Chapter 10 Flashcards
four perspectives on business growth
- Stage models, 2. Strategic entrepreneurship, 3. Environmental approaches, 4. Chance-based approaches
Stage models
suggest that start-ups follow a life cycle and will naturally grow if they successfully navigate their growth pains or crises (less clear on helping predict which business will grow)
Strategic entrepreneurship
argue that business growth stems from an entrepreneur’s strategic capability to organise resources effectively and their ability to align their activities with their key sources of competitive advantage. (problem: differs per business)
Environmental approaches
emphasize that business growth is a relative concept. Entrepreneurs compete with others and only grow if their products fit well to market needs. (but it doesn’t talk about how to find this fit, no fit with empirical evidence)
Chance-based approaches
recognise that although chance is important and may ultimately separate the winners from the near winners, an entrepreneur is only likely to be in contention if they have built up the motivations, skills, capabilities, knowledge and resources to be competitive.
standardised quantifiable measure of business growth
having a minimum of ten employees and annualised employment and sales growth rates of 20 per cent over a three year period.
gazelles
fast growth businesses.
What is the problem with using these definitions of business growth
It ignores businesses with fewer than ten workers and their contribution to job creation, Taking a three-year growth window excludes successful business that are a bit slower, Measuring percentage change rather than actual change favours smaller businesses (10% of 10 is less than of 100), Measuring employment makes sense but entrepreneurs are more interested in financial measures such as sales or profits, Growth measures are often not comparable with each other, It implies most business growth is organic, but some businesses grow by acquiring others.
what are the challanges in working out gazelles their characteristics
Inconsistent measures of growth characteristics (measure same factor in different ways), Most studies are partial (don’t look at multiple factors), Gazelles are not static, Proxies for growth might hide underlying reasons for growth.
five features that fastgrowth businesses have in common
- Fast-growth businesses are a very small proportion of the business population, 2. Fast-growth businesses contribute disproportionately to job growth (small % have a lot of employees), 3. Fast growers are smaller and younger businesses, 4. Fast growth is ‘spotty’ (not linear growth sometimes burst and downs). 5. Fast-growth businesses occur in all sectors
minimum efficient scale
To be competitive, smaller businesses have to quickly scale their operations to a size where they can compete effectively.
why are young growth business important for economy
they are the base of employment growth
why is it hard to identify predictable patterns in business growth
because its dynamic and discontinuous
what is the influence of innovation?
- There is a great deal of uncertainty about bringing innovation to the market. This makes it difficult for an innovator to capture the benefits of a product or service, 2. It takes time to capture the rewards of innovation and may never happen 3. it can improve productivity per employee → lower employement.
Penrose’s view on bussiness
administrative units led by entrepreneurs who have bundles of resources that consist of the things a business buys, makes or sells, the entrepreneurial team and the staff it employs
penrose view on what distinguishes businesses
how the entrepreneurs chose to acquire, configure and use their resources (in which the past of an entrepreneur influence future choices)
penrose view on growth
growth is better explained by what the business does (internal factors) rather than what happens to it in the marketplace (external factors) or because of blind luck. she believes the team (with the best skills and capabilities) will achieve a competitive advantage.
entrepreneurial orientation (EO)
strategic orientation, capturing specific entrepreneurial aspects of decision-making style methods, and practices / the processes, practices, and decision-making styles of organizations that act entrepreneurially.
three core dimensions to EO
innovative, proactive and ris taking (+competitive aggressiveness and autonomy (independen of activity))
criticism EO
Not all sectors are fast-paced and highly competitive, If EO is a business trait, there is little that a business can do to change its orientation. If it is a behaviour, it is unclear how businesses transform themselves to have greater levels of EO. And if it is a stable orientation, it is unclear how this fits with the fleeting and episodic nature of business growth.
solo vs team
team perform better because of its collective cognitive abilities, a good balance of a range of skills, capabilities and knowledge and the ability to collaborate (sometimes tho less diverse teams leaded by directional leader instead of empowering perform better)
effect of knowledge on growth
having prior knowledge whatsoever increase likelihood to succeed but hard to measure against each other because not all experience is equal or can be easily compared.
versatility
a quality of entrepreneurial imagination and vision.
penrose resource-based view (RBV) of business growth
Businesses are bundles of heterogeneous resources. Resources are relatively immobile and path-dependent. The entrepreneurial team directs resource usage and deployment in the business.
resources
‘all assets, capabilities, organizational processes, firm dimensions, information, knowledge, etc controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness
‘VRIN’ attributes
Valuable, Rare, Imperfectly imitable, Non-substitutable
problem focussing on vrin
neglects whether or not the business is sufficiently well organised to exploit its resources. difficult to pinpoint exactly what a ‘resource’ actually is since ‘virtually anything associated with the firm can be a resource, tautology exist (valuable → advantage, advantage → valuable)
Jovanovic’s model of ‘noisy selection
He argued that entrepreneurs can only make estimates about their entrepreneurial talent once they are in business. If they find that they lack entrepreneurial talent they exit, but if they are talented they expand their business. The process is ‘noisy’ because entrepreneurs might experience random shocks
regression to the mean
everything eventually returns to the mean
