BUSINESS IDEA SOURCES AND ENTREPRENEURSHIP: AN INSTITUTIONAL VIEW Chuck Eesley (Stanford) Xiao Hu (Tsinghua University) Delin Yang (Tsinghua University)
Motivation Prior work shows that venture performance is shaped by characteristics of: The founding team (Beckman, Burton, etc.) Growth Market (Eisenhardt and Schoonhoven, 1990) Technology (Shane) User-driven innovation (von Hippel, Sonali Shah, etc.) Gap: Prior work has rarely examined whether the source of the startup idea exerts an influence on performance Entrepreneurial Ideation and Organizational Performance: Imprinting Effects (Eesley, Hsu, and Roberts, WP)
Policy-driven business idea source Government context from policies - contacting with government (communicating with related government officials) and following the policy change closely. For example, entrepreneurs might start new ventures based on property policy reform (Walder, 1999)
Market-driven business idea source indicates that entrepreneurs choose to obtain their business ideas from market opportunities by contacting other market participants (suppliers, customers, competitors). When an entrepreneur chooses to obtain his business idea from market-driven source, he has many ways to identify better (new) potential markets or better (new) ways to serve target markets (Johne, 1999)
Hypothesis 1. In the transitional institutional environment with high level of dynamics, entrepreneurs who choose to obtain their business idea from policy-driven source will create better performing firms.
Hypothesis 2. In the stable institutional environment with low dynamics and uncertainty, entrepreneurs who choose to obtain their business idea from market-driven source will create better performing firms.
Hypothesis 3: Entrepreneurs who choose to obtain their business idea from both policy-driven and market-driven source will create better performing firms.
Research Context: China transitional institutional from 1988 to 1999, stable institutional environment from 2000 to 2002, transitional institutional environment from 2003 to 2009,
9 Tsinghua Survey Unique data on firm origins, early composition and multiple stages of performance measures Alumni: ~26,700 mailed; 3,000 surveys, 11% response rate General biographic information, education and career histories, family background, attitudes toward entrepreneurship. 718 individuals (24%) indicated founding at least one company Additional questions for self-identified entrepreneurs: Company origins, structure, and performance. Advantages: Defined‘at risk’ set, first abroad, detailed work history and founding data, less biased by govt. concerns Charles Zhang, founder and CEO of Sohu.com
Sample Population: 62.5% in engineering 11.9% in sciences 12.9% in humanities (architecture, medicine and law comprise the remainder) 25-30% women19.2% doctorate degrees 53.4% graduate degrees Tsinghua survey sample: 62.2% engineering 10.6% sciences13.7% humanities 28% women 19.3% doctorate degrees 53.9% graduate degrees
DV: ln(Revenue). We measured entrepreneurial performance as the natural logarithm of revenue in the most recent fiscal year for the entrepreneur’s firm. IVs: Policy-driven Source measures, on a scale of 1 to 8, the degree to which entrepreneurs believed that the government’s policy was an important idea source for their ventures. Market-driven Source, as the measure of the extent that an entrepreneur’s idea source depended on new market opportunities at that time. Market-driven Source measures, on a scale of 1 to 8, the degree to which entrepreneurs believed that market opportunities were an important idea source for their ventures. 13 Context - interviews
How are Tsinghua’s Entrepreneurs Born? 14
Where did the primary idea for the start-up come from?
Contributions Ideas for customers/users may not always be the best Source of the idea appears to play an important role in venture quality – deserving of greater attention in future research Varies with the institutional environment