Howard H. Stevenson

A Paradigm of Entrepreneurship: Entrepreneurial Management

Corporate entrepreneurship seems to many entrepreneurship scholars a contradiction in terms. This paper represents an attempt to bridge that gap. This is done by, first, reviewing the literature on entrepreneurship, trying to summarize it in a few major themes. Second, a view of entrepreneurship is proposed that facilitates the application of the previous findings to the field of corporate entrepreneurship. Finally, a series of propositions are developed, as instances of the kind of research that can be pursued by following the proposed approach.

Social and Commercial Entrepreneurship: Same, Different, or Both?:

Entrepreneurship has been the engine propelling much of the growth of the business sector as well as a driving force behind the rapid expansion of the social sector. This article offers a comparative analysis of commercial and social entrepreneurship using a prevailing analytical model from commercial entrepreneurship. The analysis highlights key similarities and differences between these two forms of entrepreneurship and presents a framework on how to approach the social entrepreneurial process more systematically and effectively. We explore the implications of this analysis of social entrepreneurship for both practitioners and researchers.

Capital market myopia

Abstract The purpose in writing this article is to focus attention on a phenomenon we call capital market myopia, a situation in which participants in the capital markets ignore the logical implications of their individual investment decisions. Viewed in isolation, each decision seems to make sense. When taken together, however, they are a prescription for disaster. Capital market myopia leads to overfunding of industries and unsustainable levels of valuation in the stock market. We use the Winchester Disk Drive industry to elucidate the phenomenon. We argue that capital market participants should have seen the problem coming. They should have known that valuation levels were absurd, based in large part on the greater fool theory. The data necessary to anticipate the problem were readily available before the industry shakeout began and stock prices collapsed. There are several lessons which we believe can be learned by careful examination of the disk drive experience in the period under study. These include: Taking the Broad View of the Industry is the Key to Profitable Investment. The investment mania visited on the hard disk industry contained inherent assumptions about long-run industry size and profitability and about the future growth, profitability and access to capital for each individual company. These assumptions, had they been stated explicitly, would not have been acceptable to the rational investor. Certainly there are valuations which arise which cannot be justified under any circumstance. These are the times for the manager to raise money from the public capital markets. Those managers who took advantage of unsustainable valuation levels now have a chance to survive the shakeout. Growth Is Not Equivalent to Profitability. The high growth rate in the industry made it the focus of considerable managerial, investor and technological attention. The industry attracted so many resources that the growth had high probability of being unprofitable. Excesses in the capital market turned an opportunity into a disaster. Profits For Some Are Not Equivalent to a Good Business. Many players made high profits by investing in the hard disk drive business, including the investment bankers and certain of the venture capital groups which invested early enough to “catch the wave” of euphoria in the stock market and still sell under Rule 144. Many others rode the cycle up and down without liquidity. For many buyers of disk drive stocks in 1983, losses were massive. Short-term successes of some gave the illusion of long-term profitability for all. Investors should not be fooled by such invevitably ephemeral successes. Market Instability Can Be All Bad News. Very rapid change often creates entrepreneurial opportunity: it also creates risk. Analysis of the hard disk drive industry reveals the dark side of rapid technological evolution and of customer instability. Early players are often preempted by changes in technology and in customer needs. Early birds are not always winners in product markets, but late comers are almost always losers. Recognizing the Chain. One of the more important lessons to be learned from the tale of the disk drive industry is that all players—entreprenuers, venture capitalists, investment bankers, industry analysts and investors—must recognize the chains involved in such a process. First, there was a technological chain, a series of bets on technological advances in disk drive components, disk drive designs, and end-user designs. Then, there was a financial chain, a series of related bets on the internal financial health of each player in the technological chain and on the nature of access to capital in the private and public markets. The likelihood that any player in the disk drive industry would prosper without a serious setback due to a weak link was effectively zero. Indeed, weaknesses in the chain were created by exactly the same people whose financial success depended on an unbroken series of favorable outcomes. During this same period, the public capital markets were also a large supplier of funds to the disk drive industry. The total amount of money raised in public offerings of common stocks for participants in the industry was over

Entrepreneurial management's need for a more “chaotic” theory

800 million. During the middle part of 1983, the capital markets assigned a value in excess of

Social and Commercial Entrepreneurship: Same, Different, or Both?

5 billion to 12 publicly traded, venture capital backed hard disk drive manufacturers. The strong market valuation of these companies paralleled the boom in other high technology stocks and rising valuation levels in the stock market in general. Table 2 contains data on stock prices and valuation levels for some disk drive manufacturers, and Table 3 provides general data on the economy and capital markets.

Co-operative strategies—The payoffs and the pitfalls

Abstract I know that most men, including those at ease with problems of the greatest complexity, can seldom accept even the simplest and most obvious truth if it be such as would oblige them to admit the falsity of conclusions which they have delighted in explaining to colleagues, which they have proudly taught to others and which they have woven, thread by thread, into the fabric of their lives.

The self as a problem: the intra-personal coordination of conflicting desires

O emprendedurismo ha sido el motor que viene impeliendo una buena cuota del crecimiento del sector de negocios, ademas de ser la fuerza motriz responsable por la rapida expansion de este sector. Este articulo ofrece un analisis comparativo del emprendedurismo comercial y del social, valiendose de un modelo analitico prevaleciente, proveniente del area del emprendedurismo comercial. El analisis destaca las principales semajanzas y diferencias entre esas dos formas de emprendedurismo y presenta un marco para un abordaje mas sistematico y eficaz del proceso emprendedor. Exploramos las implicaciones de este analisis de emprendedurismo social tanto para sus practicantes como para sus investigadores.O empreendedorismo tem sido o motor que vem impelindo uma boa parcela do crescimento do setor dos negocios, alem de ser a forca motriz responsavel pela rapida expansao desse setor. Neste artigo, oferece-se uma analise comparativa do empreendedorismo comercial e do social, valendo-se de um modelo analitico pre-valecente, proveniente da area de empreendedorismo comercial. Na analise, destacam-se as principais similaridades e diferencas entre essas duas formas de empreendedorismo e apresenta-se um arcabouco para uma abordagem mais sistematica e eficaz do processo empreendedor. Exploram-se as implicacoes dessa analise de empreendedorismo social tanto para seus praticantes como para seus pesquisadores.

Venture capital in transition: A Monte-Carlo simulation of changes in investment patterns

Abstract This article challenges the accepted assumption that success is achieved by unassailable competitive advantage. Examples are cited of companies that have become successful by turning potential competitors into allies and thus making co-operation, rather than competition, their objective.

Ethical universals in practice: An analysis of five principles

Abstract We show that models of the self in the social sciences can be grouped into two large families or classes: models that posit the self as a unitary system of preferences, values, images or coherent propositions, and models that posit the self as a fragmented entity, composed of either a mosaic of roles and impulsive desires that are mutually disconnected, or as an ongoing and irresolvable conflict among competing interests, impulses or identities. We distinguish between an Aristotelian tradition in modeling the self-representative of the first kind of model-and a Heraclitean tradition-representative of the second kind of model. Whereas the Aristotelian tradition has been well represented in the work of economists, economic sociologists and personality psychologists, the Heraclitean tradition has received far greater emphasis in the modeling of social phenomena -through the work of such thinkers as Marx, Althusser, Foucault and Goffman, without being explicitly acknowledged -until recently -as a source of inspiration for a model of the self. We present arguments that explicitly challenge the Aristotelian representation of the self and present an explicit set of alternatives for modeling the self as an ever-changing, possibly internally conflicting entity.

Emprendedurismo social y comercial: ¿iguales, diferentes o ambos?

Abstract This article examines the nature of the investment process which has historically generated high returns for venture capital funds, and the impact on fund returns of perceived changes in management practice and the structure of the industry. The article outlines some policy implications for fund managers, investors, and the general management of corporations. The authors have investigated the investment process and the changes in the nature of the process through the use of a Monte-Carlo simulation model. Information gathered from interviews with fund managers and the available published data on venture fund performance (including proprietary surveys) was used to develop and calibrate the model. The model replicates the relatively high average fund returns and distribution of returns for funds through the early 1980s. The model simulates a multistaged investment process which draws on a pool of investment opportunities which have a log normal distribution of returns and a low (zero) average return. The model readily permits the exploration of the impact of management and industry practices on fund returns. The conditions identified by the authors, which led to high rates of return on the part of venture capital funds, include: 1. 1) multistaged investment or commitment of funds on an incremental basis with evaluation of venture performance before commitment of additional fund; 2. 2) objective evaluation of venture performance with the clear distinguishing of winners from losers; 3. 3) parlaying funds or having the confidence to commit further funds to ventures identified as winners; 4. 4) persistence of returns from one round to the next, which implies that valuable information is gained from previous rounds of investment in the same venture; 5. 5) long-term holding of investment portfolios for a period sufficient for geometric averaging of compound returns to cause the winners to “take over” or raise portfolio returns. Taken together, these conditions have permitted venture capital funds to historically realize strong average returns with a few of them realizing extraordinary returns. The article also explores the consequences of what some believe is happening in the industry: a trend toward holding investments for shorter periods, increased competition both for investments and later in the product-market arena, and a growing lack of loyalty between investors and investees. All of these conditions and their indirect consequences were shown by the model to negatively impact the limited partners in the venture capital funds while general partners, given the structure of fees and the distribution of investment returns, generally realized a reasonable to extraordinary return. The article outlines a number of management and investment policy implications for investors and fund managers.