Description
During this such a detailed criteria around mapping the landscape of new venture creation research.
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Mapping the landscape of new venture creation research
Kevin Hindle,
Chair of Entrepreneurship Research and Director
Centre for Entrepreneurship Innovation and Community
School of Management and Marketing
Faculty of Business and Law
Deakin University
70 Elgar Road, Burwood,Victoria, 3125, Australia
Postal address: 221 Burwood Highway, Burwood, Victoria, 3125, Australia
Telephone: 61 3 9244 6077
Email: [email protected]
Dhafar Al Shanfari
Centre for Entrepreneurship Innovation and Community
School of Management and Marketing
Faculty of Business and Law
Deakin University
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Table of Contents
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PREDICATE ISSUES AND CONTROVERSIES IN NEW VENTURE CREATION 3
Summarising definitional issues concerning entrepreneurship and new venture creation 4
What is meant by ‘ new venture creation’ and how do you classify new ventures? 6
The special case of high potential new ventures 7
APPROACHES TO ENTREPRENEURSHIP AND NVC RESEARCH 8
MAPPING THE NVC RESEARCH LANDSCAPE 10
Determinants of new venture creation 12
Barriers to new venture creation 13
The new venture creation process and nascent pre-startup activities 13
Eclectic research perspectives in new venture creation 14
REFERENCES 14
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Mapping the landscape of new venture creation research
Kevin Hindle and Dhafar Al Shanfari
In this chapter we will attempt an analytical investigation of the new venture creation literature with
the aim of providing a comprehensive and parsimonious picture of the themes that literature
contains. We want to map the landsape of new venture creation research. However every journey of
exploration demands thorough preparation and in our case this leads to a necessary consideration of
some of the thorniest controversies in the larger domain of entrepreneurship. Though some
researchers and practitioners still maintain that entrepreneurship and new venture creation are
synonymous, there is a broader agreement that new venture creation is a specific subset of
entrepreneurship: just one manifestation that an entrepreneurial process might take (Shane and
Venkataramman 2000). Unfortunately, there is very little agreement about what the larger
phenomenon, entrepreneurship, actually is beyond recognizing that the unresolved entrepreneurship
definitional debate is a hurdle to developing any solid framework, model or theory as the basis of a
recognizably consistent body of research in any area of entrepreneurship. There simply is still no
concise universally accepted definition of what ‘entrepreneurship’ stands for (Hisrich et al. 2005).
The exact definition of entrepreneurship and the issue of how far that definition extends constitute a
major question that continues to exercise academics (Birley and Muzyka 2000) because of the need
have clear boundaries of what constitutes a study that qualifies as ‘entrepreneurship
research’(Busenitz et al. 2003). Those interested in new venture creation research cannot avoid
some attempt to address the issues and controversies of the larger field in which it is situated.
We do not need or intend to try readers’ patience with yet an another long-winded list, litany and
evaluation of the various contending definitions of entrepreneurship. However we feel that a chapter
in a tome that purports to be a handbook of new venture creation has to enter the definitional
minefield (treading as lightly as possible) because such a book has a key responsibility to
distinguish new venture creation as a specific entrepreneurial activity from entrepreneurship as a
more general phenomenon. That is what we try to do in this paper which takes the following form.
First, as an essential predicate to creating the map of the landscape which is our principal objective,
we visit the wider literature to try to tease out some key issues and themes in the ’parent’ field of
entrepreneurship and its ’child’, new venture creation. We summarize the key definitional issues,
clarify what is meant by and covered by the term ’new venture creation’ and highlight some of the
controversies, perspectives and problems associated with the conceptualisation and classification of
new ventures. Second, we explore and evaluate several extant approaches to the conduct of
entrepreneurship research as they affect new venture creation. Third, we do our best to articualte the
landscape of new venture creation research as it stands prior to the publication of the essays
presented in this book. The study culminates in an artefact we call the ’new venture creation
research theme map’. Hopefully, our analytical approach can serve as a useful complement to the
historical emphasis presented in Hans Landström and Fredrik Åström’s
insightful chapter.
Predicate issues and controversies in new venture creation
4
Summarising definitional issues concerning entrepreneurship and new
venture creation
Entrepreneurship is one of the youngest research areas in the management discipline family with
limited numbers of academic scholars focusing solely on it (Wortman Jr 1987; McCarthy and
Nicholls-Nixon 2001; Hisrich and Drnovsek 2002). Nevertheless, it is a dynamic, evolving and an
emerging field (Busenitz et al. 2003; Hindle 2004). The increase in endowed chairs, programs,
centres, journals dedicated to the field (Katz 1991; Katz 2003) and increasing number of
entrepreneurship publication in top management journals are good indicators of the field’s growing
distinction as a domain (Busenitz et al. 2003).
Moreover, entrepreneurship is very much an interdisciplinary field which draws from various social
and business disciplines. Entrepreneurship research until the middle of the last century was
overwhelmingly a subject of maverick interest to scholars trained in economics, though not (as John
Legge’s chapter in this Handbook demonstrates) to the economics discipline’s mainstream. Today,
as well as developing as a field in its own right, interest in entrepreneurship has matured to
encompass an array of disciplines and traditions including economics, strategic management,
organizational behavior, marketing, sociology, and psychology to name a few (Hisrich and
Drnovsek 2002). The nature of the field’s interconnected and elastic boundaries allows the field to
augment other disciplinary perspectives (Busenitz et al. 2003). For instance, renowned economist
Israel Kirzner (1982) emphasized the importance of considering entrepreneurship by economists
when developing economic models. Morris and Lewis (1995) argue that entrepreneurship shares
much ground with the marketing field and that they are strongly linked. Nearly every mainstream
social science professes an interest in and produces work about entrepreneurship. Although this
interdisciplinary input can be very enriching, one negative outcome of its cross disciplinary nature
is a concern that the field has been fragmented across scholars from different disciplines who do not
converge and make use of their collective work (Ucbasaran et al. 2001).
Accordingly, there is much debate on the legitimacy of entrepreneurship as a separate domain
(Busenitz et al. 2003). Some argue that since entrepreneurship is multi-disciplinary tthere is no need
for a distinctive entrepreneurship theory (Kuratko and Hodgetts 2001). Instead fields such as
management, marketing, finance, psychology and economies each need to have a theory that
addresses entrepreneurship within their own domains (Low 2001). In light of this, Shane and
Venkataraman (2000) argue that for entrepreneurship to become a legitimate social science it has to
create for itself a distinctive domain by having a framework that explores and predicts phenomena
not explained by other fields.
So, despite growing contributions through various disciplinary and theoretical perspectives, there is
still a lack of agreement about a unifying framework of both entrepreneurship itself and one its most
important subsets: the new venture creation phenomenon (Hisrich 1988; Bygrave and Hofer 1991;
Shane and Venkataraman 2000; Hisrich and Drnovsek 2002; Moroz and Hindle 2010). One of the
main challenges facing entrepreneurship researchers and the field is the challenge to embrace the
interdisciplinary, complex, phenomena of entrepreneurship, in general, and new venture creation, in
particular, within a comprehensive theory and set of models that are able to predict how, when and
why it happens. This has caused some drawbacks to the field and generated an increase of ‘folklore
or myths’ tied to entrepreneurship (Kuratko and Hodgetts 2001). The lack of general theory has also
resulted in slow progress in the maturing of the literature to the extent that some scholars argue that
research has increased in volume but not grown much in quality (Sexton 1988).
5
Definitional emphases have varied in past literature from the establishment of innovative new
organizations independent of where they exist, to general organization renewal, to starting a new
business regardless of its innovativeness (McCarthy and Nicholls-Nixon 2001) to not privileging
the creation of an organization, business or venture in any way (Shane and Venkataramman 2000).
Wennekers (2006) summarizes the bewildering array of competing definitions by suggesting that
there are, at bedrock, two perspectives in how the term entrepreneur and entrepreneurship has been
used and presented as the literature has developed. The first and earliest, which he calls the
‘occupational notion of entrepreneurship’ is traced to the 18
th
century and ties entrepreneurship to
self-employment and starting a business only. The second, more recent, is a ‘behavioural notion of
entrepreneurship’ which does not limit entrepreneurship to new venture creation but encompasses a
wider understanding based on a distinctive entrepreneurial behavior that can extend to corporations
and the public sector and to non-business activity.
This distinction was raised separately and earlier using slightly different terms by Davidsson
(2004), who distinguished the ‘emergence’ perspective and ‘opportunity perspective’. The later is
exemplified through Shane and Venkataraman’s (2000: 218) articulation of the scope of the field as
‘… the scholarly examination of how, by whom and with what effects opportunities to create goods
and services are discovered, evaluated and exploited’. Basically their viewpoint is that researchers
in the field should focus on the following questions. 1. How, why, and when opportunities exist. 2.
Study the processes of discovering, evaluating, and exploiting opportunities. 3. Study the individual
entrepreneur. In this perspective they believe that new venture creation is a subtopic in the larger
entrepreneurship field, where the essence of the entrepreneurial process is being innovative and
new. They believe that entrepreneurs, to be worthy of the name, create high growth innovative new
businesses not ‘mom and pop’ shops. The main fundamental argument in this school is that
entrepreneurship involves creating new means-end relationship not maximizing existing means-end
relationships (Blackman and Hindle 2007). On the other hand, optimizing existing relationships is
accepted as entrepreneurship by the second perspective lead by Gartner (Gartner 1985; Katz and
Gartner 1988). Scholars in this camp define entrepreneurship as the process of creating a new
organisation (Low and MacMillan 1988; Gartner, 1988; Krueger & Brazeal, 1994). They are willing
to apply the term entrepreneurship to the act of creating a new organization (predominantly starting
a new business) regardless of degree of innovation inherent in the endeavour (Birley and Muzyka
2000).
Blackman and Hindle (2007) following Klyver (2005) summarize and clarify these two main
schools of thought in entrepreneurship definition as a four-quadrant matrix (see figure 1). Columns
represent the principle action focus: either creating a new means and ends relationship (innovating)
or maximizing an existing means and ends relationship. Rows indicate whether the action takes
place through starting a new organization or within the context of existing organizations (this could
involve intrapreneurship or market mechanisms such as licensing). The four cells in the matrix
indicate what constitutes the emergence perspective (cells A and B where organizational creation
matters more than deriving value from innovation and novelty); what constitutes the opportunity
perspective (Cells A and C, where deriving value from novelty and innovation matters more than
organizational creation) and what is not entrepreneurship in either perspective (cell D).
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Figure 1: Distinguishing the two main perspectives of entrepreneurship research
Principal Action Focus
Creation of new means-ends
relationships
Maximizing existing means-ends
relationships
O
r
g
a
n
i
z
a
t
i
o
n
a
l
C
o
n
t
e
x
t
New
Organizations
(A) Innovation oriented venture
creation
(B) Non-innovation oriented
venture creation
Existing
Settings
(C) Innovation oriented venturing in
existing contexts (e.g. corporate
venturing; licensing via markets etc)
(D) Traditional Management
Sources
Klyver 2005); developed by Blackman and Hindle (2007)
This essay is not principally concerned with promoting or adding much to this dynamic debate
about the exact definition of the field. We accept Arnold Cooper’s advice, that, regardless of the
particular definition a researcher adopts, what is crucially important is that he or she makes clear the
definition or perspective that is being adopted for the purposes of the work in hand (McCarthy and
Nicholls-Nixon 2001). It is the oldest mandate of research honesty: state your biases. In any case, a
great deal of new venturing research is located in ‘quadrant A’: where the opportunity and
emergence perspectives overlap because the issue is the creation of a new venture based on
developing the new value inherent in an opportunity.
What is meant by ‘ new venture creation’ and how do you classify new
ventures?
We are happy to adopt the Carter et al. (1996: 52) definition of new venture creation which is:
‘organization creation involves those events before an organization becomes an organization that
is, organization creation involves those factors that lead to and influence the process of starting a
business’. Although scrutiny of new businesses post start-up growth and performance is important
in the overall understanding of entrepreneurship, the fundamental necessity is first to understand the
antecedents which constitute the prestart-up stage (Carland and Carland 2000). According to
Chrisman (1999: 99) ‘... serious gaps in our knowledge remain about the events that occur before
an independent organization is started’. These quotations raise key questions: how do we measure
buiness conception and what is considered to be the birth date of a venture? Later in this handbook,
Kim and Aldrich address these issues. In the extant literature, Katz and Gartner (1988) focused on
four properties of new organization formation which they believe comprise the minimum necessity
in considering an organization as emerging: first, intention to create a new venture; second,
acquisition of resources needed; third, working on the boundary (e.g. registration); fourth, exchange
process initiated with outsiders (e.g. sales). They suggest when studying organization creation one
needs to use at least one of these properties as a sampling frame to examine the issue of when a pre
venture becomes a complete organization.
Past studies use different ways to classify both entrepreneurs and the categories of new venture that
they create (Gartner et al. 1989; Hisrch et al. 2005). For instance Allen (1999) divides them into
micro-businesses (intends to be small, not innovative and less than 25 employees) and high growth
ventures (intend to grow in revenue and employees, and innovative). Hisrich et al. (2005) classify
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the types of new business start-ups to four main categories based on employee and revenue growth
speed (see table 1).
Table 1: Types of start-ups
Type Definition Expectation
Lifestyle A small venture that supports the
owners and usually does not grow
Grow to 30-40 employees after
several years
Annual revenues $2 million
Limited money to R & D
Foundation company A type of company formed from
research and development that does
not usually go public
Grow 5-10 years from 40-400
employees
From $10 million to $20million
yearly revenue
High-potential venture A venture that has high growth
potential and therefore receives
great investor interest
Grow 5-10 years to 500
employees
$20 million to $30million in
revenue
Gazelle Very high growth ventures More than high growth
Source: (Hisrich et al. 2005)
The special case of high potential new ventures
There is no doubt that individuals or teams of aspiring entrepreneurs will produce different
economic effects at a national level depending on their aspirations for growth and innovation
(Hessels et al 2008). At one end of spectrum are those who want to produce something new,
compete globally and change industries (gazelles, high growth) and at the end of the other spectrum
those who want to stay small (lifestyle).
An approach for distinguishing ‘entrepreneurial’ – high potential - ventures from ‘normal’ ventures
is provided by Schramm (2005 :163). He calls them new ‘high-impact firms’ and describes them as
‘…the kind that create value and stimulate growth by bringing new ideas to market, be they new
technologies, new business methods, or simply new and better ways of performing routine tasks’.
Moreover, Carland et al. (1984) suggest using four criteria adopted from Vesper (1980) as the basis
for distinguishing an entrepreneurial venture as opposed to a small businesses. These include;
1.Providing a new product or service 2. Practicing a new method of production or business conduct
3. Opening of new market 4. Changing an industry’s structure. Comportment with any one of these
criteria would qualify the new venture as an entrepreneurial one and the overall key word is
‘innovation’. Autio (2003) uses four similar criteria for classifying high potential new ventures.
First, they expect to employ at least 20 people in the next 5 years. Second, innovativeness is behind
the business’s aspiration for market expansion. Third, they have some international customers.
Fourth, they employ very recent technology (not older than a year).
Despite the clear economic value and importance of high potential new ventures very little research
has been conducted on distinguishing the characteristics of these new ventures and their founders
(Autio 2003) and virtually nothing on the environmental conditions in which they might thrive.
Firms in the category of high potential new ventures possess some very distinct characteristics.
They are strong in their innovative capabilities, surpassing large corporations in patent production
per sale dollar (Kuratko and Hodgetts 2001). One of few studies attempting to identify special
attributes that characterize these ventures and their founders was conducted by Barringer et al.
(2005). They performed a comparison of 50 rapid growth firms and 50 slow growth firms and
8
discovered a number of special attributes for high potential firms. First, the founders were better
educated, had higher work experience and were more highly motivated. Second, the firm had
stronger longing for growth in its mission statement. Third, their business model was more
innovative and aware of the market. Fourth, their internal human resource management (HRM)
practice emphasized improving their employees’ skills and provided more financial incentives.
Autio (2005) found that firms with these characteristics were usually founded by men between 25-
35 years old who were wealthy, better educated, serial entrepreneurs and opportunity driven.
While we recognize the extreme importance of high potential new ventures (those in quadrant A of
figure 1, above) our attempt to provide a map of the field covers the wide spectrum of ventures
embraced by both the opportunity and the emergence perspectives concerning the nature of the
entrepreneurship and new venturing phenomena.
Since this is a handbook of new venture creation research, we turn next to a brief consideration of
various approaches that have been taken to researching entrepreneurship and new venture creation.
Approaches to entrepreneurship and NVC research
The complex and interdisciplinary nature of the field has increased the difficulty of executing good
entrepreneurship research (Gartner 1989). Therefore, the categorization of schools of thought and
approaches in researching entrepreneurship is helpful in organizing a researcher's direction and
focus. We will briefly articulate some of what the literature discusses and displays as the main
research approaches in entrepreneurship.
Deakins and Freel (2006) posit that there have been three approaches to entrepreneurship research.
One is an economic approach where economic thinkers like Cantillon, Say, Knight, Kirzner,
Schumpeter and others wrote on the relationship between an entrepreneur and economic
development; basically the output of the entrepreneurial process. This is the earliest contribution to
the entrepreneurship literature until the 1950’s when researchers outside the economic perspective
started contributing (Kuratko and Hodgetts 2001).
The psychological trait approach places the focus more on the individual entrepreneur. This is one
of the earliest approaches in entrepreneurship research and aimed, initially, to find personal
characteristics that distinguished entrepreneurs from the rest. Folowing McClelland (1961) this
school of thought considers personal traits such as need for achievement, internal locus of control
and risk-taking ability as main driving factors for entrepreneurial action (Robertson et al. 2003).
Generally, the attribute approach focused on long lists of entrepreneurial traits that have been
identified and examined as potential characteristics associated with entrepreneurial behavior
(Volery et al. 1997). Followers of this approach emphasized that entrepreneurs have inherent skills
and cannot be ‘made’. Fascination with entrepreneurs as individuals is similar to people’s
fascination with successful people in any other field: such as movie stars, presidents and others.
Entrepreneurs attract researchers to study what made them successful in the business world.
However, this school was not leading to new answers to why people create businesses and its
popularity was declining (Volery et al. 1997) and has – according to some - reached a dead end
(Aldrich 1990; Gartner 1985,1988, 1989). In this handbook, William Gartner finds a new life for
the old wisdom when he revists David McClellands (1961) classic work: the Achieving Society.
Later psychologically influenced work has maintained the importance of the psychology of the
9
individual but shifted well away from traits to an interest in cognition (e.g Greenberger and Sexton
1988; Shaver and Scott 1991; Learned 1992; Busenitz and Lau 1996; Carland and Carland 2000;
Kolvereid and Isaksen 2006).
There is a social behavioral research cluster that emphasizes the relationship between the external
environment and personal characteristics on the entrepreneurship process (Deakins and Freel 2006).
As the study of entrepreneurship evolved, many researchers focused on the act rather than the actor
(Gartner 1988). ‘As intellectually stimulating as it may be to find out what motivates entrepreneurs
and how they differ from ordinary mortals, the more critical question is how these individuals
manage to create and sustain successful organizations, despite severe obstacles.’ (Aldrich and
Martinez 2001: 41). Many of the models used in this approach emphasize the importance of the
external environment and its resources for new business start-ups (Mazzarol et al. 1999).
Vitally important to entrepreneurship and new venturing research is the influence of the discipline
of corporate strategy. Like the field of entrepreneurship, the strategic management paradigm
consists of various schools of thought and research approaches (Sandberg 1992). Schendel and
Hofer (1979: 11) describe strategic management as ‘ a process that deals with the entrepreneurial
work of organizations, with organizational renewal and growth, and, more particularly, with
developing and utilizing the strategy which is to guide the organization’s operations’. Cooper
(1979) and Sandberg (1992) provide importnat studies on the relationship between the field of
strategic management and entrepreneurship. Sandberg (1992) suggests possible avenues for
strategic management contribution to future entrepreneurship research in general but more
particularly corporate entrepreneurship. Sandberg (1992) suggests drawing from the ‘ Design
School’ (one of the ten strategic management schools of thought posited by Mintzberg et al.
(1990;1998)) which mainly considers the process of matching internal resources to external
opportunities. The strategic management process involves six main tasks as described by Schendel
and Hofer (1979) that include ‘ goal formulation’, ‘ environmental analysis’, ‘strategy formulation’,
‘ strategy evaluation’, ‘ strategy implementation’, and ‘ strategic control’. Some of these tasks
require the same generic skills needed during the new venture creation process, particularly
environmental analysis, formulation and evaluation during business plan development.
A succinct illustration of the main extant approaches to researching entrepreneurship (and the
classification applies equally to the sub-field of new venture creation) is presented by Kuratko and
Hodgetts (2001). They plot six perspectives: three that take a ‘macro’ view and three a ‘micro’ view
of the phenomenon. The macro school includes environment, capital and displacement schools of
thought. The micro view includes the entrepreneurial trait, venture opportunity, and strategic
formulation schools of thought.
Figure 2: Main approaches in entrepreneurship research
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Source: (Kuratko and Hodgetts 2001)
Cutting the pie with a different knife, Lee and Peterson (2000) suggest entrepreneurship research
approaches are divisable under three main headings; the individual, the environment/contextual and
the firm approach. Research in the contextual approach heavily focuses on the role of the
environment climate in enhancing or hindering entrepreneurial activity. According to Lee and
Peterson (2000: 402) in this approach the ‘larger societal factors such as cultural, economic,
political, and social forces can combine to create threats or opportunities in the environments
where entrepreneurs operate.’
Having briefly considered the definitional controversies, focal study points and research approaches
to entrepreneurship and new venture creation we can now attempt to map the landscape.
Mapping the NVC research landscape
Given the complexity, controversy and diversity of approaches taken by researchers to the new
venture creation process and the sheer variety of themes and issues covered it is by no means
certain that everyone will accept that the field can be parsimonoiusly encompassed by an attempt to
provide some kind of map of what might be called the landscape of new venture creation research.
Despite the difficulties, in what follows, we have attempted to do this. After an intensive electronic
and manual search and filtration using various keywords such as firm gestation (Reid and Smith
2000), organizational emergence (Gartner and 1993), pre-organization (Katz and Gartner1988),
start-up Vesper (1990), 72 papers were scrutinised intensely. More than half of the papers were
published in the last 10 years and the publication years ranged from 1980 to 2007. Our study, based
on content analysis of the body of extant new venture creation research, resulted in four main
themes which are illustrated in figure 3, a device we call the ‘new venture creation theme map’.
Environmental School of Thought
Financial/ Capital School of Thought
Displacement School of Thought
Entrepreneurial Trait School of Thought (People School)
Venture Opportunity School of Thought
Strategic Formulation School of Thought
Macro View
Micro View
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Figure 3: New venture creation research theme map
Literature
Structure
Focal boundaries Main themes
Principal perspective
• Economic
• Psychology/Cognition
• Ecology
• Resource
• Complex science
Core unit of Analysis
• Individual
• Organization
• Industry
• Region
• National
• Countries
• Multiple
New venture
creation as sub
topic of
entrepreneurship
field concerned
with new business
start-up issues and
all activities from
conception till the
emergence of new
organization only
(not including
after start-up
activities)
1. Determinants
of NVC
3. The NVC process
& nascent pre-start-
up activities
4. Eclectic NVC
research issues
A. Micro-level factors
influencing individuals
decision to start a new
venture
Sub Themes
c. NVC rate
variations
across regions
and countries
B. Factors influencing
NVC rates
2. Barriers to
NVC
A. Pure gestation
activities
B. Factors influencing
gestation stages
A. Personal & external
barriers
B. External barriers
only
a. Psychological
and cognitive
factors
b. Personal
factors
a. Industry
level
b. Region &
national level
12
We conclude this chapter with a brief summary of the themes detected in our content analysis and
represented in our map of the new venture creation landscape.
Determinants of new venture creation
The first theme represented in the majority of papers, revolves around questions centred on the
determinants of new venture creation. The main thematic question in this area of research is
centered on ‘what factors internal or external perceived or actual have an impact on increasing
creation of new ventures?’ Papers reflecting this theme shared similar broad objectives but their
approaches, lenses and scale of focus varied greatly. They are further subdivided into to two
subthemes based on level of focus. A. Micro level factors influencing an individual’s decision to
start a new venture and B. Factors influencing new venture creation rates. The first subtheme
occurred in papers whose direction was more cognitive and focused on analysis of the individual
and looked at what influences a person’s decision to start a business. Most of the papers in this
subtheme reflect a direction in the new venture creation literature that wants to bring back the
individual into entrepreneurship research. Their argument is that the individual entrepreneur cannot
be neglected in future research on understanding the entrepreneurial process since he or she is the
soul of entrepreneurial activity (Herron and Sapienza 1992; Carland and Carland 2000). It is
possible to claim that this is a refocused and new direction that has sprung away from the old trait
school through shifting focus from attempting to distinguish entrepreneurs from managers to asking
questions similar to Learned’s (1992: 41) inquiry ‘are there person-level characteristics which, in
certain, situations, lead to an intention to found, and further, are these characteristics, again in
certain situations more likely to lead to a successful attempt to found?.
This subtheme can be further sub divided into two streams a. psychological cognitive factor focus
(e.g Greenberger and Sexton 1988; Shaver and Scott 1991; Learned 1992; Busenitz and Lau 1996;
Carland and Carland 2000; Kolvereid and Isaksen 2006). These studies mainly employ a cognitive
lens in conceptualizing the process of venture creation. Most of them posit models of organization
formation. b. personal traits focus that considers personal factors in new venturing such as personal
confidence, risk propensity, alertness to opportunity, etc. (e.g Powell and Bimmerle 1980; Hansen
and Allen 1992; Herron and Sapienza 1992). This stream of papers moves from cognitive models to
papers that investigate the role of various personal factors such as entrepreneurs’ traits and
background on the decision to form a venture.
The second subtheme involves factors influencing new venture creation rates. This category
contains theoretical and empirical studies that have postulated and examined over the years various
personal and contextual factors that are believed to impact on the rate of venture creation at the
industry, regional, and national level. We further subdivide this subtheme into three categories
based on level of analysis; a. industry level new venture creation rate ( e.g Pennings 1982; Aldrich
1990, VanderWerf 1993, Dean and Meyer 1996). For instance, Dean and Meyer (1996) investigate
dynamic industries. They find that new venture creation is positively related to dynamic industries
with high sales growth rate, niche market & dynamic consumer taste and fast technological
development. b. within a region or country level (e.g Manning et al. 1989; Gatewood 1993; Specht
1993; Gnyawali and Fogel 1994; Capaldo 1997; Mazzarol et al. 1999; Lin et al. 2000; Feldman
2001; Neck et al. 2004; Sternberg and Wennekers 2005; Mueller 2006; Zhang and Yang 2006)
These articles consider a mixture of personal and macro external determinates of new venture
creation rates at a more macro level in either regions or a specific country. c. new venture rates
13
variation across regions or countries (e.g Malecki 1990; Moyes and Westhead 1990; Davidsson et
al. 1994; Keeble and Walker 1994; Reynolds et al.1994; Armington and Acs 2002; Wennekers et al.
2002;Todtling and Wanzenbock 2003; Lee et al. 2004; Wagner and Sternberg 2004; Begley et al.
2005; Freytag and Thurik 2007).
Barriers to new venture creation
The second category of papers explored and discussed various barriers to new venture creation. It is
important to distinguish between the interpretation of ‘barriers’ in economics which is usually
associated with factors like entry cost that restrict market penetration (e.g. Bain, 1956) and the
intended meaning of the term as we employ it here. Barriers in our conception as revealled by the
literature we examined refer to a more comprehensive meaning that covers any factor internal or
external that hinders the creation of a new venture (Kouriloff 2000). The challenges or barriers
faced by those that succeeded or failed seem to be neglected and fragmented (Hatala 2005).
According to Kouriloff (2000: 63) ‘there is a need for systematic research in a priori barriers…’.
This call is echoed by Sarasvathy (2004) who suggests reshaping research questions instead of
examining incentives that increase entrepreneurial activity to focusing on identifying barriers to
entrepreneurship. The papers found in this school are subdivided between two subthemes A. those
that involve both personal and external barriers and B. those that only discuss macro external
barriers to new venture creation. In sum, personal or intrinsic barriers include family security, well
being, commitments (Finnerty and Krzystofik 1985), aversion to risk (Choo and Wong 2006), lack
of idea, lack of knowledge, aversion to stress, time for family (Kouriloff 2000; Robertson et al.
2003; Volery et al. 1997), uncertainty of the future (Choo and Wong 2006; Volery et al. 1997). On
the other hand, environmental or extrinsic barriers that a person has no control over include general
market environment, high taxes, (Finnerty and Krzystofik 1985; Volery et al. 1997), lack or scarcity
of financial resources (Barth et al. 2006; Choo and Wong 2006), government regulation (Barth et al.
2006; Klapper et al. 2006; Kouriloff 2000; Lopez 1999; Volery et al. 1997), bad economic
indicators (Choo and Wong 2006), suitable labor (Choo and Wong 2006; Volery et al. 1997), rigid
labor regulations (Klapper et al. 2006), education and advisory system (Robertson et al. 2003),
cultural barriers such as fear of failure (Kouriloff 2000; Robertson et al. 2003; Volery et al. 1997),
negative social and cultural attitude (Robertson et al. 2003), and racial discrimination (Barth et al.
2006).
The new venture creation process and nascent pre-startup activities
The third category focuses on the new venture creation process and nascent pre-start-up activities.
These papers look at the earliest possible events and activities that occur before the organization’s
emergence. There have been limited studies focusing on the new venture creation or gestation
process theoretically and even fewer empirical attempts (Reynolds and Miller 1992; Bhave 1994).
Overall the main theme in this category is to understand the process events and activities that are
involved in creating a new venture by mainly studying nascent entrepreneurs. Moreover, the theme
is subdivided into those that A. Purely focused on gestation activities An important stream of work
among those we classify as ’gestation researchers’ is the body of literature on entrepreneurial
intensions most closely associated with Krueger and his colleagues (Krueger Jr, 2003; Krueger,
1993; Krueger & Dickson, 1994; Krueger, 2000; Krueger & Brazeal, 1994; Krueger & Carsrud,
1993; Krueger & Dickson, 1993; Krueger, Reilly, & Carsrud, 2000; Shepherd & Krueger, 2002).
Researchers interested in other aspects of gestation include: Katz and Gartner 1988; Reynolds and
14
Miller 1992; Carter et al. 1996 ; Alsos and Kolvereid1998; Liao and Welsch 2003; Liao et al. 2005;
Brush et al. 2008. They attempt to understand and posit models of the dynamic, complex, unique,
unorganized process of creating a new venture, which involve activities like getting resources,
finding employees and financing etc. B. Factors that influence the gestation stages and process (e.g
Bhave 1994; Reynolds 1997; Davidsson and Honig 2003; Jin-ichiro 2004; Gelderen et al. 2005;
Rotefoss and Kolvereid 2005; Benyamin et al. 2006; Parker and Belghitar 2006; Tornikoski and
Newbert 2006; Lichtenstein et al. 2007). This group of papers mostly study factors influencing
nascent entrepreneurs’ success or failure in the different venture creation stages. For example,
Rotefoss and Kolvereid (2005) investigated empirically the individual and environmental factors
that are more likely to predict an individual’s success to reach any one of three millstone stages
‘aspiring entrepreneur, nascent entrepreneur and actual business owner’.
Eclectic research perspectives in new venture creation
Our final category is unashamedly something of a potpourri. Honest content analysis can only go so
far. It is desirable to distinguish categories where possible bu necessary to recognise the absence of
strutured classification where a binding structure does not exist. So, our final category covers a
wide array of theoretical and conceptual areas of new venture creation research. Three are
theoretical contributions to our understanding of the new venture creation phenomenon (Gartner
1985; Gartner et al. 1989; Gartner 1993), two provide different literature reviews of some aspect in
the area (Forbes 1999; Shook et al. 2003), and one discusses how the certain characteristics of a
technological opportunity impact chances of its commercialization and hence venture creation
(Shane 2001).
Such is our view of the landscape of new venture creation research prior to the stimulating
contributions which comprise this handbook.
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doc_287424733.pdf
During this such a detailed criteria around mapping the landscape of new venture creation research.
1
Mapping the landscape of new venture creation research
Kevin Hindle,
Chair of Entrepreneurship Research and Director
Centre for Entrepreneurship Innovation and Community
School of Management and Marketing
Faculty of Business and Law
Deakin University
70 Elgar Road, Burwood,Victoria, 3125, Australia
Postal address: 221 Burwood Highway, Burwood, Victoria, 3125, Australia
Telephone: 61 3 9244 6077
Email: [email protected]
Dhafar Al Shanfari
Centre for Entrepreneurship Innovation and Community
School of Management and Marketing
Faculty of Business and Law
Deakin University
CURRENT (CORRECT CITATION AND PROCEDURAL DETAILS FOR USING THIS
PAPER ARE AS FOLLOWS
INTERIM CITATION. xx
USAGE PRIOR TO PUBLICATION. This is an advance copy of the manuscript as it was in the
hands of the publisher at xx Clearly it is a draft only (though a late and accepted one). This version
is given to you because of your special interest in seeing a pre-publication version. Please cite it
with proper detail (as above) and replace your references to this work with references to the finished
pjece as soon as it is published.
2
Table of Contents
(navigation device: to be dropped before sending to journal)
PREDICATE ISSUES AND CONTROVERSIES IN NEW VENTURE CREATION 3
Summarising definitional issues concerning entrepreneurship and new venture creation 4
What is meant by ‘ new venture creation’ and how do you classify new ventures? 6
The special case of high potential new ventures 7
APPROACHES TO ENTREPRENEURSHIP AND NVC RESEARCH 8
MAPPING THE NVC RESEARCH LANDSCAPE 10
Determinants of new venture creation 12
Barriers to new venture creation 13
The new venture creation process and nascent pre-startup activities 13
Eclectic research perspectives in new venture creation 14
REFERENCES 14
3
Mapping the landscape of new venture creation research
Kevin Hindle and Dhafar Al Shanfari
In this chapter we will attempt an analytical investigation of the new venture creation literature with
the aim of providing a comprehensive and parsimonious picture of the themes that literature
contains. We want to map the landsape of new venture creation research. However every journey of
exploration demands thorough preparation and in our case this leads to a necessary consideration of
some of the thorniest controversies in the larger domain of entrepreneurship. Though some
researchers and practitioners still maintain that entrepreneurship and new venture creation are
synonymous, there is a broader agreement that new venture creation is a specific subset of
entrepreneurship: just one manifestation that an entrepreneurial process might take (Shane and
Venkataramman 2000). Unfortunately, there is very little agreement about what the larger
phenomenon, entrepreneurship, actually is beyond recognizing that the unresolved entrepreneurship
definitional debate is a hurdle to developing any solid framework, model or theory as the basis of a
recognizably consistent body of research in any area of entrepreneurship. There simply is still no
concise universally accepted definition of what ‘entrepreneurship’ stands for (Hisrich et al. 2005).
The exact definition of entrepreneurship and the issue of how far that definition extends constitute a
major question that continues to exercise academics (Birley and Muzyka 2000) because of the need
have clear boundaries of what constitutes a study that qualifies as ‘entrepreneurship
research’(Busenitz et al. 2003). Those interested in new venture creation research cannot avoid
some attempt to address the issues and controversies of the larger field in which it is situated.
We do not need or intend to try readers’ patience with yet an another long-winded list, litany and
evaluation of the various contending definitions of entrepreneurship. However we feel that a chapter
in a tome that purports to be a handbook of new venture creation has to enter the definitional
minefield (treading as lightly as possible) because such a book has a key responsibility to
distinguish new venture creation as a specific entrepreneurial activity from entrepreneurship as a
more general phenomenon. That is what we try to do in this paper which takes the following form.
First, as an essential predicate to creating the map of the landscape which is our principal objective,
we visit the wider literature to try to tease out some key issues and themes in the ’parent’ field of
entrepreneurship and its ’child’, new venture creation. We summarize the key definitional issues,
clarify what is meant by and covered by the term ’new venture creation’ and highlight some of the
controversies, perspectives and problems associated with the conceptualisation and classification of
new ventures. Second, we explore and evaluate several extant approaches to the conduct of
entrepreneurship research as they affect new venture creation. Third, we do our best to articualte the
landscape of new venture creation research as it stands prior to the publication of the essays
presented in this book. The study culminates in an artefact we call the ’new venture creation
research theme map’. Hopefully, our analytical approach can serve as a useful complement to the
historical emphasis presented in Hans Landström and Fredrik Åström’s
insightful chapter.
Predicate issues and controversies in new venture creation
4
Summarising definitional issues concerning entrepreneurship and new
venture creation
Entrepreneurship is one of the youngest research areas in the management discipline family with
limited numbers of academic scholars focusing solely on it (Wortman Jr 1987; McCarthy and
Nicholls-Nixon 2001; Hisrich and Drnovsek 2002). Nevertheless, it is a dynamic, evolving and an
emerging field (Busenitz et al. 2003; Hindle 2004). The increase in endowed chairs, programs,
centres, journals dedicated to the field (Katz 1991; Katz 2003) and increasing number of
entrepreneurship publication in top management journals are good indicators of the field’s growing
distinction as a domain (Busenitz et al. 2003).
Moreover, entrepreneurship is very much an interdisciplinary field which draws from various social
and business disciplines. Entrepreneurship research until the middle of the last century was
overwhelmingly a subject of maverick interest to scholars trained in economics, though not (as John
Legge’s chapter in this Handbook demonstrates) to the economics discipline’s mainstream. Today,
as well as developing as a field in its own right, interest in entrepreneurship has matured to
encompass an array of disciplines and traditions including economics, strategic management,
organizational behavior, marketing, sociology, and psychology to name a few (Hisrich and
Drnovsek 2002). The nature of the field’s interconnected and elastic boundaries allows the field to
augment other disciplinary perspectives (Busenitz et al. 2003). For instance, renowned economist
Israel Kirzner (1982) emphasized the importance of considering entrepreneurship by economists
when developing economic models. Morris and Lewis (1995) argue that entrepreneurship shares
much ground with the marketing field and that they are strongly linked. Nearly every mainstream
social science professes an interest in and produces work about entrepreneurship. Although this
interdisciplinary input can be very enriching, one negative outcome of its cross disciplinary nature
is a concern that the field has been fragmented across scholars from different disciplines who do not
converge and make use of their collective work (Ucbasaran et al. 2001).
Accordingly, there is much debate on the legitimacy of entrepreneurship as a separate domain
(Busenitz et al. 2003). Some argue that since entrepreneurship is multi-disciplinary tthere is no need
for a distinctive entrepreneurship theory (Kuratko and Hodgetts 2001). Instead fields such as
management, marketing, finance, psychology and economies each need to have a theory that
addresses entrepreneurship within their own domains (Low 2001). In light of this, Shane and
Venkataraman (2000) argue that for entrepreneurship to become a legitimate social science it has to
create for itself a distinctive domain by having a framework that explores and predicts phenomena
not explained by other fields.
So, despite growing contributions through various disciplinary and theoretical perspectives, there is
still a lack of agreement about a unifying framework of both entrepreneurship itself and one its most
important subsets: the new venture creation phenomenon (Hisrich 1988; Bygrave and Hofer 1991;
Shane and Venkataraman 2000; Hisrich and Drnovsek 2002; Moroz and Hindle 2010). One of the
main challenges facing entrepreneurship researchers and the field is the challenge to embrace the
interdisciplinary, complex, phenomena of entrepreneurship, in general, and new venture creation, in
particular, within a comprehensive theory and set of models that are able to predict how, when and
why it happens. This has caused some drawbacks to the field and generated an increase of ‘folklore
or myths’ tied to entrepreneurship (Kuratko and Hodgetts 2001). The lack of general theory has also
resulted in slow progress in the maturing of the literature to the extent that some scholars argue that
research has increased in volume but not grown much in quality (Sexton 1988).
5
Definitional emphases have varied in past literature from the establishment of innovative new
organizations independent of where they exist, to general organization renewal, to starting a new
business regardless of its innovativeness (McCarthy and Nicholls-Nixon 2001) to not privileging
the creation of an organization, business or venture in any way (Shane and Venkataramman 2000).
Wennekers (2006) summarizes the bewildering array of competing definitions by suggesting that
there are, at bedrock, two perspectives in how the term entrepreneur and entrepreneurship has been
used and presented as the literature has developed. The first and earliest, which he calls the
‘occupational notion of entrepreneurship’ is traced to the 18
th
century and ties entrepreneurship to
self-employment and starting a business only. The second, more recent, is a ‘behavioural notion of
entrepreneurship’ which does not limit entrepreneurship to new venture creation but encompasses a
wider understanding based on a distinctive entrepreneurial behavior that can extend to corporations
and the public sector and to non-business activity.
This distinction was raised separately and earlier using slightly different terms by Davidsson
(2004), who distinguished the ‘emergence’ perspective and ‘opportunity perspective’. The later is
exemplified through Shane and Venkataraman’s (2000: 218) articulation of the scope of the field as
‘… the scholarly examination of how, by whom and with what effects opportunities to create goods
and services are discovered, evaluated and exploited’. Basically their viewpoint is that researchers
in the field should focus on the following questions. 1. How, why, and when opportunities exist. 2.
Study the processes of discovering, evaluating, and exploiting opportunities. 3. Study the individual
entrepreneur. In this perspective they believe that new venture creation is a subtopic in the larger
entrepreneurship field, where the essence of the entrepreneurial process is being innovative and
new. They believe that entrepreneurs, to be worthy of the name, create high growth innovative new
businesses not ‘mom and pop’ shops. The main fundamental argument in this school is that
entrepreneurship involves creating new means-end relationship not maximizing existing means-end
relationships (Blackman and Hindle 2007). On the other hand, optimizing existing relationships is
accepted as entrepreneurship by the second perspective lead by Gartner (Gartner 1985; Katz and
Gartner 1988). Scholars in this camp define entrepreneurship as the process of creating a new
organisation (Low and MacMillan 1988; Gartner, 1988; Krueger & Brazeal, 1994). They are willing
to apply the term entrepreneurship to the act of creating a new organization (predominantly starting
a new business) regardless of degree of innovation inherent in the endeavour (Birley and Muzyka
2000).
Blackman and Hindle (2007) following Klyver (2005) summarize and clarify these two main
schools of thought in entrepreneurship definition as a four-quadrant matrix (see figure 1). Columns
represent the principle action focus: either creating a new means and ends relationship (innovating)
or maximizing an existing means and ends relationship. Rows indicate whether the action takes
place through starting a new organization or within the context of existing organizations (this could
involve intrapreneurship or market mechanisms such as licensing). The four cells in the matrix
indicate what constitutes the emergence perspective (cells A and B where organizational creation
matters more than deriving value from innovation and novelty); what constitutes the opportunity
perspective (Cells A and C, where deriving value from novelty and innovation matters more than
organizational creation) and what is not entrepreneurship in either perspective (cell D).
6
Figure 1: Distinguishing the two main perspectives of entrepreneurship research
Principal Action Focus
Creation of new means-ends
relationships
Maximizing existing means-ends
relationships
O
r
g
a
n
i
z
a
t
i
o
n
a
l
C
o
n
t
e
x
t
New
Organizations
(A) Innovation oriented venture
creation
(B) Non-innovation oriented
venture creation
Existing
Settings
(C) Innovation oriented venturing in
existing contexts (e.g. corporate
venturing; licensing via markets etc)
(D) Traditional Management
Sources
Klyver 2005); developed by Blackman and Hindle (2007)This essay is not principally concerned with promoting or adding much to this dynamic debate
about the exact definition of the field. We accept Arnold Cooper’s advice, that, regardless of the
particular definition a researcher adopts, what is crucially important is that he or she makes clear the
definition or perspective that is being adopted for the purposes of the work in hand (McCarthy and
Nicholls-Nixon 2001). It is the oldest mandate of research honesty: state your biases. In any case, a
great deal of new venturing research is located in ‘quadrant A’: where the opportunity and
emergence perspectives overlap because the issue is the creation of a new venture based on
developing the new value inherent in an opportunity.
What is meant by ‘ new venture creation’ and how do you classify new
ventures?
We are happy to adopt the Carter et al. (1996: 52) definition of new venture creation which is:
‘organization creation involves those events before an organization becomes an organization that
is, organization creation involves those factors that lead to and influence the process of starting a
business’. Although scrutiny of new businesses post start-up growth and performance is important
in the overall understanding of entrepreneurship, the fundamental necessity is first to understand the
antecedents which constitute the prestart-up stage (Carland and Carland 2000). According to
Chrisman (1999: 99) ‘... serious gaps in our knowledge remain about the events that occur before
an independent organization is started’. These quotations raise key questions: how do we measure
buiness conception and what is considered to be the birth date of a venture? Later in this handbook,
Kim and Aldrich address these issues. In the extant literature, Katz and Gartner (1988) focused on
four properties of new organization formation which they believe comprise the minimum necessity
in considering an organization as emerging: first, intention to create a new venture; second,
acquisition of resources needed; third, working on the boundary (e.g. registration); fourth, exchange
process initiated with outsiders (e.g. sales). They suggest when studying organization creation one
needs to use at least one of these properties as a sampling frame to examine the issue of when a pre
venture becomes a complete organization.
Past studies use different ways to classify both entrepreneurs and the categories of new venture that
they create (Gartner et al. 1989; Hisrch et al. 2005). For instance Allen (1999) divides them into
micro-businesses (intends to be small, not innovative and less than 25 employees) and high growth
ventures (intend to grow in revenue and employees, and innovative). Hisrich et al. (2005) classify
7
the types of new business start-ups to four main categories based on employee and revenue growth
speed (see table 1).
Table 1: Types of start-ups
Type Definition Expectation
Lifestyle A small venture that supports the
owners and usually does not grow
Grow to 30-40 employees after
several years
Annual revenues $2 million
Limited money to R & D
Foundation company A type of company formed from
research and development that does
not usually go public
Grow 5-10 years from 40-400
employees
From $10 million to $20million
yearly revenue
High-potential venture A venture that has high growth
potential and therefore receives
great investor interest
Grow 5-10 years to 500
employees
$20 million to $30million in
revenue
Gazelle Very high growth ventures More than high growth
Source: (Hisrich et al. 2005)
The special case of high potential new ventures
There is no doubt that individuals or teams of aspiring entrepreneurs will produce different
economic effects at a national level depending on their aspirations for growth and innovation
(Hessels et al 2008). At one end of spectrum are those who want to produce something new,
compete globally and change industries (gazelles, high growth) and at the end of the other spectrum
those who want to stay small (lifestyle).
An approach for distinguishing ‘entrepreneurial’ – high potential - ventures from ‘normal’ ventures
is provided by Schramm (2005 :163). He calls them new ‘high-impact firms’ and describes them as
‘…the kind that create value and stimulate growth by bringing new ideas to market, be they new
technologies, new business methods, or simply new and better ways of performing routine tasks’.
Moreover, Carland et al. (1984) suggest using four criteria adopted from Vesper (1980) as the basis
for distinguishing an entrepreneurial venture as opposed to a small businesses. These include;
1.Providing a new product or service 2. Practicing a new method of production or business conduct
3. Opening of new market 4. Changing an industry’s structure. Comportment with any one of these
criteria would qualify the new venture as an entrepreneurial one and the overall key word is
‘innovation’. Autio (2003) uses four similar criteria for classifying high potential new ventures.
First, they expect to employ at least 20 people in the next 5 years. Second, innovativeness is behind
the business’s aspiration for market expansion. Third, they have some international customers.
Fourth, they employ very recent technology (not older than a year).
Despite the clear economic value and importance of high potential new ventures very little research
has been conducted on distinguishing the characteristics of these new ventures and their founders
(Autio 2003) and virtually nothing on the environmental conditions in which they might thrive.
Firms in the category of high potential new ventures possess some very distinct characteristics.
They are strong in their innovative capabilities, surpassing large corporations in patent production
per sale dollar (Kuratko and Hodgetts 2001). One of few studies attempting to identify special
attributes that characterize these ventures and their founders was conducted by Barringer et al.
(2005). They performed a comparison of 50 rapid growth firms and 50 slow growth firms and
8
discovered a number of special attributes for high potential firms. First, the founders were better
educated, had higher work experience and were more highly motivated. Second, the firm had
stronger longing for growth in its mission statement. Third, their business model was more
innovative and aware of the market. Fourth, their internal human resource management (HRM)
practice emphasized improving their employees’ skills and provided more financial incentives.
Autio (2005) found that firms with these characteristics were usually founded by men between 25-
35 years old who were wealthy, better educated, serial entrepreneurs and opportunity driven.
While we recognize the extreme importance of high potential new ventures (those in quadrant A of
figure 1, above) our attempt to provide a map of the field covers the wide spectrum of ventures
embraced by both the opportunity and the emergence perspectives concerning the nature of the
entrepreneurship and new venturing phenomena.
Since this is a handbook of new venture creation research, we turn next to a brief consideration of
various approaches that have been taken to researching entrepreneurship and new venture creation.
Approaches to entrepreneurship and NVC research
The complex and interdisciplinary nature of the field has increased the difficulty of executing good
entrepreneurship research (Gartner 1989). Therefore, the categorization of schools of thought and
approaches in researching entrepreneurship is helpful in organizing a researcher's direction and
focus. We will briefly articulate some of what the literature discusses and displays as the main
research approaches in entrepreneurship.
Deakins and Freel (2006) posit that there have been three approaches to entrepreneurship research.
One is an economic approach where economic thinkers like Cantillon, Say, Knight, Kirzner,
Schumpeter and others wrote on the relationship between an entrepreneur and economic
development; basically the output of the entrepreneurial process. This is the earliest contribution to
the entrepreneurship literature until the 1950’s when researchers outside the economic perspective
started contributing (Kuratko and Hodgetts 2001).
The psychological trait approach places the focus more on the individual entrepreneur. This is one
of the earliest approaches in entrepreneurship research and aimed, initially, to find personal
characteristics that distinguished entrepreneurs from the rest. Folowing McClelland (1961) this
school of thought considers personal traits such as need for achievement, internal locus of control
and risk-taking ability as main driving factors for entrepreneurial action (Robertson et al. 2003).
Generally, the attribute approach focused on long lists of entrepreneurial traits that have been
identified and examined as potential characteristics associated with entrepreneurial behavior
(Volery et al. 1997). Followers of this approach emphasized that entrepreneurs have inherent skills
and cannot be ‘made’. Fascination with entrepreneurs as individuals is similar to people’s
fascination with successful people in any other field: such as movie stars, presidents and others.
Entrepreneurs attract researchers to study what made them successful in the business world.
However, this school was not leading to new answers to why people create businesses and its
popularity was declining (Volery et al. 1997) and has – according to some - reached a dead end
(Aldrich 1990; Gartner 1985,1988, 1989). In this handbook, William Gartner finds a new life for
the old wisdom when he revists David McClellands (1961) classic work: the Achieving Society.
Later psychologically influenced work has maintained the importance of the psychology of the
9
individual but shifted well away from traits to an interest in cognition (e.g Greenberger and Sexton
1988; Shaver and Scott 1991; Learned 1992; Busenitz and Lau 1996; Carland and Carland 2000;
Kolvereid and Isaksen 2006).
There is a social behavioral research cluster that emphasizes the relationship between the external
environment and personal characteristics on the entrepreneurship process (Deakins and Freel 2006).
As the study of entrepreneurship evolved, many researchers focused on the act rather than the actor
(Gartner 1988). ‘As intellectually stimulating as it may be to find out what motivates entrepreneurs
and how they differ from ordinary mortals, the more critical question is how these individuals
manage to create and sustain successful organizations, despite severe obstacles.’ (Aldrich and
Martinez 2001: 41). Many of the models used in this approach emphasize the importance of the
external environment and its resources for new business start-ups (Mazzarol et al. 1999).
Vitally important to entrepreneurship and new venturing research is the influence of the discipline
of corporate strategy. Like the field of entrepreneurship, the strategic management paradigm
consists of various schools of thought and research approaches (Sandberg 1992). Schendel and
Hofer (1979: 11) describe strategic management as ‘ a process that deals with the entrepreneurial
work of organizations, with organizational renewal and growth, and, more particularly, with
developing and utilizing the strategy which is to guide the organization’s operations’. Cooper
(1979) and Sandberg (1992) provide importnat studies on the relationship between the field of
strategic management and entrepreneurship. Sandberg (1992) suggests possible avenues for
strategic management contribution to future entrepreneurship research in general but more
particularly corporate entrepreneurship. Sandberg (1992) suggests drawing from the ‘ Design
School’ (one of the ten strategic management schools of thought posited by Mintzberg et al.
(1990;1998)) which mainly considers the process of matching internal resources to external
opportunities. The strategic management process involves six main tasks as described by Schendel
and Hofer (1979) that include ‘ goal formulation’, ‘ environmental analysis’, ‘strategy formulation’,
‘ strategy evaluation’, ‘ strategy implementation’, and ‘ strategic control’. Some of these tasks
require the same generic skills needed during the new venture creation process, particularly
environmental analysis, formulation and evaluation during business plan development.
A succinct illustration of the main extant approaches to researching entrepreneurship (and the
classification applies equally to the sub-field of new venture creation) is presented by Kuratko and
Hodgetts (2001). They plot six perspectives: three that take a ‘macro’ view and three a ‘micro’ view
of the phenomenon. The macro school includes environment, capital and displacement schools of
thought. The micro view includes the entrepreneurial trait, venture opportunity, and strategic
formulation schools of thought.
Figure 2: Main approaches in entrepreneurship research
10
Source: (Kuratko and Hodgetts 2001)
Cutting the pie with a different knife, Lee and Peterson (2000) suggest entrepreneurship research
approaches are divisable under three main headings; the individual, the environment/contextual and
the firm approach. Research in the contextual approach heavily focuses on the role of the
environment climate in enhancing or hindering entrepreneurial activity. According to Lee and
Peterson (2000: 402) in this approach the ‘larger societal factors such as cultural, economic,
political, and social forces can combine to create threats or opportunities in the environments
where entrepreneurs operate.’
Having briefly considered the definitional controversies, focal study points and research approaches
to entrepreneurship and new venture creation we can now attempt to map the landscape.
Mapping the NVC research landscape
Given the complexity, controversy and diversity of approaches taken by researchers to the new
venture creation process and the sheer variety of themes and issues covered it is by no means
certain that everyone will accept that the field can be parsimonoiusly encompassed by an attempt to
provide some kind of map of what might be called the landscape of new venture creation research.
Despite the difficulties, in what follows, we have attempted to do this. After an intensive electronic
and manual search and filtration using various keywords such as firm gestation (Reid and Smith
2000), organizational emergence (Gartner and 1993), pre-organization (Katz and Gartner1988),
start-up Vesper (1990), 72 papers were scrutinised intensely. More than half of the papers were
published in the last 10 years and the publication years ranged from 1980 to 2007. Our study, based
on content analysis of the body of extant new venture creation research, resulted in four main
themes which are illustrated in figure 3, a device we call the ‘new venture creation theme map’.
Environmental School of Thought
Financial/ Capital School of Thought
Displacement School of Thought
Entrepreneurial Trait School of Thought (People School)
Venture Opportunity School of Thought
Strategic Formulation School of Thought
Macro View
Micro View
11
Figure 3: New venture creation research theme map
Literature
Structure
Focal boundaries Main themes
Principal perspective
• Economic
• Psychology/Cognition
• Ecology
• Resource
• Complex science
Core unit of Analysis
• Individual
• Organization
• Industry
• Region
• National
• Countries
• Multiple
New venture
creation as sub
topic of
entrepreneurship
field concerned
with new business
start-up issues and
all activities from
conception till the
emergence of new
organization only
(not including
after start-up
activities)
1. Determinants
of NVC
3. The NVC process
& nascent pre-start-
up activities
4. Eclectic NVC
research issues
A. Micro-level factors
influencing individuals
decision to start a new
venture
Sub Themes
c. NVC rate
variations
across regions
and countries
B. Factors influencing
NVC rates
2. Barriers to
NVC
A. Pure gestation
activities
B. Factors influencing
gestation stages
A. Personal & external
barriers
B. External barriers
only
a. Psychological
and cognitive
factors
b. Personal
factors
a. Industry
level
b. Region &
national level
12
We conclude this chapter with a brief summary of the themes detected in our content analysis and
represented in our map of the new venture creation landscape.
Determinants of new venture creation
The first theme represented in the majority of papers, revolves around questions centred on the
determinants of new venture creation. The main thematic question in this area of research is
centered on ‘what factors internal or external perceived or actual have an impact on increasing
creation of new ventures?’ Papers reflecting this theme shared similar broad objectives but their
approaches, lenses and scale of focus varied greatly. They are further subdivided into to two
subthemes based on level of focus. A. Micro level factors influencing an individual’s decision to
start a new venture and B. Factors influencing new venture creation rates. The first subtheme
occurred in papers whose direction was more cognitive and focused on analysis of the individual
and looked at what influences a person’s decision to start a business. Most of the papers in this
subtheme reflect a direction in the new venture creation literature that wants to bring back the
individual into entrepreneurship research. Their argument is that the individual entrepreneur cannot
be neglected in future research on understanding the entrepreneurial process since he or she is the
soul of entrepreneurial activity (Herron and Sapienza 1992; Carland and Carland 2000). It is
possible to claim that this is a refocused and new direction that has sprung away from the old trait
school through shifting focus from attempting to distinguish entrepreneurs from managers to asking
questions similar to Learned’s (1992: 41) inquiry ‘are there person-level characteristics which, in
certain, situations, lead to an intention to found, and further, are these characteristics, again in
certain situations more likely to lead to a successful attempt to found?.
This subtheme can be further sub divided into two streams a. psychological cognitive factor focus
(e.g Greenberger and Sexton 1988; Shaver and Scott 1991; Learned 1992; Busenitz and Lau 1996;
Carland and Carland 2000; Kolvereid and Isaksen 2006). These studies mainly employ a cognitive
lens in conceptualizing the process of venture creation. Most of them posit models of organization
formation. b. personal traits focus that considers personal factors in new venturing such as personal
confidence, risk propensity, alertness to opportunity, etc. (e.g Powell and Bimmerle 1980; Hansen
and Allen 1992; Herron and Sapienza 1992). This stream of papers moves from cognitive models to
papers that investigate the role of various personal factors such as entrepreneurs’ traits and
background on the decision to form a venture.
The second subtheme involves factors influencing new venture creation rates. This category
contains theoretical and empirical studies that have postulated and examined over the years various
personal and contextual factors that are believed to impact on the rate of venture creation at the
industry, regional, and national level. We further subdivide this subtheme into three categories
based on level of analysis; a. industry level new venture creation rate ( e.g Pennings 1982; Aldrich
1990, VanderWerf 1993, Dean and Meyer 1996). For instance, Dean and Meyer (1996) investigate
dynamic industries. They find that new venture creation is positively related to dynamic industries
with high sales growth rate, niche market & dynamic consumer taste and fast technological
development. b. within a region or country level (e.g Manning et al. 1989; Gatewood 1993; Specht
1993; Gnyawali and Fogel 1994; Capaldo 1997; Mazzarol et al. 1999; Lin et al. 2000; Feldman
2001; Neck et al. 2004; Sternberg and Wennekers 2005; Mueller 2006; Zhang and Yang 2006)
These articles consider a mixture of personal and macro external determinates of new venture
creation rates at a more macro level in either regions or a specific country. c. new venture rates
13
variation across regions or countries (e.g Malecki 1990; Moyes and Westhead 1990; Davidsson et
al. 1994; Keeble and Walker 1994; Reynolds et al.1994; Armington and Acs 2002; Wennekers et al.
2002;Todtling and Wanzenbock 2003; Lee et al. 2004; Wagner and Sternberg 2004; Begley et al.
2005; Freytag and Thurik 2007).
Barriers to new venture creation
The second category of papers explored and discussed various barriers to new venture creation. It is
important to distinguish between the interpretation of ‘barriers’ in economics which is usually
associated with factors like entry cost that restrict market penetration (e.g. Bain, 1956) and the
intended meaning of the term as we employ it here. Barriers in our conception as revealled by the
literature we examined refer to a more comprehensive meaning that covers any factor internal or
external that hinders the creation of a new venture (Kouriloff 2000). The challenges or barriers
faced by those that succeeded or failed seem to be neglected and fragmented (Hatala 2005).
According to Kouriloff (2000: 63) ‘there is a need for systematic research in a priori barriers…’.
This call is echoed by Sarasvathy (2004) who suggests reshaping research questions instead of
examining incentives that increase entrepreneurial activity to focusing on identifying barriers to
entrepreneurship. The papers found in this school are subdivided between two subthemes A. those
that involve both personal and external barriers and B. those that only discuss macro external
barriers to new venture creation. In sum, personal or intrinsic barriers include family security, well
being, commitments (Finnerty and Krzystofik 1985), aversion to risk (Choo and Wong 2006), lack
of idea, lack of knowledge, aversion to stress, time for family (Kouriloff 2000; Robertson et al.
2003; Volery et al. 1997), uncertainty of the future (Choo and Wong 2006; Volery et al. 1997). On
the other hand, environmental or extrinsic barriers that a person has no control over include general
market environment, high taxes, (Finnerty and Krzystofik 1985; Volery et al. 1997), lack or scarcity
of financial resources (Barth et al. 2006; Choo and Wong 2006), government regulation (Barth et al.
2006; Klapper et al. 2006; Kouriloff 2000; Lopez 1999; Volery et al. 1997), bad economic
indicators (Choo and Wong 2006), suitable labor (Choo and Wong 2006; Volery et al. 1997), rigid
labor regulations (Klapper et al. 2006), education and advisory system (Robertson et al. 2003),
cultural barriers such as fear of failure (Kouriloff 2000; Robertson et al. 2003; Volery et al. 1997),
negative social and cultural attitude (Robertson et al. 2003), and racial discrimination (Barth et al.
2006).
The new venture creation process and nascent pre-startup activities
The third category focuses on the new venture creation process and nascent pre-start-up activities.
These papers look at the earliest possible events and activities that occur before the organization’s
emergence. There have been limited studies focusing on the new venture creation or gestation
process theoretically and even fewer empirical attempts (Reynolds and Miller 1992; Bhave 1994).
Overall the main theme in this category is to understand the process events and activities that are
involved in creating a new venture by mainly studying nascent entrepreneurs. Moreover, the theme
is subdivided into those that A. Purely focused on gestation activities An important stream of work
among those we classify as ’gestation researchers’ is the body of literature on entrepreneurial
intensions most closely associated with Krueger and his colleagues (Krueger Jr, 2003; Krueger,
1993; Krueger & Dickson, 1994; Krueger, 2000; Krueger & Brazeal, 1994; Krueger & Carsrud,
1993; Krueger & Dickson, 1993; Krueger, Reilly, & Carsrud, 2000; Shepherd & Krueger, 2002).
Researchers interested in other aspects of gestation include: Katz and Gartner 1988; Reynolds and
14
Miller 1992; Carter et al. 1996 ; Alsos and Kolvereid1998; Liao and Welsch 2003; Liao et al. 2005;
Brush et al. 2008. They attempt to understand and posit models of the dynamic, complex, unique,
unorganized process of creating a new venture, which involve activities like getting resources,
finding employees and financing etc. B. Factors that influence the gestation stages and process (e.g
Bhave 1994; Reynolds 1997; Davidsson and Honig 2003; Jin-ichiro 2004; Gelderen et al. 2005;
Rotefoss and Kolvereid 2005; Benyamin et al. 2006; Parker and Belghitar 2006; Tornikoski and
Newbert 2006; Lichtenstein et al. 2007). This group of papers mostly study factors influencing
nascent entrepreneurs’ success or failure in the different venture creation stages. For example,
Rotefoss and Kolvereid (2005) investigated empirically the individual and environmental factors
that are more likely to predict an individual’s success to reach any one of three millstone stages
‘aspiring entrepreneur, nascent entrepreneur and actual business owner’.
Eclectic research perspectives in new venture creation
Our final category is unashamedly something of a potpourri. Honest content analysis can only go so
far. It is desirable to distinguish categories where possible bu necessary to recognise the absence of
strutured classification where a binding structure does not exist. So, our final category covers a
wide array of theoretical and conceptual areas of new venture creation research. Three are
theoretical contributions to our understanding of the new venture creation phenomenon (Gartner
1985; Gartner et al. 1989; Gartner 1993), two provide different literature reviews of some aspect in
the area (Forbes 1999; Shook et al. 2003), and one discusses how the certain characteristics of a
technological opportunity impact chances of its commercialization and hence venture creation
(Shane 2001).
Such is our view of the landscape of new venture creation research prior to the stimulating
contributions which comprise this handbook.
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