates the potential of innovative web and mobile phone technologies and alternative data collection methods such as crowdsourcing in order to collect food price data in Africa. The report summarises these experiences through the lessons learned and provides a detailed overview and assessment of different aspects of the collected data that can be of help for the success of future food price collection exercises.JRC.D.4-Economics of Agricultur

Market transparency: Costs of external data reporting by private operators in the EU agri-food supply chain

Market transparency in the agri-food supply chain has been subject to intensive analysis in scientific literature and has recently been under renewed policy attention in the EU. This report contributes to the discussion on market transparency by presenting findings on estimates by operators in EU agri-food supply chains, of the costs of providing information to a third party in order to comply with a reporting obligation to help improve market transparency. The secondary objective of this report is to analyse potential benefits and risks from increased market transparency, as perceived by operators in the agri-food supply chain. The analyses are based on an online survey and structured interviews conducted among operators in the agri-food supply chain between 23 October 2018 and 5 February 2019.JRC.D.4-Economics of Agricultur

Estimation of food demand parameters in Ethiopia

In this study we analyse the structure of food demand in Ethiopia to better understand the evolution of food demand under volatile prices and household income vulnerability. In particular, this report aims to estimate the income and price elasticities of the demand of main agricultural and food commodities for Ethiopian households by using state of the art methods and recent data to inform the policy making process with better information. The income and price elasticities measure the responsiveness of quantity of food demanded to changes in income and prices, respectively, and hence contribute to the discussions about policies related to food security. Further, they are important inputs for structural models that are developed by the JRC to support the stakeholders in Ethiopia on nutrition and food security. Using a QUAIDS approach controlling for the potential endogeneity of both expenditure and prices and data from the 2015-2016 Ethiopian Socioeconomic Survey/LSMS-ISA, we find that cereals and animal products are superior (luxury) goods relative to other crops and manufactured food products that appear to be basic necessities. Further, cereals and animal products are elastic to price changes with high substitution effect, while manufactured foods and other crops are inelastic and unit elastic respectively to price changes with low substitution effect, thus confirming their status of essential foods for Ethiopian households. Finally, expenditure elasticities at regional level show a similar pattern that the national one, but price elasticities vary across regions.JRC.D.4-Economics of Agricultur

Evidence from the "Food Price Crowdsourcing in Africa" (FPCA) project in Nigeria

This report presents a summary of the discussions that took place during the Food Price Crowdsourcing Africa (FPCA) workshop with relevant stakeholders at the EU Delegation of Abuja, Nigeria on the 24th September 2019. The workshop had a double purpose: (a) to provide an overview of the work done at the Joint Research Centre (JRC) of the European Commission, in particular of the JRC-D4- Economics of Agriculture Unit’s activities in the areas of agriculture, trade, markets and development in Europe and Sub Saharan Africa, and (b) to present and exchange ideas and perspectives on the results of the FPCA project implemented in Nigeria between September 2018 and June 2019. The main objective of the FPCA project was to test a crowdsourcing or citizen-driven approach to collect, quality check, structure and make easily accessible in real-time through an online dashboard data on food prices at different stages of the food chain from voluntary data contributions of citizens of varying knowledge, heterogeneity and number, by using a smartphone app. Timely and reliable data on food prices are of interest to food supply chain participants as well as to government and other organisations to plan and implement appropriate interventions. The online price indicator dashboard is accessible at the following link (1): https://datam.jrc.ec.europa.eu/datam/mashup/FP_NGA/index.htmlJRC.D.4-Economics of Agricultur