challenges and opportunities in entrepreneurship research
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Challenges and Opportunities in Entrepreneurship Research. Phillip H. Phan Warren H. Bruggeman ’46 and Pauline Urban Bruggeman Professor of Entrepreneurship Rensselaer Polytechnic Institute Troy, New York, USA. Approach. The distinctiveness of entrepreneurship theory Testing the theory - PowerPoint PPT PresentationTRANSCRIPT
© Phillip PhanIACMR July 2007
Challenges and Opportunities in Entrepreneurship Research
Phillip H. PhanWarren H. Bruggeman ’46 and Pauline
Urban Bruggeman Professor of Entrepreneurship
Rensselaer Polytechnic InstituteTroy, New York, USA
© Phillip PhanIACMR July 2007
Approach The distinctiveness of
entrepreneurship theory Testing the theory
•Constructs•Data•Analyses• Implications
Conclusions
© Phillip PhanIACMR July 2007
What’s wrong with this picture? Most new products – even the line
extensions – and most new ventures still fail
Most business plans raise no money (and probably should never have been written!)
Only 1 or 2 in 10 companies in most venture capital portfolios achieve returns in excess of the cost of capital
© Phillip PhanIACMR July 2007
A problem?
© Phillip PhanIACMR July 2007
Why so poorly understood? Most research has focused on
process and not outcomes•Outcomes are not easily examined
through cross-sectional research•Post-hoc biases
The confounding of implementation effects
Divergent academic perspectives have not been brought together (the “blind man describing the elephant” problem)
© Phillip PhanIACMR July 2007
What is entrepreneurship? Why, when and how opportunities
for the creation of goods and services come into existence
Why, when, and how some people and not others discover and exploit these opportunities
Why, when and how different modes of actions are used to exploit entrepreneural opportunities
© Phillip PhanIACMR July 2007
How are opportunities defined? Economics: Creative destruction
(Schumpeter); Discovery (Austrian School)
Strategy: Industry attractiveness, generic strategies (Porter); cognition (Kahneman); resource-based view (Peteraf)
Finance: Real options (Dixit and Pindyke)
Bottom line: Ideas with economic value
© Phillip PhanIACMR July 2007
What is an entrepreneurial opportunity? Confluence of:
• Idea for a new way to create value
•People to give substance to the idea
•Context to ground the idea in time and space
© Phillip PhanIACMR July 2007
Research implications Theory
•Multidimensional•Multilevel•Dynamic•Multiple dependent variables (not
all are economic) Empirical
•Left censorship•Right censorship•Multi-operationalization
© Phillip PhanIACMR July 2007
Where do ideas come from? Kirzner (entrepreneurial discovery is
the gradual and systematic pushing back of the boundaries of sheer ignorance) – ideas are discovered
Schumpeter (creative destruction on the process by which a new economic order replaces an older one through the new application of technology to problems) – ideas are created
Viable ideas are ‘competitively’ determined (market for ideas)
‘Equilibrium’ does not exist
© Phillip PhanIACMR July 2007
How are ideas discovered? Hayek (information exist and are
simply discovered) – structural imperfections in the marketplace prevent discovery
Cognition (information do not always exist and are created) – cognitive biases prevent us from creating new ideas, ‘alertness’
© Phillip PhanIACMR July 2007
Research implications Theory
• Economics of information (network effects, increasing returns, spillovers, appropriability)
• Theory of knowledge (interactions between individual and group cognition, group and organization, individual and organization)
• Technology change and diffusion of innovations
• Sources of industry differences Empirical
• Recursive process models require dynamic modeling with updating
• Panel data (or at least longitudinal data)
© Phillip PhanIACMR July 2007
The entrepreneur (team)? Why do they choose to (not)
exploit the idea?• Individual differences
(Kahneman, Baron)•Human experience
(demographics) (Laffont, Caroll)
© Phillip PhanIACMR July 2007
The context? Where do they choose to (not)
exploit the idea?•Existing organized enterprise•Newly formed enterprise•Virtual enterprise
How do they choose to (not) exploit•At what point is the idea
exploitable? Can there be exploitation without
enterprise?
© Phillip PhanIACMR July 2007
Research Implications Theory
• Individual and group decision making processes
• Emergence of ordered systems from constituent components (complexity theory)
• Moderated structural models (contingency theory)
• Brain studies/ genetic studies?• New conceptualizations of value creation
(e.g., monetization of virtual worlds) Empirical
• Measuring and counting nascent organizations (also in corporate settings)
• Finding failures (projects and organizations)
© Phillip PhanIACMR July 2007
The formation of new firms Most common expression of the
entrepreneurial process Where does the process start?
• Idea?• Individual (serial entrepreneurs)?•Formal organization?
Where does it end?• Idea?• Individual (life span)?•Dissolution of formal organization?
© Phillip PhanIACMR July 2007
Research implications Contingency models
• Effectuation (person, idea, context) The importance of non-economic actors
• Family• Community• Advocacy associations• Pressure groups
Appropriate dependent variables• Value creation and value appropriation
(create economic value but appropriate it in non-economic ways)
© Phillip PhanIACMR July 2007
Resource assembly The resources (venture capital,
technology, people, legitimacy) Process of resource assembly
(networking, coalition building, political models)
Who gets involved (customers, suppliers, technology and capital providers)
© Phillip PhanIACMR July 2007
Note on empirical issues Use of panel data (right censorship) Event history analysis (critical
incident technique, event studies) Assumptions about the reaction of
markets and competitors to entrepreneurial events (based on equilibrium paradigm)
Constant updating of information (appropriate time frame)
Dependent variable(s)•congruency•contradictions
© Phillip PhanIACMR July 2007
Roundtable discussion
Questions and Answers