Determinants of exploitation of innovative venture ideas : A study of nascent entrepreneurs in an advisory system

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Mälardalen University Press Dissertations No. 145

DETERMINANTS OF EXPLOITATION

OF INNOVATIVE VENTURE IDEAS

A STUDY OF NASCENT ENTREPRENEURS IN AN ADVISORY SYSTEM

Zarina Osmonalieva 2013

School of Business, Society and Engineering Mälardalen University Press Dissertations

No. 145

DETERMINANTS OF EXPLOITATION

OF INNOVATIVE VENTURE IDEAS

A STUDY OF NASCENT ENTREPRENEURS IN AN ADVISORY SYSTEM

Zarina Osmonalieva 2013

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DETERMINANTS OF EXPLOITATION OF INNOVATIVE VENTURE IDEAS

A STUDY OF NASCENT ENTREPRENEURS IN AN ADVISORY SYSTEM

Zarina Osmonalieva

Akademisk avhandling

som för avläggande av filosofie doktorsexamen i industriell ekonomi och organisation vid Akademin för ekonomi, samhälle och teknik kommer att offentligen försvaras måndagen den 9 december 2013, 10.00 i Pi, Högskoleplan 1, Mälardalens högskola, Västerås.

Fakultetsopponent: professor Tommy D. Andersson, Handelshögskolan, Göteborgs universitet

ISBN 978-91-7485-124-3 ISSN 1651-4238

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Zarina Osmonalieva

Akademin för ekonomi, samhälle och teknik Mälardalen University Press Dissertations

No. 145

Zarina Osmonalieva

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Abstract

This study contributes to nascent entrepreneurship research by investigating factors on the individual and opportunity levels of analysis that determine the exploitation of innovative venture ideas. As a result of the literature review three theoretical perspectives were chosen to organize the factors: human and social capital, entrepreneurial self-efficacy, and domain definition strategy. The analysis of the chosen factors is based on hypotheses formulated on the basis of the literature review concerning the impact of the factors on the performance of nascent entrepreneurs during the discovery process. Empirical data were collected from the survey of 409 nascent entrepreneurs who addressed a public advisory agency in Stockholm area.

Research findings show that among all factors, statistically significant predictors of exploitation of venture ideas are social capital in terms of the contact with counselors and number of ties with different actors, planning and marshaling self-efficacy, initial investment, tangibility and innovativeness of the future offerings. As for the direction of relationships, too many ties with different networks and higher planning self-efficacy influence exploitation in a negative way. Among variables related to domain definition strategy, entrepreneurs with innovative venture ideas based on services have higher probability of exploiting their ideas. Those who have made initial investment into the development of venture ideas and have a frequent contact with counselors are more likely to continue exploitation efforts. Of five dimensions of entrepreneurial self-efficacy, higher marshaling self-efficacy was shown to positively contribute to the exploitation process.

It is especially difficult during the early stages of entrepreneurial process to predict which venture ideas will survive, thus, nascent entrepreneurship assistance should encourage experimentation. Although it is difficult to make generalizations from the study about nascent entrepreneurs in the Stockholm area, it can be advised to encourage the development of new services and enhance the entrepreneurial potential of nascent entrepreneurs by developing their entrepreneurial efficacy, especially marshaling self-efficacy.

ISBN 978-91-7485-124-3 ISSN 1651-4238

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Sammanfattning på svenska

Denna studie handlar om personer som vänt sig till Innovation Stockholm för att få råd om hur de ska gå tillväga för att utveckla fröet till en affärsidé och starta ett företag, ofta involverande att patentera eller mönsterskydda fröet till denna affärsidé, och den fråga som ställs är vilka faktorer det är som bidrar till att dessa personer inte avbryter processen utan verkligen också utvecklar sina affärsidéer. Genom en litteraturstudie identifierades tre perspektiv på denna frågeställning - mänskligt och socialt kapital, upplevd egen förmåga, samt den tänkta marknaden och affärsmiljöns karakteristika – vars betydelse kunde formuleras som hypoteser. Dessa hypoteser prövades via en enkät besvarad av 409 entreprenörer som vänt sig till Innovation Stockholm.

Hypotesprövningen visar att de statistiskt säkerställda prediktorerna för att en affärsidé ska exploateras är socialt kapital i form av kontakter med rådgivare och antalet relationer till andra aktörer, hög upplevd förmåga att kunna planera och styra processen, gjorda investeringar, och hur konkret och innovativ den tänkta produkten upplevs vara. Dock kan även alltför många relationer med olika nätverk och alltför hög upplevd egen förmåga reducera chansen att affärsidén förverkligas. Vidare har entreprenörer som baserar sina affärsidéer på innovativa tjänstekoncept högre sannolikhet att förverkliga sina idéer. Ju mer en rådtagare har investerat i sin affärsidé och ju mer frekventa kontakter denne har med sin rådgivare, ju större är sannolikheten för att affärsidén kommer att förverkligas. Vad gäller upplevd egen förmåga visade sig upplevd förmåga att kunna styra processen vara av störst betydelse.

Det är svårt att tidigt i affärsutvecklingsprocessen förutse vilka idéer som kommer att överleva, varför entreprenörer i vardande bör ges möjlighet att experimentera. Även om det är svårt att med utgångspunkt från studien generalisera om entreprenörer i Stockholmsområdet, så visar studien att det kan vara klokt att försöka stärka potentiella entreprenörers tro på sin egen förmåga, speciellt förmågan att leda utvecklingen av sin egen affärsidé.

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Acknowledgements

As often mentioned in the entrepreneurship research, innovations are never created by one person only, it’s a collective endeavor. The same can be said about the dissertation. This work could not have been produced without contribution of different people, be it direct or indirect.

First of all, I would like to thank my supervisor professor Esbjörn Segelod for tireless reading of each draft of the manuscript and detailed comments. Esbjörn, I am also very grateful for your kindness, understanding and help during difficult times. Johan Linden, my secondary supervisor, joined the process later, but his contribution, especially to the statistics part, is enormous. I would love to extend my gratitude to Gary Jordan. Thank you, Gary, for emotional support and advice during the PhD process. I want to thank Lennart Bogg and Michaël Le Duc for their feedbacks and help as well.

This study has been made possible due to financing received from Jan Wallander and Tom Hedelius’ Foundation and Tore Browldh's Foundation. I would also like to thank the members of the Management and IT Research School for their interesting questions and suggestions about the earlier drafts of this thesis

Anneli Wiklund, Peter Ekman, and Pernilla Conley and counselors from Innovation Stockholm were very kind to provide necessary information about the organization and access to their clients.

I am grateful to my colleagues from the administration, Ewa Falkenö, Ann-Sofie Magnusson and Yvonne Arlestrand-Lundgren, for helping me with the paper work which often made me confused.

Laxmi, thank you for morning tea sessions and getaways to the nature! Angelina, tack så hemskt mycket för “svenska lektioner” och omtanke! I want to also mention my colleagues Ola Svanberg, Linda Höglund, Tobias Larsson, Peter Selegård, Cecilia Erixon, Peter Ekman, Charlotta Edlund, Jakob Edlund, Erik Hansen, Kin Andersson, and the rest of the chemistry-psychology group from Eskilstuna.

My friends, thank you for being there: Adrian, Martha, Rita, Anton, Gun, Mahgol, Shahab, Mikael, Tanya, Andrey and others.

I also would like to thank people who made my stay in UK enjoyable. I extend my gratitude to professor Jay Mitra for hosting me at the Essex Business School. Sujun and Joanna, thank you very much for your company and hospitality.

Lastly, I want to express my gratitude to my beloved mother Cholpon and brother Sagynbek for their care and support during these challenging years. October 2013, Southend-on-Sea, United Kingdom

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List of tables

Table 1 Risk and uncertainty situations ... 14

Table 2 The outcomes of the discovery process ... 19

Table 3 Views on support ... 30

Table 4 Domains of entrepreneurial knowledge and entrepreneurial know how ... 34

Table 5 Hypotheses and research questions ... 50

Table 6 The study’s sample ... 62

Table 7 The sample developmental process ... 62

Table 8 Categorical and continuous variables in non-response analysis . 64 Table 9 Results of chi square tests... 65

Table 10 Results of ANOVA tests ... 66

Table 11 The mean number of ties for three categories of respondents .... 67

Table 12 Comparison of independent variables in two studies ... 72

Table 13 The summary of control variables ... 75

Table 14 Outcomes of the discovery process (1) ... 76

Table 15 Outcomes of the discovery process (2) ... 77

Table 16 The results of the sensitivity analysis of dependent variables .... 80

Table 17 Human and social capital variables ... 86

Table 18 Means and standard deviations for items of perceived entrepreneurial self-efficacy scale ... 87

Table 19 Cronbach’s alpha and inter-item correlations and covariance .... 89

Table 20 Means and standard deviations for five domains of perceived entrepreneurial self-efficacy and total perceived entrepreneurial self-efficacy ... 90

Table 21 The reliability of newness to entrepreneurs scales ... 91

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Table 23 Variables of the human and social capital model ... 96

Table 24 Descriptive statistics of the human and social capital model (N=337) ... 96

Table 25 Correlation matrix of variables of human and social capital model (N=337) ... 98

Table 26 Results of logit: the human and social capital model ... 99

Table 27 Logit: Changes in Probabilities for expl2 for Model 4 ... 102

Table 28 Results of hypotheses testing... 102

Table 29 Variables of the perceived entrepreneurial self-efficacy model103 Table 30 Descriptive statistics of the perceived entrepreneurial self-efficacy model (N=365) ... 104

Table 31 Correlation matrix of variables of entrepreneurial self-efficacy model (N=365) ... 105

Table 32 Results of logit: entrepreneurial self-efficacy model ... 106

Table 33 Logit: Change in Predictions for expl2: Confidence intervals by delta method ... 108

Table 34 Logit: Changes in Probabilities for expl2 for three models ... 108

Table 36 Variables of the domain definition strategy model ... 109

Table 37 Descriptive statistics of the domain definition strategy model (N=296) ... 110

Table 38 Correlation matrix of variables of domain definition strategy model (N=296) ... 111

Table 39 Logit: Changes in Probabilities for expl2 (Model 2) ... 112

Table 40 Changes in Probabilities for expl2 (Model 3) ... 113

Table 41 Results of logit: domain definition strategy model ... 114

Table 43 Descriptive statistics of the integrated model (N=266) ... 117

Table 44 Results of logit: integrated model ... 119

Table 45 Logit: Changes in Probabilities for expl2 for the integrated model ... 121

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Table 47 Results of hypotheses testing... 129 Table 48 The literature review of antecedents of performance ... 172 Table 49 SNI industry code for new products or services ... 176 Table 50 Results of logit: entrepreneurial self-efficacy model (alternative

regression analysis without mean substitution) ... 177 Table 51 Results of logit: domain definition strategy (alternative regression analysis without mean substitution) ... 178

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List of figures

Figure 1 Human and social capital model ... 32

Figure 2 Perceived entrepreneurial self-efficacy model ... 40

Figure 3 Domain definition strategy model ... 48

Figure 4 Gender of respondents (N=409) ... 73

Figure 5 Age of respondents (N=401) ... 74

Figure 6 The length of contact with Innovation Stockholm (N=379) ... 75

Figure 7 Respondents having commercialized their products/services versus not commercialized products/services (n=409) ... 76

Figure 8 The number of meetings with Innovation Stockholm (N=404) . 85 Figure 9 The predicted probability of exploitation and planning entrepreneurial self-efficacy ... 123

Figure 10 The predicted probability of exploitation and marshaling entrepreneurial self-efficacy ... 124

Figure 11 The predicted probability of exploitation and planning entrepreneurial self-efficacy ... 125

Figure 12 The predicted probability of exploitation and marshaling entrepreneurial self-efficacy ... 126

Figure 13 The predicted probability of exploitation and planning entrepreneurial self-efficacy ... 127

Figure 14 The predicted probability of exploitation and marshaling self-efficacy ... 128

Figure 15 The amount of hours per week spent on venture idea development ... 175

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1 Introduction

Many actions are performed in the belief that they will bring about a desired outcome, but they actually produce outcomes that were neither intended nor wanted

(Bandura, A., “Self-Efficacy: The Exercise of Control”, 1997)

The general research question of this study is “What factors predict exploitation of venture ideas?” This chapter discusses the importance of developing entrepreneurial potential and studies about the factors which predict exploitation.

1.1 The importance of developing entrepreneurial

potential

Entrepreneurship and innovations are seen as engines of economic and social development. As entrepreneurship deals with the creation of hitherto unknown combinations, it is directed towards the unpredictable and unknowable future and therefore is associated with ignorance and uncertainty (McMullen & Shepherd, 2006; Schumpeter, 1934). Of all innovations, the creation of new products and services is associated with the highest levels of uncertainty and ignorance as they are new both to a market and a firm or an individual entrepreneur and hence require a new production routine and change in consumers’ preferences (Davidsson, 2004). Besides bringing changes to the industry and market levels, individuals and firms creating new products and services also create knowledge spillovers and technological change which can be commercialized by other actors (Audretsch, 2004). Therefore, due to the benefits of new goods and services for economic development and renewal, on the one hand, and uncertainty and ignorance faced by entrepreneurs, on the other hand, policy makers initiate assistance programs. It seems that for both entrepreneurs and states entrepreneurship support is about decreasing opportunity costs associated with introducing new goods and services. In the case of entrepreneurs, their setback is lack of time to determine whether their business ideas are likely to be successful (Carayannis & von Zedtwitz, 2005), while for states it is about

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creating jobs with less spending (Deakins, Graham, Sullivan, & Whittam, 1997).

Early entrepreneurship policies stressed the importance of new firm creation for economic development. When Birch (1981) found that between 1969 and 1976 about two thirds of all new jobs were created by small businesses, his findings were interpreted to mean that the creation of small businesses leads to more jobs, facilitation of regional development and industrial change as well as commercialization of innovations (Acs & Audretsch, 1990). Recently the attention has shifted from small businesses to nascent entrepreneurs, defined broadly as “people in the process of setting up a business” (Wagner, 2004; van Gelderen, Thurik, & Patel, 2011). This change in entrepreneurship policy has been initiated as a result of the findings which showed that opportunities were discovered and exploited not by firms, but by individuals: nascent intrapreneurs, enterprising individuals within existing organizations, and nascent entrepreneurs, independent entrepreneurs committing their own time and resources(Acs & Szerb, 2007; Wagner, 2004).

Nascent entrepreneurs introducing new products and services lack necessary business expertise due to uncertainty and complexity of the initial stages of the entrepreneurial process, so assistance is provided to help filling this gap with specialized knowledge, setting feasible goals, teaching best practices and mitigating poor processes (Brooks, 1986; Christman, McMullan, & Hall, 2005; Sherman, 1999). The alternative to support to entrepreneurs is self-learning, however, this type of learning might be overly time-consuming and unreliable, while entrepreneurs can learn faster if they cooperate with counselors who have business experience (Christman, et al., 2005).

Support to entrepreneurs addresses the areas of motivation, opportunity and skills and depending on the stage during the entrepreneurial process, it focuses at pre-startup, startup and early post-startup phases (Lundström & Stevenson, 2005). On the nascent or pre-startup stage, the main objective of entrepreneurship policy is to encourage more people in the population to become nascent entrepreneurs and move into the nascent stage of taking actions for starting a business (Lundström & Stevenson, 2005, p. 105).

But which entrepreneurs should take part in the assistance programs? Scholars and policy makers have different views on the selection of entrepreneurs into assistance programs. Scholars have traditionally been more skeptical about the effect of spending on “support to many” to promote economic development, while it has been assumed by some politicians that creating more businesses is unquestionably good for the economy (Curran, 2000; Shane, 2009; Storey, 1998). The latter argument has been used to increase the expenditure on small business support since the late 1970s, however, nowadays it has become more difficult to convince taxpayers to support such policies (Curran, 2000). Recent studies strongly criticize the

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policies aiming at creating more businesses arguing that encouraging more people to start businesses will not lead to job creation because people start their business in competitive industries with low entry barriers and high failure rates, thus contributing more to job destruction rather than job creation (Shane, 2009, p. 142). By supporting all, governments “spread peanut butter thin”, while supporting high-growth firms would generate more wealth, claims Shane. In order to overcome this problem, he proposes that governments should stop subsidizing many, but act as venture capitalists and choose the most promising, i.e. high-growth startups.

However, as research shows, the selection of promising entrepreneurs or firms is not an easy task. In the literature about incubators, the selection of clients is one of the performance dimensions of incubators (Hackett & Dilts, 2004). In this case incubators behave like “venture capitalists, when selecting emerging organizations (options) for admission to the incubator”. There are advantages and disadvantages of the above type of selection process. The first argument for selection is that incubators create value by helping weak-but-promising firms and encouraging rejected entrepreneurs to reconsider the feasibility of their business models (Hackett & Dilts, 2004) or in case of hopeless cases put aside the business idea, therefore, contributing to maintaining the healthy populations of organizations (Aldrich, 1999). In addition, the use of selection mechanisms can “induce positive business building behaviors” in potential entrepreneurs and encourage them to prepare themselves adequately prior to admission. But, according to Storey, 17 out of 20 companies that venture capitalists choose to invest in, fail, implying that public agencies would most probably show similar results (2009).

Some scholars claim that due to the inability of policy makers to choose the most promising opportunities or individuals, entrepreneurship policy should also aim at experimentation (Carlsson, 2005; Davidsson, 2005, 2008). Davidsson suggests increasing the number of experiments with startups, because such programs can help to enhance entrepreneurial potential by developing entrepreneurs’ abilities to evaluate venture ideas and external environments and based on this evaluation choose a systematic and planned or a more flexible approach (Davidsson, 2005, p. 24).

1.2 The relevance of studying predictors of

exploitation of discovered opportunities

Despite different opinions about the rationales for selection of entrepreneurs, both researchers and policy makers acknowledge the importance of supporting the efforts of nascent entrepreneurs and designing entrepreneurship policies which cater to the needs of various groups of

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entrepreneurs and increase the probability of their success (Acs & Szerb, 2007).

The entrepreneurial process involves discovery, concerned with the conception of a business idea or concept, and exploitation of the discovered opportunities, that then encompasses behavioral activities such as networking, business planning, etc. (Aldrich, 1999; Davidsson, 2008). Discovery of an opportunity, the first and foremost outcome of the entrepreneurial process, is conceptualized as a venture idea, “a conjecture about unsatisfied needs and productive possibilities” (Davidsson, 2004). Because entrepreneurs act upon a conjecture rather than a conviction about the success of a venture idea, there are various possibilities of how the entrepreneurial process may unfold: by initiating actions and behaviors which are aimed at the realization of a venture idea and creation of a new business with regular sales or by termination of these activities (Davidsson, 2008). Therefore, despite that discovery of an entrepreneurial opportunity is the indicator of success, not all discovered opportunities will be exploited (Davidsson, 2008; Sarasvathy, Dew, Velamuri, & Venkataraman, 2005; Shane & Venkataraman, 2000).

Discovery of venture ideas and willingness to exploit them can be explained by a number of factors related to the intersection of an individual and an opportunity, according to Shane and Venkataraman (2000). This nexus is especially relevant during nascent stages of entrepreneurship when the firm is not yet existent. On the individual level of analysis a multitude of factors can affect the continuation of the entrepreneurial endeavor. Among them are socio-demographic variables such as age, parenting, membership in minorities, human and social capital, education and work experience, job satisfaction and salary at previous workplace (Dobrev & Barnett, 2005), and availability of initial financial capital, perception of risk, optimism, tolerance to ambiguity (Shane & Venkataraman, 2000), self-efficacy (Chen, Greene, & Crick, 1998; Krueger, 2000) and outsider assistance (Chrisman & McMullan, 2004). As for particular features of opportunities which can impact the exploitation, researchers identify the higher expected value (Shane & Venkataraman, 2000) and innovativeness of opportunities (Amason, Shrader, & Tompson, 2006; Isaksen, 2006; Samuelsson, 2004). Scholars propose that variation in opportunities can in fact have more influence on the continuation of the exploitation effort than characteristics of individuals, however this topic has not been widely researched in the entrepreneurship field (Ireland & Webb, 2007; Samuelsson, 2004; Shane & Venkataraman, 2000).

Although entrepreneurship is becoming a mature field, there is little knowledge about nascent stages of the entrepreneurial process, especially about the factors leading to exploitation of opportunities, and how to assist nascent entrepreneurs (Chandler & Hanks, 1993; Davidsson & Honig, 2003; Gordon, 2012; Larsson & Sölvell, 2006; van Gelderen, Thurik, & Bosma,

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2005). The knowledge about factors leading to exploitation can benefit not only policy makers, but also nascent entrepreneurs because they would learn to better evaluate future prospects and potential problems of an entrepreneurship career (van Gelderen, et al., 2005).

1.3 Theoretical approach, research question and

subjects of the study

This study employs the variance approach to investigate the factors influencing the outcomes of the discovery process. The variance approach enables researchers answer “what” questions in contrast to the process approach, which sheds light on “how” questions (Van de Ven & Engleman, 2004). Due to the lack of entrepreneurship theory explaining causal relationships and the versatile nature of the entrepreneurship phenomenon, researchers apply theories from other social sciences or create conceptual frameworks consisting of elements of different theories to guide data collection and analysis (Davidsson, 2004). A plethora of potential theories creates a challenge when choosing the most suitable framework for this study; however, when guided by the general theory of entrepreneurship where the individual-opportunity nexus is seen as the cornerstone of the entrepreneurship phenomenon (Shane, 2003), the creation of the conceptual framework becomes an easier task. As the main interest of this study is investigation of predictors of performance, i.e., exploitation, on the individual level of analysis performance can be influenced by individuals’ investments into their education and training (Davidsson & Honig, 2003; Ucbasaran, Westhead, & Wright, 2008), social capital in terms of exposure to different networks of professionals (Christman, et al., 2005; Klofsten, 2005) as well as their beliefs in their capabilities (Chen, et al., 1998; Krueger, 1993). On the opportunity level of analysis elements of the domain definition strategy, involving business, market aspects and perceived uncertainty, were included into the framework (Bourgeois, 1980; Isaksen, 2006). These three perspectives: human and social capital, perceived entrepreneurial self-efficacy and domain definition strategy, and reasons behind choosing these perspectives as a framework are presented in Chapter 3 in detail.

As the process of setting up a business happens initially in the minds of entrepreneurs, one of the problems researchers encounter when studying nascent entrepreneurship is of empirical character – it is difficult to identify nascent entrepreneurs as their actions are not disclosed until they reach feasible results such as starting a firm (Davidsson, 2004; Davidsson & Honig, 2003; van Gelderen, et al., 2005). To tackle this empirical problem two projects The Panel Study of Entrepreneurial Dynamics (PSED) and

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Global Entrepreneurship Monitor (GEM) were launched in late 1990s in several countries (Parker, 2009). Both studies aimed at randomly screening samples of nascent entrepreneurs among the general population. One large-scale panel research study about nascent entrepreneurship in Sweden was conducted by Samuelsson (2004), which was based on the analysis of the data from the Swedish PSED study conducted in 1998–2000. The random sample comprised 49 979 individuals at the age between 16 and 70, of which 30 427 were individually screened. Of these 622, or 2% of those initially screened, identified themselves as nascent entrepreneurs and consented to take part in the study. Samuelsson’s main contribution was that he empirically verified the existence of reproducing and innovative opportunities (88 versus 12 %) and showed that the venturing processes for innovative and reproducing opportunities differ.

The organization where respondents of this study were sampled is Innovation Stockholm1_{, one of the support agencies in the City of} Stockholm. Innovation Stockholm from initially focusing on the support of entrepreneurs with patentable venture ideas has during the last few years started providing support to entrepreneurs with a wide range of venture ideas. The choice of this empirical setting is due to two main reasons. Firstly, it provided a solution to the empirical problem of sampling nascent entrepreneurs. As Davidsson and Honig point out, entrepreneurial discovery is an infrequent phenomenon and thus it is costly and difficult to capture (2003). Sampling nascent entrepreneurs at support agencies is one of few methods of collecting data about nascent entrepreneurship, according to Davidsson (2004). Secondly, the empirical setting offered an opportunity to further knowledge about variation in opportunities, which, according to some scholars might have a larger impact on the exploitation than characteristics of nascent entrepreneurs (Ireland & Webb, 2007; Samuelsson, 2004; Shane & Venkataraman, 2000). This particular approach enables the study of nascent entrepreneurs driving innovative business ventures as the majority of venture ideas developed with the help of Innovation Stockholm are associated with acquiring intellectual property rights.

The subjects of this study are nascent entrepreneurs developing their business ideas under the guidance of one and same support organization in the City of Stockholm, therefore, in contrast to studies on the national level, this study focuses on nascent entrepreneurship in the capital of Sweden. Using one of the actors in the public advisory service in the City of Stockholm as an empirical setting, we focus on studying the factors on the individual and opportunity levels leading to the emergence of new products and services under the guidance of counselors. Accordingly, the general research question of this study is:

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What factors on the individual and opportunity levels of analysis

predict exploitation of venture ideas under the guidance of

counselors?

This study’s main objective is to enhance knowledge about nascent stages of entrepreneurship, particularly about factors on the individual and opportunity levels of analysis impacting the exploitation versus discontinuation of development of venture ideas and how these factors are related to these two outcomes of the discovery process.

Studies about the predictors of the entrepreneurial process can be contingent or configuration studies (Harms, Kraus, & Reschke, 2007). Contingent studies investigate antecedents of performance on a single domain whilst configuration studies consider relationship of performance with domains on multiple levels (Harms, et al., 2007). In the frameworks of this research we employed both contingent and configuration approaches as the propensity to exploit an opportunity depends not only on the characteristics of individuals or opportunities, but also on the simultaneous effect of these two levels of analysis on the outcome variable (Shane, 2003). Contingent and configuration approaches to studying outcomes of the discovery process are discussed in Chapters 5 and 6.

To find out what factors are related to the performance literature review was done. It was based on the review of research on predictors of discovery process outcomes. Based on this summary we identified three areas: human and social capital, entrepreneurial self-efficacy, and domain definition strategy, which are pertinent to the discovery process.

To do this we investigate:

 The impact of human and social capital as well as specific entrepreneurial self-efficacy on exploitation

 The impact of features of entrepreneurial opportunities on exploitation  The simultaneous impact of two levels of analysis on exploitation

1.3.1 Key concepts

Different perspectives tend to define their concepts and terms differently, which becomes an obstacle when applying an eclectic approach. We therefore need to define the key terms used in this study.

Entrepreneur. In this study we have chosen to adhere to McMullen and Shepherd (2006, p. 132), who state that “to be an entrepreneur is to act on the possibility that one has identified an opportunity worth pursuing”. Thus, in the frameworks of this study we defined individuals who take actions towards identified opportunities as entrepreneurs.

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Venture idea. A venture idea refers to the conjecture about unsatisfied needs and productive possibilities upon which the entrepreneur acts. Venture ideas have a changing nature.

Discovery process. An initial conception and further development of an initial idea into a business concept (Davidsson, 2008).

Exploitation of entrepreneurial opportunities. The exploitation process is defined in terms of entrepreneurial actions or behaviors, such as resource acquisition and coordination and market making, which are aimed at the realization of a venture idea (Davidsson, 2008).

Perceived entrepreneurial self-efficacy. Entrepreneurial self-efficacy measures a “person’s belief in their ability to successfully launch an entrepreneurial venture” (McGee, Peterson, Mueller, & Sequeira, 2009) and is measured along five dimensions: searching, planning, marshaling, implementing people and implementing finances.

Entrepreneurship support. The role of entrepreneurship support is seen as helping individuals to go over ignorance threshold, thus, enhancing relatedness of a venture idea and dimensions necessary for its exploitation by discussing the venture idea with entrepreneurs, giving information about possible networking opportunities and enabling development of entrepreneurial self-efficacy.

1.4 The outline of the dissertation

Chapter Two discusses theoretical foundations of entrepreneurship literature. First of all, we present varying definitions of entrepreneurship and ontological and epistemological issues related to the study of entrepreneurial opportunities. Conceptual and empirical issues regarding studies of the entrepreneurial discovery process are discussed. Lastly, the overview of studies about outcomes of the discovery process is presented.

Chapter Three presents an overview of previous research about factors which influence performance during the discovery process. The review is based on such measures of performance as discovery of opportunities, intention to form a venture, and formation of a venture. The chapter discusses the choice of three different perspectives related to entrepreneurial performance: human and social capital, perceived entrepreneurial self-efficacy, and domain definition strategy. There are four research models: these perspectives and the integrated model which contains all variables from the three research models. Overall, twenty three hypotheses based on the empirical studies are formulated in each research model. These propositions are later tested and results are described in Chapter 6.

Chapter Four describes the process of the empirical study. First, ontological and epistemological problems pertaining to research in social

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sciences particularly in entrepreneurship research are presented. This discussion helps resolve the practical issues about the choice of appropriate research designs for the research questions of interest. The section on research design contains a discussion about the sample, chosen methods of data collection, as well as units and levels of analysis. The final section presents binary logit as the statistical method of data analysis.

Chapter Five is devoted to the operationalization of studied variables and descriptive statistics. The presentation starts with data concerning the dependent variable, then independent variables identified in earlier presented research models are described. This chapter also presents descriptive statistics related to dependent and independent variables.

Chapter Six presents the analysis of twenty three hypotheses formulated in Chapter 3. Firstly, key assumptions for running binary logit and the discussion about fulfillment of these assumptions are presented. Secondly, the hypotheses are tested in each research model.

Chapter Seven discusses the findings of the empirical study. First results of each model are presented separately, and then the results of analysis of the integrated model are discussed. The chapter concludes with a discussion of practical implications, limitations of the research as well as directions for future research.

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2 Theoretical perspectives

In this chapter theoretical foundations of the entrepreneurship literature are discussed. First of all, varying definitions of entrepreneurship and ontological as well as epistemological issues related to the study of entrepreneurial opportunities are presented. Conceptual and empirical issues regarding studies of the entrepreneurial discovery process are also discussed.

2.1 Entrepreneurship as the situation of a new offer

Entrepreneurship is considered to be a complex phenomenon not only due to the lack of clear definitions, but more importantly because entrepreneurship, characterized by creation of new combinations, has a multi-faceted nature involving such elements as opportunities, individuals and teams, networks, modes of organizing and the environment (Bhave, 1994; Busenitz et al., 2003; Ireland & Webb, 2007; Penrose, 1959). This versatile nature of the entrepreneurship phenomenon has led to various conceptualizations of entrepreneurship. For example, early entrepreneurship studies aimed at investigating traits of successful entrepreneurs (Gartner, 2001). In the 1980s Birch’s studies showed that new firms were sources of innovations, job creation and industrial change and due to the importance of new firms for economic development entrepreneurship researchers turned their attention to new firms and defined entrepreneurship in terms of the creation of organizations (Birch, 1981; Gartner, 1990). Therefore, studies of entrepreneurship have predominantly been conducted with the assumption that the firm already exists and hence performance was measured in terms of survival, growth and profitability of firms.

However, when the firm is yet to come to existence, entrepreneurship involves situations on the intersection of individuals and opportunities (Sarasvathy, 1999; Shane & Venkataraman, 2000). Shane and Venkataraman (2000) propose that entrepreneurship research should consider opportunity and individual as central concepts because the definitions of entrepreneurship in terms of individuals creating firms have neglected the variation in opportunities and thus do not convey the entrepreneurship phenomenon in its entirety. Therefore, it has been suggested that entrepreneurship research should deal not only with the investigation of

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characteristics of individuals and emergence of new organizations, but also with emergence of new goods and services (Davidsson, 2008; Shane & Venkataraman, 2000) as market disequilibria is caused by the introduction of new combinations, according to Schumpeter (1934).

The situation of a new offer occurs when no other supplier has offered the same product or service to the same market or a new market is created due to introduction of a new product or service (Davidsson, 2004). It differs from other situations, because new offerings are distinguished by the creation of new means-ends frameworks leading either to entrepreneurial profit or entrepreneurial loss (Eckhardt & Shane, 2003; Shane & Venkataraman, 2000).

2.2 The opportunity-individual nexus

As mentioned above, in the case of nascent entrepreneurship the factors of interest lie in the intersection of individuals and opportunities. This chapter provides a theoretical background related to the opportunity-individual nexus.

2.2.1 Opportunity variation

The growing interest towards the opportunity as the central concept in entrepreneurship research has led to the development of different perspectives on ontology and epistemology of opportunities.

Shane and Venkatamaran write that entrepreneurial opportunities are “those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production” (2000, p. 218). In contrast to opportunities where the goal is enhancing the efficiency of existing products and services in firms, entrepreneurial opportunities create new means-ends frameworks (Busenitz, et al., 2003).

The process of creation of new means-ends framework raises questions as per how opportunities are perceived and discovered or created by individuals. If previously studies in the entrepreneurship area as well as business administration were mostly conducted in a so-called positivist tradition and the discussion of epistemological and ontological issues has been somewhat non-existent, in recent studies researchers have raised questions about the nature of entrepreneurial opportunities and how to study them (Alvarez & Barney, 2010; McMullen & Shepherd, 2006). Two polarities, objectivist versus subjectivist, create the main discussion on ontology and epistemology of entrepreneurial opportunities.

The objectivist view on opportunities, which is often referred to as the discovery view, suggests that opportunities are objectively real and exist

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independently of human perception and thus are available for everybody’s enactment (Alvarez & Barney, 2010). Discovery opportunities are described as being exogenous, formed by “changes in technology, changes in consumer preferences, changes in demographics, and so forth” (Shane, 2000). As these opportunities are objective and information about them is available, entrepreneurs can collect information about how to exploit them. This is why entrepreneurship according to the discovery view is defined as a scholarly domain which should examine “how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited” (Shane & Venkataraman, 2000).

According to the subjectivist view, also referred to as the creation view, opportunities are created in entrepreneurs’ minds and do not exist independently of perceptions and beliefs of people. Creation opportunities in contrast to discovery opportunities are endogenous as they are formed by actions of entrepreneurs; they do not emerge from competitive imperfections in industries or markets. According to the creation view, entrepreneurial opportunities are new ideas, beliefs, and actions that enable the creation of future goods or services in the absence of current markets for them (Sarasvathy, et al., 2005). It is important to note that in these situations opportunities are perceived by actors and they are meaningless until they are enacted upon. Entrepreneurs, according to this view, do not possess adequate knowledge about the nature of opportunities they are creating (Alvarez & Barney, 2010).

2.2.1.1 Objectivist-subjectivist view

There is also a view which can be placed in between these two, the so-called objectivist-subjectivist view, according to which opportunities exist objectively and those who have better perceptual abilities will be the first to recognize them due to differences in perception of information about supply and demand (Davidsson, 2008; Samuelsson, 2004). However, the fact that they recognize opportunities does not mean that they would succeed during the exploitation phase (Davidsson, 2008).

In order to clarify ontological and epistemological issues in entrepreneurship studies, Davidsson (2008) proposes to clarify the term “opportunity”. According to him, it has a positive connotation, which creates confusion among researchers, and suggests distinguishing opportunities and venture ideas. Opportunities, according to Davidsson, exist independently from actors in the form of technological possibilities, knowledge, needs and purchasing power, while venture ideas are created by individuals and if they were in fact opportunities can be known only if the outcome was successful (2008, p. 37). Venture ideas refer to “the conjecture about unsatisfied needs and productive possibilities upon which the entrepreneur (s) act” (Davidsson, 2004, p. 121). Similarly, Samuelsson suggests that opportunities

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can be defined as venture specific information about a perceived supply and demand situation (2004, p. 52).

Such definitions imply that opportunities can differ in terms of their source, how specific they are and how they develop over time. For instance, when it comes to the question about how venture ideas come about, at least two situations are possible. In the first situation entrepreneurs make a decision to start a business prior to the recognition of opportunities, which means that they would generally choose one idea out of several available. In the second case entrepreneurs do not have an intention to start a business, but due to experiencing problems in different spheres of their lives and finding solutions to these problems, they come up with, for example, a better solution for an existing product whose function can be improved. These two situations are referred to as externally versus internally stimulated opportunities and involve varying processes of development (Bhave, 1994). However, in the later stages, both processes, according to Davidsson (2004), involve the refinement of the original idea to a more developed business concept, commitment to its realization, and actions towards its realization. Thus, the path of entrepreneurs to the business concept is always idiosyncratic. Entrepreneurs might start from the decision to become an entrepreneur and then search for opportunities worth pursuing or develop better solutions to self-experienced problems and then decide to exploit this opportunity. Secondly, the definition in terms of venture ideas enables differentiation of imitative or innovative venture ideas (Davidsson, 2004, p. 122). Thirdly, it suggests that venture ideas change over time, i.e. initially they are unformed and become developed over time (Ardichvili, Cardozo, & Ray, 2003; Davidsson, 2008; Klofsten, 2005). For instance, Davidsson writes that entrepreneurs come up with venture ideas, which are “not formed as a complete and unchangeable entity at a sudden flash of insight”, instead they are based on more or less explicit perceptions of external conditions and can become more elaborate over time (2008, pp. 38-39). Therefore, when it comes to the content of venture ideas Davidsson suggests that due to heterogeneous and the emergent nature of venture ideas, it is problematic to specify the components of a venture idea (2004, p. 121).

Characteristics of individuals have been widely researched in entrepreneurship research from different perspectives, such as need theory (McLelland, 1961), social learning theory (Chen, et al., 1998), cognitive psychology (Krueger, 2000), human capital (Davidsson & Honig, 2003). By contrast features of opportunities have been considered only in few studies (Amason, et al., 2006; Samuelsson, 2004). This is despite the agreement that the opportunity variance can play an important role for further developments. For instance, researchers argue that the variation in the quality of opportunities can be crucial for decisions to exploit discovered opportunities (Shane & Venkataraman, 2000) as well as influence

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performance of new firms (Ardichvili, et al., 2003; Davidsson, 2008; Shane & Venkataraman, 2000).

2.2.2 The nature of the entrepreneurial action

The second part of the nexus is the entrepreneur whose actions are directed towards an unknowable future. These actions are based either on more willingness to bear uncertainty or on lower perceived uncertainty due to possessing better information than others. The entrepreneurial action is shaped by uncertainty about the future prospects and ignorance stemming from unavailable information about the outcomes of one’s actions.

2.2.2.1 Uncertainty, risk and ignorance

New combinations do not just occur by themselves, but are created by enterprising individuals (Schumpeter, 1934). The cornerstone of this entrepreneurial action designing new means-ends relationships is uncertainty as this action is always directed towards an unknowable future (McMullen & Shepherd, 2006). Scholars usually distinguish risk from uncertainty situations (Casson, 2005). These two different concepts have been central to entrepreneurship theory (see Table 1).

Table 1 Risk and uncertainty situations

Risk Uncertainty Authors

Objective Subjective Casson, 2005

Knight, 1921 Outcomes are possible to

calculate Future distributions are unknown Casson, 2005 Knight, 1921

Actions based on

knowledge Actions based on opinion Casson, 2005 Knight, 1921

Causation logic Effectuation logic Sarasvathy, 1999

Actions are based on

ends Actions are based on means Sarasvathy, 1999

According to Casson (2005), risk is understood as an objective phenomenon and uncertainty as subjective. In situations of risk it is possible to calculate the potential outcomes, because the options available for the enactment are known beforehand. Opportunities that bring optimizing change to a given means-ends framework involve risk and are referred to as reproducing (Samuelsson, 2004). Innovative opportunities involve creative change, i.e., they alter given supply and demand and lead to new products or services. Such opportunities are associated with situations of uncertainty, whose future distributions are unknown, and as a result entrepreneurs’ actions are based on opinion rather than knowledge (Coase, 1937; McMullen & Shepherd, 2006; Sarasvathy, et al., 2005).

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McMullen and Shepherd in their review about entrepreneurial action propose to consider entrepreneurs as individuals who fulfill the economic or organizational function rather than personalities with particular traits such as risk propensity or innovativeness (2006, p. 134). In their conceptualization of the entrepreneurial action they suggest distinguishing the entrepreneurial action as a consequence of a less perceived uncertainty from the entrepreneurial action driven by more willingness to bear uncertainty. These two are distinct in that the first refers to possession of knowledge necessary for the entrepreneurial action, while the second is related to the motivational sphere (McMullen & Shepherd, 2006). However, it is important to bear in mind that they do not comprise two different typologies of actions, but are two composites of the entrepreneurial action, which is based on belief-desire relationships, where a belief plays the function of knowledge (what to do) and a desire is the function of motivation (why to do) (2006).

2.3 Studying nascent entrepreneurship

The literature review has shown that studying the nascent stage of the entrepreneurial process is not a straightforward task. We see that despite the observation that entrepreneurship is gradually becoming a mature field of inquiry and considerable effort has been put for studying, for example, traits of successful entrepreneurs and performance of firms, early stages of entrepreneurship remain an overlooked area (Davidsson & Honig, 2003; Lundström & Stevenson, 2005; Norrman, 2008; van Gelderen, et al., 2005).

The major explanations for underdeveloped research about nascent entrepreneurship are of empirical and conceptual character. Firstly, it is problematic to investigate early stages of the entrepreneurial process because of empirical issues. As nascent entrepreneurs do not appear in governmental registers in contrast to small business owners, it is difficult to capture their activities (Davidsson, 2004; Davidsson & Honig, 2003; van Gelderen, et al., 2005). Secondly, there is a variation in conceptualization of the early entrepreneurial stages and the process (Ireland & Webb, 2007). One of the reasons for conceptual variance is that entrepreneurship scholars have been borrowing models from different disciplines ranging from psychology to Austrian economics (Ardichvili, et al., 2003; Ireland & Webb, 2007).

Another explanation is that conceptualizations of early phases of the entrepreneurial process are dependent on the unit of analysis. When the firm is the main unit of analysis, the initial phase is referred to as a preparation stage and is called “pre-startup” (Atherton, 2007; Liao & Gartner, 2007; van Gelderen, et al., 2005) or conception, which is followed by gestation, infancy and adolescence of firms (Aldrich & Martinez, 2007). A similar definition of the early stage entrepreneurship is given by Sarasvathy (1999).

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She refers to the pre-startup as pre-firm whose main function is to transform an idea into a firm (p. 4).

If we look at the opportunity-based theorizing in the entrepreneurship field, the entrepreneurial process can be understood from either the discovery or the creation perspectives. These two views employ different perspectives on how opportunities develop and use various vocabularies when it comes to describing the process. For example, as regards the discovery view, the entrepreneurial process encompasses opportunity recognition, opportunity evaluation and opportunity development (Ardichvili, et al., 2003; Ucbasaran, et al., 2008) as well as opportunity discovery and exploitation (Davidsson, 2008; Shane & Venkataraman, 2000). The opportunity development process refers to the process of identification of a market need or underemployed resources, discovery of the fit between this need and necessary resources, and creation of a fit between the need and those resources in the form of a business concept (Ardichvili, et al., 2003, p. 110). The first stage, identification or recognition of opportunities, has been widely researched with the aim to identify the “ideal types” of entrepreneurs, which are usually conceptualized in the discovery view as possessing alertness to entrepreneurial opportunities (Ardichvili, et al., 2003).

Another similar perspective on the entrepreneurial process refers to the processes of discovery and exploitation of opportunities (Davidsson, 2008; Shane & Venkataraman, 2000). According to Davidsson (2008), entrepreneurial process does not necessarily culminate in the creation of a new up-and-running business, but might end when entrepreneurs decide to discontinue their activities prior to starting a business. His definition suggests that the entrepreneurial process includes cognitive and behavioral activities from the initial conception of a business idea or first behavior towards the realization of a new business activity until the termination of the process or the creation of a new business with regular sales (Davidsson, 2008, p. 76). As mentioned, the entrepreneurial process can be divided into discovery and exploitation processes. The discovery process is characterized by conception and development of a venture idea into a business concept (Davidsson, 2008, p. 39). During this process entrepreneurs develop and crystallize venture ideas and elaborate upon value creation for the customer and appropriation of value by business (Davidsson, 2008). As mentioned earlier in section 2.2.1 about opportunities, venture ideas have an emergent nature and therefore it is difficult to specify components and features of venture ideas especially at early stages of entrepreneurship, which in turn is characterized by the lack of information about alternatives (Larsson & Sölvell, 2006, p. 343).

The exploitation process is defined in terms of entrepreneurial actions or behaviors aimed at the realization of a venture idea, such as resource acquisition and coordination and market creation (Davidsson, 2008, p. 39).

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As discussed earlier, the distinction between discovery and exploitation processes is nominal because they are not always linear. But nonetheless, it is necessary to distinguish discovery from exploitation as it is generally admitted that not all discovered opportunities are exploited (Davidsson, 2008; Shane & Venkataraman, 2000). On the individual level of analysis, the discrepancy between the discovery and exploitation is explained by the difference between the ability to discover opportunities and the ability to execute a new venture, which is driven by motivation, abilities to mobilize resources and control the new organization (Aldrich & Martinez, 2007; Dahlqvist & Wiklund, 2012). Therefore, attributes of entrepreneurs which lead to the decision to exploit an opportunity do not necessarily lead to success, i.e., further performance (Shane & Venkataraman, 2000, p. 224). However, it is important to note that discontinuation of the entrepreneurial process is not only determined by the characteristics of individuals, but by the features of opportunities as well. It has been shown in entrepreneurship studies that the entrepreneurial process progresses differently depending on venture types (Bhave, 1994; Samuelsson, 2004; Sarasvathy Saras, 2004).

In general, neither discovery nor exploitation necessarily lead to attainment of profits as both processes are changeable and the discovery process is never deterministic, but iterative, during which entrepreneurs conduct evaluations, which might in their turn lead to abandoning recognized opportunities and to the recognition of new ones (Ardichvili, et al., 2003; Davidsson, 2004). Therefore, it can be concluded that the discovery process is a rather unpredictable process with varying outcomes.

2.4 The outcomes of the discovery process

Previous studies about entrepreneurship, as mentioned, have focused on firms rather than opportunities, and as a result performance and outcome variables in entrepreneurship research are generally referred to as the performance of new ventures or new firms (Brush, Manolova, & Edelman, 2008; Davidsson, 2008). But how do one study performance when the firm is non-existent yet?

Davidsson (2008, p. 156) distinguishes entrepreneurial and business performance, where the former is measured in terms of actions towards the creation of a new business activity and latter in terms of firm or venture profitability. The review of literature shows that there are fewer studies about actions toward creation of business than about venture profitability and growth. For instance, in their review Brush et al. (2008) write that fifty percent of entrepreneurship studies concentrated on dependent variables related to firm performance, while twenty six percent – on individual level dependent variables. Researchers suggest that traditional outcome variables

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used in studies of firms, such as sales, profitability or firm value are not applicable in studies about emerging ventures (Chandler & Hanks, 1993; Samuelsson, 2004, p. 237; Wiklund, 1998) as for instance, growth rates of emerging firms are often inconsistent and erroneous which produce outliers distorting the statistical analysis (Chandler & Hanks, 1993, p. 393).

Traditionally the inherent assumption of the entrepreneurship research has been wealth creation (Cohen, Smith, & Mitchell, 2008). But it is suggested that value creation strategies might be more complex including economic, environmental and social dimensions (Cohen, et al., 2008, p. 108). For instance, growth is considered to be an indicator of success, however, managers might have different expectations about growth or other than growth objectives (Chandler & Hanks, 1993; Davidsson, 2008, p. 196). Findings of Chandler and Hanks (1993) showed that founders might have different expectations about the growth, from a goal of fast growth to unwillingness to grow. Referring to his own dissertation and joint projects, Davidsson (2008) describes findings from the Swedish data which show that the concern for employee well-being is more important for managers than growth.

Therefore, scholars call for reconsidering the value creation in entrepreneurship research, arguing that traditionally used financial measures limit our understanding of entrepreneurial performance (Brush, et al., 2008; Cohen, et al., 2008; A. Cooper, 1993; Davidsson, 2008; Murphy, Trailer, & Hill, 1996). Brush et al. propose that performance might also include subjective dimensions such as personal expectations, aspirations, skills and decisions (2008, p. 262). According to Davidsson (2008) and Murphy (1996, p. 44), different types of outcomes in entrepreneurship can in general refer to financial and indirect outcomes such as satisfaction, learning, and imitation.

As mentioned, entrepreneurial performance is of a multidimensional character. Performance indicators can be chosen depending on various factors such as the unit of analysis and the stage in the entrepreneurial process. Because early stages of entrepreneurship can generally be characterized by the lack of a clear venture idea and of information about other alternatives, studies involving traditionally used measures of performance might show an erroneous picture of development (Larsson & Sölvell, 2006, p. 343; Samuelsson, 2004), and more importantly such performance measures are more likely to be missing.

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Table 2 The outcomes of the discovery process

Performance Measures Authors

Intention to start a business The probability of starting a

business in the next five years

Krueger, 2000

Opportunity recognition The number of opportunities

recognized Ucbasaran, et al., 2008

Status of ventures ”Abandoned”, ”Still trying”,

”Started a business” Carter, Gartner, & Reynolds, 1996;

van Gelderen, et al., 2005 Entrepreneurial engagement Intention to start a firm and

actual start-up activity Hessels, Grilo, Thurik, & van der Zwan, 2009

Table 2 shows performance measures during early stages of entrepreneurship used in previous research. As it can be seen, an intention to start a business is seen as a performance measure. Such studies were based on the samples of individuals who have not yet started entrepreneurial activity (Davidsson & Honig, 2003). Intentions are used as a performance measure because research in cognitive psychology has shown that there is a strong link between intentions and subsequent behavior (Krueger, Reilly, & Carsrud, 2000).

Another measure of performance during early stages of entrepreneurship is opportunity discovery or opportunity recognition. According to the discovery view, the fact that the opportunity is recognized or identified is a type of performance measure as the individual who has done that has some special features which differentiate him or her from others (Ucbasaran, et al., 2008). The discovery of opportunity or opportunity recognition in entrepreneurship studies was measured by the number of opportunities identified (Ucbasaran, et al., 2008). However, it is suggested that not all recognized opportunities are pursued, and opportunity discovery, even though signaling about some type of entrepreneurial ability, is not necessarily followed by further actions (Davidsson, 2008; Sarasvathy, et al., 2005; Shane & Venkataraman, 2000).

Another way of measuring the outcome of the discovery process is making progress in the startup process (Davidsson, 2006). It has been measured in terms of the number of gestation activities or self-reported status of the venture such as “abandoned”, “dormant”, “still trying”, “up and running” or a creation of a binary variable out of these (Carter, Gartner, & Reynolds, 1996; Davidsson, 2006; Gimeno, Folta, Cooper, & Woo, 1997; van Gelderen, et al., 2005). Carter et al. (1996) investigated activities of entrepreneurs and outcome statuses such as “started a business”, “gave up” and “still trying”. They investigated the differences between these three groups and found that the groups “abandoned” and “up and running” were more similar and differed from the group of “still trying”. Few

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entrepreneurship studies investigated the differences between continuation of exploitation efforts and discontinuation of such (van Gelderen, et al., 2005) due to difficulties with sampling nascent entrepreneurs, while this type of research can help gain knowledge about how to assist nascent entrepreneurs move to the entrepreneurship career with least problems. At the same time, usage of such labels as “success” and “failure” to the above outcomes is rather problematic, because abandoned cases might be regarded as experiments finished at reasonable costs and entrepreneurs who continue their efforts despite negative information they get from environment, or “escalation of commitment”, actually spend more resources in the absence of a viable opportunity, according to Davidsson (2006).

Determinants of exploitation of innovative venture ideas : A study of nascent entrepreneurs in an advisory system

DETERMINANTS OF EXPLOITATION

OF INNOVATIVE VENTURE IDEAS

DETERMINANTS OF EXPLOITATION

OF INNOVATIVE VENTURE IDEAS

Sammanfattning på svenska

Acknowledgements

Table of contents

List of tables

List of figures

1 Introduction

(Bandura, A., “Self-Efficacy: The Exercise of Control”, 1997)

1.1 The importance of developing entrepreneurial

potential

1.2 The relevance of studying predictors of

exploitation of discovered opportunities

1.3 Theoretical approach, research question and

subjects of the study

What factors on the individual and opportunity levels of analysis

predict exploitation of venture ideas under the guidance of

counselors?

1.3.1 Key concepts

1.4 The outline of the dissertation

2 Theoretical perspectives

2.1 Entrepreneurship as the situation of a new offer

2.2 The opportunity-individual nexus

2.2.1 Opportunity variation

2.2.2 The nature of the entrepreneurial action

2.3 Studying nascent entrepreneurship

2.4 The outcomes of the discovery process