Dave Valliere

Entrepreneurship and economic growth: Evidence from emerging and developed countries

This paper presents an extension to the economic growth model developed by Wong, Ho, and Autio (2005), to reflect differences in the economic effects of opportunity and necessity-based entrepreneurship in both emerging and developed countries. Data from 44 countries for the years 2004 and 2005, as collected by Global Entrepreneurship Monitor (GEM) research and Global Competitiveness Report (GCR) research, are used to identify predictors of GDP growth for emerging and developed nations. The GEM data are used to determine the effect of different types of entrepreneurship on GDP growth. The GCR data operationalize additional control variables suggested by three economic growth theories: new economic geography, endogenous growth theory and national systems of innovation. This contribution to the literature suggests that, in developed countries, a significant portion of economic growth rates can be attributed to high-expectation entrepreneurs exploiting national investments in knowledge creation and regulatory freedom. However, in emerging countries this effect is absent. It is hypothesized that a threshold exists for entrepreneurs to gain access to the formal economy, below which entrepreneurial contributions act through informal mechanisms.

Inflating the bubble: examining dot-com investor behaviour

Findings are presented from a study of the cognitive behaviours of 57 venture capital investors in the early-stage technology sector during the 1998 – 2001 Internet bubble period. The inductive research methodology was based on open-ended qualitative interviews with investment practitioners, conducted by the lead author who was an investment practitioner during the bubble. The data obtained were used to develop a grounded model of how generally accepted venture capital industry decision-making practices were bypassed and modified by investors competing intensively in an unfamiliar sector with unknown success criteria, which contributed to the creation of the bubble. Insights from prospect theory, attribution theory and cognitive dissonance theory were used to identify the cognitive processes that led through groupthink to the development of a conceptual framework in the industry, similar to what organizational theorist Gareth Morgan has called a Psychic Prison. The study identified four positive feedback loops in the environment surrounding the activities of Internet investors that contributed to the bypassing of generally accepted practices by investors who believed they were behaving rationally.

Exploring Buddhist influence on the entrepreneurial decision

Purpose – The purpose of this paper is to explore the role that socio‐religious context plays in the decision of whether to become and entrepreneur, and what type of new business venture to create.Design/methodology/approach – Interpretivist development from qualitative data obtained by interviews of entrepreneurs in Nepal and Canada.Findings – Conceptions of Right Livelihood play an important role in the evaluation and exploitation of entrepreneurial opportunities and in the day‐to‐day operations of the resultant new businesses.Originality/value – Links the literatures of social economics and entrepreneurship to explore how entrepreneurs must balance economic, social, and religious objectives when launching and operating new businesses.

When entrepreneurs choose VCs: Experience, choice criteria and introspection accuracy

Abstract This study examines the criteria by which entrepreneurs choose their venture capital investors, using data from 59 entrepreneurs evaluating the relative importance of seven selection criteria. We divided our sample into three approximately equal subsamples, according to the degree of previous venture capital experience of the entrepreneur. These data suggests that novice entrepreneurs value the seven criteria differently from more experienced entrepreneurs, and in practice value these criteria differently from what they espouse. All groups of entrepreneurs consider valuation to be the primary criterion, and also view the terms and conditions of the investment deal as important. But as entrepreneurs gain experience they increasingly value the personal compatibility of the VC as important in their selection. Other differences between inexperienced and experienced entrepreneurs are reported for secondary selection criteria. These results recommend caution in the use of espoused data for future empirical research in this area, and suggest practical negotiating strategies for participants in this market.

Entrepreneurial Remixing: Bricolage and Postmodern Resources

The innovation of organizations has been likened to the improvisation capacity of musicians playing jazz – a modernist form of music that emphasizes improvisation within the boundaries of a particular genre. But recent bricolage research suggests that this metaphor is incomplete when applied to entrepreneurs. The innovation of entrepreneurs lies not only in the improvisational combining of resources, but also in the eclectic selection of resources and the embedding of these innovative combinations into novel contexts. This makes entrepreneurs less like jazz musicians and more like hip-hop DJs – a postmodern form of music that emphasizes sampling and remixing of musical fragments from diverse genres. This paper places entrepreneurial bricolage into a larger postmodern context and thereby identifies other unexplored implications for entrepreneurial value creation. By drawing from postmodern theorists, it explicates broader design principles that are latent only in the current narrow bricolage perspectives. A model is developed for how entrepreneurs enact postmodern resources and markets through hyperdifferentiation, how they develop novel pastiches using techniques such as bricolage, and how they embed these pastiches into novel contexts that create value from three distinct sources. Specific propositions and implications for entrepreneurs and researchers are developed.

Entrepreneurship and national economic growth: the European entrepreneurial deficit

We develop a quantitative model relating entrepreneurship and economic growth, based on global competitiveness report and global entrepreneurship monitor data for 18 countries in the European Union, plus USA and China, for the years 2003?2005. The model is used to identify policy actions that can be undertaken to achieve the goals set forth in the Lisbon Agenda for the EU. Low GDP growth rates are associated with an entrepreneurial deficit. Higher levels of entrepreneurship need to be encouraged to commercialise the considerable knowledge and technology available in Europe. We find support for a model in which GDP growth is dependent on an exploitation bridge between independent entrepreneurs and corporate entrepreneurs in larger firms. The latter have the resources to mass market radical innovations developed by independent entrepreneurs and to capitalise on the technological spillover effects. In particular, opportunity-based entrepreneurs affect GDP by exploiting national investments in the commercialisation/innovation infrastructure.

Venture Capitalist Behaviours: Frameworks for Future Research

Much of traditional investment theory is based on risk taking with known parameters. This article looks at a case where the parameters of the risk function are unknown and investors therefore face uncertainty in risk-taking. We provide a theoretical background to develop alternative cognitive and economic models of investor behaviour. Using a previously developed descriptive model of investor behaviour grounded in interviews with 57 venture capitalists during the internet bubble, we apply theoretical constructs from prospect theory, signalling theory, regret theory, and career concerns and reputation theory to provide deeper insights into different investor behaviours observed empirically. The different perspectives on investor utility offered by the theories developed in this paper serve to explain the unique model components that emerged during the bubble period. No single model or theory was sufficient by itself. Relationships are also suggested between the governance existing with specific investor classes, and the degree to which those investors exhibit the cognitions we model. We conclude that the bubble was a degenerate case that resulted from the failure of VCs with limited experience to follow accepted VC investment practices and governance, and from predictable human nature and weaknesses. This article concludes with theory-based directions for future research.

Entrepreneurial Alertness And Paying Attention

This article uses theoretical approaches from cognitive psychology to examine the basis for entrepreneurial alertness and to connect it to existing theories of attention in strategic management and decision-making. It thereby provides a theoretical basis for understanding how entrepreneurial alertness leads the individual to pay attention to new opportunities. A model is developed to show how attention and entrepreneurial alertness work together to support the recognition or creation of opportunities. Entrepreneurial alertness is believed to be a manifestation of differences in the schemata and cognitive frameworks that individuals use to make sense of changes in the environment. This suggests that entrepreneurial alertness mediates the impact of observed phenomena upon the situated attention of individual decision-makers.

Prior Relationships and M&A Exit Valuations: A Set-Theoretic Approach

An empirical investigation was conducted into the effects that prior relationships between buyer and target firm have on the purchase price paid. Forty acquisitions of Canadian and US high-technology firms are examined using a set-theoretic approach (Ragin [2000]) to determine the effects of industry and inter-firm alliances on the price-to-book ratio. We find that specific combinations of prior relationship type are positively associated with higher prices. These results suggest that relationships at different levels of analysis can act to mitigate information asymmetries in a value-creating manner and may provide practitioner guidance on strategies to increase value in M&A exits.

Multidimensional entrepreneurial intent: an internationally validated measurement approach

Purpose Entrepreneurial intent (EI) is a foundational construct in theories of entrepreneurship. But three challenges currently threaten the author’s ability to accurately measure EI. First, previous measurement approaches have confounded EI with closely related but theoretically distinct constructs such as attitudes and beliefs about entrepreneurship. Second, they have treated EI as an “all-or-nothing” decision, without reflecting the step-wise commitment of the entrepreneuring process. And finally, much of past EI research has been done in Western developed countries without validation in a diverse international context in which unstated assumptions about the EI construct may not hold. The purpose of this paper is to report on the development of a new EI scale that addresses these issues. Design/methodology/approach Nested structural equation modelling is used to develop and validate a novel scale for measuring EI in international contexts, based on data from 998 respondents in eight countries. Findings A two-dimensional substructure to the EI construct is revealed as especially apparent in non-Western countries. Based on this, a new 11-item scale is proposed and validated. Research limitations/implications Previous studies utilizing the EI construct may be biased by its imprecise measurement and confounding by other constructs in the nomological net. The present study provides new insight into the nature of the EI construct and a novel instrument for measuring it without bias. The discovered two-dimensional structure for EI measurement may also have implications for theorists interested in antecedents and effects of EI. Practical implications Accurate measurement of EI is essential to developing and targeting policies to effect changes in national entrepreneurship. Previous measurements may therefore have contributed to misstatement of policy objectives and allocation of national resources. Originality/value This research provides a validated method of measuring EI without the serious confounds of previous scales, and that is robust to a wide range of international settings. It also provides new insight into a two-dimensional substructure to the EI construct that has not been observed in previous studies.