Robert D. Hisrich

Toward a Model of Venture Capital Investment Decision Making

Venture capital investment decision-making can be modeled as a six-stage process that employs fifteen criteria and produces both supply- and demand-side benefits to the market.

Israeli women entrepreneurs: An examination of factors affecting performance

Abstract This article examines individual factors influencing performance of 200 Israeli women-owned businesses. Whereas research on women entrepreneurs is extensive in developed countries, especially in the United States and Europe, there are comparatively few studies of performance of women-owned businesses in non-OECD countries. There is evidence that social structures (work, family, and organized social life) vary among developed and developing countries as these relate to women entrepreneurs. However, these differences have not been considered as they may relate to theories explaining performance of women-owned businesses. The extent to which existing theories are useful in the context of non-OECD countries is of increasing importance as women in these countries are assuming a greater role in enterprise creation and economic development as a result of radical geopolitical and economic policy changes worldwide. In Israel, women suffer from occupational segregation and typically earn less money than their male counterparts, despite a generally high level of education. Entrepreneurship offers a vehicle for Israeli women to achieve economic parity. Approximately 5.1% of Israeli women are self-employed (compared with 15% of Israeli men) of the 816,800 Israeli working women. This study is the first systematic investigation of performance variation among Israeli women entrepreneurs, thereby contributing to our understanding of womens entrepreneurship in non-OECD countries. Five theoretical perspectives explain performance: individual motivations and goals; social learning (entrepreneurial socialization); network affiliation (contacts and membership in organizations); human capital (level of education, business skills); and environmental influences (location, sectoral participation, and sociopolitical variables). Each of these perspectives is associated with empirical work showing relationships between these individual level factors and performance. Three questions directed this study: (1) Which factors influence the performance of Israeli women entrepreneurs? (2) Which factors explain any variance in performance among businesses established by Israeli women entrepreneurs? (3) How similar are these explanatory factors to those found in other countries? A sample of 220 Israeli women business-owners responded to a survey instrument originally composed by Hisrich and Brush (1982, 1985) that was translated into Hebrew and adapted to the particular conditions of the Israeli population. A majority of the questionnaires was distributed at meetings of professional associates of women entrepreneurs and returned by mail, but one-fourth was distributed to women who were not members of any professional association. No significant differences were found between the respondents who were members or non-members of associations. Reliability testing showed alpha coefficients of 0.65 and higher for scaled questions, which is acceptable for survey data. Statistical analyses, including Pearsonss correlations and multiple regressions, examined relationships between factors identified from theoretical perspectives and performance, which was measured by profitability, income, size (number of employees), and revenues. Demographic variables were examined, and the age of the woman entrepreneurs children was significantly related to profitability ( p Of the five theoretical perspectives, results showed network affiliation, motivation, human capital, and environmental factors affected different aspects of performance, whereas social learning theory or existence of a role model had no significant effect on performance outcomes. Network affiliation was significantly related to profitability ( p Motivations showed a strong relationship to performance. Factor analysis identified three basic groups of motives: achievement, independence, and economic necessity. Similar to findings in other countries, achievement motives were highly related to personal income, whereas economic necessity was significantly related to both profitability and revenue. Analyses of human capital variables showed mixed results; education level, areas of study, and previous entrepreneurial experience had no effect on previous experience. The fact that this population was highly educated (51% had university degrees) may have impacted on this result. Consistent with prior research findings, previous experience in the industry had a direct and significant effect on performance ( p p p This study supports previous research from the United States and Europe on women entrepreneurs, which found that performance is related to previous industry experience, business skills, and achievement motivation. However, the differential effects of network affiliations was significantly more important for women entrepreneurs in Israel. Affiliation with a single network was highly related to profitability, whereas involvement in multiple networks was detrimental to both revenues and the number of employees. These findings imply that to perform well, Israeli women entrepreneurs should gain related industry experience, develop business skills, and seek to achieve success. Most importantly, commitment to a single network for support and advice is better than a loose alignment with many support groups. This research has implications for studies of women entrepreneurs in other non-OECD as well as developing countries. In countries such as Russia or China, anecdotal evidence shows self-employment offers women an opportunity to improve their economic status as more capitalistic policies are adopted. The extent to which individual factors found important in this study, such as business skills, motivations, previous industry experience, and network affiliation, affect performance in these countries is a topic for future investigation. This study suggests that individual factors affect performance differentially as a consequence of variations in social structures, work, organized social life, and family. Future research should explore the extent to which this is the case. Examination of aspects of organizational strategies and government policies as these influence performance is another topic for future study.

How venture capital firms differ

Abstract Four potential sources of differences between venture capital (VC) firms were examined—venture stage of interest, amount of assistance provided by the VC, VC firm size, and geographic region where located. Through a questionnaire, 149 venture capitalists provided data about their firms, about what they look for in evaluating an investment, and about how they work with a portfolio company following an investment. Firms were divided into four groups based on venture stage of interest. The earlier the investment stage, the greater the interest in potential investments built upon proprietary products, product uniqueness, and high growth markets. Late-stage investors were more interested in demonstrated market acceptance. There were no differences by stage regarding the desired qualities of management. However, after the investment was made, earlier stage investors attached more importance to spending their time evaluating and recruiting managers. Earlier stage investors sought ventures with higher potential returns—a 42% hurdle rate of return for the earliest stage investor versus 33% for the late-stage investor. Late-stage investors spent more time evaluating a potential investment. However, after the investment was made, there was little difference in the amount of time spent assisting the portfolio company. There were, however, differences in the significance that VCs attached to particular post-investment activities. Firms were split into three groups based upon the amount of time the VC spent with a portfolio company after an investment was made as lead investor. The most active group averaged over 35 hours per month per investment, and the least active group averaged less than seven hours. The difference in assistance provided was not strongly tied to differences in investment stage of interest. There were major differences in the importance the VCs attached to their post-investment activities. Not surprisingly, high involvement VCs viewed their activities as more important. Based upon the amount of capital they managed, firms were also split into three groups. Average fund size varied from 278 to 12 million dollars. The larger firms had more professionals and managed more money per professional. The large firms provided the least, and the medium-sized firms the most, assistance to portfolio companies. Large firms also made larger individual investments. Even though they invested over half their funds in late-stage investments whereas smaller firms focused on the earlier stages, the large firms were still a major source of early stage financing. There were no differences between geographic regions in the proportion of investments where the venture capital firm served as lead investor. There were, however, major regional differences in investment stages of interest. Also differences were observed between regions that were not a result of differing size and investment stage.

Corporate entrepreneurship contingencies and organizational wealth creation

Despite the recognized importance of entrepreneurship for organizational wealth creation, research has devoted minimal attention to investigating this area. This study contributes to a better understanding of the relationship between corporate entrepreneurship and wealth creation by developing and testing a normative model, which clarifies the nature of the influences of corporate entrepreneurship and its environmental and organizational antecedents on organizational performance. The findings of structural equation modeling, based on mail survey data from 477 Slovenian firms, demonstrate that corporate entrepreneurship and some its contingencies make a difference in organizational wealth creation, growth and profitability.

Strategy and the board of directors in venture capital-backed firms

Abstract The results of this research demonstrate that boards of directors in venture-capital backed companies are more involved in both strategy formation and evaluation than are boards where members do not have large ownership stakes. These same results are demonstrated even when industry, board size, level of diversification, and insider board representation are held constant. Agency theory and institutional theory are advanced as reasons for this higher level of involvement. Venture capitalists are generally seen as value-added investors who have played a significant role in the development of many entrepreneurial businesses (Bygrave and Timmons 1992) . This success has lead students of industrial competitiveness like Thurow (1992) to argue that the venture capitalist should serve as an example for directors of all types of organizations. One of the most significant value-added activities of the venture capitalist is involvement with strategy Fried and Hisrich 1995 , MacMillan, Kulow, and Khoylian 1988 , Sapienza 1989 , Sapienza et al. 1996 , Rosenstein, Bruno, Bygrave, and Taylor 1993 . Implicit in the writings extolling directors who act like venture capitalists Porter 1992a , Porter 1992b , Bhide 1994 , Thurow 1992 is the belief that they will be more active than traditional board members. However, little empirical work has been done to directly compare the level of strategic involvement of the two types of boards. Building on the work of Judge and Zeithaml (1992) , this study compares the level of board involvement with strategy by the boards of venture capital-backed companies with the boards of other types of organizations. After establishing different levels of involvement, it then examines why there is a difference. Finally, this study provides additional empirical evidence on the relationship between board involvement and performance (Zahra and Pearce 1989) .

Ethics and entrepreneurs: An international comparative study

Abstract In this study, we develop a conceptual framework for the examination of cross-cultural differences in ethical attitudes of business people based on the assumptions of integrative social contract theory (ISCT). ISCT reveals the relevant cultural and economic norms that are predictive of the level of the ethical attitudes among societies and at the same time points out the more subtle impact of social institutions on ethical attitudes of different groups within a society. The evidence supports the use of integrative theoretical approaches within the field of business ethics.

ANTECEDENT INFLUENCES ON WOMENOWNED BUSINESSES

This study explores the relationship between the antecedent influences – composed of personal background, educational and occupational experiences, motivations, skills and knowledge, of women entrepreneurs and the growth of their ventures. Findings from this longitudinal study shows experience, business skills, and personal factors do affect the future growth of women‐owned enterprises.

Women entrepreneurs in a developing economy

While research on women entrepreneurs is extensive in developed countries, little has been done in this area in non‐OECD and developing economies. This research focuses on the characteristics, performance, and problems of women entrepreneurs in one developing economy – Turkey. The results indicate that while the women entrepreneurs exhibited many similarities with their counterparts in other countries they differed in other aspects such as in their reasons and motivation for starting a venture and problems encountered. These differences reflect in part the effect of a different social structure in a developing economy, particularly the impact of occupational segregation, wage disparity, and participation in a non‐supported sector of the economy. These findings suggest that the theories regarding women entrepreneurs based on developed economies need to be carefully examined before being applied to non‐OECD and developing economies.

Venture Capitalist and CEO Dismissal

This exploratory research utilized a nationwide survey to examine CEO dismissals by boards of directors on which venture capitalists serve. The findings demonstrate that it is a CEOs failure in strategic concerns, rather than operational ones, that typically lead to CEO dismissal. In addition, replacing a CEO typically has a strong positive effect on new venture performance. These performance gains are not significantly different if replacement CEOs are internal or external to the venture.

Entrepreneurship and small business research – a European perspective

Interest in the field of entrepreneurship has significantly increased among academics, practitioners and government officials in the past decade both in the USA and in Europe. The increased interest is reflected in the increased number of courses, majors and minors at colleges and universities throughout the world; the increased number of endowed chairs; the increased number of journals in the field; the increased coverage of the field by the media; and the increased interest in the provision of government support. In light of this significant increased interest, it is important to understand the state of research in the field in Europe in the last few years, the focus of this article.