Scott Shane

Explaining the formation of international new ventures: The limits of theories from international business research

Examines the formation process of international new ventures (INVs)--i.e., firms that are international from the time of their formation. It is discovered that none of the existing theories from the field of international business explain the formation process because they focus on firm-level analysis of large, mature firms. An alternative formation process for international startups is proposed that identifies the specific characteristics of entrepreneurs and their social network of business alliances that makes them ideally suited for the international market. Data were gathered from twenty-four case studies of international new ventures identified through business press articles and an iterative networking process. The investigation involved interviews and analysis of documents and physical artifacts. Findings demonstrate that founders of INVs are more alert to the possibilities from different national markets due to the competencies developed from earlier activities, and only someone with these particular competencies is capable of combining the necessary resources across national borders to start an international business. Also, access to exceptional international funding networks is a major factor inducing these entrepreneurs to compete internationally rather than just locally. In addition, international entrepreneurs have routines for managing multicultural workforces, coordinating resources from different nations, and simultaneously targeting customers located in multiple geographic locations. Finally, founders rely on trust developed through repeated interactions over time to diminish opportunistic behavior in hybrid partners. (SFL)

Opportunities and Entrepreneurship

This article extends and elaborates the perspective on entrepreneurship articulated by Shane and Venkataraman (2000) and Venkataraman (1997) by explaining in more detail the role of opportunities in the entrepreneurial process. In particular, the article explains the importance of examining entrepreneurship through a disequilibrium framework that focuses on the characteristics and existence of entrepreneurial opportunities. In addition, the article describes several typologies of opportunities and their implications for understanding entrepreneurship.

Network Ties, Reputation, and the Financing of New Ventures

Explaining how entrepreneurs overcome information asymmetry between themselves and potential investors to obtain financing is an important issue for entrepreneurship research. Our premise is that economic explanations for venture finance, which do not consider how social ties influence this process, are undersocialized and incomplete. However, we also argue that organization theoretic arguments, which draw on the concept of social obligation, are oversocialized. Drawing on the organizational theory literature, and in-depth fieldwork with 50 high-technology ventures, we examine the effects of direct and indirect ties between entrepreneurs and 202 seed-stage investors on venture finance decisions. We show that these ties influence the selection of ventures to fund through a process of information transfer.

Why do some universities generate more start-ups than others?

Abstract The results of this study provide insight into why some universities generate more new companies to exploit their intellectual property than do others. We compare four different explanations for cross-institutional variation in new firm formation rates from university technology licensing offices (TLOs) over the 1994–1998 period—the availability of venture capital in the university area; the commercial orientation of university research and development; intellectual eminence; and university policies. The results show that intellectual eminence, and the policies of making equity investments in TLO start-ups and maintaining a low inventor’s share of royalties increase new firm formation. The paper discusses the implications of these results for university and public policy.

Legitimating first: organizing activities and the survival of new ventures

The life stories of 223 new Swedish ventures started by a random sample of firm founders in 1998 are examined. The previous literature is reviewed and methodological obstacles are presented. Ignoring what happens to new ventures that fail very early is limiting. A theoretical framework is developed to examine the effect of legitimatingactivities on the hazard of disbanding and transition to other firm organizingactivities. To identify such ventures, 30,427 people were surveyed, and it isfound that 453 were members of a venture team of an independent effort to start a business in 1998. The key findings resulting from analyzing the data set on the lives of 223 firms during their first 30 months of existence include that performing activities with external stake holders to gain legitimacy (such as resource allocation) limits the danger of a venture disbanding, and facilitates the transition to other organizing activities. (CBS)

Technological Opportunities and New Firm Creation

Research on the creation of new high-technology companies has typically focused either on industry-level factors such as market structure and technology regime or on individual-level factors such as the work experience of entrepreneurs. This study complements these approaches by examining the effect of technological opportunities on firm formation. In particular, the study shows that the probability that an invention will be commercialized through firm formation is influenced by its importance, radicalness, and patent scope.

Why do some societies invent more than others

Abstract Having being involved in management operations overseas, many executives have come to the conclusion that cultural differences influence the relative performance of companies in different countries. This managerial gut feeling has been supported by academic research, which has shown that cultural forces influence the strategies and structures that firms use. However, one aspect of this cross-cultural research that has gotten little academic research attention is the relationship between cultural values and the innovativeness and inventiveness of a society. This study examines this relationship. Two aspects of culture should have an influence on inventiveness. The first—the extent to which a society stresses social hierarchy—should decrease inventiveness for a number of reasons. Inventiveness is more likely to occur if a society is less hierarchical since bureaucracy reduces creative activity. Communication enhances invention because much of peoples inventive activity requires input from others. In hierarchical societies, there is less communication between superiors and subordinates than in non-hierachical societies. Innovation requires decentralized authority because such a structure brings more information to the attention of the senior managers and gives employees greater incentive, and hierarchical societies tend to have more centralized authority. Hierarchical societies tend to have control systems based less on trust, and more on rules and procedures, and these controls inhibit creativity and inventiveness. Inventiveness is hard work and requires a strong work ethic, and hierarchical societies are more fatalistic and less inclined to undertake the hard work necessary for innovation. Finally, inventions often cause radical social change. Hierarchical societies seek to minimize this change because the redistribution of power that accompanies social change might cause those at the top of the hierarchy to fall. Individualistic societies should be more inventive than collectivistic ones. Individualistic societies value freedom more than collectivistic societies, and freedom is necessary for creativity. Inventiveness requires an outward-looking view. Individualistic societies do not stress loyalty to the extent that collectivistic societies do, so they are able to gather more information necessary for invention. Small firms are more innovative than large ones, and people in individualistic societies tend to prefer small firms, whereas those in collectivistic societies prefer large ones. Inventors need to be compensated for their inventions monetarily and with recognition. This is more likely in individualistic societies, which are more willing to single people out. The support of senior people in organizations is necessary for innovation to occur, and people in individualistic societies are more likely to seek this support. Finally, the psychological characteristics of independence, achievement, and non-conformity, which have been found to encourage innovation, are all more common in individualistic societies. This study examined the per capita number of invention patents granted to nationals of 33 countries in 1967, 1971, 1976, and 1980 and compared it with an index of the values of power distance (social hierarchy) and individualism, compiled from a survey of 88,000 employees at IBM undertaken by Geert Hofstede in the late 1960s and early 1970s. The results showed that individualistic and non-hierarchical societies are more inventive than other societies. The findings have two implications for managers. First, some societies might have a cultural comparative advantage in inventiveness. If this is true, these countries are the best locations for research and development in multinational corporations. Second, the same cultural values that operate on the national level operate on the firm level, leading companies and countries with innovative cultures to invent more than others.

Hybrid Organizational Arrangements and Their Implications for Firm Growth and Survival: A Study of New Franchisors

This study proposes that hybrid organizational forms provide a way to overcome the agency problems of adverse selection and moral hazard in selecting, assimilating, and monitoring new managers. Con...

Selling University Technology: Patterns from MIT

Many research universities engage in efforts to license inventions developed by university-affiliated inventors. However, no systematic explanation of the conditions under which university inventions will be licensed or commercialized has been provided. Drawing on transaction cost economics, I provide a conceptual framework to explain which university inventions are most likely to be licensed, commercialized, and generate royalties, and who will undertake that commercialization. I test this framework on data on the 1,397 patents assigned to the Massachusetts Institute of Technology during the 1980-1996 period. The results showthat (1) university inventions are more likely to be licensed when patents are effective; (2) when patents are effective, university technology is generally licensed to noninventors; (3) when patents are effective, licensing back to inventors increases the likelihood of license termination and reduces the likelihood of invention commercialization; and (4) the effectiveness of patents increases royalties earned for inventions licensed to noninventors. The implications of these findings for innovation management and strategy, entrepreneurship, and university technology commercialization are discussed.

Encouraging university entrepreneurship? The effect of the Bayh-Dole Act on university patenting in the United States

Abstract Universities are seen as a source of technology development that is useful to entrepreneurial activity. As a result, policy makers often consider mechanisms to stimulate technology commercialization at research universities as a way to encourage entrepreneurial activity in a region. However, the transfer of technology from universities to the private sector requires the exploitation of markets for knowledge, which are fraught with difficulty [Arrow, K., 1962. Economic welfare and the allocation of resources for inventions. In: Nelson, R. (Ed.), The Rate and Direction of Inventive Activity. Princeton, NJ: Princeton Univ. Press.]. This article examines the effect of one U.S. public policy initiative—the Bayh-Dole Act in the United States—on one aspect of technology commercialization—university patenting. Specifically, the article explores the university share of patents from 1969 through 1996 across 117 lines of business, and shows that the effectiveness of licensing in a line of business is significantly correlated with university share of patents in the post-Bayh-Dole period, but not in the pre-Bayh-Dole period. These results suggest that the Bayh-Dole Act provided incentives for universities to increase patenting in those fields in which licensing is an effective mechanism for acquiring new technical knowledge. The paper discusses the implications of this shift in patenting for research and public policy.