Description
During this illustration regarding long term performance of habitual entrepreneurs which direction to go.
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Long-term performance of habitual entrepreneurs – which direction to go?
FLORIAN KIRSCHENHOFER
ESC Toulouse
Research Center for Entrepreneurship and Growth Strategies
20, bd Lascrosses
BP 7010
31068 Toulouse – CEDEX 7
France
Tel: (+33) 561 294824
Fax: (+33) 561 294994
e-mail: [email protected]
CHRISTIAN LECHNER
ESC Toulouse
November, 2005
Paper submitted for the
Workshop on Firm Exit and Serial
Entrepreneurship at the Max Planck Institute (Jena, Germany) at 13-14
th
January 2006
Keywords: habitual entrepreneurs – performance factors
Long-term performance of habitual entrepreneurs – which direction to go?
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Long-term performance of habitual entrepreneurs – which
direction to go?
INTRODUCTION
Since the appeal from Ian MacMillan (1986) within his article “To really learn about
entrepreneurship, let’s study habitual entrepreneurs”, many scholars started to work on the
performance differences between novice and habitual entrepreneurs (Starr et al. 1993,
Westhead and Wright 1998, Hsu 2003). But up to today all attempts to prove a higher per-
formance rate of habitual entrepreneurs over novice entrepreneurs failed (Starr and Bygrave
1991, Birley and Westhead 1994, Westhead et al. 2004). Researchers explained this missing
effect of a higher performance rate by the existence of factors, which have a negative influ-
ence on the performance of habitual entrepreneurs. Within the concepts, these negative ef-
fects outbalance the positive ones (Starr and Bygrave 1991, Ucbasaran et al. 2003a, Westhead
et al. 2004).
Within our work, we shifted the view from the comparison of the performance rate of
novice and habitual entrepreneurs to the influence of several factors on the performance of
habitual entrepreneurs, or, with other words, which factors separate better performing habitual
entrepreneurs from underperforming habitual entrepreneurs (Lechner and Kirschenhofer
2005, Kirschenhofer and Lechner 2005, Lechner et al. 2005).
A current problem of the research situation on habitual entrepreneurs is that very gen-
eral hypotheses are test on a quantitative base, without having built a sufficient theoretical
construct. Within our research we tried to contribute to the extension of the theory of habitual
entrepreneurs by concentrating on several factors which could influence the performance of
habitual entrepreneurs in the long run.
This paper provides a synthesis of three different research projects. The first paper – a
qualitative research – investigated in depth and over time (from venture to venture) the influ-
ence of the achievement level and social networks on the performance of habitual entrepre-
neurs (Lechner and Kirschenhofer 2005). According to former research, entrepreneurs with
higher achievement level delivered a higher growth rate than a control group of entrepreneurs
with lower low-growth entrepreneurs and non-entrepreneurs (Smith and Miner 1985). So
does achievement level also influence habitual entrepreneurs in a positive way? Social net-
Long-term performance of habitual entrepreneurs – which direction to go?
3
works were chosen as a factor, because positive effects are abundant in literature about the the
development of entrepreneurial firms (Lechner 2001): entrepreneurs can overcome the lack
of resources by using social networks (Stuart et al. 1999). They are also mentioned frequently
in the existing habitual entrepreneurship research (Starr and Bygrave 1991, Hellmann und
Puri 2002, Hsu 2003, Ucbasaran et al. 2003a). Social networks are mentioned both as advan-
tages and disadvantages: they can lower the risk and cost of a project, but also act as disad-
vantages, by installing “strong ties” which avoid information flow from outside the network
(Starr and Bygrave 1991).
Our second paper used the proposition that had derived from the qualitative research:
they were transferred into hypotheses and tested with a sample of habitual entrepreneurs in
the multimedia industry (Kirschenhofer and Lechner 2005). In addition we included experi-
ence as a third factor, which could influence the performance of habitual entrepreneurs. Ex-
perience effects were claimed as important by (among others) influential work by of Lamont
(1972) and MacMillan (1986). MacMillan (1986) even mentioned the existence of than “ex-
perience curve of entrepreneuring”.
The third paper concentrated on the mentioned factors and expanded them by includ-
ing ideas as variable of influence (Lechner et al. 2005). The hypotheses were tested on a
sample of the 84 most performanceful Hollywood directors during 1980 and 2003. Ideas
were included into the framework because they are the starting point of all entrepreneurial ac-
tivities (McGrath and MacMillan 2000).
THEORY AND HYPOTHESES
Habitual entrepreneurs
There is no generally accepted definition of habitual entrepreneurs (Alsos and
Kolvereid 1998, Wright et al. 1998, McKelvie and Cedere 2001). According to our under-
standing habitual entrepreneurs are individuals, who work within a company and take respon-
sibility within the management team, which they founded, purchased, inherited, or acquired.
In addition they own an important part of the equity and the current venture is not the first one
in which they work and which they own (Lechner und Kirschenhofer 2005).
The group of habitual entrepreneurs can be divided into two subgroups, the serial and
the parallel (also called portfolio) entrepreneurs (Hall 1995, Wright et al. 1997, Rosa und
Scott 1999, Lechner und Leyronas 2003). Serial entrepreneurs always participate at just one
Long-term performance of habitual entrepreneurs – which direction to go?
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entrepreneurial project at one moment in time. After stopping one project for any reason they
get involved into the next one (Westhead and Wright 1998). Parallel entrepreneurs are in-
volved in more than one entrepreneurial project at one point in time (Westhead et al. 2004).
Habitual entrepreneurs should have advantages over their novice counterparts (Mac-
Millan 1986). According to former research they had the chance to build up effective net-
works during their former projects (McKelvie and Cedere 2001), which can be helpful to find
and realize opportunities (Mc Grath and MacMillan 2000), to get easier access to financial re-
sources (Hsu 2003) and to hire skilled labor (Hellmann und Puri 2002). But habitual entre-
preneurs also achieve advantages because of the reputation, which they were able to build up
during the former entrepreneurial projects (Starr and Bygrave 1991) and experience effects,
which gives them the chance to execute the opportunity better (MacMillan 1986).
Until today the statistical evidence of a higher performance of habitual entrepreneurs
over their novice counter parts failed. Starr and Bygrave (1991) introduced the first concept
which included disadvantages, like ‘biases and blinders’, ‘strong ties’ and ‘performance syn-
drom’, of habitual entrepreneurs. According to the authors these disadvantages outbalance
the advantages (Starr and Bygrave 1991, Ucbasaran et al. 2003a, Westhead et al. 2004). All
the concepts were developed from selected case studies and were not tested on a quantitative
base.
Within our research we shifted the view from the comparison of novice and habitual
entrepreneurs to the question, which factors influence positively the long-term performance of
habitual entrepreneurs. Over time we developed a framework with factors assumed to have
positive influence on the performance.
Social Networks
Entrepreneurs usual suffer from the “liabilities of newness” (Stinchcombe 1965, Hart
et al. 1965), the lack of internal resources, handicap of size and problems of growth (Stinch-
combe 1965, Hart et al. 1965, Lechner 2003). Networks are helpful by identifying new op-
portunities (Witt 2004) and to overcome these disadvantages by providing external resources
(Wisnieski und Dowling 1997, Baum et al. 2003). The use of social assets like friendship,
trust, gratitude and obligation reduces cost and the risks of start ups (Starr and MacMillan
1990).
Long-term performance of habitual entrepreneurs – which direction to go?
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But different types of relationship define different networks (Knoke and Kulinsky
1983). People and firms use different networks for different issues and during different
phases of the venture development (Lechner and Dowling 2003). So, measuring the total
network of an entrepreneur could hide important information about the contribution of each
single network for the long-term performance of a firm, but also for the long-term perform-
ance of a habitual entrepreneur over time and different entrepreneurial projects (Lechner et al.
2005). A firm’s network usual starts with the personal network of the entrepreneur and de-
velops over time to different relations and networks which can be used to solve different prob-
lems (Lipparini and Sobrero 1997, Baum et al. 2000).
The structure of a network shows the position of each single member (central or not)
and the strength of ties (weak vs. strong ties) between them. Each position can be seen as ad-
vantages or disadvantages (Aldrich and Zimmer 1986). Strong ties are trustful relationships
between actors like family and friends and provide deep information, but weak ties deliver
broader and new information (Granovetter 1974, Lechner und Dowling 2003). Central posi-
tions are usual seen positively (Granovetter 1974, Gulati 1999), but over-embeddedness and
too many strong ties can lead to decrease of the flow of new information and the installation
of “clubs” of strong ties, which do not share information with outside contacts anymore (Starr
und Bygrave 1991). The accumulation of strong ties can so lead to the inability to act (Uzzi
1997). But also the question of the diversity of resources which can be provided by a network
could influence the long-term performance of their members. Just networks with diversified
members can deliver diversified resources (Burt 1992). If relations are strong, the depth of
the accessed resources should help building effective businesses.
Habitual entrepreneurs had the chance to develop networks during their former pro-
jects and can carry them to the actual one (Starr and Bygrave 1991, Hellmann und Puri 2002,
Hsu 2003, Ucbasaran et al. 2003a). They can participate from the above mentioned advan-
tages of getting access to resources which can solve vertical and horizontal related develop-
ment problems of the firm (Lechner und Kirschenhofer 2005). Research showed that long-
standing members of networks do not gain as many advantages from the network as younger
counterparts, becaus of the high number of strong ties, they do not have the access to broader
and latest information anymore (Starr and Bygrave 1991).
Hypotheses 1: A limited, but stable network of a habitual entrepreneur is positive correlated
with the performance of entrepreneurial ventures.
Long-term performance of habitual entrepreneurs – which direction to go?
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Hypotheses 2: The size of the strong partner network is not positively correlated with the
performance of the firm.
Hypotheses 3: The diversity of the strong partner network is positively correlated with the
performance of the firm.
Hypotheses 4: Different types of networks have different influences on the long-term per-
formance of serial entrepreneurs.
Achievement level
People with a higher achievement motivation are attracted by jobs with higher per-
sonal responsibility, are willed to take higher, but calculated risks, set high, but achievable
goals and have desire for honest feedback about their performance (McClelland 1965). These
characteristics are matched by an entrepreneurial environment (Collins et al. 2004). Accord-
ing to former research entrepreneurs have a higher achievement motivation than non entre-
preneurs (Johnson 1990). Within the group of entrepreneurs, those with higher growth rate
delivered a higher achievement motivation than a control group of entrepreneurs with lower
growth rates or non entrepreneurs (Smith and Miner 1985). There was a positive relationship
between achievement level and entrepreneurial performance (Collins et al. 2004). But
achievement motivation is not an asset of the personality of a person; it can change over time
and can be influenced by the environment (McClelland 1965).
According to former research founding new ventures is a growth mechanism for ha-
bitual entrepreneurs (Iacobucci and Rosa 2003, Lechner and Leyronas 2003). If growth is a
key driver for habitual entrepreneurs, the achievement level of the entrepreneur should in-
crease from one venture to the other (McGrath and MacMillan 2000). Also the characteristic
of people with high achievement motivation to take calculated risk is matched by habitual en-
trepreneurs (Sarasvathy and Menon 2004).
Hypotheses 5: An increasing achievement level over time has a positive influence on the
long-term performance of habitual entrepreneurs.
Long-term performance of habitual entrepreneurs – which direction to go?
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Experience
The experience effect was one the (expected) positive effects of habitual entrepreneurs
when researches started to work on this topic (Lamont 1972). MacMillan (1986) assumed an
“experience curve of entrepreneuring” over time and from project to project. According to
the literature habitual entrepreneurs are better in realizing opportunities (Ucbasaran et al.
2003a) their knowledgebase is stronger (Carter and Ram 2003), and they can fall back on a
strong and well balanced network (Ehrenfeld 1993). Industry related experience has a posi-
tive influence on the performance of an entrepreneurial venture (Riqueleme and Rickards
1999).
The value of a certain experience depends on the also on the routine of an event (Reu-
ber and Fischer 1999), the time gap between the moment when the stock of experience was
built and point in time when it is used and its degree of consequences for the outcome of an
event (Miller 1994). But it can just influence the outcome of an event if the person learns
something from the former events (Starr and Bygrave 1991). Habitual entrepreneurs had the
chance to built such a stock and use it for later events, i.e. in getting access to external re-
source by using their network (Reuber and Fischer 1999). In addition experience could lead
to certain image within the own network, so the two points are connected (Hart et al. 1995).
But experience seems to be more helpful within one region and one industry (Iacobucci and
Rosa 2004).
But there is not one homogenous stock of experience. It can be divided into broad and
deep experience (Westhead et al. 2005). Former research mentioned that deep experience in
one discipline is not as helpful as broader experience based on different skills and fields for
the task of management an entrepreneurial venture (Alsos and Kaikonen 2004, Politis 2005).
This result is confirmed by the effect, that entrepreneurs tend to be rather generalists than
(functional) specialists (Flamholtz and Randle 2000). Shane (2000) argued that entrepreneurs
discover opportunities related to their prior knowledge. So if an entrepreneur has a broader
knowledge base (experience), he is able to identify a larger number of opportunities in differ-
ent fields.
Hypotheses 6: There is a positive relationship between number of prior ventures and the
performance of the actual one.
Hypothesis 7: Depth of industry experience is positively correlated with long-term per-
formance of serial entrepreneurs.
Long-term performance of habitual entrepreneurs – which direction to go?
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Hypothesis 8: Breath of industry experience effects from different fields is positively corre-
lated with the long-term performance of serial entrepreneurs.
Ideas
The idea is the starting point of all entrepreneurial activities. From this starting point
opportunities are identified and executed (Mc Grath and MacMillan 1990). Most entrepre-
neurial ideas are born at the intersection of existing fields and with the combination of exist-
ing resources (Schumpeter 1934, McKelvie and Cedere 2001, Johansson 2004).
Creativity research argues that mainly the quantity of ideas is driving the quality (Jo-
hansson 2004). So the quality of ideas is randomly distributed among all ideas. Habitual en-
trepreneurs are better in identifying ideas (Ucbasaran et al. 2003b, Talpin 2004) and the like-
lihood of executing them is higher than with novice or non entrepreneurs (Wright 2001).
They do not “analyze them to death”, they act (Ucbasaran et al. 2003a).
Hypotheses 9: The number of ideas influences positively the long-term performance of ha-
bitual entrepreneurs
METHOD
Within this paper we summarize the results of three different articles and try to extract
common results to the above mentioned topics.
1. Article – the case studies
The first article was built on two extreme case studies about one serial and one parallel
entrepreneur (Lechner and Kirschenhofer 2005). According to the theory qualitative, explora-
tory research is suitable to answer “how” and “why” questions (Eisenhardt 1989, Yin 2003).
While there was no theoretical construct about what factors influence the long-term perform-
ance of habitual entrepreneurs, we could not developed testable hypotheses from existing
theories. Therefore, we developed a framework of 12 propositions which can contribute to
answer the “how” and “why” questions of this issue.
Long-term performance of habitual entrepreneurs – which direction to go?
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Data were collected by a series of interviews and mails with both habitual entrepre-
neurs during September 2004 and January 2005. To increase validity, we used additional data
sources, like secondary information and company released information (Eisenhardt 2001).
2. Article –hypotheses test on a quantitative base by using a survey
From the starting point of these propositions and additional literature research we de-
veloped five hypotheses, which were tested at a single industry sample of the Multimedia in-
dustry (Kirschenhofer und Lechner 2005). We were using a pre-tested questionnaire, which
was designed for this survey. A questionnaire was the most appropriate way to collect data,
because secondary data about the achievement level, the influence of the network and experi-
ence of habitual entrepreneurs were not available.
350 surveys were sent to the CEOs of firms from the multimedia industry. They were
randomly chosen from 800 companies, delivered by the database “Kompass Monde”. Actu-
ally the database delivered 1.400 firms, after a consistency check 800 firms remained. 72
questionnaires were sent back, of which 53 could be used for analyses leading to a response
rate of 15%. OLS regressions were used to test the hypotheses.
3. Article – hypotheses tested on a quantitative base by building a database from
secondary data
The third paper concentrated mainly on serial entrepreneurs (Lechner et al. 2005).
Hollywood directors which made more than one movie were defined as serial entrepreneurs,
according to their film projects, also if there might be parallel entrepreneurs, who work at dif-
ferent film projects in different stages, at one point in time. Within the movie project they
take the risk and are responsible for the access to resources and their allocation, so the defini-
tion as serial entrepreneurs were possible. We used the data of the 87 most performanceful
Hollywood directors with 400 film projects during 1980 and 2003; provided by the internet
based database IMDb (Internet Movie Database). Each director had at least one movie with a
US gross income of more than 100 Mil. US Dollar. Missing data were completed by com-
pany information, production information and additional industry sources. The data con-
tained information about the director’s industry experience, the social network (with whom
they work before according to the major Academy Award categories), budget and gross in-
come (US numbers only) of the single films. OLS regression was used to test the hypotheses.
Long-term performance of habitual entrepreneurs – which direction to go?
10
RESULTS, CONCLUSSION AND DISCUSSION
The objectives all three articles was to make a contribution to the question which fac-
tors influence the performance of habitual entrepreneurs. The first article delivered the base
propositions and assumptions for the later research. At this point in time concentrated on
achievement level and social networks. With the following two papers we tested the findings
and with each article we included one more factor to the framework (experience and idea).
Social networks
According to the literature social networks are a performance factor of habitual entre-
preneurs (Hsu 2003, Ucbasaran 2003a). They had the chance to built them during their for-
mer projects and carry them to the actual ones (Starr and Bygrave 1991). Research on habit-
ual entrepreneurs divided the networks according to the strength of the ties (Starr and Bygrave
1991). Weak ties networks should have a positive effect for habitual entrepreneurs; strong
ties could also turn into disadvantage, because of the weak flow of new information within the
strong ties networks (Starr and Bygrave 1991). According to our research strong ties network
did not have any effect on the performance. Within the qualitative research the direct (string
tie) project network did have any importance for the performance of the subsequent ventures
(Lechner and Kirschenhofer 2005). This result was confirmed by the first quantitative based
article (Kirschenhofer and Lechner 2005) and was not tested during the last one (Lechner et
al. 2005). Weak ties seemed to have a significant influence on the identification and exploit-
ing of new opportunities (Lechner and Kirschenhofer 2005). So, hypotheses 1 need to be re-
jected. Hypotheses 2 could be confirmed.
To evaluate the influence of networks we splitted them into different sub-networks.
The global measurement of the total network like stability and size did not explain entrepre-
neurial performance (Fombrun 1982, Lechner and Dowling 2003, 2005). But different sub
networks had different influences on the venture performance and were able to contribute to
the explanation of (Lechner et al. 2005). So, not all networks have the same effect on the ven-
ture: I.e. a stable technical support network for movies did have a significant negative effect
on the venture performance, the stability of the creative network a positive (Lechner et al.
2005). Hypotheses 3 and 4 could be supported.
Long-term performance of habitual entrepreneurs – which direction to go?
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Achievement Level:
Due to analysis of the literature it was assumed that the achievement level has a posi-
tive influence on the long-term performance of habitual entrepreneurs (Hypotheses 5). With
other words, the need for more wealth and to grow is one of the main factors of the long-term
performance of habitual entrepreneurs. Opportunists with the main motivation of financial
gain (Westhead and Wright 1998) and increasing expectation from one project to the other
(McGrath and MacMillan 2000) should be better performing in terms of revenue than crafts-
men, which have other motivation, like the need for independence.
The results of all three research projects suggest the opposite (Lechner und Kirschen-
hofer 2005, Kirschenhofer und Lechner 2005, Lechner et al. 2005). Both entrepreneurs
within the case studies were motivated by personal drivers like the need for independence and
personal interests in certain topics. An increasing achievement level could not be found for
both of them, but an interest (fun!) for the new opportunity with different expectations
(Lechner and Kirschenhofer 2005). It looks like better performing entrepreneurs are obsessed
by opportunities they like and less by pure need for financial gain (Timmons 1994). Habitual
entrepreneurs are opportunity driven. These results were confirmed by both samples tested
on a quantitative base (Kirschenhofer und Lechner 2005, Lechner et al. 2005).
Experience
From the beginning research concentrated on the influence of experience on the per-
formance of habitual entrepreneurs (Lamont 1972, MacMillan 1986, Westhead and Wright
1999). Positive effects were expected, but could not be confirmed by qualitative samples
(Birley and Westhead 1994, Carter and Ram 2003, Iacobucci and Rosa 2004). Within our
first quantitative research we found surprisingly a slightly positive effect of experience on the
venture performance (Kirschenhofer and Lechner 2005). We considered entrepreneurial ex-
perience as a continue ranging for novice entrepreneurs with no experience to very experi-
enced entrepreneurs that might have started ten or more ventures. Former research treated
habitual entrepreneurs as a homogenous group, so an entrepreneur who started two ventures
was treated like an entrepreneur who started 10 ventures. But it might be that the experience
effect does not started by the second venture, it might be that it started later (Kirschenhofer
and Lechner 2005). Hypotheses 6 was slightly confirmed.
Long-term performance of habitual entrepreneurs – which direction to go?
12
Most scholars define experience by the number of ventures, the years of experience
within an industry, … (Lamont 1972, MacMillan 1986). We tried to include another view
into the picture, the breath and depth of experience (Lechner et al. 2005). As a result, it seems
that over-specialization in one limited function within the industry does not prepare for a per-
formanceful entrepreneurial career. Broad, high variety of experience prepare better for the
life of a habitual entrepreneur (Lechner et al. 2005). So, hypotheses 7 could not be supported,
hypotheses 8 could be confirmed.
Ideas
Ideas are the starting point of the entrepreneurial activity (Mc Grath and MacMillan
1990). We could not show a significant influence of the number of ideas quality of the ideas
and the venture performance (Lechner et al. 2005). The number of good ideas seems to be
randomly distributed between all ideas. So the likelihood of an experienced entrepreneur,
which worked on several projects before, to have a better for the subsequent project, is not
higher than the likelihood of an inexperienced entrepreneur. These results confirm the finding
from former habitual entrepreneur research (Schollhammer 1991, Westhead and Wright 1999;
Carter and Ram 2003).
In conclusion it can be stated, that in most fields it seems to be important to look on
the detail. A view on the total network was not as performanceful like a view on the sub
networks, the total view on experience less performanceful than the look on the different ex-
periences. All three research projects showed similar results, also if the sample were from to-
tally different industries (Quantitative research on Multimedia and Hollywood film industry,
Qualitative research on a diversified parallel entrepreneur and a serial entrepreneur from the
vacation business). We did not find any inconsistence between the results of the different
studies.
Conclusions
Literature on performance factors of habitual entrepreneurs is full of assumptions and anec-
dotical evidence. Our research tries to unbundled the arguments brought forward, to investi-
gate in depth the how’s and why’s of these assumptions.
The study of habitual entrepreneurs has been suggested as a promising route. Two perspec-
tives are possible. First, it has been argued that a lot can be learned from the study of habitual
Long-term performance of habitual entrepreneurs – which direction to go?
13
entrepreneurs for entrepreneurship in general (Low and McMillan 1988). This perspective
implies that the experience accumulated by habitual entrepreneurs acts as a sort of filter which
allows to identify better the essential, i.e. the factors that influence success or failure of new
ventures. This knowledge should also help novice entrepreneurs to increase their chances in
launching a new venture. Second, it is not unreasonable to assume that most entrepreneurs do
not only found one firm during their life-time. This means that habitual entrepreneurship is an
important part of entrepreneurship in general. Therefore it is interesting to understand what
explains the performance variance of habitual entrepreneurs.
First, habitual entrepreneurs are opportunity driven. Essentially, it is not the drive to gain
more money with the next venture that drives the performance of entrepreneurs. Entrepre-
neurs seem to be interested in the opportunity. They seem to start want they like independ-
ently whether the next opportunity is potentially more profitable than the previous one. Sec-
ond, not all forms of experience are positive for being an entrepreneur. We found that the
depth of industry experience had a negative influence on performance while breath of experi-
ence had a positive influence. It seems therefore that a variety of experiences, which make
the entrepreneur a generalist, prepares an entrepreneur better for her/his endeavors than a deep
but specialized experience. This means that it is important for research to distinguish between
different types of experience and their role on entrepreneurial performance. Our results con-
firm the assumption that entrepreneurs have an atypical career path and suggest that aspiring
entrepreneurs should try to make very different experiences before launching a venture (Poli-
tis 2005).
Third, habitual entrepreneurship is a process. There is therefore no significant linear relation-
ship between the number of ventures started or number of business ideas created and the en-
trepreneur’s performance. We did find confirmation for the assumption that the quality of
ideas and the success of habitual entrepreneurs are randomly distributed. There is no magic
number: the third venture created by entrepreneurs has in general not a higher success rate
than the second, the first or the fourth. Habitual entrepreneurs go through a process of suc-
cessful and unsuccessful ventures with no predictable pattern.
Fourth, networks can be important for entrepreneurs but not all networks have the same ef-
fect. Global network measures such as total network size or stability of all contacts of an en-
trepreneur in time have limited value in explaining entrepreneurial performance (Fombrun
1982, Lechner & Dowling 2003). The success in a given industry is influenced more by par-
ticular networks than others.
Long-term performance of habitual entrepreneurs – which direction to go?
14
Fifth, easier access of financing comes not from stable finance networks. It had been argued
that entrepreneurs use partners from previous ventures for the subsequent ventures; in this
sense, stability of financing networks should have two effects: it should facilitate access to fi-
nancing and increase the chances for performance. The increase in the probability of the new
ventures could be explained by the following factors: information asymmetry between fi-
nance partners and the entrepreneur is reduced; the partners know each other better, know
each others’ strength and weaknesses and are therefore able to better choose new projects.
We could however not find a significant influence of stability of the finance networks on per-
formance.
In conclusion, it can be said that we need to develop a more fine-grained picture about the
factors influencing positively or negatively the performance of habitual entrepreneurs. Gen-
eral assumptions about experience, networks and achievement motivation give an erroneous
picture on habitual entrepreneurs as our study could show.
Long-term performance of habitual entrepreneurs – which direction to go?
15
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doc_992745630.pdf
During this illustration regarding long term performance of habitual entrepreneurs which direction to go.
1
Long-term performance of habitual entrepreneurs – which direction to go?
FLORIAN KIRSCHENHOFER
ESC Toulouse
Research Center for Entrepreneurship and Growth Strategies
20, bd Lascrosses
BP 7010
31068 Toulouse – CEDEX 7
France
Tel: (+33) 561 294824
Fax: (+33) 561 294994
e-mail: [email protected]
CHRISTIAN LECHNER
ESC Toulouse
November, 2005
Paper submitted for the
Workshop on Firm Exit and Serial
Entrepreneurship at the Max Planck Institute (Jena, Germany) at 13-14
th
January 2006
Keywords: habitual entrepreneurs – performance factors
Long-term performance of habitual entrepreneurs – which direction to go?
2
Long-term performance of habitual entrepreneurs – which
direction to go?
INTRODUCTION
Since the appeal from Ian MacMillan (1986) within his article “To really learn about
entrepreneurship, let’s study habitual entrepreneurs”, many scholars started to work on the
performance differences between novice and habitual entrepreneurs (Starr et al. 1993,
Westhead and Wright 1998, Hsu 2003). But up to today all attempts to prove a higher per-
formance rate of habitual entrepreneurs over novice entrepreneurs failed (Starr and Bygrave
1991, Birley and Westhead 1994, Westhead et al. 2004). Researchers explained this missing
effect of a higher performance rate by the existence of factors, which have a negative influ-
ence on the performance of habitual entrepreneurs. Within the concepts, these negative ef-
fects outbalance the positive ones (Starr and Bygrave 1991, Ucbasaran et al. 2003a, Westhead
et al. 2004).
Within our work, we shifted the view from the comparison of the performance rate of
novice and habitual entrepreneurs to the influence of several factors on the performance of
habitual entrepreneurs, or, with other words, which factors separate better performing habitual
entrepreneurs from underperforming habitual entrepreneurs (Lechner and Kirschenhofer
2005, Kirschenhofer and Lechner 2005, Lechner et al. 2005).
A current problem of the research situation on habitual entrepreneurs is that very gen-
eral hypotheses are test on a quantitative base, without having built a sufficient theoretical
construct. Within our research we tried to contribute to the extension of the theory of habitual
entrepreneurs by concentrating on several factors which could influence the performance of
habitual entrepreneurs in the long run.
This paper provides a synthesis of three different research projects. The first paper – a
qualitative research – investigated in depth and over time (from venture to venture) the influ-
ence of the achievement level and social networks on the performance of habitual entrepre-
neurs (Lechner and Kirschenhofer 2005). According to former research, entrepreneurs with
higher achievement level delivered a higher growth rate than a control group of entrepreneurs
with lower low-growth entrepreneurs and non-entrepreneurs (Smith and Miner 1985). So
does achievement level also influence habitual entrepreneurs in a positive way? Social net-
Long-term performance of habitual entrepreneurs – which direction to go?
3
works were chosen as a factor, because positive effects are abundant in literature about the the
development of entrepreneurial firms (Lechner 2001): entrepreneurs can overcome the lack
of resources by using social networks (Stuart et al. 1999). They are also mentioned frequently
in the existing habitual entrepreneurship research (Starr and Bygrave 1991, Hellmann und
Puri 2002, Hsu 2003, Ucbasaran et al. 2003a). Social networks are mentioned both as advan-
tages and disadvantages: they can lower the risk and cost of a project, but also act as disad-
vantages, by installing “strong ties” which avoid information flow from outside the network
(Starr and Bygrave 1991).
Our second paper used the proposition that had derived from the qualitative research:
they were transferred into hypotheses and tested with a sample of habitual entrepreneurs in
the multimedia industry (Kirschenhofer and Lechner 2005). In addition we included experi-
ence as a third factor, which could influence the performance of habitual entrepreneurs. Ex-
perience effects were claimed as important by (among others) influential work by of Lamont
(1972) and MacMillan (1986). MacMillan (1986) even mentioned the existence of than “ex-
perience curve of entrepreneuring”.
The third paper concentrated on the mentioned factors and expanded them by includ-
ing ideas as variable of influence (Lechner et al. 2005). The hypotheses were tested on a
sample of the 84 most performanceful Hollywood directors during 1980 and 2003. Ideas
were included into the framework because they are the starting point of all entrepreneurial ac-
tivities (McGrath and MacMillan 2000).
THEORY AND HYPOTHESES
Habitual entrepreneurs
There is no generally accepted definition of habitual entrepreneurs (Alsos and
Kolvereid 1998, Wright et al. 1998, McKelvie and Cedere 2001). According to our under-
standing habitual entrepreneurs are individuals, who work within a company and take respon-
sibility within the management team, which they founded, purchased, inherited, or acquired.
In addition they own an important part of the equity and the current venture is not the first one
in which they work and which they own (Lechner und Kirschenhofer 2005).
The group of habitual entrepreneurs can be divided into two subgroups, the serial and
the parallel (also called portfolio) entrepreneurs (Hall 1995, Wright et al. 1997, Rosa und
Scott 1999, Lechner und Leyronas 2003). Serial entrepreneurs always participate at just one
Long-term performance of habitual entrepreneurs – which direction to go?
4
entrepreneurial project at one moment in time. After stopping one project for any reason they
get involved into the next one (Westhead and Wright 1998). Parallel entrepreneurs are in-
volved in more than one entrepreneurial project at one point in time (Westhead et al. 2004).
Habitual entrepreneurs should have advantages over their novice counterparts (Mac-
Millan 1986). According to former research they had the chance to build up effective net-
works during their former projects (McKelvie and Cedere 2001), which can be helpful to find
and realize opportunities (Mc Grath and MacMillan 2000), to get easier access to financial re-
sources (Hsu 2003) and to hire skilled labor (Hellmann und Puri 2002). But habitual entre-
preneurs also achieve advantages because of the reputation, which they were able to build up
during the former entrepreneurial projects (Starr and Bygrave 1991) and experience effects,
which gives them the chance to execute the opportunity better (MacMillan 1986).
Until today the statistical evidence of a higher performance of habitual entrepreneurs
over their novice counter parts failed. Starr and Bygrave (1991) introduced the first concept
which included disadvantages, like ‘biases and blinders’, ‘strong ties’ and ‘performance syn-
drom’, of habitual entrepreneurs. According to the authors these disadvantages outbalance
the advantages (Starr and Bygrave 1991, Ucbasaran et al. 2003a, Westhead et al. 2004). All
the concepts were developed from selected case studies and were not tested on a quantitative
base.
Within our research we shifted the view from the comparison of novice and habitual
entrepreneurs to the question, which factors influence positively the long-term performance of
habitual entrepreneurs. Over time we developed a framework with factors assumed to have
positive influence on the performance.
Social Networks
Entrepreneurs usual suffer from the “liabilities of newness” (Stinchcombe 1965, Hart
et al. 1965), the lack of internal resources, handicap of size and problems of growth (Stinch-
combe 1965, Hart et al. 1965, Lechner 2003). Networks are helpful by identifying new op-
portunities (Witt 2004) and to overcome these disadvantages by providing external resources
(Wisnieski und Dowling 1997, Baum et al. 2003). The use of social assets like friendship,
trust, gratitude and obligation reduces cost and the risks of start ups (Starr and MacMillan
1990).
Long-term performance of habitual entrepreneurs – which direction to go?
5
But different types of relationship define different networks (Knoke and Kulinsky
1983). People and firms use different networks for different issues and during different
phases of the venture development (Lechner and Dowling 2003). So, measuring the total
network of an entrepreneur could hide important information about the contribution of each
single network for the long-term performance of a firm, but also for the long-term perform-
ance of a habitual entrepreneur over time and different entrepreneurial projects (Lechner et al.
2005). A firm’s network usual starts with the personal network of the entrepreneur and de-
velops over time to different relations and networks which can be used to solve different prob-
lems (Lipparini and Sobrero 1997, Baum et al. 2000).
The structure of a network shows the position of each single member (central or not)
and the strength of ties (weak vs. strong ties) between them. Each position can be seen as ad-
vantages or disadvantages (Aldrich and Zimmer 1986). Strong ties are trustful relationships
between actors like family and friends and provide deep information, but weak ties deliver
broader and new information (Granovetter 1974, Lechner und Dowling 2003). Central posi-
tions are usual seen positively (Granovetter 1974, Gulati 1999), but over-embeddedness and
too many strong ties can lead to decrease of the flow of new information and the installation
of “clubs” of strong ties, which do not share information with outside contacts anymore (Starr
und Bygrave 1991). The accumulation of strong ties can so lead to the inability to act (Uzzi
1997). But also the question of the diversity of resources which can be provided by a network
could influence the long-term performance of their members. Just networks with diversified
members can deliver diversified resources (Burt 1992). If relations are strong, the depth of
the accessed resources should help building effective businesses.
Habitual entrepreneurs had the chance to develop networks during their former pro-
jects and can carry them to the actual one (Starr and Bygrave 1991, Hellmann und Puri 2002,
Hsu 2003, Ucbasaran et al. 2003a). They can participate from the above mentioned advan-
tages of getting access to resources which can solve vertical and horizontal related develop-
ment problems of the firm (Lechner und Kirschenhofer 2005). Research showed that long-
standing members of networks do not gain as many advantages from the network as younger
counterparts, becaus of the high number of strong ties, they do not have the access to broader
and latest information anymore (Starr and Bygrave 1991).
Hypotheses 1: A limited, but stable network of a habitual entrepreneur is positive correlated
with the performance of entrepreneurial ventures.
Long-term performance of habitual entrepreneurs – which direction to go?
6
Hypotheses 2: The size of the strong partner network is not positively correlated with the
performance of the firm.
Hypotheses 3: The diversity of the strong partner network is positively correlated with the
performance of the firm.
Hypotheses 4: Different types of networks have different influences on the long-term per-
formance of serial entrepreneurs.
Achievement level
People with a higher achievement motivation are attracted by jobs with higher per-
sonal responsibility, are willed to take higher, but calculated risks, set high, but achievable
goals and have desire for honest feedback about their performance (McClelland 1965). These
characteristics are matched by an entrepreneurial environment (Collins et al. 2004). Accord-
ing to former research entrepreneurs have a higher achievement motivation than non entre-
preneurs (Johnson 1990). Within the group of entrepreneurs, those with higher growth rate
delivered a higher achievement motivation than a control group of entrepreneurs with lower
growth rates or non entrepreneurs (Smith and Miner 1985). There was a positive relationship
between achievement level and entrepreneurial performance (Collins et al. 2004). But
achievement motivation is not an asset of the personality of a person; it can change over time
and can be influenced by the environment (McClelland 1965).
According to former research founding new ventures is a growth mechanism for ha-
bitual entrepreneurs (Iacobucci and Rosa 2003, Lechner and Leyronas 2003). If growth is a
key driver for habitual entrepreneurs, the achievement level of the entrepreneur should in-
crease from one venture to the other (McGrath and MacMillan 2000). Also the characteristic
of people with high achievement motivation to take calculated risk is matched by habitual en-
trepreneurs (Sarasvathy and Menon 2004).
Hypotheses 5: An increasing achievement level over time has a positive influence on the
long-term performance of habitual entrepreneurs.
Long-term performance of habitual entrepreneurs – which direction to go?
7
Experience
The experience effect was one the (expected) positive effects of habitual entrepreneurs
when researches started to work on this topic (Lamont 1972). MacMillan (1986) assumed an
“experience curve of entrepreneuring” over time and from project to project. According to
the literature habitual entrepreneurs are better in realizing opportunities (Ucbasaran et al.
2003a) their knowledgebase is stronger (Carter and Ram 2003), and they can fall back on a
strong and well balanced network (Ehrenfeld 1993). Industry related experience has a posi-
tive influence on the performance of an entrepreneurial venture (Riqueleme and Rickards
1999).
The value of a certain experience depends on the also on the routine of an event (Reu-
ber and Fischer 1999), the time gap between the moment when the stock of experience was
built and point in time when it is used and its degree of consequences for the outcome of an
event (Miller 1994). But it can just influence the outcome of an event if the person learns
something from the former events (Starr and Bygrave 1991). Habitual entrepreneurs had the
chance to built such a stock and use it for later events, i.e. in getting access to external re-
source by using their network (Reuber and Fischer 1999). In addition experience could lead
to certain image within the own network, so the two points are connected (Hart et al. 1995).
But experience seems to be more helpful within one region and one industry (Iacobucci and
Rosa 2004).
But there is not one homogenous stock of experience. It can be divided into broad and
deep experience (Westhead et al. 2005). Former research mentioned that deep experience in
one discipline is not as helpful as broader experience based on different skills and fields for
the task of management an entrepreneurial venture (Alsos and Kaikonen 2004, Politis 2005).
This result is confirmed by the effect, that entrepreneurs tend to be rather generalists than
(functional) specialists (Flamholtz and Randle 2000). Shane (2000) argued that entrepreneurs
discover opportunities related to their prior knowledge. So if an entrepreneur has a broader
knowledge base (experience), he is able to identify a larger number of opportunities in differ-
ent fields.
Hypotheses 6: There is a positive relationship between number of prior ventures and the
performance of the actual one.
Hypothesis 7: Depth of industry experience is positively correlated with long-term per-
formance of serial entrepreneurs.
Long-term performance of habitual entrepreneurs – which direction to go?
8
Hypothesis 8: Breath of industry experience effects from different fields is positively corre-
lated with the long-term performance of serial entrepreneurs.
Ideas
The idea is the starting point of all entrepreneurial activities. From this starting point
opportunities are identified and executed (Mc Grath and MacMillan 1990). Most entrepre-
neurial ideas are born at the intersection of existing fields and with the combination of exist-
ing resources (Schumpeter 1934, McKelvie and Cedere 2001, Johansson 2004).
Creativity research argues that mainly the quantity of ideas is driving the quality (Jo-
hansson 2004). So the quality of ideas is randomly distributed among all ideas. Habitual en-
trepreneurs are better in identifying ideas (Ucbasaran et al. 2003b, Talpin 2004) and the like-
lihood of executing them is higher than with novice or non entrepreneurs (Wright 2001).
They do not “analyze them to death”, they act (Ucbasaran et al. 2003a).
Hypotheses 9: The number of ideas influences positively the long-term performance of ha-
bitual entrepreneurs
METHOD
Within this paper we summarize the results of three different articles and try to extract
common results to the above mentioned topics.
1. Article – the case studies
The first article was built on two extreme case studies about one serial and one parallel
entrepreneur (Lechner and Kirschenhofer 2005). According to the theory qualitative, explora-
tory research is suitable to answer “how” and “why” questions (Eisenhardt 1989, Yin 2003).
While there was no theoretical construct about what factors influence the long-term perform-
ance of habitual entrepreneurs, we could not developed testable hypotheses from existing
theories. Therefore, we developed a framework of 12 propositions which can contribute to
answer the “how” and “why” questions of this issue.
Long-term performance of habitual entrepreneurs – which direction to go?
9
Data were collected by a series of interviews and mails with both habitual entrepre-
neurs during September 2004 and January 2005. To increase validity, we used additional data
sources, like secondary information and company released information (Eisenhardt 2001).
2. Article –hypotheses test on a quantitative base by using a survey
From the starting point of these propositions and additional literature research we de-
veloped five hypotheses, which were tested at a single industry sample of the Multimedia in-
dustry (Kirschenhofer und Lechner 2005). We were using a pre-tested questionnaire, which
was designed for this survey. A questionnaire was the most appropriate way to collect data,
because secondary data about the achievement level, the influence of the network and experi-
ence of habitual entrepreneurs were not available.
350 surveys were sent to the CEOs of firms from the multimedia industry. They were
randomly chosen from 800 companies, delivered by the database “Kompass Monde”. Actu-
ally the database delivered 1.400 firms, after a consistency check 800 firms remained. 72
questionnaires were sent back, of which 53 could be used for analyses leading to a response
rate of 15%. OLS regressions were used to test the hypotheses.
3. Article – hypotheses tested on a quantitative base by building a database from
secondary data
The third paper concentrated mainly on serial entrepreneurs (Lechner et al. 2005).
Hollywood directors which made more than one movie were defined as serial entrepreneurs,
according to their film projects, also if there might be parallel entrepreneurs, who work at dif-
ferent film projects in different stages, at one point in time. Within the movie project they
take the risk and are responsible for the access to resources and their allocation, so the defini-
tion as serial entrepreneurs were possible. We used the data of the 87 most performanceful
Hollywood directors with 400 film projects during 1980 and 2003; provided by the internet
based database IMDb (Internet Movie Database). Each director had at least one movie with a
US gross income of more than 100 Mil. US Dollar. Missing data were completed by com-
pany information, production information and additional industry sources. The data con-
tained information about the director’s industry experience, the social network (with whom
they work before according to the major Academy Award categories), budget and gross in-
come (US numbers only) of the single films. OLS regression was used to test the hypotheses.
Long-term performance of habitual entrepreneurs – which direction to go?
10
RESULTS, CONCLUSSION AND DISCUSSION
The objectives all three articles was to make a contribution to the question which fac-
tors influence the performance of habitual entrepreneurs. The first article delivered the base
propositions and assumptions for the later research. At this point in time concentrated on
achievement level and social networks. With the following two papers we tested the findings
and with each article we included one more factor to the framework (experience and idea).
Social networks
According to the literature social networks are a performance factor of habitual entre-
preneurs (Hsu 2003, Ucbasaran 2003a). They had the chance to built them during their for-
mer projects and carry them to the actual ones (Starr and Bygrave 1991). Research on habit-
ual entrepreneurs divided the networks according to the strength of the ties (Starr and Bygrave
1991). Weak ties networks should have a positive effect for habitual entrepreneurs; strong
ties could also turn into disadvantage, because of the weak flow of new information within the
strong ties networks (Starr and Bygrave 1991). According to our research strong ties network
did not have any effect on the performance. Within the qualitative research the direct (string
tie) project network did have any importance for the performance of the subsequent ventures
(Lechner and Kirschenhofer 2005). This result was confirmed by the first quantitative based
article (Kirschenhofer and Lechner 2005) and was not tested during the last one (Lechner et
al. 2005). Weak ties seemed to have a significant influence on the identification and exploit-
ing of new opportunities (Lechner and Kirschenhofer 2005). So, hypotheses 1 need to be re-
jected. Hypotheses 2 could be confirmed.
To evaluate the influence of networks we splitted them into different sub-networks.
The global measurement of the total network like stability and size did not explain entrepre-
neurial performance (Fombrun 1982, Lechner and Dowling 2003, 2005). But different sub
networks had different influences on the venture performance and were able to contribute to
the explanation of (Lechner et al. 2005). So, not all networks have the same effect on the ven-
ture: I.e. a stable technical support network for movies did have a significant negative effect
on the venture performance, the stability of the creative network a positive (Lechner et al.
2005). Hypotheses 3 and 4 could be supported.
Long-term performance of habitual entrepreneurs – which direction to go?
11
Achievement Level:
Due to analysis of the literature it was assumed that the achievement level has a posi-
tive influence on the long-term performance of habitual entrepreneurs (Hypotheses 5). With
other words, the need for more wealth and to grow is one of the main factors of the long-term
performance of habitual entrepreneurs. Opportunists with the main motivation of financial
gain (Westhead and Wright 1998) and increasing expectation from one project to the other
(McGrath and MacMillan 2000) should be better performing in terms of revenue than crafts-
men, which have other motivation, like the need for independence.
The results of all three research projects suggest the opposite (Lechner und Kirschen-
hofer 2005, Kirschenhofer und Lechner 2005, Lechner et al. 2005). Both entrepreneurs
within the case studies were motivated by personal drivers like the need for independence and
personal interests in certain topics. An increasing achievement level could not be found for
both of them, but an interest (fun!) for the new opportunity with different expectations
(Lechner and Kirschenhofer 2005). It looks like better performing entrepreneurs are obsessed
by opportunities they like and less by pure need for financial gain (Timmons 1994). Habitual
entrepreneurs are opportunity driven. These results were confirmed by both samples tested
on a quantitative base (Kirschenhofer und Lechner 2005, Lechner et al. 2005).
Experience
From the beginning research concentrated on the influence of experience on the per-
formance of habitual entrepreneurs (Lamont 1972, MacMillan 1986, Westhead and Wright
1999). Positive effects were expected, but could not be confirmed by qualitative samples
(Birley and Westhead 1994, Carter and Ram 2003, Iacobucci and Rosa 2004). Within our
first quantitative research we found surprisingly a slightly positive effect of experience on the
venture performance (Kirschenhofer and Lechner 2005). We considered entrepreneurial ex-
perience as a continue ranging for novice entrepreneurs with no experience to very experi-
enced entrepreneurs that might have started ten or more ventures. Former research treated
habitual entrepreneurs as a homogenous group, so an entrepreneur who started two ventures
was treated like an entrepreneur who started 10 ventures. But it might be that the experience
effect does not started by the second venture, it might be that it started later (Kirschenhofer
and Lechner 2005). Hypotheses 6 was slightly confirmed.
Long-term performance of habitual entrepreneurs – which direction to go?
12
Most scholars define experience by the number of ventures, the years of experience
within an industry, … (Lamont 1972, MacMillan 1986). We tried to include another view
into the picture, the breath and depth of experience (Lechner et al. 2005). As a result, it seems
that over-specialization in one limited function within the industry does not prepare for a per-
formanceful entrepreneurial career. Broad, high variety of experience prepare better for the
life of a habitual entrepreneur (Lechner et al. 2005). So, hypotheses 7 could not be supported,
hypotheses 8 could be confirmed.
Ideas
Ideas are the starting point of the entrepreneurial activity (Mc Grath and MacMillan
1990). We could not show a significant influence of the number of ideas quality of the ideas
and the venture performance (Lechner et al. 2005). The number of good ideas seems to be
randomly distributed between all ideas. So the likelihood of an experienced entrepreneur,
which worked on several projects before, to have a better for the subsequent project, is not
higher than the likelihood of an inexperienced entrepreneur. These results confirm the finding
from former habitual entrepreneur research (Schollhammer 1991, Westhead and Wright 1999;
Carter and Ram 2003).
In conclusion it can be stated, that in most fields it seems to be important to look on
the detail. A view on the total network was not as performanceful like a view on the sub
networks, the total view on experience less performanceful than the look on the different ex-
periences. All three research projects showed similar results, also if the sample were from to-
tally different industries (Quantitative research on Multimedia and Hollywood film industry,
Qualitative research on a diversified parallel entrepreneur and a serial entrepreneur from the
vacation business). We did not find any inconsistence between the results of the different
studies.
Conclusions
Literature on performance factors of habitual entrepreneurs is full of assumptions and anec-
dotical evidence. Our research tries to unbundled the arguments brought forward, to investi-
gate in depth the how’s and why’s of these assumptions.
The study of habitual entrepreneurs has been suggested as a promising route. Two perspec-
tives are possible. First, it has been argued that a lot can be learned from the study of habitual
Long-term performance of habitual entrepreneurs – which direction to go?
13
entrepreneurs for entrepreneurship in general (Low and McMillan 1988). This perspective
implies that the experience accumulated by habitual entrepreneurs acts as a sort of filter which
allows to identify better the essential, i.e. the factors that influence success or failure of new
ventures. This knowledge should also help novice entrepreneurs to increase their chances in
launching a new venture. Second, it is not unreasonable to assume that most entrepreneurs do
not only found one firm during their life-time. This means that habitual entrepreneurship is an
important part of entrepreneurship in general. Therefore it is interesting to understand what
explains the performance variance of habitual entrepreneurs.
First, habitual entrepreneurs are opportunity driven. Essentially, it is not the drive to gain
more money with the next venture that drives the performance of entrepreneurs. Entrepre-
neurs seem to be interested in the opportunity. They seem to start want they like independ-
ently whether the next opportunity is potentially more profitable than the previous one. Sec-
ond, not all forms of experience are positive for being an entrepreneur. We found that the
depth of industry experience had a negative influence on performance while breath of experi-
ence had a positive influence. It seems therefore that a variety of experiences, which make
the entrepreneur a generalist, prepares an entrepreneur better for her/his endeavors than a deep
but specialized experience. This means that it is important for research to distinguish between
different types of experience and their role on entrepreneurial performance. Our results con-
firm the assumption that entrepreneurs have an atypical career path and suggest that aspiring
entrepreneurs should try to make very different experiences before launching a venture (Poli-
tis 2005).
Third, habitual entrepreneurship is a process. There is therefore no significant linear relation-
ship between the number of ventures started or number of business ideas created and the en-
trepreneur’s performance. We did find confirmation for the assumption that the quality of
ideas and the success of habitual entrepreneurs are randomly distributed. There is no magic
number: the third venture created by entrepreneurs has in general not a higher success rate
than the second, the first or the fourth. Habitual entrepreneurs go through a process of suc-
cessful and unsuccessful ventures with no predictable pattern.
Fourth, networks can be important for entrepreneurs but not all networks have the same ef-
fect. Global network measures such as total network size or stability of all contacts of an en-
trepreneur in time have limited value in explaining entrepreneurial performance (Fombrun
1982, Lechner & Dowling 2003). The success in a given industry is influenced more by par-
ticular networks than others.
Long-term performance of habitual entrepreneurs – which direction to go?
14
Fifth, easier access of financing comes not from stable finance networks. It had been argued
that entrepreneurs use partners from previous ventures for the subsequent ventures; in this
sense, stability of financing networks should have two effects: it should facilitate access to fi-
nancing and increase the chances for performance. The increase in the probability of the new
ventures could be explained by the following factors: information asymmetry between fi-
nance partners and the entrepreneur is reduced; the partners know each other better, know
each others’ strength and weaknesses and are therefore able to better choose new projects.
We could however not find a significant influence of stability of the finance networks on per-
formance.
In conclusion, it can be said that we need to develop a more fine-grained picture about the
factors influencing positively or negatively the performance of habitual entrepreneurs. Gen-
eral assumptions about experience, networks and achievement motivation give an erroneous
picture on habitual entrepreneurs as our study could show.
Long-term performance of habitual entrepreneurs – which direction to go?
15
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