James O. Fiet

The relationship between entrepreneurship education and entrepreneurial intentions: : a meta-analytic review

The research on entrepreneurship education–entrepreneurial intentions has yielded mixed results. We meta–analyzed 73 studies with a total sample size of 37,285 individuals and found a significant but a small correlation between entrepreneurship education and entrepreneurial intentions ( ρ ^ ). This correlation is also greater than that of business education and entrepreneurial intentions. However, after controlling for pre–education entrepreneurial intentions, the relationship between entrepreneurship education and post–education entrepreneurial intentions was not significant. We also analyzed moderators, such as the attributes of entrepreneurship education, students’ differences, and cultural values. Our results have implications for entrepreneurship education scholars, program evaluators, and policy makers.

New venture teams' assessment of learning assistance from venture capital firms

Abstract Prior research examining whether venture capital firms (VCs) add value to the ventures in their portfolios by advising their new venture teams (NVTs) has led to inconclusive results. Whereas most prior studies have assumed that NVTs value VC assistance, this study tests for the possibility that they differentially value two different types of VC assistance-business management and operational. We collected data by surveying 837 firms identified in the Venture Capital Journal that had received financing from venture capital firms. Only firms that received first-round financing were included in our analysis, which reduced our sample size to 205 firms. Our central finding is that systematic differences exist among NVTs in their evaluation of learning assistance from VCs. Even though VCs can chose their own level of involvement with an NVT, successfully improving venture performance through nonfinancial assistance at least partially depends upon the extent to which the NVT values VC input. Our results indicate that NVTs with more industry experience and longer team tenure in the current venture are negatively related to both business management advice and operational assistance offered by their VCs. However, when an NVT has previously worked together and when its primary experience is from another industry, it tends to welcome business management advice from its VC. One interpretation of this finding is that an advanced level of operational specialization already exists in such a team, which reinforces established operating patterns. Changing established operating patterns could make it more costly to adopt VC input on operational issues. However, business management advice may be more welcome, because the NVT is still learning how to compete in a new industry. These findings add to the growing literature that suggests that VCs play a particularly important role in entrepreneurial ventures when they pursue the development of new technologies (Ehrlich et al. 1994; Sapienza 1992). However, business management advice is not highly valued by NVTs that pursue more technical innovations. These findings in combination with those of Sapienza and Amason (1993) suggest that conflict in the VC-NVT relationship may be the greatest when the parties attempt to resolve critical differences, which ironically appear to be the ones where the NVT could derive the greatest benefit from listening to its VC. Finally, current firm performance is not related to the NVTs evaluation of VC assistance. Although cross-sectional measures of performance have obvious limitations, particularly with new ventures, these results indicate that the NVT evaluation of VC assistance is not driven by short-term performance. Past research has shown that VCs vary widely in their preferred level of involvement with the managers of firms in their portfolio. Some VCs prefer a laissez-faire approach, whereas others think that they must be more involved if they are to ultimately receive high rewards. The central finding from this study is that significant differences exist among NVTs in their evaluation of business management and operational assistance. For VCs that are more involved, these findings suggest that the optimal level of involvement is also partially contingent upon the NVTs openness to learning. Ignoring the contingent nature of the VC-NVT relationship, VCs could reduce their influence as a tool to improve firm performance and to ensure the ultimate survival of the venture.

The informational basis of entrepreneurial discovery

Scholars have identified four different roles played by entrepreneurs in the discovery of new venture opportunities. What each of these roles has in common is that the discovery process consists of the acquisition of specific, risk-reducing information. Uncertain returns from such investments deter some would-be entrepreneurs from making discoveries. This approach suggests that the vision to make entrepreneurial discoveries depends on making cost-effective informational investments, not on special talents possessed by only a few aspirants.

Signaling in Venture Capitalist—New Venture Team Funding Decisions: Does It Indicate Long-Term Venture Outcomes?

According to signaling theory, new venture teams (NVTs) can communicate to venture capitalists and other potential investors both a “value” signal and a “commitment” signal, based on the level of personal investment in a venture. Venture capitalists (VCs) typically want to know if a NVT is really committed to a venture and if its members truly believe that a venture has wealth creating potential. Team members can convey signals via their investment behavior. We test our hypotheses based on a sample of 183 VC–backed ventures that we tracked over a ten–year time period. These data indicate that the signals sent to VCs in the early stages of the funding process do not appear to have any significant relationship with long–term venture outcomes. We explore possible explanations for these findings, as well as their implications for signaling theory and future research.

Reliance upon informants in the venture capital industry

Abstract Can venture capital investors rely upon informants to be forthcoming with what they know? Or do they need to be concerned about self-serving conduct? These questions are investigated among two types of venture capital investors: business angels and venture capital firms. The results of the present study suggest that the more either type of investor is concerned with market or agency risk, the less likely he or she will be to use informal network informants (business associates and friends). Market risk is due to unforeseen competitive circumstances, whereas agency risk results from the separate and possibly divergent interests of investors and their informants. Investors with a higher concern for risk consult formal network informants (venture capital firm investors) for information about market risk, but concern with agency risk is not related to the frequency of use of venture capital firm sources. Agency risk deals with particular, self-interested individuals who are unlikely to be known to the formal informant network. Venture capital firm investors consult formal network sources more frequently than do business angels. Compared to business angels, they enjoy a much more efficient flow of information from their informants. As they gain more experience exchanging information, venture capital firm investors increase their reliance upon formal network informants. Because informal network informants have less experience exchanging information, it is possible that some informal sources could escape being detected if they decided to act in a devious, self-interested manner. Rather than relying upon informal informants, several investors indicated in face-to-face interviews that they prefer to perform their own due diligence. Business angels seem to distinguish between two types of informants: close associates with whom they have had extensive investment experience and mere acquaintances to whom they are only weakly tied by a referral from a close associate or someone else. It is quite likely that business angels rely upon informants who are close associates. However, the informants in this study were predominantly acquaintances, which may be fairly typical of most business angel informants. Because they were acquaintances and not close associates, they were not utilized much as informants. Venture capital firm investors rely heavily upon associates at other venture capital firms for market information. Because they do not trust other informants to the same extent, they may wish to de-emphasize their reliance upon them. Similarly, there are indications that business angels rely upon close associates to provide them with information about agency factors. Because angels do not trust others for this information and may in fact have limited access to other informants, they may wish to focus their search for information on business associates. This would enable them to avoid the expense of investigating the reliability of other informants. This research should be helpful to entrepreneurs who are searching for new venture funding. It suggests that certain types of informants may be more effective in championing the prospects of a deal to a venture capitalist. An entrepreneur with a technical or market advantage ought to approach a venture capital firm. Because the informant network for venture capital firms is highly interconnected with other venture capital firms, it is likely that presenting a request for funding to one of them will quickly result in the sharing of it among their informant associates. If entrepreneurs possess a market advantage, they ought to concentrate on obtaining funding from the first venture capital firm investor who reviews the deal. Entrepreneurs who can argue that they are trustworthy or competent, even if they lack a technical or market advantage, ought to present their deals to a business angel using a close business associate as an intermediary. A mere acquaintance used as an intermediary would be much less effective. Although statistical testing indicated that such an approach would not generate significant success, interviews with business angels suggested that using a close associate as an intermediary would improve an entrepreneurs prospects, especially if the business angel were relatively unconcerned about a deals risk. Moreover, using an informant intermediary to contact a business angel would avoid the need to do an initial background check on the entrepreneur.

A Prescriptive Analysis of Search and Discovery

I develop a prescriptive model of entrepreneurial search and discovery, which operationalizes constrained, systematic search. This approach appears to be superior to the alertness perspective in both the number and the wealth-creating potential of the opportunities that it can assist entrepreneurs to discover. Essentially, this research shows how entrepreneurs can improve their search effectiveness by systematically restricting their searching to known domains, which I elaborate prescriptively. Finally, I discuss the implications of the approach for researchers, educators and entrepreneurs.

Knowledge Combination and the Potential Advantages of Family Firms in Searching for Opportunities

This study examines differences in knowledge structures and combinative capabilities that provide family firms with distinct advantages over nonfamily firms in identifying opportunities. Drawing on constrained, systematic search, we explore how noneconomic goals and family relations enhance searching for opportunities. Unique human capital conditions create specific knowledge and economies of scope in knowledge combination. Differences in knowledge stocks, knowledge combination, and the long–term orientation of family firm managers explain differences in finding opportunities between family and nonfamily firms. Furthermore, we propose that family firms are more likely to improve their search routines over time. Fewer endgame scenarios in family firms allow the refinement of search routines.

Systematic Search and Its Relationship to Firm Founding

This research uses a representative sample of U.S. nascent entrepreneurs to find that there is a positive relationship between their use of systematic search and their success in founding new firms. We control for mediating variables and find that searching systematically leverages firm founding by using an adaptive decision–making style and social capital. Systematic search also appears to reduce environmental uncertainty, which has additional important implications for aspiring entrepreneurs. Finally, this research suggests possible lines of future inquiry.

Forgiving Business Models for New Ventures

We set forth the attributes of forgiving business models that entrepreneurs can use to minimize losses while exploiting ideas to launch new ventures. Venture ideas possessing these attributes have greater potential because they can shift risk to resource providers. Thus, the success of a venture partially depends on the market conditions for others, which affects how an opportunity can be exploited. We emphasize combinations of outside options for resource providers together with their market interaction costs. Finally, we discuss the contributions of this research for entrepreneurs, its theoretical implications, and future research possibilities.

The Influence of Changes in Social Capital on Firm‐Founding Activities

This study examines how founders can manage changes in their network ties during firm founding. We find that an increase in tie strength is negatively associated with founding activities, whereas an increase in the number of ties is positively associated with founding activities. Furthermore, entrepreneurial intensity mitigates the negative relationship between an increase in tie strength and founding activities; and social competence reinforces the positive relationship between an increase in the number of ties and founding activities. Our study contributes to the social capital literature by theorizing and testing how changes in a founders network structure can be beneficial to founding activities.