Foundational Works – Pre 2000
Andrew Corbett1, Lally School of Management & Technology
E*ntrepreneurship Faculty Development Workshop
Fischback Room, Folsom Library
Rensselaer Polytechnic Institute
June 2, 2008
Obviously this is not a complete review of the entrepreneurship literature. Instead this document
represents some of the classic works published previous to 2000, and also comes from my perspective as
a strategy scholar who focuses on corporate entrepreneurship and psychological constructs. It should
serve as a platform for you to begin to investigate in greater depth concepts important to you. Current
conversations in entrepreneurship will be covered elsewhere during this workshop.
Table of Contents
Significant Events in the Evolution of the Entrepreneurship Field....................................4
Definitions of Entrepreneurship.........................................................................................6
Topic Areas in the Field of Entrepreneurship....................................................................8
Annotated Entrepreneurship Bibliography.......................................................................10
Useful Theories for Entrepreneurship Research...............................................................56
SIGNIFICANT EVENTS IN THE EVOLUTION OF THE FIELD
PRECURSORS TO THE FIELD OF ENTREPRENEURSHIP
1700s Richard Cantillion: entrepreneurship as the act of selling products at an unpredictable
and uncertain price. (economist)
1800s Jean Baptise Say: entrepreneur is a broker taking risk. (economist)
1920s Frank Knight: skill of entrepreneur is in his ability to handle uncertainty. (economist)
1934 Joseph Schumpeter The Theory of Economic Development: disequilibrium through
creative destruction. (economist)
1947 1st entrepreneurship course offered at Harvard Business School
1956 National Council for Small Business Management started after conference at the
University of Colorado. (Name changed to ICSB in 1977)
1958 3-year SBA Small Business Research Program started (98 studies)
1959 Edith Penrose The Theory of the Growth of the Firm: entrepreneurial services,
exploiting opportunities, interstices (economist)
1968 Babson 1st to offer undergraduate major in entrepreneurship
1970s – ENTREPRENEURSHIP EMERGES AS AN ACADEMIC DISCIPLINE
1970 1st entrepreneurship academic conference at Purdue University
1970 Collin and Moore Organization Makers: A behavioral study of independent
1972 USC offers 1st MBA major in entrepreneurship
1973 Israel Kirzner Competition and Entrepreneurship: alertness & ent. discovery
1974 Entrepreneurship interest group developed as part of BPS division of AOM
1975 American Journal of Small Business begins publication (named ETP in 1988)
1980s – PERSON TO PROCESS RESEARCH
1980 1st “State of the Art” research conference
1981 1st Babson entrepreneurship research conference
1982 “State of the Art” Volume 1: Encyclopedia of Entrepreneurship
1985 Journal of Business Venturing begins publication
1986 “State of the Art” Volume 2: The Art and Science of Entrepreneurship
1987 Entrepreneurship becomes its own division at AOM
1988 Entrepreneurship Theory & Practice begins publication
1990s – IN SEARCH OF A PARADIGM; IN SEARCH OF LEGITIMACY
1992 “State of the Art” Volume 3: The State of the Art in Entrepreneurship Research
1997 “State of the Art” Volume 4: Entrepreneurship 2000
1998 Study commissioned on Doctoral Education in Entrepreneurship
1999 Journal of Small Business Strategy begins publication
DEFINITIONS OF ENTREPRENEURSHIP
“Entrepreneur” is French and, literally translated, means “between-taker” or “go-between” (Hisrich & Peters, 1998).
Schumpter (1934) Entrepreneurship is seen as new combinations including the doing of new things or the doing of things that are already
being done in a new way. New combinations include 1)introduction of new good, 2)new method of production, 3)opening
of a new market, 4)new source of supply, 5)new organizations. Entrepreneur disrupts equilibrium.
Penrose (1959) Distinguished between entrepreneurial and managerial services. ESs refer to those contributions to the operations of a firm
which relate to the introduction and acceptance on behalf of the firm of new ideas such as new products, locations,
significant changes in technology, acquisition of new management personnel, fundamental changes in the administrative
organization, raising capital, making of plans for expansion. Managerial services execute entrepreneurial services.
Entrepreneurs provides ESs.
Kirzer (1973) The entrepreneur is a decision maker whose entire role arises out of his alertness to unnoticed opportunities; therefore,
entrepreneurship is the ability to perceive new opportunities. This recognition and seizing of the opportunity will tend to
“correct” the market and bring it back toward equilibrium. “Entrepreneurial Discovery”
Drucker (1985) Entrepreneurship is an act of innovation that involves endowing existing resources with new wealth producing capacity.
Rumelt (1987) Entrepreneurship is the creation of new businesses. New business meaning that they do not exactly duplicate existing
businesses but have some element of novelty.
Low & MacMillan (1988) Entrepreneurship is the creation of new enterprise.
Gartner (1988) Entrepreneurship is the creation of organizations, the process by which new organizations come into existence.
Entrepreneurship ends when the creation stage of the organization ends.
Stevenson et al. (1989) Entrepreneurship is the pursuit of an opportunity w/o concern for current resources or capabilities.
Amit, Glosten & Muller (1993) Entrepreneurship is the process of extracting profits from new, unique, and valuable combinations of resources in an
uncertain and ambiguous environment.
Timmons (1994) Entrepreneurship is creating and building something of value from practically nothing. That is, entrepreneurship is the
process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled. (textbook)
Venkataraman (1997) Entrepreneurship research seeks to understand how opportunities to bring into existence future goods and services are
discovered, created, and exploited, by whom, and with what consequences.
Getting to Know the Field of Entrepreneurship
Aldrich, H. E., & Baker, T. 1997. Blinded by the cites? Has there been progress in
entrepreneurship research?. In D. L. Sexton & R. W. Smilor (Eds.), Entrepreneurship 2000,
377-400. Chicago: Upstart Publishing.
The authors contend that the answer to the question of entrepreneurship research progress depends upon
one’s assumption about the scientific and normative structure of the field. Accordingly, progress is
subdivided into, and examined from, three viewpoints: a unitary, normal science view, a multiple
paradigm view, and a totally pragmatic view. The authors conclude that not much has changed over the
last fifteen years other than a decisive break with journalistic and armchair methods by journals after
Amit, R., Glosten, L., & Muller, E. 1993. Challenges to theory development in entrepreneurship
research. Journal of Management Studies, 30(5): 815-834.
Entrepreneurship research is plagued by fundamental unanswered questions, for which there does not
exist a cohesive, explanatory, predictive, or normative theory. The study of entrepreneurship spans a
wide range of fields including decision sciences, economics, management, sociology, and psychology. A
theory of entrepreneurship is defined as a verifiable and logically coherent formulation of relationships,
or underlying principles that either explain entrepreneurship, predict entrepreneurial activity, or provide
normative guidance. A study focuses on challenges to theory development by drawing on all of the
fields, yet emphasizes the economic and financial theory perspectives. Any unresolved issues that relate
to the role of entrepreneurs and to the concept of entrepreneurship are highlighted. The available
theoretical literature is classified into several categories, and the purpose and perspective of the theories
Baumol, W. J. 1993. Formal entrepreneurship theory in Economics: Existence and bounds. Journal
of Business Venturing, 8(3): 197-210.
The reasons for the paucity of formal analyses of the role of the entrepreneur are examined. It is shown
that there is room for useful and illuminating analysis of entrepreneurship and several examples of new
theoretical work on the subject, leading to concrete results, are provided. Specifically, the subjects
examined as illustrations of the theory are the influences that determine the allocation of
entrepreneurship and differences in the resulting contribution to production; the role of the entrepreneur
in technology transfer and its importance for the economy; and the optimal timing of the introduction to
the market of an innovation whose development and improvement is a continuous process.
Bull, I., & Willard, G. E. 1993. Towards a theory of entrepreneurship. Journal of Business
Venturing, 8(3): 183-196.
A summary of the current state of the development of theory of entrepreneurship is provided along with a
background for five papers presented at a recent Conference on Entrepreneurship Theory. The problems
of multiple and conflicting definitions and the exclusion of parallel research on the subject is discussed.
The adoption of Schumpeter's definition of an entrepreneur and an economic outcome approach to the
study of entrepreneurship is proposed. A tentative theory of entrepreneurship is proposed, and
opportunities for further research are suggested.
Bygrave, W. D., & Hofer, C. W. 1991. Theorizing about entrepreneurship. Entrepreneurship
Theory & Practice, 16(2): 13-22.
In entrepreneurship research, it may be useful to shift the focus from the characteristics and functions of
the entrepreneur and the many definitions of what constitutes an entrepreneur to a focus on the nature and
characteristics of the entrepreneurial process. Important characteristics of this process include: 1. the
importance of human volition, 2. change occurring at the level of the individual firm, 3. a change of
state, 4. discontinuity, 5. entrepreneurship as a holistic, dynamic, and unique process, 6. the role of
numerous antecedent variables, and 7. sensitivity to the initial conditions of these variables. These
characteristics create a set of parameters and criteria that will have to be met by any ideal model of
entrepreneurship. Entrepreneurship researchers pursuing mathematical models should abandon the
Getting to Know the Field of Entrepreneurship
linear, incremental thinking that regression models inculcate, because alternative models can better deal
with such entrepreneurial processes as discontinuities and changes of state.
Cheah, H. 1990. Schumpeterian and Austrian entrepreneurship: Unity within duality. Journal of
Business Venturing, 5(6): 341-347.
The different ways that J. A. Schumpeter and his Austrian critics conceived of entrepreneurship are
examined. The distinction between Schumpeterian and Austrian entrepreneurs identifies the dual nature
of entrepreneurship and strengthens the theoretical foundation of the research in this field by linking it
more closely to propositions that originate from Schumpeter and these critics. The resulting better
perspective leads to a greater appreciation of the significant roles that the 2 modes of entrepreneurship
can play in the evolutionary development process. The distinction between Schumpeterian and Austrian
entrepreneurs is sufficiently comprehensive to encompass all types of entrepreneurs, whether in small or
large businesses or in new or established enterprises. Propositions arising from the analysis provide a
useful model of the entrepreneurial process.
Gartner, W. 1985. A conceptual framework for describing the phenomenon of new venture
creation. Academy of Management Review, 14 (4): 696-706.
A review of the entrepreneurship literature indicates that differences among entrepreneurs and among
their ventures are as great as those between entrepreneurs and nonentrepreneurs and between new firms
and established firms. Once this diversity among entrepreneurs and their ventures is recognized, the need
to find a way to classify them becomes obvious. An attempt is made to organize the many variables that
have been used in previous research in order to describe entrepreneurs and their ventures in a
comprehensive framework. A framework is presented that integrates 4 major perspectives in
entrepreneurship: 1. characteristics of the individual(s) who start the venture, 2. the organization that is
created, 3. the environment around the new venture, and 4. the process by which the new venture is
launched. The primary value of this framework is that it provides a systematic means of comparing and
contrasting complex ventures and a way to conceptualize variation and complexity.
Gartner, W. B. 1990. What are we talking about when we talk about entrepreneurship? Journal of
Business Venturing, 5(1): 15-28.
A study explored the underlying meanings researchers amd practitioners have about entrepreneurship and
outlined themes that characterize the major issues and concerns in the debate over entrepreneurship as a
field of study. The process utilized to identify the themes took the form of a policy Delphi, constructed
as a series of 3 questionnaires. In the first phase, a questionnaire asked for a definition of
entrepreneurship from leading academic researchers, business leaders, and politicians. In phase 2, the
definitions were sent back to the 44 respondents, with 90 identified attributes. Factor analysis clustered
the attributes into 8 factors: the entrepreneur, innovation, organization creation, value creation, profit or
nonprofit, growth, uniqueness, and the owner-manager. In the 3rd phase, 41 participants were asked to
evaluate the 8 factors. A cluster analysis revealed that 79% of the participants focused on the
characteristics of entrepreneurship, looking at what happened in the situation.
Gartner, W. B. 1993. Words lead to deeds: Toward an organizational emergence vocabulary.
Journal of Business Venturing, 8(3): 231-240.
The words people use to talk about entrepreneurship influence their ability to think about this
phenomenon, and subsequent to these thoughts, direct actions toward research that might be conducted
on this topic. Some words are offered to be included in a lexicon on organizational emergence: being,
circumstance, emerge, emergence, emergency, emergent evolution, equivocal, found, founder, genesis,
and variation. These words are discussed and directions for research on organizational emergence are
Gartner, W. B., Bird, B. J., & Starr, J. A. 1992. Acting as if: Differentiating entrepreneurial from
organizational behavior. Entrepreneurship Theory & Practice, 16(3): 13-32.
Getting to Know the Field of Entrepreneurship
Some relationships between the entrepreneuship and organizational behavior disciplines are proposed. It
is suggested that thinking of entrepreneurship as the process of "emergence" offers a fruitful metaphor for
relating entrepreneurship to other disciplines. An organizational behavior perspective on
entrepreneurship would focus on the process of organizational emergence. The usefulness of the
emergence metaphor is explored by examining 2 questions that are the focus of much of the research in
organizational behavior: 1. What do people in organizations do? 2. Why do they do what they do? The
fundamental property of emergence will require entrepreneurship theorists to acquire and appreciate
property a broad array of methodologies and theoretical approaches to understanding this phenomenon.
Much of the task of generating theory about entrepreneurship will be in understanding both the emerging
world and the existing world and in thoughtfully probing how connections between these 2 worlds can be
Hofer, C. W., & Bygrave, W. D. 1992. Researching entrepreneurship. Entrepreneurship Theory &
Practice, 16(3): 91-100.
There are 9 important aspects of the entrepreneurial process: 1. It is initiated by an act of human
volition. 2. It occurs at the level of the individual firm. 3. It involves a change of state. 4. It involves
a discontinuity. 5. It is a holistic process. 6. It is a dynamic process. 7. It is unique. 8. It involves
numerous antecedent variables. 9. It generates outcomes that are extremely sensitive to the initial
conditions of those variables. It is argued that these characteristics have substantial implications not only
for theory building, but also for the practice of researching entrepreneurship. More specifically, all
aspects of the research process are affected by the unique characteristics of the entrepreneurship process.
The traditional methods of the research process will be supplemented by other approaches that in many
instances better fit the the unique characteristics of the entrepreneurship process. It is imperative that
these methodologies be incorporated into future research.
Kirzner, I. 1997. Entrepreneurial discovery and the competitive market process: An Austrian
approach. Journal of Economic Literature, 35(1): 60-85.
The Austrian tradition is represented in modern economics by a very vocal, feisty and dedicated subset of
the economics profession. Much of the work of this group of scholars is devoted to the most fundamental
problems of microeconomics. The Austrian work, therefore, differs in character and content from a good
deal of neoclassical theory which, despite widespread and growing awareness of its limitations, continues
to serve as the analytical core of mainstream economics. The outline of one important approach, the
entrepreneurial discovery approach, within modern Austrian economics is presented. This approach
offers a perspective on microeconomic theory which is not ordinarily well-represented either at the
textbook level, or in the journal literature.
Long, W. 1983. The meaning of entrepreneurship. American Journal of Small Business, 8(2): 47-56.
Reviewed are various definitions of entrepreneurship employed by a number of theoretical economists,
beginning with Cantillon (circa 1730). Entrepreneurship is frequently defined as involving: 1.
uncertainty and risk, 2. complementary managerial competence, and 3. creative opportunism. Modern
definitions that exclude any of these 3 fundamental dimensions are basically incomplete. These
dimensions suggest definitional boundaries circumscribing the essential qualities of entrepreneurship.
The definition serves as a hypothesis that permits research direction and theoretical integration, which in
turn, would ultimately strengthen the practice of entrepreneurship. Among others, the definitions of
entrepreneurship of Say (circa 1810), Marshall (circa 1890), Schumpeter (circa 1910), and Knight (circa
1920) are examined.
Low, M. B., & MacMillan, I. C. 1988. Entrepreneurship: Past research and future challenges.
Journal of Management, 14(2): 139-161.
Past research on entrepreneurship is reviewed within the context of 6 design dimensions: 1. purpose, 2.
theoretical perspective, 3. focus, 4. level of analysis, 5. time frame, and 6. methodology. Researchers
Getting to Know the Field of Entrepreneurship
should state their purpose clearly and link it to the more fundamental purpose of explaining and
facilitating the role of new enterprise in economic progress. Theoretical assumptions also should be
outlined and new perspectives explored. The trend from deterministic personality and cultural theories
toward more contextual and process-oriented research should be continued as should multilevel studies
that provide a broader understanding of entrepreneurial phenomena. Studies that employ wide time
frames are important, as well as those that investigate causality more aggressively. These design issues
also should help the entrepreneur translate theoretical and empirical research into useful knowledge and
MacMillan, I. C., & Katz, J. A. 1992. Idiosyncratic milieus of entrepreneurial research: The need
for comprehensive theories. Journal of Business Venturing, 7(1): 1-8.
Idiosyncratic milieus refer to research situations extremely difficult to study because of their obscurity.
The need for a cohesive theory of entrepreneurship is brought into sharp focus by the special challengess
posed to traditional research by the idiosyncratic milieus involved in entrepreneurship. A model of
obscurity is presented and applied in order to show how research on idiosyncratic milieus might proceed.
Useful links between entrepreneurship research and other social and natural sciences are identified, as are
the theoretical underpinings for studying idiosyncratic milieus. Five lessons may be drawn from better-
integrated multimethod fields indicating several needs in entrepreneurial research: 1. the need to have
hypotheses waiting to be tested, 2. the need to become comfortable using models and homomorphs, 3.
the need to have common measures, 4. the need to build competing theories, and 5. the need to have
Rumelt, R. P. 1987. Theory, strategy, and entrepreneurship. In D. J. Teece (Ed.), The Competitive
Challenge, 137-158. Cambridge, MA: Ballinger.
Rumelt attempts to determine the motivation for entrepreneurial activity. He specifically ponders why so
many risky new businesses are formed when existing firms should have the compelling advantage in new
business formation. The locus of entrepreneurship in terms of product-market conditions and
organizational context is examined, and a framework for predicting entrepreneurial activity is developed.
Rumelt frames his position as a counter-point to existing economic and strategy theory. He defines
entrepreneurship as the creation of new businesses that do not exactly duplicate existing businesses and
have some degree of novelty. He argues that all rents are not monopoly rents and proposes that
entrepreneurial rents are the difference between a venture’s ex post value (or payment stream) and the ex
ante cost (or value) of the resources combined to form the venture.
Sandberg, W. R. 1992. Strategic management’s potential contributions to a theory of
entrepreneurship. Entrepreneurship Theory & Practice, 16(3): 73-90.
A recent study offers an overview of strategic management and its various schools of thought, followed
by a summary of the field of entrepreneurship and its own disagreements over definition and boundaries.
It is suggested that strategic management might help resolve such disagreements through its focus on the
entrepreneurial work of the organization, which is based on variables that describe the organization's
industry, resources, processes, and strategy. The contributions of strategic management to
entrepreneurship theory are described, specifically dealing with issues of new business creation,
innovation, opportunity seeking, risk assumption, top management teams, and group processes in
strategic decisions. Even without total integration, momentum is building for substantially more cross-
fertilization between the fields of strategic management and entrepreneurship.
Stevenson, H., & Gumpert, D. 1985. The heart of entrepreneurship. Harvard Business Review,
Firms that get bogged down by inertia find it easier and safer to pursue familiar courses of action rather
than to experiment with the unknown. However, in a rapidly changing business environment, strategies
based on the familiar can jeopardize a firm's survival. Such an environment requires that firms develop a
spirit of entrepreneurship that encourages flexibility, creativity, and risk taking. Traditional management
stresses risk reduction and effective management of existing resources. Entrepreneurial management
Getting to Know the Field of Entrepreneurship
emphasizes the identification of new opportunities, how they may be exploited, what resources are
needed, and how they may be acquired. Entrepreneurial management approaches new opportunities as
both desirable and attainable. To stimulate an entrepreneurial spirit, firms must promote individual
creativity to develop new products and services, provide appropriate rewards for successful risk taking,
minimize the costs to individuals for failing in the pursuit of new opportunities, and exploit any resource
Stevenson, H., & Jarillo, J. C. 1990. A paradigm of entrepreneurship: Entrepreneurial
management. Strategic Management Journal, 11(summer): 17-27.
Corporate entrepreneurship appears to many scholars to be a contradiction in terms. Establishing clear
links between the fields of entrepreneurship and corporate management is important because many
consider entrepreneurship as just what is outside of mainstream corporate management. Research on
entrepreneurship can be grouped in 3 main categories: 1. what happens when entrepreneurs act, 2. why
they act, and 3. how they act. It is proposed that entrepreneurship is a process by which individuals -
either alone or inside organizations - pursue opportunities without regard to the resources they currently
control. Six specific propositions are derived concerning corporate entrepreneurship research. Three
elements of the entrepreneurship process are discussed: 1. the detection of the opportunity, 2. the
willingness to pursue it, and 3. the belief that it can be successfully exploited.
Van de Ven, A. 1993. The development of an infrastructure for entrepreneurship. Journal of
Business Venturing, 8(3): 211-230.
A macro-community perspective of entrepreneurship is taken, and the development of an industrial
infrastructure that any entrepreneurial community needs to sustain its members is examined. The
infrastructure includes institutional arrangements that legitimate, regulate, and standardize an innovation,
resource endowments of basic scientific knowledge, financing mechanisms, and a pool of competent
labor, as well as proprietary functions of applied R&D, manufacturing, marketing, and distribution of
innovative products or services. The industry system emerges over time through the accretion of
numerous actions and events involving many different entrepreneurs who are located in public and
private sector organizations. A social system framework for understanding the collective process of
entrepreneurship is proposed.
Venkataraman, S. 1997. The distinctive domain of entrepreneurship research. Advances in
Entrepreneurship, Firm Emergence and Growth, 3: 119-138.
Venkataraman explores what the field of entrepreneurship research is and what it should be. He
questions a number of assumptions about the discipline and specifically asks what distinctive contribution
the study of entrepreneurship makes to our broader understanding of the business enterprise.
Acknowledging that the main problem of defining the field comes from a lack of a broadly accepted
definition of the boundaries of the field, he offers his own. Venkat states that “entrepreneurship as a
scholarly field seeks to understand how opportunities to bring into existence ‘future’ goods and services
are discovered, created, and exploited, by whom, and with what consequences.” The two issues of
greatest importance to scholars should be the source of opportunities and the nexus of these opportunities
with individuals. Venkat further articulates his idea for what the performance measurement tool for
entrepreneurship should be. He states that we must look beyond the relative performance of firms, which
is the tool of strategic management researchers. Entrepreneurship researchers must look at return that
exceed this threshold to account for opportunity costs, effort, time, premium for risk taken, premium for
uncertainty, etc. The two performance benchmarks for entrepreneurship are 1) the absolute level of
economic performance that provides for a return for enterprising effort, and 2) the social contributions of
the individual’s effort.
Amit, R., Muller, E. & Cockburn, I. 1995. Opportunity costs and entrepreneurial activity. Journal
of Business Venturing, 10(2): 95-106.
A study provides empirical support for the hypothesis that the lower the opportunity costs of individuals,
the more likely they are to undertake entrepreneurial activity. This prediction emerged from earlier
theoretical work that modeled the decision of individuals to develop new ventures on their own, seek the
backing of a venture capitalist, or remain as paid employees. The study finds that paid employees who
choose to leave their employment to become entrepreneurs earned, prior to leaving, substantially less on
average than those whose employment status did not change and who remained paid employees
throughout the survey period. Specifically, the study establishes that the wages of those workers who
chose to remain paid employees throughout the survey period were, on average, 12% higher than the
wages of those who left their employment to become entrepreneurs.
Baron, R. A. 1998. Cognitive mechanisms in entrepreneurship: Why and when entrepreneurs think
differently than other people. Journal of Business Venturing, 13(4): 275-294.
The findings of basic research on human cognition point to the possibility that because entrepreneurs
operate in special kinds of situations - ones which overload their information-processing capacities and
involve high levels of emotion, uncertainty and time pressure - entrepreneurs may be more susceptible to
a number of cognitive errors than are other people. Several of these potential sources of error, ones that
have not previously been examined in detail in the entrepreneurship literature, are examined. These
include counterfactual thinking, affect infusion, attributional style, the planning fallacy, and self-
justification. Specific predictions concerning the potential impact of each of these mechanisms on the
thinking of entrepreneurs are proposed. It is suggested that incorporating a cognitive perspective into
entrepreneurship research may provide the field with several new conceptual tools and may also foster
the development of procedures for assisting entrepreneurs.
Brockhaus, R. H. 1980. Risk taking propensity of entrepreneurs. Academy of Management Journal,
A recent study defined risk taking propensity as the perceived probability of receiving rewards associated
with the success of a proposed situation, that an individual requires before he will subject himself to the
consequences associated with failure, the alternative situation furnishing less reward and less severe
consequences than the proposed situation. The definition might best describe the situation confronting
the potential entrepreneur in the decision to establish a new business venture. Data for the study were
objectively obtained using the Kogan-Wallach choice dilemmas questionnaire. Three groups were
participants: 1. a group containing individuals who within the 3 months prior to the study ceased
working for their employers and owned as well as managed business ventures, 2. a group of managers
who had changed organizations, and 3. a group containing managers who had only changed positions
within an organization. Results indicated that risk taking propensity may not be a distinguishing
characteristic of entrepreneurs. Results also refuted assumptions based on research that had been
subjective and noncomparative using established entrepreneurs.
Busenitz, L. W., & Barney, J. B. 1997. Differences between entrepreneurs and managers in large
organizations: Biases and heuristics in strategic decision-making. Journal of Business Venturing,
A study examines differences in the decision-making processes used by entrepreneurs and managers in
large organizations. It is hypothesized that entrepreneurs are more susceptible to the use decision-making
biases and heuristics than are managers in large organizations. The study examines differences with
respect to 2 biases and heuristics: overconfidence (overestimating the probability of being right) and
representativeness (the tendency to overgeneralize from a few characteristics or observations). The
results from the logistic regression analysis showed strong support for both hypotheses.
Busenitz, L. W., & Lau, C. M. 1996. A cross-cultural cognitive model of new venture creation.
Entrepreneurship Theory & Practice, 20(4): 25-39.
In examining the global landscape, it is clear that some cultures produce many more entrepreneurs than
others. This phenomenon is explored with a cognitive perspective, because it is assumed that the way
one thinks has a significant impact on the intention to start a new business. Through the development of
this cognitive model, it is clarified why some individuals across different cultures tend to be more prolific
in starting new ventures than others both inside and outside the home country. In illustrating the model,
the Chinese population and their high propensity to start new businesses when they migrate to new
countries are discussed. Implications for competitive advantage and other areas of cross-cultural research
Carland, J. W., Hoy, F., & Carland, J. C. 1988. Who is an entrepreneur? Is a question worth
asking. American Journal of Small Business, 12(4): 33-40.
This article is a response to Gartner’s (1988) critique of definitions for entrepreneur and small business
owner proposed by Carland, Hoy, Boulton, and Carland (1984). The response to Gartner’s critique
focuses on two areas. The first areas is whether “Who is an entrepreneur?” should focus on intentions or
creation. Carland et al. operationalize their definitions through intentionality (whether in articulated
strategies or observed behaviors). Gartner (1988) proposes that organization creation distinguishes
entrepreneurship from other activities. The second area of conflict is whether to study the act of
entrepreneurship (behavioral school) or the entrepreneur (train school). The authors respond to Gartner’s
support for the behavioral school stating it is difficult to isolate what people do from what they are. They
also contend that one cannot modify a behavior pattern without first understanding why an individual
behaves in a particular manner. Researchers must understand the parts in order to under the whole.
Gartner, W. B. 1988. Who is an entrepreneur? Is the wrong question. American Journal of Small
Business, 12(4): 11-32.
Entrepreneurship is the process by which new organizations come into existence. The differentiation
between entrepreneurs and nonentrepreneurs is that entrepreneurs create organizations while
nonentrepreneurs do not. In trait approaches to the study of entrepreneurship, an entrepreneur is seen as a
set of personality traits and characteristics. In behavioral approaches, the entrepreneur is seen as a set of
activities involved in organization creations. Attention is focused on research that is based on the trait
approach to entrepreneurship, and it is argued that this view alone is insufficient to explain the
phenomenon of entrepreneurship. After a presentation of the behavioral approach, the 2 approaches are
compared and contrasted. The following suggestions are made: 1. The latter approach will be a more
productive perspective for future research in entrepreneurship. 2. Entrepreneurship ends when the
creation stage of the organization ends.
Gatewood, E. J., Shaver, K. G., & Gartner, W. B. 1995. A longitudinal study of cognitive factors
influencing start-up behaviors and success at venture creation. Journal of Business Venturing,
A study sought to determine whether certain cognitive factors, such as ways of thinking as measured by
attributions for entering into business and a personal efficacy scale, could be used to predict whether
potential entrepreneurs would subsequently persist in entrepreneurial activities that resulted in
successfully starting a business. Responses from a longitudinal study of 85 preventure clients were
analyzed. Results showed that internal/stable explanations for choosing to start a business were related to
successfully starting a business for female entrepreneurs, whereas external/stable explanations were
related to successfully starting a business for male entrepreneurs. The personal efficacy scale was
unrelated to entrepreneurial activity or to successfully starting a business.
Herron, L., & Sapienza, H. J. 1992.The Entrepreneur and the initiation of new venture launch
activities. Entrepreneurship Theory & Practice, 17(1): 49-55.
Much of the previous research attempting to relate traits of the entrepreneur to new venture creation has
failed to demonstrate a definitive linkage. This failure should not impugn the importance of the
individual as the most cogent unit of analysis in entrepreneurship research and theory. On the contrary,
since most new organizations are initiated and created by individuals operating alone or in small teams, it
should motivate new ways of modeling and testing the human phenomena involved in venture creation.
A structural model of the initiation of new venture creation is presented. The model links psychological
and behavioral concepts with those of organization theory to explain the initiation of launch activities for
new business enterprises. The model implies that entrepreneurship is possible to those who have the
necessary level of aspiration and skills and is not necessarily a phenomenon restricted by birth to certain
"entrepreneurial types." It also implies that context is important but is not sufficient to explain
Katz, J. A. 1992. A psychosocial cognitive model of employment status choice. Entrepreneurship
Theory & Practice, 17(1): 91-102.
A psychosocial cognitive model (PCM) of employment status choice is proposed. The model is
psychosocial insofar as it utilizes an individual's psychology in the form of values and decision-making
processes, and social insofar as it depends on personal history and social context as factors contributing to
the decision process. The PCM offers a possible solution to the 3 problems of traditional approaches.
First, it is a model applicable to all vocational decision-makers. Second, this process follows recognized
cognitive heuristic processes, improving upon "black box" explanations of the impact of biography on
individual choice. Third, where there are opportunity-value mismatches, the model posits alternative
construction to occur, accounting for violations of tracking not considered in traditional models. The 2
major advantages of the PCM as an explanatory model are its populism and its robustness.
Kets de Vries, M. 1977. The entrepreneurial personality: A person at the crossroads. Journal of
Management Studies, 14: 34-57.
While being highly creative, the entrepreneurial personality is one whose total domination of his
enterprise may endanger its future existence by his refusal to plan for who will succeed him.
Entrepreneurs generally want to take personal responsibility for decisions, prefers moderately risky
decisions, want concrete knowledge to make decisions, and dislike repetition. They are very often
anxious and uncomfortable with authority figures. Many tend to be from religious or ethnic minorities,
and their childhoods generally contain many distressing experiences. They react by becoming rebellious
and nonconforming, acting impulsively, often feeling dissatisfied and rejected, with self esteem
becoming depreciated. The entrepreneur totally dominates his enterprise. There is often little planning
for who will succeed him, which can hinder the future growth and viability of the enterprise.
Krueger, N., Reilly, M. D., & Carsrud, A. L. 1995. Impact of prior entrepreneurial exposure on
perceptions of new venture feasibility and desirability. Entrepreneurship Theory & Practice, 18(1):
Entrepreneurship is clearly a process where intentionality is central. Yet, few studies explicitly test
theory-driven process models in entrepreneurship. Shapero (1975, 1982) proposed an intentionality-
based process model of the entrepreneurial event. Entrepreneurial intentions should derive from
feasibility and desirability perceptions plus a propensity to act on opportunities. Prior entrepreneurship-
related experiences should influence entrepreneurial intentions indirectly through these perceptions. Path
analyses found that feasibility and desirability perceptions and propensity to act each proved significant
antecedents of entrepreneurial intentions. Perceived feasibility was significantly associated with the
positiveness of that prior exposure. Strong support was found for Shapero's model, arguing for further
application of intentions-based process models of entrepreneurial activity.
Manimala, M. J. 1992. Entrepreneurial heuristics: A comparison between high PI (pioneering-
innovative) and low PI ventures. Journal of Business Venturing, 7(6): 477-504.
Entrepreneurial heuristics were identified and rated through the content analysis of 138 published
undisguised cases using the case survey method. Through a similar procedure, scores were also
generated on the overall innovativeness of the ventures. Data on these 2 variables were collected from an
additional sample of 26 entrepreneurs for verification purposes. The final sample of 164 was divided into
3 groups - the top 1/3 called the high pioneering-innovative (PI) group and the bottome 1/3 called the low
PI - based on their innovativeness scores. Preferred heuristics of these 2 groups and commonly used
heuristics were identified through t-tests. Such heuristics were separately factor analyzed to identify the
PI and general entrepreneurial orientations. A regression analysis showed that heuristic orientations
could explain 50% of the variance in innovativeness. It was also found that PI orientations could fairly
well discriminate between the high PI and low PI groups, with a probability of misclassification of 0.12.
McGrath, R. G., MacMillan, I. C., & Scheinberg, S. 1992. Elitists, risk-takers, and rugged
individualists? An exploratory analysis of cultural differences between entrepreneurs and non-
entrepreneurs. Journal of Business Venturing, 7(2): 115-135.
A study addresses whether or not individuals who have started their own businesses differ in their
fundamental beliefs and values from a contrast sample of people who have not done so. Data from a
cross-cultural study of entrepreneurship are used to differentiate the responses. Findings suggest that
entrepreneurs have a persistent and characteristic value orientation, irrespective of the values of their
base culture. These values appear to be aligned along 4 dimensions first identified by Hofstede (1980).
Using these dimensions, a set of hypotheses are derived that posit the following for entrepreneurs: 1. high
power distance, 2. high individualism, 3. low uncertainty avoidance, and 4. high masculinity
orientations. The findings support the hypotheses.
Palich, L., & Bagby, R. 1995. Using cognitive theory to explain entrepreneurial risk-taking:
Challenging conventional wisdom. Journal of Business Venturing, 10(6): 425-438.
A study compared the outcomes of the cognitive processes of entrepreneurs and others. In accord with
cognitive theory, the study predicted that entrepreneurs would frame business situations more
optimistically than would nonentrepreneurs. After reading the same series of fictitious business
scenarios, entrepreneurs in the sample perceived greater strengths than weaknesses, more opportunities
than threats, and greater potential for positive performance than nonentrepreneurs. However,
entrepreneurs did not differ significantly from nonentrepreneurs on a risk propensity scale. Altogether,
these results strongly supported the theory, while calling into question the conventional view of
entrepreneurs as risk takers.
Shaver, K. G., & Scott, L. R. 1991. Person, process and choice: The psychology of new venture
creation. Entrepreneurship Theory & Practice, 16(2): 23-46. <entrepreneur>
A comprehensive psychological portrait of new venture creation, an operational definition for
entrepreneurship, will need to show how an individual's cognitive representations of the world get
translated into action. To accomplish this aim, it will be necessary to consider general orienting
dispositions, motivational principles, and personal motives. A thorough psychological approach to the
study of choices involved in new venture creation must also incorporate both the rational and irrational
aspects of decision making. For both methodological and conceptual reasons, a psychological view of
new venture creation concentrates on individuals in their situational context. Because the creation of a
business venture is a social activity, the processes of social cognition are important. A psychological
approach to new venture creation should also focus on the immediate antecedents of choice.
Westhead, P., & Wright, M. 1998. Novice, portfolio, and serial founders: Are they different?
Journal of Business Venturing, 13(3): 173-204.
There is considerable interest in the nature of entrepreneurial individuals and entrepreneurial actions.
Drawing upon previous conceptual and empirical evidence, 3 types of founders are identified. The
characteristics and performance of independent small firms in the UK owned by novice, portfolio, and
serial founders are compared. The implications for future research studying entrepreneurial careers and
independent businesses over time are discussed.
Woo, C. Y., Cooper, A. C., & Dunkelberg, W. C. 1991. The development and interpretation of
entrepreneurial typologies. Journal of Business Venturing, 6(2): 93-114.
The conceptual frameworks used and specific methods applied in developing entrepreneurial typologies
are analyzed. The analysis groups entrepreneurs using 3 categories: 1. goals, 2. goals and background,
and 3. goals, background, and management style. The results indicate that different classification
criteria result in different groupings. Classification based solely on goal orientation demonstrates the
most pronounced differences from the results of the other classifications. The results also show that none
of the 3 pairs of groups patterns closely the craftsman-opportunist delineation as described in the
literature. While the craftsman-opportunist classification appears to serve as a useful yardstick for
measuring the potential behavior and likely success of entrepreneurs, its applicability and scope may
have been exaggerated to this point. Without consistency and the careful consideration of the definition
of types, the validity of the yardstick remains questionable.
Aldrich, H. E., & Mueller, S. 1982. The evolution of organization forms: Technology, coordination,
and control. Research in Organizational Behavior, 4: 33-87.
The population perspective explains organizational change by focusing on the distribution of resources in
environments and the terms on which they are available. Variation within and between organizations
provides the occasion for selection criteria to make their presence felt, and retention mechanisms
preserve the selected variations. The authors examine changes in environmental selection criteria from
the early 19th century until the present, relating changes in these criteria to changes in organizational
forms. Forms are defined along three dimensions: technology, coordination, and control. It is shown that
systematic change in organization forms has been associated with a number of long-term evolutionary
changes in the social, political, and economic environment of the US.
Bird, B. J. 1992. The operation of intentions in time: The emergence of the new venture.
Entrepreneurship Theory & Practice, 17(1): 11-20.
A study examines the role of intention in what entrepreneurs do and when they do it. Clearly, the content
of behavior is critical to the value-adding process of organizing resources into firms or corporations.
Specifically, intention requires the individual's ability and willingness to sustain temporal tension, to
stretch between a vision of what could be and current conditions. Thus, temporal tension is associated
with the intervals of the venture creation process, which is one element of timing. The other aspect of
timing involves controlling, or at least predicting, durations. A model of this aspect is presented. The
model has relevance to entrepreneurial goal setting, persistence, and "effectiveness" as judged by outside
observers. Temporal brackets, pacing, and market events flow from individual differences,
environmental rhythms, and entrepreneurs' cognitions. Entrepreneurs tune in to changes in the
environment and form thoughts and behaviors that bracket the time involved in creating an organization
and that set a pace for that creation.
Birley, S. 1985. The role of networks in the entrepreneurial process. Journal of Business Venturing,
Entrepreneurs often depend on building contacts and developing formal and informal networks. A study
in St. Joseph County, Indiana -- a county that had suffered severe economic decline -- showed that firms
tend to be started by local people using their own informal networks. Since the firm's elements are set
during the start-up process, the choice of networks is key in understanding the nature of the subsequent
firm. The entrepreneur is likely to recreate the elements of previous employment when using only
business contacts and family, but in an efficient network, the system diagnoses needs and provides the
necessary information and advice. Therefore, strategies are needed to increase community awareness to
formal sources of help. Those in the formal system could exchange information on the various schemes
and services they offer, perhaps in the context of a central clearing house. The enterprise office
(clearing house) could also monitor new firms and help develop strategies for finding new customers and
Cooper, A. C. 1985. The role of incubator organizations in the founding of growth-oriented firms.
Journal of Business Venturing, 1(1): 75-86.
To examine the role of incubator organizations, 161 new, growth-oriented firms were examined for
factors that might be expected to relate incubator organizations to entrepreneurial success. Results imply
that the incubator phenomenon plays an important role. Most of the new firms studied began their
operations close to the incubator organization both in terms of geography and of the nature of their
business. Variations occurred across industries, but the findings have various implications for
prospective entrepreneurs in most areas: 1. A growth-oriented technical firm is unlikely to be started in a
geographic area in which there are few people with experience in the industry. 2. Regional programs to
attract entrepreneurs are unlikely to succeed without the proximity of other businesses of the same nature
to act as incubators. 3. Local and regional programs to attract branch facilities of larger corporations are
more likely to succeed if they focus on those companies most likely to function as incubators. 4.
Universities play less of a direct role in the process than is often assumed.
Cooper, A. C., Folta, T. B., & Woo, C. Y. 1995. Entrepreneurial information search. Journal of
Business Venturing, 10(2): 107-120.
Searching for information is a central task for the entrepreneur. A study considers the influences on
information search. In particular, the study hypothesizes that entrepreneurs are boundedly rational in
their search behavior, constrained by lack of experience and overconfidence. The study of 1,176
entrepreneurs found mixed support for the hypotheses. Those who had no entrepreneurial experience, on
average, sought more, not less information. However, consistent with the hypotheses, those who
ventured into fields which were very different and those who were more confident sought less
information. Interestingly, the inexperienced entrepreneurs varied their search, depending upon whether
they were in familiar or unfamiliar domains. Novice entrepreneurs search less extensively in their fields,
a behavior consistent with bounded rationality. In contrast, experienced entrepreneurs seemed to search
with about the same intensity, regardless of whether they knew the field.
Dubine, P. & Aldrich, H. 1991. Personal and extended networks are central to the entrepreneurial
process. Journal of Business Venturing, 6(5): 305-313.
A set of networking strategies for entrepreneurs is proposed. First, general network concepts are
introduced by describing personal networks. Such networks take the role set of individual entrepreneurs
as the unit of analysis. Second, the aggregation of personal networks into extended networks is
discussed. These networks can be analyzed within, as well as between, firms. Two strategic principles
that apply to personal networks are identified: 1. Systematically plan and monitor networking activities.
2. Attempt to increase network diversity. The most effective firms are those in which entrepreneurs
pursue these principles in their personal networks, in their firm's internal structuring, and in their firm's
relations with other firms.
Feeser, R. H., & Willard, G. E. 1989. Incubators and performance: A comparison of high and low-
growth high-tech firms. Journal of Business Venturing, 4(6): 429-441.
An incubator organization is one in which the entrepreneur was employed before leaving to start the new
venture. Four hypotheses were tested to determine whether differences exist between high- and low-
growth firms along 3 incubator dimensions: 1. the size of the incubator, 2. whether the new firm is
closely related to the markets and core technology of the incubator, and 3. whether the incubator was a
profit-seeking or nonprofit organization. Questionnaires were mailed to 39 very-high-growth companies
identified in Inc. magazine's listing of fastest growing firms and to a matched set of 39 low-growth
firms. Some results are: 1. A greater proportion of the founders of high-growth companies compete in
markets or technologies that are closely related to those of their incubators than do low-growth firms. 2.
A greater proportion of founders of high-growth companies are from large incubators than are founders of
low-growth firms. 3. Founders of high-growth firms tended to come from publicly held incubators.
Gaglio, C. M. 1997. Opportunity identification: Review, critique and suggested research directions.
Advances in Entrepreneurship, Firm Emergence, and Growth, 3: 139-102.
The purpose of this chapter is to organize and review the literature regarding opportunity creation and
identification: what behaviors are necessary and sufficient for theory? Can we identify and measure
them? Can we form predictions about how these variables relate and interact such that an entrepreneurial
opportunity is discovered or created? Three conceptual frameworks are reviewed: 1) Long and
McMullan’s (1984) adaptation of Schumpeter’s creative person; 2) Herron and Sapienza’s (1992)
adaptation of March and Simon’s (1958) thinking about the development of innovative programs; 3)
Kirner’s (1979; 1985) view of entrepreneurial behavior that depends on entrepreneurial alertness.
Additionally, an alternative cognitive conceptual framework of the opportunity identification process is
offered. It is argued that this alternative integrates the useful properties of prior frameworks; provides a
testable model; and facilitates both empirical and theoretical comparisons between entrepreneurs and
other market actors.
Hansen, E. L. 1995. Entrepreneurial network and new organization growth. Entrepreneurship
Theory & Practice, 19(4): 7-19.
The emerging literature on entrepreneurial networks suggests that entrepreneurial action sets may be
organizational in nature and may be investigated in organizational terms. Three pre-founding
entrepreneurial action set variables are linked: 1. size, 2. degree (a measure of inter-connectivity within
the entrepreneurial action set), 3. frequency (a measure of how often entrepreneurial action set members
interact with each other) to first-year new organization growth. Data were gathered through structured
interviews with 44 entrepreneurs and analyzed with multiple regression. The hypotheses were strongly
supported by the data.
Kaish, S., & Gilad, B. 1991. Characteristics of opportunities search of entrepreneurs versus
executives: Sources, interests, general alertness. Journal of Business Venturing, 6(1): 45-61.
In a study, 3 hypotheses derived from the theory of entrepreneurship developed by Israel Kirzner were
tested. These hypotheses concern: 1. differences in the manner in which entrepreneurs and corporate
managers expose themselves to information, 2. differences in the sources of information used, and 3.
differences in evaluating information cues. The hypotheses that success and experience will erode the
above differences between entrepreneurs and corporate managers also were tested. The study sample
included 51 founders of companies in New Jersey and 36 executives of a very large financial company.
Differences were tested using univariate and multivariate statistical methods. The results showed that the
entrepreneurs spent significantly more time searching for information in their off hours and through
nonverbal scanning. In addition, they employed different sources than executives and paid special
attention to risk cues about new opportunities. The executives tended to focus on the economics of the
opportunity. As success and experience increased, the differences became smaller.
Kamm, J. B., & Nurick, A. J. 1993. The stages of team venture formation: A decision-making
model. Entrepreneurship Theory & Practice, 17(2): 17-28.
A model of multi-founder organizational formation assumes that organizations emerge in stages,
following an a priori sequence of transitions. The idea stage comes first. In it, individuals or groups
within the context of their social networks make decisions about the business concept and what is needed
to implement it. The 2nd stage consists of implementation decisions, including who will supply
resources, what inducements will be used to attract more partners if necessary, and how the team will be
kept together. Feedback loops indicate that the process may return to the concept and implementation
needs decisions, depending on the choices made at certain critical points.
Katz, J. A. 1993. The dynamics of organizational emergence: A contemporary group formation
perspective. Entrepreneurship Theory & Practice, 17(2): 97-101.
Contributions from social pyschology to the study of entrepreneurship, especially the process of
organizational emergence, are outlined. The major topics covered are role theory, the minimal group
paradigm reported by Tajfel and others, the new plant works of Lawler and others, and recent advances in
conceptualizing task group emergence reported by Gersick.
Katz, J., & Gartner, W. B. 1988. Properties of emerging organizations. Academy of Management
Review, 13(3): 429-441.
An attempt is made to examine the interaction between entrepreneurship and organization theory in order
to generate an understanding of the properties of emerging organizations and to offer avenues for further
research. McKelvey's (1980) definition of organizations offers 4 main properties of organizations
(including those in the process of creation): 1. intentionality, 2. resources, 3. boundary, and 4.
exchange. These properties have both structural and process characteristics and are the minimum needed
to identify the existence of an organization. Since the identification of firms using boundary and
exchange processes has been considered in much detail, the properties of intention and resources are
focused upon as alternative means of identifying new organizations. Using these 4 properties as
guidelines for identifying and choosing emerging organizations has implications for both methods and
theory in organization theory and entrepreneurship. It is noted that this perspective is a micro
Larson, A. 1992. Network dyads in entrepreneurial settings: A study of governance of exchange
relationships. Administrative Science Quarterly, 37(1): 75-104.
Social control in network organizational forms is examined through an inductive field study of a sample
of dyadic relationships established by high-growth entrepreneurial firms. The social dimensions of the
transactions are central in explaining control and coordination in the exchange structures. A process
model of network formation is presented that highlights the importance of reputation, trust, reciprocity,
and mutual interdependence. The network form is proposed as an alternative to vertical integration for
high-growth entrepreneurial firms. The key goal for resource-poor entrepreneurial organizations is to
build network exchange structures with outsiders that are identified as critical resource suppliers, and that
can stabilize the new firm as a player in its targeted markets. The findings also contain implications for
studying network modes of economic exchange such as research and development partnerships,
cooperative marketing agreements and other forms of strategic alliances and joint ventures.
Lumpkin, G. T., & Dess, G. G. 1996. Clarifying the entrepreneurial orientation construct and
linking it to performance. Academy of Management Review, 21(1): 135-172.
The nature of the entrepreneurial orientation (EO) construct is clarified, and a contingency framework is
proposed for investigating the relationship between EO and firm performance. The dimensions of EO are
explored and refined, and the usefulness of viewing a firm's EO as a multidimensional construct is
discussed. Drawing on examples from the EO-related contingencies literature, alternative models
(moderating effects, mediating effects, independent effects, interaction effects) are suggested for testing
the EO-performance relationship.
Romanelli, E. 1991. The evolution of new organizational forms. Annual Review of Sociology, 7:
Recent research examines how new forms of social organization arise and become established in the
community. Three views of social organization are discussed: the organizational genetics view, the
environmental conditioning view and the social systems view.
Barry, C. B. 1994. New directions in research on venture capital finance. Financial Management,
Empirical evidence on venture capital is not easy to develop because of the private nature of venture
capital firms and their investments. Nevertheless, recent work has tapped into existing databases and led
to the development of some new ones, paving the way for further work. Recent findings are examined,
particularly models and empirical work about the staging of financing, the use of syndicates, the process
of screening investments, and the participation by venture capitalists in initial public offerings (IPO).
Much has been learned about the contracting technology that permits venture capitalists to manage their
dual roles as agents with respect to their limited partner-investors and as principals with respect to
entrepreneurs in their portfolio firms. Although recent work explains what venture capitalists do, it does
not show whether those activities in fact create value.
Barry, C. B., Muscarella, C. J., Peavy, J. W., & Vetsuypens, M. R. 1990. The role of venture capital
in the creation of public companies. Journal of Financial Economics, 27: 447-471.
An exhaustive set of initial public offerings (IPO) by venture-capital-backed companies between 1978
and 1987 is examined. It is found that venture capitalists specialize their investments in firms to provide
intensive monitoring services. Consistent with their monitoring role, the venture capitalists take
concentrated equity positions, maintain their investment beyond the IPO, and serve on the boards of their
portfolio firms. The quality of their monitoring sevices appears to be recognized by capital markets
through lower underpricing for IPOs with better monitoring. Taken as a whole, the empirical evidence
shows that venture capitalists, as large blockholders, play an important role in shaping and governing
Bruno, A., & Tyebjee, T. 1985. The entrepreneur’s search for capital. Journal of Business
Venturing, 1: 61-74.
Five studies were undertaken to identify and evaluate the factors that impinge upon the entrepreneur's
search for venture capital. Results imply the need for: 1. division of ownership among multiple founders
in a way that reflects past, present, and future contributions to success, 2. significant previous experience
on the part of founders, 3. a management team that is well rounded in technical and management skills,
4. early planning, 5. recognition of the significant cost of outside capital in terms of relinquished equity,
6. recognition of the dramatic effect of outside capital on growth, and 7. realization of the possibilities
for raising venture capital besides the venture capital firm. Venture capital can supply a far greater
infusion of capital than can other sources, but the management expertise accompanying it is more
expensive in terms of the share of equity that must be given up.
Busenitz, L. W. 1996. Research on entrepreneurial alertness. Journal of Small Business
Management, 34(4): 35-44.
In taking an economic and behavioral approach, Kaish and Gilad (1991) recently tested Kirzner's (1973)
theory of alertness which asserts that entrepreneurs are more alert to new opportunities and use
information differently. Because of the lack of generalizable samples and the exploratory nature of the
Kaish and Gilad study, the current research replicated and developed some of the scales originally
developed by them. Results indicate that little empirical support exists for this theoretical framework,
but the measures of entrepreneurial alertness need further development. Empirical and theoretical
implications are discussed along with the roles of exploratory and replication research in a vibrant
discipline like entrepreneurship.
Busenitz, L. W., Moesel, D. D., Fiet, J. O., & Barney, J. B. 1997. The framing of the perceptions of
fairness in the relationship between venture capitalists and new venture teams. Entrepreneurship
Theory & Practice, 21(3): 5-21.
A paper investigates how a variety of conditions in place at the time of first-round funding can frame a
new venture team's (NVT) perception of the fairness of its relations with its venture capitalists (VC). A
major finding of the research is that the indiscriminant use of contractual covenants can adversely frame
a NVT's perception of how fairly it is treated by its VC, which ultimately could inhibit the former's
receptivity to advice.
Cable, D. M., & Shane, S. 1997. A prisoner’s dilemma approach to entrepreneur-venture capitalist
relationships. Academy of Management Review, 22(1): 142-176.
New business startups with venture capital backing depend on mutual cooperation between entrepreneurs
and venture capitalists, but little is known about what makes these relationships work. A paper considers
the implicit similarities between entrepreneur-venture capitalist relationships and the Prisoner's Dilemma
framework, using this paradigm to develop a conceptual model of entrepreneurs' and venture capitalists'
decisions to cooperate. The model is used to generate a number of testable propositions concerning long-
term cooperation between entrepreneurs and venture capitalists. Implications of the model for
researchers, entrepreneurs, and venture capitalists are discussed, and the paper concludes by examining
implications of the entrepreneur-venture capitalist context for the traditional Prisoner's Dilemma
Chan, Y. 1983. On the positive role of financial intermediation in allocation of venture capital in a
market with imperfect information. Journal of Finance, 38(5): 1543-1581.
A theory of financial intermediation is developed that highlights the contribution of intermediaries as
informed agents in a market with imperfect information. A venture capital market is considered where
the entrepreneurs select the qualities of projects and their perquisite consumptions, about which the
investors are imperfectly informed. It is shown that when all investors have positive search costs, the
entrepreneurs are induced to offer unacceptable inferior projects. The investors will not enter the venture
capital market, but will put their funds in other low-return investments - an undesirable allocation of
resources. Attention is focused on the existence of financial intermediation equilibria when the market
for intermediation services is competitive. It is shown that: 1. There cannot be a competitive
intermediation equilibrium with very high institutional holdings. 2. In other cases, multiple equilibria
may exist, but the one with the highest institutional holdings dominates the others in a Pareto sense.
Ehrlich, S. B., De Noble, A. F., Moore, T., & Weaver, R. R. 1994. After the cash arrives: A
comparative study of venture capital and private investor involvement in entrepreneurial firms.
Journal of Business Venturing, 9(1): 67-82.
Forty-seven venture capital-funded and private investor-funded entrepreneurs were surveyed about the
relationship with their primary investors. Activities associated with levels of involvement, reporting and
operational controls, and types of expertise sought by the entrepreneur were investigated. The results
indicate that there are important distinctions between venture capitalists (VC) and private investors (PI)
in terms of the value-added benefits they bring to entrepreneurial firms. While VCs provide higher
performance standards for their investments, they also provide more frequent, detailed feedback than PIs
when the firm is not achieving these standards. VCs provide assistance in selecting the venture's
management team significantly more often than PIs. These findings suggest that a formalized VC
approach may be needed by entrepreneurs with a strong technical background and limited managerial
experience, while entrepreneurs with strong managerial experience may prefer PIs since they are less
likely to alter the makeup of the team that they have assembled.
Fried, V. H., & Hisrich, R. D. 1988. Venture capital research: Past, present, and future.
Entrepreneurship Theory & Practice, 13(1): 15-28.
Venture capital research since 1981 is examined. The review is limited to academic literature and covers
16 articles, 18 proceedings papers, and 5 book chapters. The research from 1981-1987 focuses on: 1. the
portfolio of venture capital firms, 2. the investment decision, 3. operations, 4. strategy, 5. impact on
the entrepreneur, and 6. public policy. The heaviest research emphasis has been on the portfolio and
investment decision topics. A descriptive model of the venture capital process is developed to serve as
an organizing framework for the research in the field. This research is mainly in the areas of the linkage
between investor and venture capital firm, the relationship between the venture capital firm and the
investee, and the operation of the venture capital firm. Suggestions for further research are made. In the
venture capital firm level, they are in the areas of creating a firm, making and managing investments, and
funding liquidation. In the investment process, they relate to: 1. search, 2. screening, 3. evaluation, 4.
structure, 5. management stage, 6. liquidation, and 7. investee.
Fried, V. H., & Hisrich, R. D. 1994. Towards a model of venture capital investment decision
making. Financial Management, 36(3):28-37.
In order to know whether the venture capital market allocates resources properly, it is necessary to
understand how venture capitalists make investment decisions. A case study methodology is used to
develop a model of the venture capital investment decision-making process. Generic criteria that venture
capitalists use are identified. The venture capitalist investment decision-making process is designed to
reduce the risk of adverse selection. A 6-stage process model is proposed: 1. origination, 2. venture
capital firm-specific screen, 3. generic screen, 4. first-phase evaluation, 5. second-phase evaluation, and
6. closing. Different activities occur in each stage. It is argued that the venture capitalist provides both
the supply-side and demand-side benefits to the market.
Gorman, M., & Sahlman, W. A. 1989. What do venture capitalists do? Journal of Business
Venturing, 4(4): 231-248.
To explore the relationship between venture capitalists and their portfolio companies, a survey was
mailed to 100 venture capitalists in 1984. The results of the study show that the 49 respondents spend
about half their time monitoring 9 portfolio investments. Of these, 5 are firms they helped found and on
whose board of directors they sit. For the companies on whose boards they serve, the capitalists usually
invest 80 hours of on-site time and 30 hours of telephone time per year in direct contact with companies.
Venture capitalists assist in fund raising, in strategic analysis, and in management recruiting. In cases of
company failure, venture capitalists occasionally dismiss and replace current management. Usually,
failures are attributed to problems in senior management; among nonmanagerial causes, product
development was cited in half the cases.
MacMillan, I. C., & Siegel, R. M., & Subba Narashimha, P. N. 1987. Criteria distinguishing
successful from unsuccessful ventures in the venture screen process. Journal of Business Venturing,
A study was conducted to determine which criteria are used by venture capitalists to evaluate venture
proposals. Using 25 screening criteria and several performance criteria, 67 venture capital firms rated a
total of 150 ventures. The groups of criteria included: 1. the venture team, 2. market characteristics,
and 3. the product or service. Cluster analysis identified 3 classes of unsuccessful ventures, including a
venture where the venture team is strong but the market is lost to competition because of a lack of
protection for the product. Cluster analysis also identified 4 classes of successful ventures, such as the
high-technology venture with a skilled venture team that has the staying power needed to face
competitive attack. Regression analysis revealed 2 criteria as consistent predictors of venture success: 1.
degree of competitive threat, and 2. degree of market acceptance of the product.
Megginson, W. C., & Weiss, K. A. 1991. Venture capitalist certification in initial public offerings.
Journal of Finance, 46(3): 879-903.
Support is provided for the certification role of venture capitalists in initial public offerings (IPO).
Consistent with the certification hypothesis, a comparison of venture capital backed IPOs with a control
sample of nonventure capital backed IPOs from 1983 through 1987 matched as closely as possible by
industry and offering size indicates that venture capital backing results in dramatically lower initial
returns and gross spreads. In effect, the presence of venture capitalists in the issuing firms serves to
lower the total costs of going public and to maximize the net proceeds to the offering firm. In addition, it
is shown that venture capitalists are not using the IPO as an opportunity to cash out of their holdings and
realize a return on investment. Indeed, a majority of venture capitalists do not sell any of their holdings
at the offer date.
Sapienza, H. 1992. When do venture capitalists add value? Journal of Business Venturing, 7(1):
Venture capitalists functioning as lead investors and the entrepreneur-chief executive officers (CEO) of
their portfolio companies responded to surveys concerning the rate of the venture capitalists' involvement
in the ventures. A total of 51 matched pairs of lead investor-CEO surveys were returned, and interviews
were conducted to clarify information. The findings indicated that the greater the level of innovation
pursued by the venture, the more frequent the contact between lead investor and the CEO, the more open
the communication, and the less conflict of perspective in the venture capitlist-CEO pair, the greater was
value of the involvement. Neither the stage of the venture nor the CEO's experience had a significant
impact on value added. The value of venture capitalists' involvement was also strongly correlated with
Sapienza, H., & Gupta, A. K. 1994. Impact of agency risk and task uncertainty on venture
capitalists CEO interaction. Academy of Management Journal, 37(6): 1618-1632.
A study examines the impact of agency risks and task uncertainty on venture capitalist-chief executive
officer (VC-CEO) interaction. Results from 51 VC-CEO dyads indicate that the frequency of interaction
depends on the extent of VC-CEO goal congruence, the degree of the CEO's new venture experience, the
venture's stage of development, and the degree of technical innovation it is pursuing. However, contrary
to conventional expectations, the degree of management ownership had no impact on the frequency of
Tyebjee, T. T., & Bruno, A. V. 1984. A model of venture capitalists investment activity.
Management Science, 30(9): 1051-1066.
A model of deal flow in a venture capital firm, including the stages in the deal consideration, scrutiny,
and disposition of venture investment deals, is presented. Venture capital deals are orderly processes of 5
sequential steps: 1. deal origination, 2. deal screening, 3. deal evaluation, 4. deal structuring, and 5.
post-investment activities. A questionnaire was administered to 41 venture capitalists who provided data
on a total of 90 deals. Factor analysis of questionnaire data determined 5 categories of activity: 1.
market attractiveness, 2. product differentiation, 3. managerial capabilities, 4. environmental threat
resistance, and 5. cash-out potential. Expected return is determined by market attractiveness and product
differentiation. Perceived risk is determined by managerial capabilities and environmental threat
resistance. The model, while simplistic, suggests that professional relationships with influential people
help in locating capital, that the venture capital community is often smaller than it seems, and that
venture capitalists differ in their choices of screening criteria. Marketing factors, product uniqueness,
and management team quality are also crucial.
Zacharakis, A. L., & Meyer, G. D. 1998. A lack of insight: Do venture capitalists really understand
their own decision process? Journal of Business Venturing, 13(1): 57-76.
The venture capitalist (VC) decision process receives much attention within entrepreneurship literature.
The majority of these studies rely on post hoc methodologies to capture the decision process. Post hoc
methods assume that VCs can accurately relate their decision processes, but studies from cognitive
psychology suggest that people, in particular experts, are poor at introspecting. Introspection typically
suffers from rationalization and post hoc recall biases. As such, past research may be misleading. Using
social judgment theory and the associated lens model as a framework, a study investigates how well VCs
introspect. It appears that VCs do not have strong insight, especially when confronted with information-
rich situations such as they face in making an investment decision.
Entrepreneurial Strategy/New Ventures
Aldrich, H. E. & Auster, E. 1986. Even dwarfs start small: Liabilities of age and size and their
strategic implications. Research in Organizational Behavior, 8: 165-198.
This paper links the organizational ecology and business strategy literatures by focusing on liabilities of
age and size and their strategic implications. The first section discusses external and internal liabilities
associated with age and size. The authors argue that the strengths of large, old organizations are often
the weaknesses of small, new organizations and vice versa. The second section of the paper considers
population-level and organizational-level strategic implications of liabilities of age and size. Loose
coupling strategies such as subcontracting, and franchising and emulation strategies such corporate
entrepreneurship are examined. At the population level, these strategies create new forms which may
improve the viability of whole populations of organizations. At the organizational level these strategies
may help larger, older organizations and newer, smaller organizations compensate for their weaknesses.
Aldrich, H. E., & Fiol, M. 1994. Fools rush in? Conditions affecting entrepreneurial strategies in
new organizations. Academy of Management Review, 19(4): 645-670.
New organizations are always vulnerable to the liabilities of newness, but such pressures are especially
severe when an industry is in its formative years. One set of constraints is focused upon facing
entrepreneurs in emerging industries - their relative lack of cognitive and sociopolitical legitimacy. The
strategies that founders can pursue are examined, and suggestions are made on how their successful
pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping
industry and institutional environments.
Boeker, W. 1989. Strategic change: The effects of founding and history. Academy of Management
Journal. 32(3): 489-515.
Strategy theorists are interested in the evolution of organizational strategy and the extent to which
strategy is amenable to change. A model was tested on 51 semiconductor producers operating in 1984 in
the Santa Clara-San Jose area of California. Data were gathered from: 1. personal interviews with top
managers, 2. information collected by 3 of the 4 largest market research firms serving the industry, and
3. information from articles in the electronics and business press. Results indicate that conditions at
founding, including the extent to which an initial strategy is dominant, the distribution of functional
influence is aligned with the dominant strategy, and a firm is owned by its founding managers, help to
form the strategy of a firm by building internal consensus around a given approach. Conditions
subsequent to founding, including an organization's performance, its age, and the length of the tenure of
its founding entrepreneur, also influence the degree to which a founding strategy endures. Managers of
organizations must recognize that they operate within constraints, many of which come from the initial
establishment of structures, routines, and repertories that become institutionalized over the years.
Bruderl, J., Preisendorfer P., & Ziegler, R. 1992. Survival chances of newly founded business
organizations. American Sociological Review, 57: 227-242.
Hypotheses about the survival of newly formed business organizations were examined. The number of
employees, amount of capital invested and organizational strategies were the most important factors
Brush, C. G., & Chaganti, R. 1996. Cooperative strategies in non-high-tech new ventures: An
exploratory study. Entrepreneurship Theory & Practice, 21(2): 37-54.
Cooperative strategies are of growing interest in entrepreneurship. Differences in distinct competencies
based on technology suggest that lessons from high-tech companies may not fully apply to non-high-tech
companies. This research explores the nature, extent, and approaches to cooperative strategies in non-
high-tech new ventures, utilizing quantitative and qualitative methods. Survey data is analyzed to assess
usage and characteristics of cooperative strategies. Results show that few companies used cooperative
strategies and these were not central to core operations. Field interviews comparing 3 non-high-tech and
3 high-tech new ventures examine motives and approaches to cooperative strategies. For all 6 cases,
resource constraints motivated usage of cooperative strategies and all had cooperative arrangements with
Entrepreneurial Strategy/New Ventures
competitors. However, goals and approaches to cooperative strategies differed between non-high-tech
and high-tech businesses.
Carter, N. M., Stearns, T. M., Reynolds, P. D., & Miller, B. A. 1994. New venture strategies:
Theory development with an empirical basis. Strategic Management Journal, 15: 537-554.
The strategy focus of over 2,500 new ventures across 6 different industries was examined to identify what
dimensions coalesce into distinct configurations. The supposition that traditional strategy typologies are
inadequate to describe the breadth of differentiation exhibited among new ventures was supported.
Factor and cluster analysis revealed 6 generic new venture strategy archetypes that can be distinguished
along 2 dimensions: 1. scope of segmentation, and 2. product versus marketing emphasis. The extent to
which the archetypes tend to dominate in different industries was found to vary according to the
industry's position on the industry supply chain. Strategies with a narrow scope of segmentation tended
to prevail in industries near the end of the supply chain, whereas those that adopted a broad approach
tended to predominate in industries near the beginning or middle of the supply chain.
Chandler, G. N., & Hanks, S. H. 1994. Market attractiveness, resource-based capabilities, venture
strategies, and venture performance. Journal of Business Venturing, 9(4): 331-349
Variables are identified that should be related to venture performance. It is hypothesized that both
market attractiveness and resource-based capabilities are directly related to new venture performance.
Also, specific resource-based capabilities are hypothesized to be directly related to the competitive
strategies selected by a firm. The sample consisted of 155 manufacturing firms. As hypothesized,
perceived market attractiveness and the overall abundance of resource-based capabilities were
significantly related to venture performance. In 2 of the 3 cases, the evidence suggests that specific
resource-based capabilities are related to the firm's stated competitive strategies. Although the
relationship between fit and performance is not supported in all cases, the performance of the emerging
manufacturing ventures included in the sample appears to be enhanced when resource-based capabilities
are supportive of a cost leadership strategy.
Cooper, A. C. 1993. Challenges in predicting new firm performance. Journal of Business Venturing,
The growing number of research studies examining predictors of new venture performance have, to date,
met with mixed success. Analysis is presented of some of the underlying challenges in modeling new
firm performance. Environmental uncertainty and the narrow resource base of each firm make it difficult
to forecast individual venture performance. The noneconomic goals pursued by some entrepreneurs add
to the challenge, as do the possible variations by type of firm and level of performance. Effectiveness of
past research has been limited by emphasis upon accessible variables, rather than those really driving
performance. These challenges are examined and directions for future research are suggested.
Cooper, A. C., Gimeno-Gascon, F., & Woo, C. 1994. Initial human and financial capital as
predictors of new venture performance. Journal of Business Venturing, 9(5): 371-395.
A study develops a predictive model of new venture performance based upon measures of human and
financial capital, discernible at the time of start-up. The importance of initial conditions and resources in
predicting future behavior and performance is emphasized by both imprinting theory and path-
dependence theory. The study utilizes a longitudinal study of 1,053 new ventures, representative of all
industry sectors and geographical regions. Using a multinomial logit model, the study achieves strong
predictive power as indicated by the close fit between predicted and actual frequencies pertaining to the
outcomes of failure, marginal survival, and growth.
Covin, J. G., & Slevin, D. P. 1990. New venture strategic posture, structure, and performance: An
industry life cycle analysis. Journal of Business Venturing, 5(2): 123-135.
The strategic postures, structural forms, and performance levels of new ventures in emerging, growing,
and mature industries are analyzed using data obtained from senior executives in 90 new ventures.
Entrepreneurial Strategy/New Ventures
Discriminant and correlation analyses were used to test 4 hypotheses. The results indicate that strategic
posture and organizational structure vary significantly over the industry life cycle. New ventures in
emerging industries have the most entrepreneurial strategic postures and the most organic organizational
structures. The industry life cycle moderates the strength of the relationship between new venture
performance and both strategic posture and organizational structure. The results show that the
correlations between a firm's performance and its strategic posture and organicity scores are more
significantly positive among new ventures in emerging industries than among new ventures in mature
Dean, T. J., Brown, R. L., & Bamford, C. E. 1998. Differences in large and small firm responses to
environmental context: Strategic implications from a comparative analysis of business formation.
Strategic Management Journal, 19(8): 709-728.
Despite growing recognition of some strategic advantages held by small firms, little comparative research
has been performed on the advantages and disadvantages accruing to firm size. In order to delineate the
differential responses of small and large businesses to their environmental context, A comparative
analysis was done of the impact of industry structural characteristics on the formation of large and small
businesses in a large sample of US manufacturing industries from 1977 to 1987. The results suggest that
small businesses possess certain resources that allow them to overcome some barriers which create
greater difficulties for their larger counterparts, as well as allow small businesses to exploit certain
industry opportunities more readily than larger ones.
Dean, T. J., & Meyer, G. D., & DeCastro, J. 1993. Determinants of new firm formations in
manufacturing industries: Industry dynamics, entry barriers, and organizational inertia.
Entrepreneurship Theory & Practice, 17(2): 49-60.
The ideas of Austrian economists, industrial organization economists, and organizational theorists are
used to build a model of new-firm creation in manufacturing industries. Market dynamics create
disequilibrium and profit opportunities for entrepreneurs. Whether available opportunities are exploited
by existing firms or through the founding of new firms is dependent on the constraints on each of these
types of entrepreneurs. Entry barriers tend to constrain new firms and therefore decrease the relative
occurrence of new business formations. Organizational inertia acts as a constraint on existing firms and
thereby encourages the creation of new organizations.
Feeser, R. H., & Willard, G. E. 1990. Founding strategy and performance: A comparison of high
and low growth high tech firms. Strategic Management Journal, 11(2): 87-98.
Potential explanations for differences in performance levels between high-growth firms and low-growth
firms operating in the same industry were sought by comparing the firms' founding strategies. The term
founding strategies refers to the characteristics and experiences of the entrepreneurs who establish the
firm and to the decisions regarding markets, technologies, and competitive postures to be pursued by the
firms. The founding strategies of 39 firms in the computer industry that have grown very rapidly were
compared to those of 39 similar firms that have grown much less vigorously. The results indicated
systematic differences among high- and low-growth firms. For example, it was found that the initial
product-market focus of high-growth firms, compared to that of their low-growth counterparts, tends to
be much more stable.
Garvin, D. A. 1983. Spin-offs and the new firm formation process. California Management Review,
Spin-off companies are formed when entrepreneurs in an existing industry form a new firm within the
same industry. Most studies that have attempted to determine the conditions conducive to the formation
of spin-offs have focused on the high technology industry. However, spin-offs have occurred within a
wide variety of manufacturing and service industries. A broader view of spin-off formation can be
obtained by examining the emerging and mature phases of the industry life cycle. During the emerging