Raymond H. Lopez

Big bets, small wins? Entrepreneurial behavior and ROI

Purpose – Researchers into entrepreneurial strategy have overlooked the impact of small vs big investments on a ventures return on investment (ROI). The purpose of this paper is to investigate to what extent does entrepreneurial behavior impact initial investment size and the return on that investment?Design/methodology/approach – This investigation summarizes research into entrepreneurial leadership behavior and uses data from longitudinal case studies of four innovative start‐up wine businesses in California, India, and Italy.Findings – Investment size and ROI appear to be related to entrepreneurial behavior.Practical implications – Lead entrepreneurs must develop both technical competence and social networking skills to achieve small wins, i.e. early if only modest ROI.Originality/value – This paper develops a model consisting of several testable propositions to measure the impact of entrepreneurial behavior on ROI.

Beringer Wine Estates Holdings, Inc.1

The Beringer Wine Estates Company has been expanding its market share in the premium segment of the wine industry in the 1990s. After operating as a wholly owned subsidiary of the giant Nestle food company for almost a quarter of a century, the firm was sold in 1996 to new owners, in a leveraged buyout. For the next year and a half, management and the new owners restructured the firm and expanded through internal growth and strategic acquisitions. With a heavy debt load from the LBO, it seemed prudent for management to consider a significant rebalancing of its capital structure. By paying off a portion of its debt and enhancing the equity account, the firm would achieve greater financial flexibility which could enhance its growth rate and business options. Finally, a publicly held common stock would provide management with another “currency” to be used for enhancing its growth rate and overall corporate valuation. With the equity markets in turmoil, significant strategic decisions had to be made quickly. Should the IPO be completed, with the district possibility of a less than successful after market price performance and these implications for pursuing external growth initiatives? A variety of alternative courses of action and their implications for the financial health of the Beringer Company and the financial wealth of Beringer stockholders are integral components of this case.