Session 100

Founders, Founding Conditions and Human Capital

Track K

Date: Monday, October 12, 2009

 

Time: 15:45 – 17:00

Common Ground

Room: Meeting Room 10


Facilitator:
Sharon Alvarez, University of Denver

Title: Differentiating the Role Played by Founders’ Human Capital in the Performance of Firms

Authors

  • Joana Mendonça, Technical University of Lisbon
  • Rui Baptista, Technical University of Lisbon
  • Francisco Lima, Technical University of Lisbon

Abstract: We study the performance of new firms in knowledge based sectors, created in Portugal between 1991 and 2003. We follow the impact of human capital on firms’ sales and survival, differentiating between general and specific human capital, distinguishing the employee and employer human capital, accounting for different moments in time. Our results show that entrepreneur’s characteristics and decisions in the beginning of the firm have a role in determine how the firm will perform. Firms from more educated business owners are more likely to succeed; business owners’ with previous managerial and sector specific experience are more likely to survive and present better sales performance. In addition, the results indicate that a more experienced workforce may lead to lower survival probabilities, but to higher sales increase.

Title: For How Long Do Founding Conditions Matter?

Authors

  • Jose Mata, Nova School of Business and Economics
  • Pedro Portugal, New University of Lisbon

Abstract: This paper explores the effects that founding conditions have on the survival of new firms. The effect of founding conditions is estimated taking also into account that survival may be affected by current market conditions. Further, the model allows the effects of founding conditions to be transitory, and provides a way to assess how long such effects last. Using data on 118,114 Portuguese new firms observed over the period 1983 – 1993, we find that founding effects are important determinants of exit rates, and in some cases, they are more important that current conditions. In most cases, founding effects seem to persist without much of a attenuation in their effect on survival rates for at least several years after the founding of the firm.

Title: Founders to Firms: Examing the Institutionalization of Founder-CEO Social Capital

Authors

  • Bret Fund, University of Colorado-Boulder

Abstract: This article examines how organizations protect themselves from the potential negative performance consequences associated with the loss of a key member’s personal social capital. I draw from the executive succession stream of literature along with the knowledge transfer and social capital literatures to develop hypotheses. To test these hypotheses I analyze survey data from 126 venture-backed startups and find that the ventures that actively engage in actions targeted to institutionalize a founder-CEO’s social capital experience better performance in a very delicate and unstable period in the organization’s history. The models I use in this study provide a basis for not only understanding how social mechanisms influence economic organization, but also provide prescriptions regarding how to think about succession and compensation in a new venture context.

Title: Specific Human Capital as a Source of Above Normal Returns

Authors

  • Pankaj Patel, University of Louisville
  • James Fiet, University of Louisville

Abstract: We assess the effectiveness of property rights to provide incentives for new venture employees to invest in specific human capital. The greater necessity of deploying specific human capital increases the necessity of ceding greater residual rights. The extent of the ceded residual rights will be contingent on the degree of specific human capital required. We used a 10-year longitudinal sample of 205 new ventures to explore the opposing effects of TCE and RBV interpretations on venture survival. We identify 837 ventures that received venture capital financing in the 1987-1989 editions of the Venture Capital Journal. We use piece-wise Weibull event history model with time varying industry covariates. We further explore the two-way and three-way moderating effects of capabilities, asset specificity, and environmental uncertainty. Event history studies typically do not plot interactions. We contribute to the literature by plotting and explaining 2-way and 3-way interactions in the survival models.

Title: The Effect of Faculty Founders on New Technology Based Firms

Authors

  • Anne Fuller, Sacramento State University
  • Frank T. Rothaermel, Georgia Institute of Technology

Abstract: We examine the growing phenomena of U.S. academic entrepreneurship. Building on prior work demonstrating the embryonic state of science and engineering research that is licensed through the university (Jensen & Thursby 2001), we extend this framework to include university inventions commercialized by a new technology-based firms (NTBFs). We posit that the presence of faculty inventor founders will be beneficial to the NTBF. This is tested with a uniquely constructed dataset representing a variety of university and industry settings. Initial results indicate firms with faculty founders have a higher likelihood to experience an IPO or become acquired than other similar new firms. We interpret this to be an indication that the specific human capital brought in with the academic founder is useful in moving the technology into the commercial marketplace.

Title: Why Do Entrepreneurial Stories Matter? Obtaining Legitimacy and Resources by Recounting a Coherent Mission

Authors

  • Jatinder Sidhu, Erasmus University Rotterdam
  • Bettina Wittneben, University of Oxford
  • Shahzad Ansari, University of Cambridge

Abstract: This article carries the cultural-entrepreneurship literature forward by arguing that the substance of entrepreneurial narratives is the critical ingredient that distinguishes between stories that triumph and those that fail in drumming up support behind a new business in an uncertain world. By drawing on the mission concept from the strategic-management literature, we advance the thesis that stories recounting a coherent mission promote the legitimacy of a new venture and attract financial, human and institutional resources to it. This bequeaths an enterprise vital assets that are necessary for competing effectively and creating wealth. Our investigation reveals how, besides storytelling, story-enactment and story-adaptation processes also play a crucial role in mobilizing resources. We discuss the implications of our work for entrepreneurship research and practice.

All Sessions in Track K...

Sun: 10:00 – 11:30
Session 254: Developing a Game Plan for Strategy Research on Social Entrepreneurship
Sun: 13:00 – 14:30
Session 253: Knowledge Spillovers and Strategic Entrepreneurship
Sun: 15:00 – 16:30
Session 252: Key Issues and Emerging Questions in Entrepreneurial Strategy Research
Sun: 16:30 – 17:30
Session 315: Entrepreneurship & Strategy, IG Meeting
Mon: 12:45 – 14:00
Session 102: Networks, Alliances and Entrepreneurship
Session 244: Entrepreneurship in Emerging and Transition Economies
Mon: 15:45 – 17:00
Session 100: Founders, Founding Conditions and Human Capital
Session 249: Examining Entrepreneurial Phenomena at Multiple Levels
Mon: 17:15 – 18:30
Session 101: Opportunities & Founders
Session 248: Issues in Governance and Technology Commercialization in New Ventures
Tue: 10:00 – 11:15
Session 107: Current Thoughts on Entrepreneurship in Emerging and Transition Economies
Session 111: Opportunties, Uncertainty & Innovation in Entrepreneurial Ventures
Tue: 11:30 – 12:45
Session 106: Current Thoughts on Signaling and Venture Capital
Tue: 14:30 – 15:45
Session 108: The Impact of Institutions, Regions and Countries on Entrepreneurial Ventures
Wed: 10:00 – 11:15
Session 105: Current Research on Serial Entrepreneurs and Market Makers
Session 112: The Impacts of Diversification on Entrepreneurial Ventures
Wed: 11:30 – 12:45
Session 104: Employees Mobility and Corporate Entrepreneurship
Session 109: Current Research on Uncertainty and Entrepreneurship


Strategic Management Society

Washington DC