Frédéric Delmar

Arriving at the high-growth firm

This study explores heterogeneity in how firms have achieved high growth. Using the population of all firms in Sweden with more than 20 employees in existence in 1996 (n= 11,748), we analyzed their development for each year of the previous 10 years (1987 to 1996). From this population of all firms in Sweden, multiple criteria were used to define a sample of high growth firms (n = 1,501). Using nineteen different measures of firm growth (such as relative and absolute sales growth, relative and absolute employee growth, organic growth versus acquisition growth, and the regularity and volatility of growth rates over the ten year period) we identified seven different types of firm growth patterns. These patterns were related to firm age and size as well as industry affiliation. Implications for research and practice are offered.

Where Do They Come from? Prevalence and Characteristics of Nascent Entrepreneurs

This paper reports on a unique study of a large, random sample of business start-ups that were identified prior to the actual, commercial launch of the ventures. The purpose of this paper is two-fold. First, to present frequencies on the involvement of the Swedish population in the small business sector (particularly in start-ups of firms) and to compare these with estimates from Norway and the USA, which are based on studies using a similar research design. The authors also discuss the possible reasons for the differences that emerge between countries. Second, the characteristics of nascent entrepreneurs (i.e. individuals trying to start an independent business) are analysed and compared for sub-groups within the sample and with characteristics of business founders as they appear in theoretical accounts or retrospective empirical studies of surviving all firms. In order to get a representative sample from the working age population, respondents (n = 30,427) were randomly selected and interviewed by telephone. It was found that 2.0% of the Swedish population at the time of the interview were trying to start an independent business. Sweden had a significantly lower prevalence rate of nascent entrepreneurs compared to Norway and the USA. Nascent entrepreneurs were then compared to a control group of people not trying to start a business. The results confirmed findings from previous studies of business founders pointing to the importance of role models and the impression of self-employment obtained through these, employment status, age, education and experience. Marital status, the number of children in the household, and length of employment experience were unrelated to the probability of becoming a nascent entrepreneur. The gender of the respondent was the strongest distinguishing factor. Importantly, the results suggest that while one has a reasonably good understanding of the characteristics associated with men going into business for themselves, the type of variables investigated here have very limited ability to predict nascent entrepreneur status for women.

Legitimating first: organizing activities and the survival of new ventures

The life stories of 223 new Swedish ventures started by a random sample of firm founders in 1998 are examined. The previous literature is reviewed and methodological obstacles are presented. Ignoring what happens to new ventures that fail very early is limiting. A theoretical framework is developed to examine the effect of legitimatingactivities on the hazard of disbanding and transition to other firm organizingactivities. To identify such ventures, 30,427 people were surveyed, and it isfound that 453 were members of a venture team of an independent effort to start a business in 1998. The key findings resulting from analyzing the data set on the lives of 223 firms during their first 30 months of existence include that performing activities with external stake holders to gain legitimacy (such as resource allocation) limits the danger of a venture disbanding, and facilitates the transition to other organizing activities. (CBS)

What Do They Think and Feel about Growth? An Expectancy-Value Approach to Small Business Managers’ Attitudes Toward Growth†

This study focuses on small business managers’ motivation to expand their firms. More specifically, we examine the relationships between expected consequences of growth on the one hand, and overall attitude toward growth on the other. Data were collected in three separate studies over a ten–year period using the same measuring instrument. The results suggest that noneconomic concerns may be more important than expected financial outcomes in determining overall attitude toward growth. In particular, the concern for employee well–being comes out strongly. We interpret this as reflecting a concern that the positive atmosphere of the small organization may be lost in growth. We conclude that this concern may be a cause for recurrent conflict for small business managers when deciding about the future route for their firms.

Does experience matter? The effect of founding team experience on the survival and sales of newly founded ventures

While earlier researchers have argued that the founding team’s industry and start-up experience should positively affect new venture performance, robust empirical support for these arguments has been lacking. Moreover, theory suggests that the relationship between founding team experience and new venture performance may be more complex than previous empirical research suggests. We test specific hypotheses about the effect of founding team industry and start-up experience on the survival and sales of 223 new ventures initiated by a representative sample of Swedish new ventures, using a methodology that overcomes the limitations to previous research. Our results show that founding team experience enhances both new venture survival and sales, but that the effects are non-lin ear, and vary with venture age.

The Effect of Small Business Managers Growth Motivation on Firm Growth: A Longitudinal Study

This study addresses the role of small business managers’ growth motivation for business growth, taking into account the important effects of previous motives and feedback from earlier performance. We hypothesize that small business managers’ growth motivation has a unique influence on firm outcome measured as growth in sales and in number of employees. Data were gathered from two different Swedish samples of small firms using telephone interviews. Using cross–lagged regression analysis, we find support for our hypotheses when examining employment growth, but only partial support when examining sales.

Multistage Selection and the Financing of New Ventures

Using a random sample of 221 new Swedish ventures initiated in 1998, we examine why some new ventures are more likely than others to successfully be awarded capital from external sources. We examine venture financing as a staged selection process in which two sequential selection events systematically winnow the population of ventures and influence which ventures receive financing. For a venture to receive external financing its founders must first select it as a candidate for external funding, and then a financier must fund it. We find evidence that founders select ventures as candidates for external finance based on their perceptions of market competition, market growth, and employment growth, while financiers base funding decisions on objective verifiable indicators of venture development, such as the completion of organizing activities, marketing activities, and the level of sales of the venture. Our findings have implications for venture financing and evolutionary theories of social processes.

Firm size expectations of nascent entrepreneurs

Because a firmsstart size and subsequentgrowth are significant for creating jobs, the expectations of nascententrepreneurs regarding these factors are investigated.A decision modelwhose dependent variable is the expected size of the firm is presented andtested by the researchers. The data for this longitudinal study were collected from 405 self-identifiedSwedish nascent entrepreneurs over a two-year period. Four componentsrelated to size expectations were tested both separately and in combination,including initial human capital, personal/business goals, environmental andbusiness context, and gestation activities.Both the separate and combinedmodel results are presented. The findings indicate that most nascent entrepreneurs have low expectationsregarding size and growth.A nascent entrepreneurs level of earlycommitment, as based on incorporation, income expectations, growth goals, andnumber of gestation activities, may have some predictive capacity based on theutilized dependent variables.However, the findings further suggest thatthe ability to predict startup development is limited. (AKP)

A Real Options Model of Stepwise Entry Into Self-Employment

This paper tests a real options model of stepwise entrepreneurial entry. We distinguish between part time and full time entry among the self employed in Swedish knowledge intensive industries. Two multinomial logit models tests the entry from employment to part- or full time entry in 1998, and to subsequent full time entry in 1999. The empirical evidence indicates the need to distinguish between part time and full time entry, something overlooked in earlier research. We find strong support for our notion that entrepreneurs used part time entry as a strategy to test the value of their conceived business opportunity without risking their full income. However, our hypothesis that entrepreneurs use a real options heuristic shaped by the uncertainty and the irreversibility of entry received only mixed support.

Social Influence Interpretation of Interpersonal Processes and Team Performance Over Time Using Bayesian Model Selection

The team behavior literature is ambiguous about the relations between members’ interpersonal processes—task debate and task conflict—and team performance. From a social influence perspective, we show why members’ interpersonal processes determine team performance over time in small groups. Together, over time, dissenting in-group minorities who share information (via debate) with majorities, who selectively engage with them to consider their alternative proposals (via conflict), can improve their team performance (via innovation). The context/comparison model of social influence and its leniency contract extension to the special case of in-group minorities suggest a pattern of members’ interpersonal processes that unfolds over time to reconcile factions with the same social identity who hold different approaches to shared projects. Conditional on typical levels of task debate, we predict that (a) in early episodes, task conflict increases the relation between task debate and team performance; (b) in middle episodes, task conflict decreases the relation; and (c) in late episodes, task conflict increases the relation again. We explore our thesis using a longitudinal design with a sample of 60 student teams (360 individuals) working together for course credit over 5 months (21 weeks) to write a first business plan for a new venture. We use a multilevel structural equation modeling approach with Bayesian estimation. We found support for our theory expressed in informative hypotheses using Bayesian model selection. These results were not evident from conventional graphing and post hoc statistical probing of simple slopes against the null hypothesis.