Govert Vroom

Opportunity evaluation and changing beliefs during the nascent entrepreneurial process

This article explores an important but less understood part of the nascent entrepreneurial process, the changes that occur to beliefs associated with continuing evaluation of the opportunity and related learning. Using samples from the Panel Study of Entrepreneurial Dynamics, we demonstrate that engaging in planning activities by nascent entrepreneurs as they proceed through the process is associated with a decrease in perceptions of environmental uncertainty but an increase in perceived individual self-efficacy and business performance expectations. Overall, our evidence is consistent with a dynamic view of the nascent stage of the entrepreneurial process characterized by ongoing significant changes in beliefs.

Ownership Structure, Profit Maximization, and Competitive Behavior

We question the broad applicability of the assumption of profit maximization as the goal of the firm and investigate how variance in objective functions across different ownership structures affects competitive behavior. While prior work in agency theory has argued that firms may fail to engage in profit maximizing behaviors due to misalignment between the goals of owners and managers, we contend that we are unlikely to observe pure profit maximizing behavior even in the case of the perfect alignment of goals that exists in owner-managed firms. We compare the competitive behaviors of owner-managed and professionally managed firms and find that, contrary to the expectations of agency theory, professionally managed firms are more likely to engage in behaviors consistent with profit-maximization goals. Consistent with the view that owner-managers are less concerned with maximizing profits, we observe that the entry, exit, and pricing decisions of owner-managed firms are all relatively less responsive to the underlying economic attractiveness of the markets in which they operate.

Modeling the Effects of Psychological Pressure on First-Mover Advantage in Competitive Interactions The Case of Penalty Shoot-Outs

The relationship between psychological pressure and performance outcomes has been studied across a variety of sporting contexts. As an extension and complement to recent empirical studies, we construct a formal model of soccer penalty shoot-outs to determine the links between psychological pressure and first-mover advantage (FMA). Our approach indicates that even seemingly simple competitive interactions may include a rich, complex set of effects. We demonstrate that psychological pressure leads to FMA in shoot-outs; however, we show that this relationship can vary depending on a variety of different factors, such as the nature of the pressure, the magnitude of the pressure, and the specific rules governing the shoot-out. Overall, our work clarifies and extends knowledge of the operation of FMA and of how psychological pressure impacts performance outcomes in competitive interactions.

Mergers and Acquisitions Revisited: The Role of Business Model Relatedness

While the literature on corporate strategy has typically focused on examining diversification along the industry and geographical market dimensions, this study seeks to supplement previous research by introducing the concept of business model as a new way of thinking about diversification. Specifically, by integrating the literatures on business models, diversification, and acquisition strategy, we provide a conceptual analysis of how business model relatedness may influence performance implications of M&As. When business models among acquirers and targets are related, the sharing and transfer of superior resources may improve post-acquisition performance. In contrast, when business models among acquirers and targets are unrelated, internal and external identity conflicts may harm post-acquisition performance. Moreover, the conceptual framework developed in this study suggests that even if acquirers and targets are related in a product and geographical market sense, dissimilarities across business models may still harm post-acquisition performance. Overall, we suggest that using the recently emerged concept of business model may provide a new step in examining diversification decisions above and beyond the traditionally examined concepts of product and geographical markets, providing a more complete understanding of when and how multibusiness firms can create value.

Competitive Behavior and Nonfinancial Objectives: Entry, Exit, and Pricing Decisions in Closely Held Firms

Because of the predominance of the assumption of profit maximization as the goal of the firm and its decision makers, especially in the competitive strategy literature, research has yet to investigate how differences in objectives might influence competitive actions such as entry, exit, and pricing decisions. This represents an important gap in the literature given the fundamental role of objectives in decision making and widespread evidence that many firms, especially those that are closely held, are motivated by nonfinancial objectives in addition to an interest in financial returns. To further our understanding of firms’ competitive strategy decisions, we discuss how the presence of nonfinancial objectives in closely held firms leads to a weakening of the relationship between economic indications of profitability and competitive behaviors. Using a unique data set of nearly 4,000 closely held and non-closely held establishments engaged in local competition in the Texas hotel industry, we find that the entry, exit, and pricing decisions of closely held establishments are less responsive to economic indicators of profit potential compared with decisions of non-closely held establishments.