Über die Autorin bzw. den Autor

Claudia Bird Schoonhoven is Professor of Organization and Strategy in the Graduate School of Management at the University of California, Irvine. She is co-author of The Innovation Marathon: Lessons from High Technology Firms. Elaine Romanelli is Associate Professor of Management at the Georgetown University School of Business.

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THE ENTREPRENEURSHIP DYNAMIC

STANFORD UNIVERSITY PRESS

Contents

PREFACE...............................................................................................................................................................................................xiCONTRIBUTORS..........................................................................................................................................................................................xv1 Introduction: Premises of the Entrepreneurship Dynamic CLAUDIA BIRD SCHOONHOVEN and ELAINE ROMANELLI...............................................................................................1PART I The Origins of Entrepreneurial Activity and New Organizations2 The Company They Keep: Founders' Models for Organizing New Firms M. DIANE BURTON...................................................................................................................133 The Local Origins of New Firms ELAINE ROMANELLI and CLAUDIA BIRD SCHOONHOVEN.......................................................................................................................404 The Role of Immigrant Entrepreneurs in New Venture Creation ANNALEE SAXENIAN.......................................................................................................................685 The Magic Beanstalk Vision: Commercializing University Inventions and Research ANNE S. MINER, DALE T. EESLEY, MICHAEL DEVAUGHN, and THEKLA RURA-POLLEY.............................................1096 Knowledge Industries and Idea Entrepreneurs: New Dimensions of Innovative Products, Services, and Organizations ERIC ABRAHAMSON and GREGORY FAIRCHILD..............................................1477 From the Technology Cycle to the Entrepreneurship Dynamic: The Social Context of Entrepreneurial Innovation JOHANN PETER MURMANN and MICHAEL L. TUSHMAN............................................178PART II Entrepreneurship in the Evolution of Industries8 Learning and Legitimacy: Entrepreneurial Responses to Constraints on the Emergence of New Populations and Organizations HOWARD E. ALDRICH and TED BAKER...........................................2079 Entrepreneurial Action in the Creation of the Specialty Coffee Niche VIOLINA P. RINDOVA and CHARLES J. FOMBRUN.....................................................................................23610 The Power of Public Competition: Promoting Cognitive Legitimacy Through Certification Contests HAYAGREEVA RAO.....................................................................................26211 Social Movement Theory and the Evolution of New Organizational Forms ANAND SWAMINATHAN and JAMES B. WADE..........................................................................................28612 Entrepreneurship in Context: Strategic Interaction and the Emergence of Regional Economies ARI GINSBERG, ERIK R. LARSEN, and ALESSANDRO LOMI......................................................31413 The Legal Environment of Entrepreneurship: Observations on the Legitimation of Venture Finance in Silicon Valley MARK C. SUCHMAN, DANIEL J. STEWARD, and CLIFFORD A. WESTFALL.....................34914 Emergent Themes and the Next Wave of Entrepreneurship Research CLAUDIA BIRD SCHOONHOVEN and ELAINE ROMANELLI......................................................................................383REFERENCES............................................................................................................................................................................................409INDEX.................................................................................................................................................................................................441

Chapter One

CLAUDIA BIRD SCHOONHOVEN AND ELAINE ROMANELLI

This book developed from the basic idea that it is both necessary and the right time to focus theoretical and empirical attention on the key questions of entrepreneurship research rather than on the differing assumptions and emphases of the disciplines. We think there are two major questions that cut across the disciplines and animate the abiding fascination of entrepreneurship research.

First, what are the conditions, including economic, cultural, and even personal situations and proclivities, that prompt the founding of new organizations? In other words, what are the origins of new organizations? Especially, what are the conditions in industries, economies, and societies that generate large numbers of new organizations being founded in particular times and places? This question, while motivating the majority of entrepreneurship studies, has rarely been asked objectively or systematically. Instead, disparate theories of origins-that is, the personal, the cultural, and the economic-have been posited and tested for their influence in isolation from one another. The unsurprising result is that we find evidence in the literature of a myriad of factors that, sometimes, for some industries, in some nations or regions, and in certain periods of history, appear to promote the rise of new organizations, especially in large numbers. Still, no one today can predict when and where large numbers of new organizations will emerge. We still don't know which factors to emphasize or when different factors will be important. And, of course, the factors themselves may be changing over time. Research needs to be directed to the study of organizational origins in a way that is independent of disciplinary biases. Organization theory, which cuts across the various disciplines, seems a good scholarly venue for approaching this research.

Second, what are the real and important outcomes of entrepreneurial activity? Somewhat surprisingly, since outcomes, including the economic and social transformation of whole societies, are the only reasonable motivation for research into origins, little research has directly explored outcomes. Birley (1986) verified the general and seemingly indisputable observation that new organizations produce new jobs and economic wealth in greater proportion than established organizations. Popular statistics, like those from the U.S. Small Business Administration and Department of Commerce, seem to confirm the idea that new organizations produce innovation, and reap profits from major innovations, to a much greater extent than established organizations. Organizational ecologists (e.g., Hannan and Freeman 1989) have explored organizational foundings as a key dynamic in the development of organizational populations. Aldrich (1979; 1999), echoing Schumpeter's (1934) arguments about the business cycle, has maintained that the effects of organizational foundings, especially in large numbers, on the competitive conditions of industry is one of the most important questions in all of the social sciences. Nonetheless, outcomes themselves have been little examined.

At the nexus of these two fundamental questions, we believe, lies a still more basic understanding, or perhaps only belief, about entrepreneurship as a root dynamic of change in industries, economies, and societies. New organizations do not emerge de novo from the idiosyncratic and isolated invention of individual entrepreneurs. Their ideas for new organizations, their ability to acquire capital and other important material and human resources, and their new organization's likelihood of surviving derive from the contexts in which individuals live and work. Context, even assuming a special and broad influence of distinctive and uncommon individual inclinations, must exert a constraining influence on rates and kinds of organization creation at the same time that it motivates organization creation. New organizations are both users of existing resources and creators of new resources-knowledge, skills, and needs-that drive markets for new products and services. The very process of organization creation, although it is the product of context, we argue, fundamentally and immediately transforms the context. New organizations, in other words, are both the products of conditions already evolved and the producers of change. Entrepreneurship is a pivotal dynamic of economic and social change.

The Entrepreneurship Dynamic is organized into two parts, the first addressing the question of organizational origins in context and the second exploring the role of entrepreneurial activity in the transformation of contexts. We admit up front, and it should come as no surprise, that the chapters actually produced for this book do not fit neatly under the two questions posed as independent issues. As we have briefly discussed, origins and outcomes are not independent issues. Rather, the origins, and perhaps we should say the processes, rather than the outcomes of entrepreneurial activity are two sides of one overarching process of industry transformation in regions and economies. Sometimes the origins lie in established systems of industry knowledge and production, systems that may have outlived their capacities for incorporating new ideas or innovations. Sometimes, though, they lie in the very conditions and processes of new industry creation. We thus organized this book to reflect the predominant emphases of the chapters on either the contextual origins of entrepreneurial activity or the role and influence of entrepreneurial activity on processes of industry development. As the reader will discover, there are both many overlapping and newly emerging themes in these chapters. In our closing chapter, we try to highlight some of these themes and outline an agenda for new research that holds promise for transforming the study of entrepreneurship itself.

The six papers in Part One, "The Origins of Entrepreneurial Activity and New Organizations," directly tackle the questions, "Where do new firms come from, and what are the conditions that promote the rise of entrepreneurial activity in general?" Each paper examines entrepreneurial origins empirically and provides insight into the creation of new organizations in context.

The first three chapters-"The Company They Keep: Founders' Models for Organizing New Firms," by M. Diane Burton, "The Local Origins of New Firms," by Elaine Romanelli and Claudia Bird Schoonhoven, and "The Role of Immigrant Entrepreneurs in New Venture Creation," by AnnaLee Saxenian-all directly address the question of where founders come from and, more important, how the originating contexts affect both the kinds of organizations the founders create and the influence of their new organizations on regional and industrial contexts. In Chapter 2, Burton explores how founders' experiences in previous organizations, and the mental models they develop about appropriate employment relationships as a result of those experiences, influence the forms of organizations they create. In focusing on founders' experiences in existing organizations as the incubators of ideas about organizational forms, Burton both fuses the individual and contextual influences on organizational creation and at least partially locates the origins of organizational diversity in the forms of existing organizations. The chapter develops theory and tests hypotheses about the origins of entrepreneurs' employment models, using a sample of 173 young high-technology firms in Silicon Valley. Mental models about appropriate modes of organization creation, held by entrepreneurs as well as institutional players such as venture capitalists, lawyers, and professional organizations, emerged as a central theme in discussions and debates at the Balboa Bay Conference, as we will discuss in Chapter 14.

In Chapter 3, we draw on similar premises about the importance of existing organizations in the entrepreneurial process, but we shift perspective to the organization community circumscribed by major metropolitan regions. In this chapter, we argue that entrepreneurs' ideas for new ventures, while based in their experiences in established organizations, also acquire character from the nature of the surrounding organizational community. In particular, the formation of an idea for a new venture proceeds not merely from experience in the design or marketing of a particular product or service in an existing organization but also from knowledge about local markets and competitive conditions for new products or services. The importance of understanding entrepreneurial activity as a predominantly local process and phenomenon was a second major theme of the conference. This chapter explores the geographically local character of organizational creation and develops a theory of the local origins of entrepreneurial activity.

Saxenian, in Chapter 4, adds another dimension to this developing perspective about the regional origins of entrepreneurial activity. Focusing on Silicon Valley and its now-legendary capacity for generating innovation through homegrown entrepreneurial activity, she explores the role of immigration as a central feature of the region's penchant for entrepreneurial experimentation. Saxenian explores the regular influx and outflow of immigrant entrepreneurs in Silicon Valley as a persistent dynamic of industry and regional transformation. Partly as a result of a perceived glass-ceiling effect for non-White technology workers, immigrant entrepreneurs in Silicon Valley have increasingly established their own organizations and professional associations to promote exchanges of information and personnel. Moreover, as immigrant entrepreneurs in Silicon Valley show a persistent concern for economic development in their home countries, Saxenian explores how the knowledge and experiences they gained in California may diffuse throughout the world.

The last three chapters in Part One-"The Magic Beanstalk Vision: Commercializing University Inventions and Research," by Anne S. Miner, Dale T. Eesley, Michael DeVaughn, and Thekla Rura-Polley, "Knowledge Industries and Idea Entrepreneurs: New Dimensions of Innovative Products, Services, and Organizations," by Eric Abrahamson and Gregory Fairchild, and "From the Technology Cycles to the Entrepreneurship Dynamic: The Social Context of Entrepreneurial Innovation," by Johann Peter Murmann and Michael L. Tushman-shift our perspective on entrepreneurial origins from the somewhat personalized location of the individual entrepreneur to a broader notion of originating contexts: the university, the knowledge industry, and the technology cycle, respectively. In distinct but related ways, these chapters explore communities of knowledge or learning as venues for the generation of entrepreneurial ideas.

In Chapter 5, Miner and her colleagues explore universities as popularly presumed prolific producers of new organizations. Building on interviews with senior university officers and technology transfer administrators at universities and research institutions in seven countries, these authors document the prevalence of a theory in use about the close relationship between university research and organizational formation. They explore both the cultural origins of this pervasive belief about universities as producers of entrepreneurial activity and consequent regional wealth, as well as the broad empirical literature about the actual influences of universities. While the authors are systematically and insightfully critical of the mental model of the university as a "magic beanstalk" of new organizations, they also extend a theory of how population-level learning from shared (even if erroneous) assumptions can generate real change. Like most of the chapters in this section, the authors found it impossible to consider origins in isolation from outcomes. One produces the other.

Abrahamson and Fairchild, in Chapter 6, explore an intriguing new question about how entrepreneurship arises in what they call the knowledge industries-book publishing, consulting, mass media, and education, among many others. Entrepreneurship, they argue, lies not only in the domain of innovative products and services but also in the ideas that govern our understandings about how organizations and industries should function. Asking questions about the sources of ideas for new knowledge ventures as well as the timing and development of new industry segments from the activities of idea entrepreneurs, these authors again emphasize the inseparability of entrepreneurial individuals and the contexts from which they emerge.

Finally, in Chapter 7, Murmann and Tushman examine technological systems as dynamic sources of knowledge or ideas for new organizations. While much research on innovation and technology has focused on the emergence of a dominant design as a singular event from which mainly process innovations follow, these authors argue that such breakthroughs establish merely the first interesting event in a nested hierarchy of dominant designs in technological subsystems. Dominant designs, which are typically first identified at the product level, give way over time, through learning by the technologists, to whole new technologies and dominant designs in the technological subsystems of the original dominant design. In this chapter, Murmann and Tushman build on their earlier work to focus here on the social context of entrepreneurial innovation, emphasizing the influence of networks of relationships among academic and industry scientists as well as decisions and policies of players in the institutional environments of nations.

Taken together, these six chapters seek to locate the origins of new organizations in (1) the organizational contexts in which individuals live and work, and (2) the knowledge and resource communities that, through the interactions and learning of the individuals within the communities, produce the conceptual raw material of new ideas. Community, whether bounded by geography, knowledge, or technology, is a rich, emergent theme in organizational theory writ large, and one that conference participants considered might develop generally as a unifying theme for future investigation of the origins of entrepreneurship. Perhaps precisely the problem in decades and centuries of previous research has been a failure to properly or richly enough define the context of entrepreneurial origins.

As we argued at the outset of this chapter, there is but one inescapably important reason to care about the origins of entrepreneurial activity: the outcomes that new organizations produce for economies and societies. While many sorts of outcomes-such as jobs, innovation, and economic wealth-have been examined as important products of entrepreneurial activity, the chapters in this section focus on ways in which new organizations affect the development of industries and the creation of new organizational populations. The six chapters contained in Part Two, "Entrepreneurship in the Evolution of Industries," diversely address this issue.

The first four papers-"Learning and Legitimacy: Entrepreneurial Responses to Constraints on the Emergence of New Populations and Organizations," by Howard E. Aldrich and Ted Baker, "Entrepreneurial Action in the Creation of the Specialty Coffee Niche," by Violina P. Rindova and Charles J. Fombrun, "The Power of Public Competition: Promoting Cognitive Legitimacy Through Certification Contests," by Hayagreeva Rao, and "Social Movement Theory and the Evolution of New Organizational Forms," by Anand Swaminathan and James B. Wade-examine the processes and tools that entrepreneurs use to create and legitimate new organizational populations. These chapters develop the third major insight from the Balboa Bay Conference, that entrepreneurs play an active and purposive role in the creation and development of new industries and new organizations.

Aldrich and Baker, in Chapter 8, examine this question directly in an exploration of strategies that entrepreneurs have used to establish the cognitive and sociopolitical legitimacy of new forms of business and consumer transactions in the emerging community of Internet organizations. Legitimacy, which refers to the establishment of new organizational forms as both taken-for-granted and appropriate ways of conducting business, is not easily or naturally granted in society. Rather, entrepreneurs must systematically and strategically promote the legitimacy of their new organizational forms. Aldrich and Baker emphasize the collective nature of this activity. Entrepreneurs, at the same time as they may compete in particular product or service domains of the Internet, also share information and act collectively to legitimate the organizational form.

(Continues...)

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