Howard E. Aldrich

Fools Rush in? The Institutional Context of Industry Creation

Now organizations are always vulnerable to the liabilities of newness, but such pressures are especially severe when an industry is in its formative years. We focus on one set of constraints facing entrepreneurs in emerging industries-their relative lack of cognitive and sociopolitical legitimacy. We examine the strategies that founders can pursue, suggesting how their successful pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping industry and institutional environments. Founding a new venture is risky business under any conditions, but especially so when entrepreneurs have few precedents for the kinds of activities they want to found. Early ventures in the formative years of a new industry face a different set of challenges than those that simply carry on a tradition pioneered by thousands of predecessors in the same industry. Such foundings are risky, but are they also foolish? From an institutional and ecological perspective, founders of new ventures appear to be fools, for they are navigating, at best, in an institutional vacuum of indifferent munificence and, at worst, in a hostile environment impervious to individual action. In addition to the normal pressures facing any new organizations, they also must carve out a new market, raise capital from skeptical sources, recruit untrained employees, and cope with other difficulties stemming from their nascent status. Among the many problems facing innovating entrepreneurs, their relative lack of legitimacy is especially critical, as both entrepreneurs and crucial stakeholders may not fully understand the nature of the new ventures, and their conformity to established institutional rules may still be in question. We capture these problems by using the term legitimacy in two related senses: (a) how taken for granted a new form is and (b) the extent to which a new form conforms to recognized principles or accepted rules and standards. The first form of legitimacy is labeled cognitive, and the second, sociopolitical. In this article, we examine the social processes surrounding the emergence of new industries, from the early pioneering ventures through the early stages of ∗ Originally published in Academy of Management Review, 1994, 19(4): 645–670. Reprinted by permission of Academy of Management Review via the Copyright Clearance Center. ∗ growth, when the form proliferates as the industry becomes established. Legitimacy is not the only factor influencing whether an industry successfully moves beyond the stage of a few pioneers to fully realized growth. Clearly, many other factors are important to a new industry’s success, such as the state of the economy, latent demand for the product or service, competitive pressures from related industries, and the skills of new venture owners and workers. Because only a few theorists have examined failed industries (e.g. Astley, 1985), and we have no systematic research in this area, our article is necessarily speculative. However, we believe that legitimacy is a more important issue than previously recognized, and so we focus our arguments and propositions on factors affecting an industry’s legitimacy and on legitimating strategies pursued by innovating entrepreneurs. Our aim is to identify factors hindering and supporting the progression from the founding of a completely new activity, in an institutional void, through its development as a legitimate industry. Our focus is on the development of independent new ventures that are not sheltered by sponsoring organizations. By definition, such ventures cannot rely on existing institutions to provide external legitimacy. Throughout the article, we refer to new activities as specific product/process innovations, one aspect of what ecologists refer to generally as new organizational forms; new ventures are independent organizations initiating the new activity; and industries are groups of organizations with similar products/processes.

The Pervasive Effects of Family on Entrepreneurship: Toward a Family Embeddedness Perspective

Families and businesses have often been treated as naturally separate institutions, whereas we argue that they are inextricably intertwined. Long-term changes in family composition and in the roles and relations of family members have produced families in North America that are growing smaller and losing many of their previous role relationships. Such transformations in the institution of the family have implications for the emergence of new business opportunities, opportunity recognition, business start-up decisions, and the resource mobilization process. We suggest that entrepreneurship scholars would benefit from a family embeddedness perspective on new venture creation. D 2003 Elsevier Science Inc. All rights reserved.

Personal and Extended Networks Are Central to the Entrepreneurial Process

In an executive forum (Dubini and Aldrich, 1991 (http://dx.doi.org/10.1016/0883-9026(91)90021-5)),we proposed a way of generating networking strategies for entrepreneurs. First, we introduce general network concepts by considering personal networks; thus, we take the role set of individual entrepreneurs as the unit of analysis. Second, we discuss the aggregation of personal networks into extended networks, which in turn can be analyzed within firms (intra-firm relations) or between firms (interfirm relations).

The Structure of Founding Teams: Homophily, Strong Ties, and Isolation among U.S. Entrepreneurs

In: AMERICAN SOCIOLOGICAL REVIEW, 2003, Vol. 68 (April:195–222) In the following excerpt from Appendix A (page 219 of original article), there were two errors in equation A-2. Two instances of “K” should have been replaced with ellipses ( . . . ). The correct equation is as follows: Provided that the roles included in a particular structural event are events in N occurring with probability p(n1), p(n2), . . . p(nk), the sampling distribution of joint structural events is given by the multinomial formula: r! p(E | r) = | n1 |!| n2 |! . . . | nk |! [p(n1) |n1| p(n2) |n2| . . . p(nk) |nk|], (A-2) where r = |n1| + |n2| + . . . |nk|.

Ethnic entrepreneurs : immigrant business in industrial societies

Foreword - John H Stanfield II Preface Opportunities, Group Characteristics, and Outcomes - Roger Waldinger, Howard Aldrich and Robin Ward Trends in Ethnic Business in the United States - Roger Waldinger and Howard Aldrich European Trends in Ethnic Business - Jochen Blaschke et al Spatial Dimensions of Opportunity Structures - Roger Waldinger, David McEvoy and Howard Aldrich Ethnic Entrepreneurs and Ethnic Strategies - Jeremy Boissevain et al Business on the Ragged Edge - Roger Waldinger, Mirjana Morokvasic and Annie Phizacklea Immigrant and Minority Business in the Garment Industries of Paris, London, and New York Conclusions and Policy Implications - Roger Waldinger et al

Many Are Called, but Few Are Chosen: An Evolutionary Perspective for the Study of Entrepreneurship

More than a decade ago, Low and MacMillan identified three elements indispensable to an understanding of entrepreneurial success: process, context, and outcomes. Since their critique, three important advances include (a) a shift in theoretical emphasis from the characteristics of entrepreneurs as individuals to the consequences of their actions, (b) a deeper understanding of how entrepreneurs use knowledge, networks, and resources to construct firms, and (c) a more sophisticated taxonomy of environmental forces at different levels of analysis (population, community, and society) that affect entrepreneurship. Although our knowledge of entrepreneurial activities has increased dramatically, we still have much to learn about how process and context interact to shape the outcome of entrepreneurial efforts. From an evolutionary approach, process and context (strategy and environment) interact in a recursive continuous process, driving the fate of entrepreneurial efforts. Thus, integrating context and process into research designs remains a major challenge. Such integration constitutes a necessary step to a more complete evolutionary approach and a better understanding of entrepreneurial success.

Populations, Natural Selection, and Applied Organizational Science.

? 1983 by Cornell University 0001-8392/83/2801-01 01 /

Using an Ecological Perspective to Study Organizational Founding Rates

00 75 This paper proposes that organizational science could be applied more widely if the field were more concerned with the conditions under which research findings are valid. Papers in the field generalize about organizations as if they were all alike, or refrain from generalizing at all, as if they were all unique. The population perspective presented de-emphasizes the all-alike and all-unique approaches, placing emphasis instead on research methods that improve the description and classification of organizational forms, define more homogeneous groupings, and specify the limited conditions under which predictions may be expected to hold true. The principles of the population perspective are reviewed, and an outline is presented for developing a classification of organizational forms. Suggestions are then made on how to use the perspective to increase and improve the application of organizational research.

Women on the verge of a breakthrough:networking among entrepreneurs in the United States and Italy

Moving away from a “traits” approach to a “rates” approach, using an ecological perspective, highlights the salience of organizations as the key component of environments. Foundings of new organizations are highly dependent upon the experiences of already existing organizations, both in a particular population and in the larger community of populations. Intra-population processes—prior foundings, dissolutions, density, and factors associated with density—structure the environment into which foundings are born. Inter-population processes—the nature of relations between populations, whether competing or cooperating, and actions by dominant organizations—affect the distribution of resources in the environment and the terms on which they are available to entrepreneurs. Institutional factors—government policies, political events, cultural norms, and so on—shape the macro-context within which other processes occur.

Resource Mobilization Through Ethnic Networks: Kinship and Friendship Ties of Shopkeepers in England

The literature on work, marriage and the family, and organized social life irrtplies that women are embedded in different personal networks than men, with potential conseauences for their rates of business formation, sirvival, and growth. We tested this implication by studying the personal networks of potential and active entrepreneurs in the Research Triangle Area, North Carolina and Milan, Italy. Instead of substantial differences in the networks of men and women, we were surprised by the degree of similarity we discovered, within and between countries. Networking activity is very similar within each country, as is network density. However, the sex composition of networks differs dramatically by sex in both countries. In some respects, the gap between the male and female worlds appears to have dosed substantially, but the personal networks of women in both countries still include few men.