Interpreting Performance in Small Business Research

For obvious reasons, researchers and policy-makers alike have an interest in assessing the performance of small firms as well as in understanding the factors that contribute to it. Attaining such knowledge is not a trivial undertaking. Researchers have pointed out that the performance of small firms can be difficult to assess (Brush & Vanderwerf, 1992)—e.g., because reliable data cannot be obtained—and also difficult to predict (Cooper, 1995). In this paper I will discuss the equally important and difficult issue of how research results regarding small business performance and its predictors can or should be interpreted. In particular, I will discuss whether commonly used performance indicators like survival vs. non-survival and growth vs. non-growth really reflect ‘good’ vs. ‘bad’ performance, as is commonly assumed. Although theory and other researchers’ findings will also be used to some extent, my exposition will rely primarily on experiences and illustrations from a number of research projects I have been directly involved in during the last 20 years. The paper proceeds as follows. I will first question the assumption that business discontinuance—often called ‘failure’—is a ‘bad’ outcome that best should be avoided from the aggregate perspective of the economic system. I will then continue to discuss ‘failure’ from more of a micro-perspective, arguing that most instances of discontinuation of new or emerging firms are not associated with substantial financial losses and do not necessarily represent efforts that should have been avoided. Staying at the micro level I will then turn to the issue of firm growth and the conditions under which growth represents a ‘good’ outcome from the perspective of the firm’s principal stakeholders. I will then return to the aggregate level and discuss the extent to which firm level employment growth translates to net increases of employment in the economy. Finally, the implications of the issues raised in the paper will be restated and discussed in the concluding section of the paper

An Analytical Overview of Labour Market Reforms Across the EU: Making Sense of the Variation

While there has been an increase in interest in employment protection, for example in the literature on labour market insiders and outsiders, there is a lack of cross-country comparative research on reforms of the employment protection legislation and the regulation of temporary work. This article provides such an overview for a wide set of countries including the EU-15 plus five Central and Eastern European countries: the Czech Republic, Hungary, Poland, Slovakia and Slovenia. It makes two contributions: first, it identifies a set of reform types. One major reform type, two-tier reform, and several minor types: deregulation of temporary employment in countries with low levels of job protection for regular work; reregulation in countries with high levels of temporary employment; reregulation in countries with low regulation of temporary work; and across-the-board concurrent deregulation. Second, the article highlights the difference in regulation that exists between fixed-term contracts concluded inside and outside temporary work agencies (TWAs). In identifying reform types, and the difference in the regulation of fixed-term contracts inside and outside TWAs, the article contributes to our understanding of the variation in labour market regulation and reform. In addition, the article points to different explanations for the reforms, in particular the influence of EC directives.

Venture idea newness, relatedness and performance in nascent ventures

Principal Topic The study of the origin and characteristics of venture ideas - or ''opportunities'' as they are often called - and their contextual fit are key research goals in entrepreneurship (Davidsson, 2004). We define venture idea as ''the core ideas of an entrepreneur about what to sell, how to sell, whom to sell and how an entrepreneur acquire or produce the product or service which he/she sells'' for the purpose of this study. When realized the venture idea becomes a ''business model''. Even though venture ideas are central to entrepreneurship yet its characteristics and their effect to the entrepreneurial process is mysterious. According to Schumpeter (1934) entrepreneurs could creatively destruct the existing market condition by introducing new product/service, new production methods, new markets, and new sources of supply and reorganization of industries. The introduction, development and use of new ideas are generally called as ''innovation'' (Damanpour & Wischnevsky, 2006) and ''newness'' is a property of innovation and is a relative term which means that the degree of unfamiliarity of venture idea either to a firm or to a market. However Schumpeter's (1934) discusses five different types of newness, indicating that type of newness is an important issue. More recently, Shane and Venkataraman (2000) called for research taking into consideration not only the variation of characteristics of individuals but also heterogeneity of venture ideas, Empirically, Samuelson (2001, 2004) investigated process differences between innovative venture ideas and imitative venture ideas. However, he used only a crude dichotomy regarding the venture idea newness. According to Davidsson, (2004) as entrepreneurs could introduce new economic activities ranging from pure imitation to being new to the entire world market, highlighting that newness is a matter of degree. Dahlqvist (2007) examined the venture idea newness and made and attempt at more refined assessment of the degree and type of newness of venture idea. Building on these predecessors our study refines the assessment of venture idea newness by measuring the degree of venture idea newness (new to the world, new to the market, substantially improved while not entirely new, and imitation) for four different types of newness (product/service, method of production, method of promotion, and customer/target market). We then related type and degree of newness to the pace of progress in nascent venturing process. We hypothesize that newness will slow down the business creation process. Shane & Venkataraman (2000) introduced entrepreneurship as the nexus of opportunities and individuals. In line with this some scholars has investigated the relationship between individuals and opportunities. For example Shane (2000) investigates the relatedness between individuals' prior knowledge and identification of opportunities. Shepherd & DeTinne (2005) identified that there is a positive relationship between potential financial reward and the identification of innovative venture ideas. Sarasvathy's 'Effectuation Theory'' assumes high degree of relatedness with founders' skills, knowledge and resources in the selection of venture ideas. However entrepreneurship literature is scant with analyses of how this relatedness affects to the progress of venturing process. Therefore, we assess the venture ideas' degree of relatedness to prior knowledge and resources, and relate these, too, to the pace of progress in nascent venturing process. We hypothesize that relatedness will increase the speed of business creation. Methodology For this study we will compare early findings from data collected through the Comprehensive Australian Study of Entrepreneurial Emergence (CAUSEE). CAUSEE is a longitudinal study whose primary objective is to uncover the factors that initiate, hinder and facilitate the process of emergence and development of new firms. Data were collected from a representative sample of some 30,000 households in Australia using random digit dialing (RDD) telephone survey interviews. Through the first round of data collection identified 600 entrepreneurs who are currently involved in the business start-up process. The unit of the analysis is the emerging venture, with the respondent acting as its spokesperson. The study methodology allows researchers to identify ventures in early stages of creation and to longitudinally follow their progression through data collection periods over time. Our measures of newness build on previous work by Dahlqvist (2007). Our adapted version was developed over two pre-tests with about 80 participants in each. The measures of relatedness were developed through the two rounds of pre-testing. The pace of progress in the venture creation process is assessed with the help of time-stamped gestation activities; a technique developed in the Panel Study of Entrepreneurial Dynamics (PSED). Results and Implications We hypothesized that venture idea newness slows down the venturing process whereas relatedness facilitates the venturing process. Results of 600 nascent entrepreneurs in Australia indicated that there is marginal support for the hypothesis that relatedness assists the gestation progress. Newness is significant but is the opposite sign to the hypothesized. The results give number of implications for researchers, business founders, consultants and policy makers in terms of better knowledge of the venture creation process

Understanding venture idea newness, relatedness and change among nascent and young entrepreneurs

The entrepreneurial process involves all the functions, activities, and actions associated with the perception of opportunities and the creation of the organizations to pursue these opportunities (cf. Key, Foo and Lim, 2002). Shane and Venkataraman (2000) introduced entrepreneurship as a nexus between the opportunity and entrepreneurial individuals. Thus, opportunities are an important part and central to the entrepreneurial process. Following Davidsson (2003) we here use the concept ''venture idea'' rather than ''opportunities''. Venture ideas are ideas for new products or services or bundles; introducing new price/value relations; imitative entry and entering new markets (Davidsson, 2003). This implies that venture ideas are the core ideas of an entrepreneur about what to sell, how to sell, whom to sell and how an entrepreneur acquire or produce the product or service which he/she sells. Timmons (1994) states that the finding a good idea is the first step in the task of converting an entrepreneur's creativity in to an opportunity. Explaining the development of venture ideas or - as they are often called - 'opportunities' is regarded as a key research goal in entrepreneurship (Davidsson, Hunter and Klofsten, 2006). For example, since the ideas have differentiating effects on the discovery and exploitation processes as well as on profitability and potential market impact the identifying and selecting the right venture ideas for new businesses are among the most important abilities of a successful entrepreneur (Ardichvili, Cardozo and Ray, 2003) Even though the opportunity, its recognition and exploitation have been extensively discussed and researched among researchers around the world (Bhave, 1994; Casson, 1982; Davidsson, 2003; Kirzner, 1973; Sarsvathy, Dew, Ramakrishna & Venkataraman, 2003; Shane, 2000; Shane & Venkataraman, 2000; Venkataraman,1997) there is a scarcity of research carried out on the characteristics of those opportunities and how such characteristics affect, e.g., firm performance , growth or survival. The importance of investigating such questions is exemplified by Samuelsson (2004), who found that the gestation process and its determinants were vastly different for innovative vs. imitative ventures. In this research we investigate how three aspects of venture ideas affect the pace at which progress is made in the venture creation process. Bhave (1994) argues that the venture creation process is more complex or difficult for novel business ideas. For this reason we assess and estimate the effects of four aspects of newness: the procuct/service itself; the method for promotion and selling; the methods for producing or sourcing, and newness in terms what markets or customers are served or targeted. Shane (2000) demonstrated that prior knowledge of the founders is an important factor in venture development. Similarly, Sarasvathy's (2001) Effectuation Theory proposes a high degree of relatedness with founders' knowledge and means. Hence, we assess and estimate the effects of the degree of alignment of the venture ideas with the prior knowledge and skills of the founders as well as with the financial, physical and other resources they had access to. Further, since entrepreneurs operate in an environment of heterogeneous and uncertain, they have to change their original business ideas time to time (Davidsson, Hunter, Klofsten, 2006). Presumably, changes of the venture idea could either facilitate or complicate the gestation process. In order to explore this we also assess and estimate the effect of the extent of change of the business idea that have been made. We investigate this for the same four aspects as for which we assess newness. Methodology/Key Propositions For this study we will compare early findings from data collected through the CAUSEE. CAUSEE is a longitudinal study whose primary objective is to describe how new venture come into existence. Data was collected from a representative sample of some 25,000 households in Australia using random digit dialling (RDD) telephone survey interviews. Included in the study are the approximately 600 cases where the respondent is currently involved in a business start-up, and another 600 who are owners of an up-and-running firm started in the last three years, in both cases where the respondent is also willing to participate in the study. The unit of the analysis is the emerging venture, with the respondent acting as its spokesperson. The study methodology allows researchers to identify ventures in early stages of creation and to longitudinally follow their progression through data collection periods over time. Our measures of newness build on previous work by Dahlqvist (2007). Our adapted version was developed over two pre-tests with about 80 participants in each. The measures of relatedness and change were newly developed through the two rounds of pre-testing. The pace of progress in the venture creation process is assessed with the help of time-stamped gestation activities; a technique developed in the Panel Study of Entrepreneurial Dynamics (PSED) (see Gartner et al., 2004). Results and Implications Data collection is under way at the time of this writing. The results will help develop better knowledge of the venture creation process and its success factors, enabling better theory as well as more adequate dissemination of practical advice through teaching and consultancy

Re-examining And Extending Penrose's Growth Theory: Updating Penrose For The 21St Century

Edith Penrose argued that firms face a constraint on organic growth because of growth activities in previous periods. Central to her ideas about growth is the distinction between managerial and entrepreneurial capabilities. Growth in previous periods creates adjustment costs which are associated with managerial capabilities and impacts on the growth opportunities which are associated with entrepreneurial capabilities. In this paper we revisit Penrose’s work to examine how the nature of growth in previous periods may effect growth in the current period. Employing a panel of all commercially active enterprises in the private (non-government) sector in Sweden over a 10 year period our results indicate that previous organic growth acts as a constraint on organic growth, however, acquisitive growth may act as a catalyst for organic growth. Based on these findings, we suggest extensions Penrose’s to growth theory

The role of human capital and strategic intent in internationalisation scope of new technology-based firms

This paper explores the internationalization scope of new technology based firms (NTBFs) during their early years of operation. Internationalization is considered as a growth strategy in its own right whose successful implementation requires relevant resources and capabilities. We focus on the role of human capital in the form of the international experience of the firm founders, and its interaction with the strategic intent to internationalize from the outset. Our analysis of a sample of 466 cases of UK and German NTBFs shows that human capital is a key success factor for international growth strategies. This human capital is an asset strongly facilitating the penetration of foreign markets, but it also appears that it is much more influential when backed up by a deliberate strategic intent to internationalize from the inception of the new venture. Similar conclusions can be drawn for the scale of entrepreneurial resources dedicated to the start-up: the higher they are, the higher the scope of internationalization, and scale is also leveraged by strategic intent

Presidential Popular Constitutionalism

This Article adds a new dimension to the most important and influential strand of recent constitutional theory: popular or democratic constitutionalism, the investigation into how the U.S. Constitution is interpreted (1) as a set of defining national commitments and practices, not necessarily anchored in the text of the document, and (2) by citizens and elected politicians outside the judiciary. Wide-ranging and groundbreaking scholarship in this area has neglected the role of the President as a popular constitutional interpreter, articulating and revising normative accounts of the nation that interact dynamically with citizens’ constitutional understandings. This Article sets out a “grammar” of presidential popular constitutionalism, lays out the historical development and major transformations in its practice, proposes a set of thematic alternatives for today’s presidential popular constitutionalism, and locates presidential popular constitutionalism within the larger concerns of constitutional theory. In particular, it argues that some of the major political developments of recent decades, such as the “Reagan revolution” and the Clinton-Bush era, can be fully understood only by grasping that they are episodes in presidential popular constitutionalism

Early stage start-ups: Evidence from the Comprehensive Australian Study of Entrepreneurial Emergence (CAUSEE)

In this chapter, the picture of Australian small business is supplemented by using data from the Comprehensive Australian Study of Entrepreneurial Emergence (CAUSEE) . This data tracks large numbers of on-going business start-ups over time. The Australian Centre of Entrepreneurship Research at Queensland University of Technology collected data in four annual waves. (Wave 1 to Wave 4) from 2007 to 2011. CAUSEE allows the analysis of entrepreneurial entrants at two stages of development, i.e. nascent and young firms. Nascent firms are defined as firms in the process of being created, but not yet established in the market, and young firms are defined as having been operational for up to four years. An analysis of nascent firms provides unique insights, as no other known Australian database captures and follows the development of business start-ups at the pre-operational stage. In addition, the project captured judgment over samples of high-potential start-ups

Entrepreneurial bricolage and firm performance: some preliminary findings

The behavioral theory of “entrepreneurial bricolage” attempts to understand what entrepreneurs do when faced with resource constraints. Most research about bricolage, defined as “making do by applying combinations of the resources at hand to new problems and opportunities” (Baker & Nelson 2005: 333), has been qualitative and inductive (Garud & Karnoe, 2003). Although this has created a small body of rich descriptions and interesting insights, little deductive theory has been developed and the relationship between bricolage and firm performance has not been systematically tested. In particular, prior research has suggested bricolage can have both beneficial and harmful effects. Ciborra’s (1996) study of Olivetti suggested that bricolage helped Olivetti to adapt, but simultaneously constrained firm effectiveness. Baker & Nelson (2005) suggested that bricolage may be harmful at very high levels, but more helpful if used judiciously. Other research suggests that firm innovativeness may play an important role in shaping the outcomes of bricolage (Anderson 2008). In this paper, we theorize and provide preliminary test of the bricolage-performance relationship and how it is affected by firm innovativeness