Batten Institute

Research Paper Series

In order to provide a robust platform for the thought leadership of its affiliated scholars in entrepreneurship and innovation, the Batten Institute has created the following Research Paper Series. This series features working papers and published articles that have been authored, in whole or in part, by faculty members, their affiliates, and Batten Fellows in any of the institute's primary focus areas. The broad intent for this series is to serve as a comprehensive and authoritative resource for scholarship excellence in entrepreneurship and innovation. (Names in bold indicate a Darden/UVa faculty member or a Batten Fellow.)

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Title: “Exploring the Socio-Cultural Drivers of De Novo versus De Alio Entry in Emerging Industries.”
Authors: Michael Lenox and Jeff York
Date: (forthcoming)
Format: journal article
Source: Strategic Management Journal 

 Title: Reflections on the 2010 AMR Decade Award: Whither the Promise? Moving Forward with Entrepreneurship As a Science of the Artificial
Authors: Sankaran Venkataraman, Saras D. Sarasvathy, Nicholas Dew, William R. Forster
Date: January, 2012
Format: Article
Source: AMR

In this article we speak of roads taken and paths yet to be traversed. Over the past decade, entrepreneurship researchers have accumulated considerable work related to opportunities. Here we outline new possibilities opened up by that work and seek to recast entrepreneurship as a science of the artificial in three ways: understanding opportunities as made as well as found, moving beyond new combinations to transformations, and developing a new nexus around actions and interactions.

Title: Corporate Venture Capital, Value Creation, and Innovation
Authors: Thomas J. Chemmanur, Elena Loutskina, Xuan Tian
Date: December, 2011
Format: Working Paper

We analyze how corporate venture capitalists (CVCs) differ from independent venture capitalists (IVCs) in nurturing innovation for entrepreneurial firms. Using the NBER Patent Citation database, we find that CVCs help their portfolio firms achieve a higher degree of innovation productivity, as measured by their patenting, although these firms are younger, riskier, and less profitable compared to the entrepreneurial firms backed by IVCs. To establish causality, we use both an instrumental variable approach and a differences-in-differences approach, and show that the above baseline results are unlikely to be driven by better project selection abilities on the part of CVCs. Finally, our analysis suggests that the mechanisms through which CVCs are able to better nurture innovation are their greater tolerance for failure and their superior knowledge of the entrepreneurial firms’ technology due to the strategic fit between CVCs’ parent firms and the entrepreneurial firms backed by them.


Title: Financial Integration, Housing and Economic Volatility
Authors: Elena Loutskina and Philip E. Strahan
Date: November, 2011
Format: Working Paper

The Financial Crisis and the Great Recession that followed illustrate the sensitivity of the economy to a housing bust. This paper shows that financial integration both amplified the volatility of housing prices and economic sensitivity to housing-price shocks. We exploit variation credit-supply subsidies across local markets from the Government-Sponsored Enterprises to construct an instrument for housing price changes unrelated to fundamentals. Using this instrument, we find that a 1% rise in housing prices causes a 0.25% increase in economic growth. This effect is larger in localities more financially integrated with other markets through bank ownership ties. Financial integration thus raised the effect of collateral shocks on the economy, thereby increasing economic volatility.

 
Title: Entrepreneurship as Method: Open Questions for an Entrepreneurial Future
Source: Entrepreneurship Theory and Practice, Vol. 35, Issue 1, pp.
Authors: Saras D. Sarasvathy and Sankaran Vekataraman
Date: March, 2011
Format: Research paper

In this essay, we outline the provocative argument that in the realm of human affairs there exists an entrepreneurial method- analogous to the scientific method spelled out by Francis Bacon and others with regard to the natural realm. We then suggest a series of open questions that we believe will help future scholars spell out the contents of such a method and ways in which it can be put to work in the design and achievement of socioeconomic ends. At least one normative implication of accepting the argument would be to teach entrepreneurship not only to entrepreneurs but to everyone, as a necessary and useful skill and an important way of reasoning about the world. 

Title: Napsterizing Pharmaceuticals: Access, Innovation, and Welfare
Authors:  James W. Hughes, Ph.D.; Michael J. Moore, Ph.D.; Edward A. Snyder, Ph.D.
Date: January, 2011
Format: Research Paper

We analyze the effects of a hypothetical change from the status quo with patent protection on pharmaceuticals to a world in which all patent rights on both existing and future branded drugs wouldbe eliminated. Our analysis takes into account stylized facts concerning the nature of competition between branded and generic competition, the value of the flow of potential new drugs, the effective patent life under the existing Hatch-Waxman framework, and, most critically, the essential features of prescription benefit coverage whereby consumers pay relatively low marginal prices (copayments) for their prescriptions. Our calibration of a simple model indicates that the costs of Napsterizing pharmaceuticals exceed the benefits by a ratio of about 3 to 1.

Title:Incentives for Complex R&D Products
Authors: Raul O. Chao, Kenneth C. Lichtendahl, Yael Grushka-Cockayne
Date: January, 2011
Format: Working Paper

R&D projects are critical to innovation and growth, but are often plagued by organizational and project challenges. The organization hierarchy makes it difficult to manage R&D projects because knowledge and development effort needed to deliver project value are decentralized from managerial authority. Making matters worse, complexity in R&D projects often arises from interactions between the attributes that determine a project’s potential value. In light of these challenges, how should the firm structure incentives to ensure that managers reveal the true potential of a project and invest adequate resources to create value? Leading economic models of R&D often consider agency or complexity, but not both. In this paper, we develop a model that shows how an idea that emerges from search on a complex landscape is intimately tied to an agency problem of adverse selection and moral hazard. Our results show that incentives depend on both the mode of search employed in an organization as well as the complexity of the project. When organizations employ local search (exploitation), incentives should be set higher the more complex is the project. Conversely, when organizations employ distant search (exploration), incentives should be set lower the more complex is the project. The reason for this difference is the distribution of idea quality resulting from local or distant search on a complex landscape.  

Title: Firm Responses to Secondary Stakeholder Action
Source: Strategic Management Journal, Vol. 27, No. 8, pp. 765-782
Authors: Charles E. Eesley and Michael Lenox
Date: Fall, 2010
Format: Research Paper

In this paper, we explore the conditions under which secondary stakeholder groups are likely to elicit positive firm responses. To this end, we build upon and advance Mitchell, Agle, and Wood’s (1997) stakeholder saliency and identification framework by defining saliency in terms of actions, not perceptions, and by proposing that power, legitimacy, and urgency arise out of the nature of stakeholder - request - firm triplets. To test this framework, we build a unique dataset of over 600 secondary stakeholder actions within the United States, all concerning environmental issues over the period 1971-2003. 

Title: Sustainable Development and Entrepreneurship: Past Contributions and Future Directions
Source: Journal of Business Venturing, Vol. 25, Issue 5 (editors: Gregory Daneke, Jeremy Hall, Michael J. Lenox)
Authors: Jeremy K. Hall, Gregory A. Daneke, Michael J. Lenox
Date: September, 2010
Format: Research Paper

This article discusses the emerging research concerned with sustainable development and entrepreneurship, which is the focus of this special issue of the Journal of Business Venturing. Entrepreneurship has been recognized as a major conduit for sustainable products and processes, and new ventures are being held up as a panacea for many social and environmental concerns. However, there remains considerable uncertainty regarding the nature of entrepreneurship's role and how it may unfold. We begin with an overview of sustainable development and the role of entrepreneurship and outline recent contributions exploring this role. We then summarize the papers presented in this special issue and conclude with suggestions for further research.

Title: VIPE Financing: Venture (Capital) Investments in Public Equity
Type: Technical Note
Source: The Handbook of Venture Capital (Oxford University Press)
Authors: Susan Chaplinsky and David Haushalter
Date: Fall, 2010
Format: Research Paper

This paper studies 1,655 venture investments in public equity ("VIPEs") over 1995-2008. Although it has been conjectured that venture capital firms (VCs) have increased investments in public equity over time, we find little evidence to support this claim as VIPEs represent less than 2 percent of total VC investment in most years. VCs appear to invest in VIPEs to leverage their experience and to capitalize on perceived undervaluation of the issuer’s equity shares. Consistent with this, VIPEs are highly concentrated in a few industries and VCs purchase stakes at a price 47 percent below the issuer’s previous year’s high price. Post-issue average and median benchmark adjusted returns are negative for 6, 12, and 24 month intervals. The findings do not suggest that the experience VCs gain from investing in private companies results in an ability to consistently identify undervalued public companies.  

Title: "Ought" to "Can": Questions for an Entrepreneurial Future

Type: Technical Note
Authors: S. Venkataraman and S. Sarasvathy
Date: May, 2010
Format: Cases and Multimedia
 
This technical note explores the broadening role of entrepreneurship as both an economic and societal force. Students learn that as a distinct problem-solving method, entrepreneurship is teachable and applicable to a wide variety of issues central to human well-being and social improvement. It is akin to the scientific method in its capability to generate both the means to achieve yesterday's ends and the reasons to reject them in favor of new ends undreamed of previously. In this sense, it pervades and intervenes in every sphere of human hope  from economics and social welfare to the very definition of who we are and what we want for ourselves and the societies we live in.  
 

Title: The Entrepreneur-Environment Nexus: Uncertainty, Innovation, and Allocation

Source: Journal of Business Venturing
Authors: J. York and S. Sarasvathy
Date: January 2010
Format: Research Paper Series
 
We build upon a recent stream of research that has proposed entrepreneurship as a solution to, rather than a cause of, environmental degradation. Our proposition is that under certain conditions entrepreneurs are likely to supplement, or surpass, the efforts of governments, NGOs and existing firms to achieve environmental sustainability. Entrepreneurs can contribute to solving environmental problems through helping extant institutions in achieving their goals and by creating new, more environmentally sustainable products, services and institutions. Our model illustrates how entrepreneurs 1) address environmental uncertainty, 2) provide innovation and 3) engage in resource allocation to address environmental degradation.
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Title:  Affordable Loss: Behavioral Economic Aspects of the Plunge Decision   

Source: Strategic Entrepreneurship Journal
Authors: N. Dew, S. Sarasvathy, S. Read and R. Wiltbank
Date: June 2009
Format: Research Paper Series

Affordable loss involves decision makers estimating what they might be able to put at risk and determining what they are willing to lose in order to follow a course of action. Using the entrepreneur's new venture plunge decision, this article combines insights from behavioral economics to develop a detailed analysis of the affordable loss heuristic. Specifically, we develop propositions to explain how individuals: (1) decide what they can afford to lose; and (2) what they are willing to lose in order to plunge into entrepreneurship. The article also discusses the implications of affordable loss for the economics of strategic entrepreneurship. Copyright © 2009 Strategic Management Society.   

 

Title: The Impact of Social Norms on Entrepreneurial Action: Evidence from the Environmental Entrepreneurship Context

Source: Journal of Business Venturing
Authors: Meek, William R., Desiree F. Pacheco, Jeffrey G. York
Date: Forthcoming 2009
Format: Research Paper Series

Using insights from institutional theory, sociology, and entrepreneurship we develop and test a model of the relationship between centralized and decentralized institutions on entrepreneurial activity. We suggest that both decentralized institutions that are socially determined as well as centralized institutions that are designed by governmental authorities are important in promoting firm foundings in the environmental context. In a sample of the U.S. solar energy sector we find that state-sponsored incentives, environmental consumption norms, and norms of family interdependence are related to new firm entry in this sector. Our findings also suggest that the efficacy of state-level policies in the sponsoring of entrepreneurial growth is dependent upon the social norms that prevail in the entrepreneur's environment. We expand entrepreneurship theory and the study of institutions and the natural environment by demonstrating the integral role that social norms play in influencing the creation of new firms and by illustrating the potential effect social norms have on the effect of policy that seeks to encourage environmentally responsible economic activity. 

  

Title: R&D Intensity and the NPD Portfolio 

Source: Darden School Working Paper
Authors: R. Chao and S. Kavadias
Date: 2009
Format: Research Paper Series

A key metric for the assessment of innovative activity at the firm level is R&D intensity. R&D intensity is the ratio of a firm's R&D investment to its revenue (the percentage of revenue that is reinvested in R&D). Empirical and anecdotal evidence suggests that R&D intensity within an industry is remarkably consistent. Despite this consistency in R&D spending, firms tend to be differentiated with respect to their NPD portfolio strategy and overall performance. This study aims to explain the observed consistency in R&D intensity for firms within an industry, despite the varying choices in terms of how much the firm invests in R&D and how resources are allocated among projects in a portfolio. We consider the implications of firm level factors, such as NPD portfolio composition, as well as industry level factors, such as competition intensity and environmental stability. We find that R&D intensity alone does not explain firm performance. Rather, it is the proper alignment between R&D intensity (how much the firm invests) and NPD portfolio strategy (how the firm invests the money) that drives profitability. More importantly, the proper alignment critically depends on two industry factors  competition intensity and environmental stability. 

  

Title: Effectual Versus Predictive Logics in Entrepreneurial Decision-Making: Differences Between Experts and Novices

Source: Journal of Business Venturing, Volume 24, Issue 4, Pages 287-309
Authors: N. Dew, S. Read, S. Sarasvathy, and R. Wiltbank
Date: 2009
Format: Research Paper Series

In support of theory, this study demonstrates that entrepreneurial experts frame decisions using an "effectual" logic (identify more potential markets, focus more on building the venture as a whole, pay less attention to predictive information, worry more about making do with resources on hand to invest only what they could afford to lose, and emphasize stitching together networks of partnerships); while novices use a "predictive frame" and tend to "go by the textbook." We asked 27 expert entrepreneurs and 37 MBA students to think aloud continuously as they solved typical decision-making problems in creating a new venture. Transcriptions were analyzed using methods from cognitive science. Results showed that expert entrepreneurs framed problems in a dramatically different way than MBA students. 

  

Title: Residential Segregation Influences on the Likelihood of Being Self-Employed"

Source: Entrepreneurship Theory and Practice (Vol. 33, No. 2)
Authors: G.Fairchild
Date: 2009
Format: Research Paper Series


Geographic and environmental influences on economic action have a long history in managerial research. This paper develops and estimates a model of the potential of a broad set of U.S. racial minority groups to enter self-employment based on individual, household, and metropolitan area level factors. The model allows for an analysis of two distinct residential segregation processes on self-employment likelihood. Results indicate that clustering by race has group-specific influences, increasing the likelihood of self-employment for some groups and diminishing for others. Higher levels of racial exposure raise the likelihood of entrepreneurial careers for all groups, but especially for blacks. 

  

Title: Beyond Hubris: How Highly Confident Entrepreneurs Rebound to Venture Again

Source: Journal of Business Venturing (in press) 

Authors: M. Hayward, W. Forster, S.Sarasvathy and B. Fredrickson

Date: 2009 

Format: Research Paper Series


This article outlines why highly confident entrepreneurs of focal ventures are better positioned to start and succeed with another venture; and therefore why overconfidence in one's capabilities functionally persists and pervades amongst entrepreneurs. By combining cognitive perspectives on confidence in decision making with Fredrickson's [Fredrickson, B.L. 1998. What good are positive emotions?. Review of General Psychology, 2, 300-319.; Fredrickson, B.L. 2001. The role of positive emotions in positive psychology: the broaden-and-build theory of positive emotions. American Psychologist, 56, 218-226.; Fredrickson, B.L. 2003. The value of positive emotions. American Scientist, 91: 330-335] 'broaden-and-build' theory of positive emotions, this paper elaborates the manner in which such entrepreneurs can develop emotional, cognitive, social and financial resilience that can be marshaled and mobilized for a subsequent venture.  

 

Title: Prediction and Control Under Uncertainty: Outcomes in Angel Investing

Source: Journal of Business Venturing, Volume 24, Issue 2, Pages 116-133
Authors: R.Wiltbank, S. Read, N. Dew and S.Sarasvathy
Date: 2009
Format: Research Paper Series

Venture investing plays an important role in entrepreneurship not only because financial resources are important to new ventures, but also because early investors help shape the ventures' managerial and strategic destiny. In this study of 121 angel investors who had made 1,038 new venture investments, we empirically investigate angel investors' differential use of predictive versus non-predictive control strategies. We show how the use of these strategies affects the outcomes of angel investors. Results show that angels who emphasize prediction make significantly larger venture investments, while those who emphasize non-predictive control experience a reduction in investment failures without a reduction in their number of successes. 

  

Title: A Theoretical Framework for Managing the New Product Development Portfolio: When and How to Use Strategic Buckets  

Source: Management Science, Vol. 54, No. 5.
Authors: R.Chao and S.Kavadias
Date: 2008
Format: Research Paper Series

Developing the "right" new products is critical to firm success and is often cited as a key competitive dimension. This paper explores new product development (NPD) portfolio strategy and the balance between incremental and radical innovation. We characterize innovative effort through a normative theoretical framework that addresses a popular practice in NPD portfolio management: the use of strategic buckets. Strategic buckets encourage the division of the overall NPD resource budget into smaller, more focused budgets that are defined by the type of innovative effort (incremental or radical). We show that time commitment determines the balance between incremental and radical innovation. When managers execute this balance, they are often confounded by: (i) environmental complexity, defined as the number of unknown interdependencies among technology and market parameters that determine product performance; and (ii) environmental instability, the probability of changes to the underlying performance functions. Although both of these factors confound managers, we find that they have completely opposite effects on the NPD portfolio balance. Environmental complexity shifts the balance toward radical innovation. Conversely, environmental instability shifts the balance toward incremental innovation. Risk considerations and implications for theory and practice are also discussed. 

  

Title: Revenue Driven Resource Allocation: Funding Authority, Incentives, and the NPD Portfolio Management 

Source: Darden School Working Paper
Authors:  Chao, R., Kavadias, S., and Gaimon C
Date: 2008
Format: Research Paper Series 


The first step in transforming strategy from a hopeful statement about the future to an operational reality is to allocate resources to innovation and new product development (NPD) programs. We explore how funding authority affects a manager's allocation of resources between multiple programs in a portfolio. Funding may be either fixed or variable depending on the extent to which the manager is free to use revenue derived from existing product sales to fund NPD efforts. Our results indicate that the allocation of resources between existing product improvement (relatively incremental projects) and new product development (more radical projects) depends critically on the funding authority. We find that the use of variable funding drives higher effort toward improving existing products and developing new products. However, variable funding induces the manager to focus on existing product improvement to a greater degree than new product development, and leads to an incremental balance in the NPD portfolio. In addition, we highlight a substitution effect between explicit incentives (compensation parameters) and implicit incentives (career concerns). Explicit incentives are reduced as career concerns become more salient. 


Title: Outlines of a Behavioral Theory of the Entrepreneurial Firm

Source: Journal of Economic Behavior & Organization, Volume 66, Issue 1, Pages 37-59  

Authors: N. Dew, S. Read, S. Sarasvathy, and R. Wiltbank
Date: 2008
Format: Research Paper Series

 In A Behavioral Theory of the Firm (BTF), Cyert and March [Cyert, R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Prentice-Hall, Englewood Cliffs, NJ] present a clutch of ideas for explaining the behavior of established firms within an environment of well-defined markets, stakeholder relationships, technologies, and so on. In this paper, we outline a behavioral theory of the entrepreneurial firm that emphasizes transforming environments rather than acting within extant ones. In particular, we explicate three ideas that parallel key concepts in BTF: (1) accumulating stakeholder commitments under goal ambiguity (in line with a political conception of goals), (2) achieving control (as opposed to managing expectations) through non-predictive strategies, and (3) predominately exaptive (rather than adaptive) orientation.

  

Title: The Influence of Residential Segregation and its Correlates on Ethnic Enterprise in Urban Areas

Source: Journal of Business Venturing, Volume 23, Issue 5, Pages 513-527
Authors: G. Fairchild
Date: 2008

Format: Research Paper Series 


This paper develops and estimates a model of potential to enter self-employment based on individual and community-level factors. Of particular interest is the influence of racial residential segregation processes and segregation's tendency to concentrate people with similar demographic profiles in geographical space. It has been argued that segregation processes can also concentrate poverty and its associated social dislocations. An analysis of a database of 8,917 households in four U.S. metropolitan areas revealed that two residential segregation processes (clustering and exposure) limit and enhance potential entry into self-employment for blacks, and provides a partial explanation for the long-standing gaps in white and black self-employment rates. 

  

Title: Residential Segregation Influences on the Likelihood of Black and White Self-Employment

Source:  Journal of Business Venturing; Volume 23, Issue 1, Pages 46-74 

Authors: G. Fairchild
Date: 2008
Format: Research Paper Series 

 This paper estimates a model of potential to enter self-employment based on individual, household and community-level factors. This paper focuses on the impact of segregation on the likelihood of black and white working-age adults to be self-employed workers rather than wage or salary workers. A multilevel analysis combined answers of over 400,000 respondents to the 1990 and 2000 Integrated Public Use Micro Sample (IPUMS) [Ruggles, S., Sobek, M.,Alexander, T., Fitch, C.,Goeken, R.,Hall, P.,King, M.,Ronnander, C., 2004. Integrated Public Use Microdata Series: Version 3.0 [Machine-readable database]. Minnesota Population Center [producer and distributor], Minneapolis, MN] with structural measures from 327 metropolitan areas from the U.S. Census Bureau's Housing Patterns files [Iceland, J.,Weinberg, D., Steinmetz, E., 2002. Racial and ethnic residential segregation in the United States, 1980-2000. Special Report Series, CENSR no.3, U.S. Census Bureau, Washington, DC] to test the influence of each segregation process. The two residential segregation processes (relative clustering and exposure) were found to limit and enhance potential entry into self-employment, but in unique ways for each group. 

  

Title: Diffusing Management Practices within the Firm: The Role of Information Provision

Source: Harvard Business School Technology & Operations Mgt. Unit Research Paper No. 08-085 
Authors: M.Lenox
Date: 2008
Format: Research Paper Series

 A key role of corporate managers is to encourage subsidiaries to adopt innovative practices. This paper examines the conditions under which corporate managers use information provision to encourage subsidiaries' adoption of advanced management practices. Focusing on the distribution of expertise across subsidiaries, we propose that corporate managers elect an information provision strategy when (i) subsidiaries, on average, possess moderate levels of related expertise, (ii) subsidiaries exhibit significant heterogeneity in this expertise, and (iii) the subsidiaries are more diversified and less concentrated. We examine the efforts to diffuse pollution prevention practices exhibited by manufacturing firms in the information and communication technology sector in the United States, and find empirical support for the four hypotheses developed here. The research presented in this paper has implications for our understanding not only of who adopts advanced environmental management practices, but more broadly, of when firms adopt information provision strategies to encourage knowledge transfer within the organization. 

  

Title: Does Component Sharing Help or Hurt Reliability? An Empirical Study in the Automotive Industry

Source: Management Science Vol. 54, No. 5, May 2008, pp. 922-938 
Authors: K. Ramdas and T. Randall
Date: 2008 
Format: Research Paper Series

 Component sharing-the use of a component on multiple products within a firm's product line-is widely practiced as a means of offering high variety at low cost. Although many researchers have examined tradeoffs involved in component sharing, little research has focused on the impact of component sharing on quality. In this paper, we examine how component sharing impacts one dimension of quality reliability defined as mean time to failure. Design considerations suggest that a component designed uniquely for a product will result in higher reliability due to the better fit of the component within the architecture of the product. On the other hand, the learning curve literature suggests that greater experience with a component can improve conformance quality, and can increase reliability via learning from end-user feedback. The engineering literature suggests that improved conformance in turn increases reliability. Sharing a component across multiple products increases experience, and hence, should increase reliability. Using data from the automotive industry, we find support for the hypothesis that higher component reliability is associated with higher cumulative experience with a component. Further, we find support for the hypothesis that higher component reliability is associated with a component that has been designed uniquely for a product. This finding suggests that the popular design strategy of component sharing can in some cases compromise product quality, via reduced reliability.

  

Title: Designing Organizations that Design Environments: Lessons from Entrepreneurial Expertise

Source: Organization Studies, Vol. 29, No. 3, 331-350 
Authors: S. Sarasvathy, N. Dew, S. Read, and R. Wiltbank
Date: 2008
Format: Research Paper Series 

 Human artifacts lie on the interface between their inner environments and their outer environments. Organizations, therefore, are apt subjects to be studied through a science of the artificial. Furthermore, organizational design happens at two interfaces: first, at the interface between organizational founder(s) and the firms they design, and second, between the firms and the environments in which they operate. We use recent developments in the study of entrepreneurial expertise to show why an effectual logic of design is necessary at the first interface, and what its consequences are for designing at the second. In particular, we use the exemplar case of Starbucks to codify three key characteristics of the design problem at the first interface  namely, Knightian uncertainty, goal ambiguity and environmental isotropy. We then use an `alternate histories' method to trace four strategic options - namely, planning, adaptation, vision and transformation  for designing at the second interface. In the final analysis, organizational design is important because effectuators using transformational approaches not only design organizations, but concurrently end up designing the environments we live in. 

  

Title: Effectuation and Over-Trust: Debating Goel and Karri

Source: Entrepreneurship Theory and Practice, Vol. 32, No. 4, pp. 727-737
Authors:  S. Sarasvathy, and N. Dew
Date: 2008
Format: Research Paper Series

 In their article on entrepreneurship, effectuation, and over-trust, Goel and Karri suggest relationships between effectuation, over-trust, and certain psychological characteristics of entrepreneurs. In this response we debate their article. Goel and Karri are correct in claiming that effectuation supposes over-trust. However, we argue that effectual logic works in a different way than they presented because it neither predicts nor assumes trust. Goel and Karri's article also draws attention to the behavioral assumptions underlying constructs such as over-(under) trust. Our suggestion is that effectuation is based on alternative behavioral assumptions that open up interesting avenues for future research in entrepreneurship.  

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Title: Is Effectuation Lachmannian? A Response to Chiles, Bluedorn, and Gupta (2007)

Source:  Organization Studies, 29(02): 239-245
Authors: S. Sarasvathy and N. Dew
Date: 2008
Format: Research Paper Series 

 In an excellent recent paper on Ludwig Lachmann's contributions to entrepreneurship, Chiles, Bluedorn and Gupta draw parallels between Lachmann's work and later contributions in the entrepreneurship literature, including Sarasvathy (2001), suggesting that, 'Sarasvathy's economic approach to entrepreneurship is decidedly Lachmannian' (Chiles et al. 2007: 487). Our purpose in responding to the Chiles et al. article is twofold. First, our interpretation about how effectuation works differs in certain ways from the interpretations placed on it by these authors; we therefore wish to clarify our views on these matters. Second, we view the relationship between effectuation and Lachmann's perspective on entrepreneurship somewhat differently than Chiles et al.; in this note we lay out this alternative view. The crux of our presentation is that, although Lachmann and Sarasvathy have much the same starting point (entrepreneurial action in the face of true uncertainty) and several overlaps in terms of the overall implications for dominant economic theories, there are crucial differences that draw upon recent developments in our understanding of how the human mind works and what knowledge is constituted of.  

  

Title: Innovations, Stakeholders & Entrepreneurship

Source: Journal of Business Ethics, Volume 74, Number 3, Pages 267-283  
Authors:  N. Dew and S.Sarasvathy
Date: 2007 
Format: Research Paper Series
 

In modern societies entrepreneurship and innovation are widely seen as key sources of economic growth and welfare increases. Yet entrepreneurial innovation has also meant losses and hardships for some members of society: it is destructive of some stakeholders' well-being even as it creates new wellbeing among other stakeholders. Both the positive benefits and negative externalities of innovation are problematic because entrepreneurs initiate new ventures before their private profitability and/or social costs can be fully recognized. In this paper we consider three analytical frameworks within which these issues might be examined: pre-commitments, contractarianism, and an entrepreneurial framework. We conclude that the intersection of stakeholder theory and entrepreneurial innovation is a potentially rich arena for research.   

 

Title: The Challenges of Evolution: EDM Initiatives in Private Equity in Conception and Practice 

Source: Community Development Investment Review. San Francisco, CA: San Francisco Federal Reserve Board
Authors: G. Fairchild
Date: 2007
Format: Research Paper Series 
 

The term "emerging domestic markets" (EDM) has generated considerable practical and scholarly interest in economic opportunities in communities that have largely been overlooked by the investment community as a whole. The explicitly economic perspective offered by EDM and the positive associations with international emerging markets have contributed to growing investor interest in low-income and minority communities. However, the lack of clarity in definitions may have created unintended consequences for the investment professionals attempting to develop these markets. In this essay, I describe three examples of how loose definitions have created dilemmas for private equity professionals managing what have been termed EDM-targeted funds. If we agree that language matters, then these cautionary tales call for a greater degree of clarity among opinion leaders when discussing these opportunities.

  

Title: Possibility Thinking: Lessons from Breakthrough Engineering  

Source: Journal of Business Strategy, Vol. 28 Issue 4, p30-37
Authors: R. Friedel and J. Liedtka  
Date: 2007
Format: Research Paper Series 

 

The ability to see new possibilities is fundamental to creating innovative designs  but what do we know about state-of-the-art possibility thinking? The purpose of this paper is to look at this topic, which the strategy field has largely ignored in favor of analytics, by examining a selection of breakthrough engineering projects. Out of these, the paper aims to draw eight different ways of illuminating new possibilities  challenging, connecting, visualizing, collaborating, harmonizing, improvising, re-orienting, and playing  and discuss what each of these might look like if applied to business strategy. The paper explores eight different engineering projects that are regarded as especially innovative. It then explores the lessons of these for business strategists. The paper finds that innovative business strategy development has many parallels with engineering approaches.   

 

Title: How Physicians Can Change the Future of Health Care

Source: Journal of the American Medical Association, 297:1103-1111
Authors: M. Porter and E. Teisberg  
Date: 2007 
Format: Research Paper Series 

Today's preoccupation with cost shifting and cost reduction undermines physicians and patients. Instead, health care reform must focus on improving health and health care value for patients. We propose a strategy for reform that is market based but physician led. Physician leadership is essential. Improving the value of health care is something only medical teams can do. The right kind of competition competition to improve results  will drive dramatic improvement. With such positive-sum competition, patients will receive better care, physicians will be rewarded for excellence, and costs will be contained. Physicians can lead this change and return the practice of medicine to its appropriate focus: enabling health and effective care. Three principles should guide this change: (1) the goal is value for patients, (2) medical practice should be organized around medical conditions and care cycles, and (3) results risk-adjusted outcomes and costs  must be measured. Following these principles, professional satisfaction will increase and current pressures on physicians will decrease. If physicians fail to lead these changes, they will inevitably face ever-increasing administrative control of medicine. Improving health and health care value for patients is the only real solution. Value-based competition on results provides a path for reform that recognizes the role of health professionals at the heart of the system. 

  

Title: Who do I Listen to? The Role of the Customer in Product Evolution

Source: Handbook of New Product Development Research, C. H. Loch, and S. Kavadias (editors) 
Authors: K. Ramdas, M. Meyer and T. Randall 
Date: 2007 
Format: Research Paper Series 
 

Title: When Does Corporate Venture Capital Create Firm Value?


Source: Journal of Business Venturing. 21(6): 753-772 
Authors: G. Dushnitsky and M. Lenox
Date: 2006 
Format: Research Paper Series

Over the past decade, billions of dollars have been invested by established companies in entrepreneurial ventures  what is often referred to as corporate venture capital. Yet, there is little systematic evidence that corporate venture capital investment creates value to investing firms. Scholars have suggested that established firms face underlying challenges when investing corporate venture capital. Namely, structural deficiencies inherent in corporate venture capital may inhibit financial gains. However, firm value may still be created as a result of other benefits from investing-primarily providing a window onto novel technology. In this paper, we propose that corporate venture capital investment will create greater firm value when firms explicitly pursue corporate venture capital to harness novel technology. Using a panel of CVC investments, we present evidence consistent with our proposition. The findings are robust to various specifications and remain unchanged even after controlling for unobserved heterogeneity in investing firms. Our results have important implications for corporate venture capital in particular, and technology strategy in general.

  

Title: The Piracy Paradox: Innovation and Intellectual Property in Fashion Design 

Source: 92 Va. L. Rev. 1687  
Authors: K. Raustiala and C. Sprigman  
Date: 2006 
Format: Research Paper Series 

The orthodox justification for intellectual property is utilitarian. Advocates for strong IP rights argue that absent such rights copyists will free-ride on the efforts of creators and stifle innovation. This orthodox justification is logically straightforward and well reflected in the law. Yet a significant empirical anomaly exists: the global fashion industry, which produces a huge variety of creative goods without strong IP protection. Copying is rampant as the orthodox account would predict. Yet innovation and investment remain vibrant. Few commentators have considered the status of fashion design in IP law. Those who have almost uniformly criticize the current legal regime for failing to protect apparel designs. But the fashion industry itself is surprisingly quiescent about copying. Firms take steps to protect the value of trademarks, but appear to accept appropriation of designs as a fact of life. This diffidence about copying stands in striking contrast to the heated condemnation of piracy and associated legislative and litigation campaigns in other creative industries.

  

Title: Driving Improvement in Value for Patients

Source: The Cerner Quarterly, vol. 2, no. 3 
Authors: E. Teisberg  
Date: 2006 
Format: Research Paper Series 

The purpose of any product or service is to create value for people. In the health sector, value is created by enabling health or improving health care. Patients experience value when their medical conditions are resolved safely, effectively and efficiently, as well as when disease or disease progression is prevented. Improving value  the quality received per dollar spent  should be the clear goal of health sector competition. Unfortunately, today, that is often not the case.

  

Title: Aspirations, Market Offerings and the Pursuit of Entrepreneurial Opportunities

Source: Journal of Business Venturing, Vol. 21(1), 107-123 
Authors: S. Venkataraman and J. Lee 
Date: 2006 
Format: Research Paper Series 

In this paper we focus on two core questions: (1) Why do some people seek entrepreneurial opportunities? (2) Under what conditions is the pursuit of entrepreneurial opportunity most likely? We attempt to answer these questions by creating a theoretical framework that considers the interaction between an individual's level of aspiration and their appraised value in the labor market. We propose that when there is disequilibrium between the aspiration vector (AV) of an individual and the perceived valuation of the market offering vector (P-MOV), an individual tends to pursue entrepreneurial opportunities. In addition, when hiring officers, HR directors, or other relevant parties involved in the hiring decision are biased or when existing organizations have limitations in reflecting an individual's AV, prospective entrepreneurs begin searching for new opportunities in society. Finally and in our view most crucially, we consider the interaction between an individual's subjective consideration and his perceived assessment by the labor market, a novel approach, which we hope takes into account the complexity and richness of entrepreneurship. We offer seven specific propositions that derive from the disequilibrium predicted by our framework.

  

Title: Innovative Stakeholder Relations: When "Ethics" Pays (and When It Doesn't)"  

Source: Business Ethics Quarterly, Vol. 16(1), 43-68 
Authors: S. Venkataraman, T. Harting and S. Harmeling 
Date: 2006 
Format: Research Paper Series 
 

Title: Entrepreneurial Opportunity

Source: Encyclopedic Dictionary of Entrepreneurship, Michael Hitt, and Duane Ireland (eds.). Blackwell Press. pp. 100-103 
Authors: S. Venkataraman
Date: 2006 
Format: Research Paper Series 

 

Title: What to do Next? The Case for Non-Predictive Strategy 

Source: Strategic Management Journal, Volume 27, Issue 10, Pages 981 - 998 
Authors: R. Wiltbank, N. Dew, S.  Read, and S. Sarasvathy  
Date: 2006 
Format: Research Paper Series 

Two prescriptions dominate the topic of what firms should do next in uncertain situations: planning approaches and adaptive approaches. These differ primarily on the appropriate role of prediction in the decision process. Prediction is a central issue in strategy making owing to the presumption that what can be predicted can be controlled. In this paper we argue for the independence of prediction and control. This implies that the pursuit of successful outcomes can occur through control-oriented approaches that may essentially be non-predictive. We further develop and highlight control-oriented approaches with particular emphasis on the question of what organizations should do next. We also explore how these approaches may impact the costs and risks of firm strategies as well as the firm's continual efforts to innovate.

  

Title: Financing Under Extreme Uncertainty: Evidence from Private Investments in Public Equities 

Source: Darden School Working Paper
Authors: S.Chaplinsky and D. Haushalter 
Date: 2005 
Format: Research Paper Series


We investigate the motivations and the returns to the firms and investors using Private Investments in Public Equities (PIPE) financing, an increasingly common form of equity-based financing. From 1995-2000, 1,466 firms raised more than $29 billion through 2,626 PIPE issues. We find that PIPE issuers are poorly performing firms, urgently in need of cash that, as a consequence, are without access to traditional forms of financing. The contract terms and embedded options in PIPEs allow investors to alter their exposure to post-issue movements in the value of the issuer's equity. As a result, the returns earned by investors substantially exceed those of shareholders. Hence PIPEs provide incentives for investors to make investments in firms with substantial operating uncertainties, enabling companies barred from traditional capital markets to obtain much needed financing.  

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Title: When Do Firms Undertake R&D by Investing in New Ventures?

Source: Strategic Management Journal. 26(10): 947-965.
Authors: G.Dushnitsky and M. Lenox
Date: 2005
Format: Research Paper Series
 

We explore the conditions under which firms are likely to pursue equity investment in new ventures as a way to source innovative ideas. We find that firms invest more in new ventures  commonly referred to as "corporate venture capital"  in industries with high technological ferment, weak intellectual property protection, and where complementary distribution capability is important. Furthermore, we find that the greater a firm's cash flow and history of innovation, the more likely it is to invest. Our results suggest that in Schumpeterian environments, incumbents may supplement their innovative efforts by tapping into the knowledge generated by new ventures.  

  

Title: When Do Incumbents Learn from Entrepreneurial Ventures? Corporate Venture Capital and Incumbent Firm Innovation Rates

Source: Research Policy. 34(5): 615-639
Authors: G.Dushnitsky and M. Lenox  
Date: 2005
Format: Research Paper Series

In this paper, we focus on the potential innovative benefits to corporate venture capital (CVC), i.e., equity investments in entrepreneurial ventures by incumbent firms. We propose that corporate venture capital programs may be instrumental in harvesting innovations from entrepreneurial ventures and thus an important part of a firm's overall innovation strategy. We hypothesize that these programs are especially effective in weak intellectual property (IP) regimes and when the firm has sufficient absorptive capacity. We analyze a large panel of public firms over a 20-year period and find that increases in corporate venture capital investments are associated with subsequent increases in firm patenting.  

  

Title: What is the Emerging Domestic Market?

Source: Journal of EDM Finance. Washington, DC: National Association of Investment Companies
Authors: G. Fairchild
Date: 2005
Format: Research Paper Series

In the early 1980s, Antoine W. van Agtmael of the International Finance Corporation of the World Bank coined the term "emerging market" to describe nations with low-to-middle per capita incomes and that are instituting economic development and reform programs that allow them to "emerge" into the arena of global economic competitiveness. Since that time, the phrase has gained popularity and has been used to describe nations and even regions within and across nations. Scholarly and practical interest in understanding the factors that lead to rapid growth in these markets has proliferated, and investment activity has increased accordingly. One key element of nearly all usage is the notion of rapid economic transition and burgeoning investment opportunity in formerly overlooked areas.  

  

Title: Up or Out: New Product Positioning in an Evolving Technology Environment

Source: Production and Operations Management, Volume 14, No. 3
Authors: K. Ramdas and S. Jain
Date: 2005
Format: Research Paper Series

In many design environments, the technology around which a product is designed may evolve over the course of the product development cycle. In reaction, designers may modify the product's design to avail of new technology, resulting in cost overruns and delays. This effect can be mitigated if a firm proactively considers the revenue projections for alternate technology choices, the cost of these choices, and the anticipated path of technology evolution, in choosing the optimal product positioning policy. We develop an analytical model that navigates this tradeoff.  

  

Title: An Empirical Study of the Transition from Paid Work to Self-Employment

Source: Journal of Entrepreneurial Finance and Business Ventures, Vol. 10(1): 1-16
Authors: S. Venkataraman
Date: 2005
Format: Research Paper Series

We explore the relationship between the probability of a transition from paid work to self-employment and three explanatory variables: paid income, predicted income, and income for ability. We use panel data for heads of households from the PSID SRC sample for eight pairs of years. Our results show that the relationship between paid income and self-employment is not linear. We then break up paid income into two components: (a) predicted income based on human capital, demographic, and locational variables, and (b) income for ability. Again, we find nonlinear relationship between self-employment and either predicted income or income for ability. We then test for curvilinear relationships between these three variables (i.e., paid income, predicted income, and income for ability) and the transition to self-employment. We find that individuals with low incomes are more likely to take up self-employment. Further, income for ability is a stronger predictor of the transition to self-employment than predicted income. We show that the relationship between ability and self-employment is U-shaped: very low ability and very high ability individuals are more likely to take up self-employment than medium ability individuals. We use prospect theory to explain this result.  

  

Title: Entrepreneurship and Ethics

Source: Dictionary of Ethics. Edward R. Freeman, and Patricia Werhane (editors). Blackwell Press, Pp. 170-175
Authors: S.Venkataraman
Date: 2005
Format: Research Paper Series
 

Title: In Your Own Backyard: Investment Opportunities in Emerging Domestic Markets

Source: Council of Urban Investors Institute: Connecting Communities with Capital
Authors: G.Fairchild
Date: 2004
Format: Research Paper Series
 

Title: It's What You Know and Who They Know: Structural Holes and Strong Ties in Urban Labor Markets

Source: Council 2004 Best Paper Proceedings, Academy of Management
Authors: G. Fairchild and J. Robinson
Date: 2004 
Format: Research Paper Series

 

Title: The questions we ask and the questions we care about: reformulating some problems in entrepreneurship research

Source: Journal of Business Venturing, Volume 19, Issue 5, Pages 707-717
Authors: S. Sarasvathy
Date: 2004
Format: Research Paper Series

  

Both history of science and creativity research have shown that reformulating the questions we ask can lead to breakthroughs more often than trying harder to search for more rigorous answers. In such a spirit of creative play, I suggest we throw away our obsession with dividing the world into entrepreneurs and nonentrepreneurs and focus instead on categories within entrepreneurs. In particular, (a) those who want to become entrepreneurs but do not suggest compelling research questions about barriers to entrepreneurship; while, (b) those who do become entrepreneurs need to develop expertise, impelling our research to focus on the rubric of design.  

  

Title: Making It Happen: Beyond Theories of the Firm to Theories of Firm Design

Source: Entrepreneurship Theory and Practice, Volume 28 Issue 6, Pages 519 - 531
Authors: S. Sarasvathy
Date: 2004
Format: Research Paper Series

Current theories of the firm provide no explanation for entrepreneurial success except in terms of firm success. Even when the focus is on the entrepreneur, s/he is entirely cast as a bundle of traits/behaviors or heuristics/biases that serves to explain firm performance. In this article, I suggest putting the entrepreneur center stage, adopting an instrumental view of the firm. Drawing upon the work of Simon in symbolic cognition and Lakoff in semantic cognition, I explore how we can go beyond explanations based on economic forces and evolutionary adaptation to entrepreneurial effectuation; I end with specific research questions pertaining to firm design.   

 

Title: Redefining Competition in Health Care

Source: Harvard Business Review, June. pp. 64-77
Authors: M. Porter and E. Teisberg
Date: 2004
Format: Research Paper Series

  

The U.S. health care system is in bad shape. Medical services are restricted or rationed, many patients receive poor care, and high rates of preventable medical error persist. There are wide and inexplicable differences in costs and quality among providers and across geographic areas. In well-functioning, competitive markets, such outcomes would be inconceivable. In health care, these results are intolerable. Competition in health care needs to change, say the authors. It currently operates at the wrong level. Payers, health plans, providers, physicians, and others in the system wrangle over the wrong things, in the wrong locations, and at the wrong times. System participants divide value instead of creating it. (And in some instances, they destroy it.) They shift costs onto one another, restrict access to care, stifle innovation, and hoard information  all without truly benefiting patients. This form of zero-sum competition must be replaced by competition at the level of preventing, diagnosing, and treating individual conditions and diseases. Among the authors' well-researched recommendations for reform: Standardized information about individual diseases and treatments should be collected and disseminated widely so patients can make informed choices about their care. Payers, providers, and health plans should establish transparent billing and pricing mechanisms to reduce cost shifting, confusion, pricing discrimination, and other inefficiencies in the system. And health care providers should be experts in certain conditions and treatments rather than try to be all things to all people. U.S. employers can also play a big role in reform by changing how they manage their health benefits.  

  

Title: Dispersed knowledge and an entrepreneurial theory of the firm

Source: Journal of Business Venturing. Vol. 19 (5), 659-680
Authors: S. Venkataraman, R. Velamuri, and N.  Dew
Date: 2004
Format: Research Paper Series

  

In this article, we propose an entrepreneurial theory of the firm that is based on dispersed knowledge. We argue that the dispersion of knowledge over people and places and over time leads to uncertainty. This uncertainty, combined with heterogeneous expectations and the nexus of an individual and opportunity, explains the emergence of new firms. We then suggest that the theory of the firm proposed by us answers questions that have been overlooked by alternative theories. The specific question we discuss in this article is when and why an entrepreneurial opportunity will be taken to market through an existing firm, and when and why a new firm will be chosen as a vehicle for taking a new idea to market, i.e., whether the residual will be concentrated in an existing or in a new firm.  

  

Title: Entrepreneurial opportunities

Source: Next Generation Business Handbook. Subir Chowdhury (ed.). John Wiley & Sons: NJ, pp. 666-679
Authors: S. Venkataraman
Date: 2004
Format: Research Paper Series

In this article, we propose an entrepreneurial theory of the firm that is based on dispersed knowledge. We argue that the dispersion of knowledge over people and places and over time leads to uncertainty. This uncertainty, combined with heterogeneous expectations and the nexus of an individual and opportunity, explains the emergence of new firms. We then suggest that the theory of the firm proposed by us answers questions that have been overlooked by alternative theories. The specific question we discuss in this article is when and why an entrepreneurial opportunity will be taken to market through an existing firm, and when and why a new firm will be chosen as a vehicle for taking a new idea to market, i.e., whether the residual will be concentrated in an existing or in a new firm.  

  

Title: Regional transformation through entrepreneurship

Source: Journal of Business Venturing, Vol. 19(1), 153-167

Authors: S. Venkataraman
Date: 2004
Format: Research Paper Series

What does it take for a region to foster technological entrepreneurship? Recently, there has been significant interest in this topic. Most writers on this topic emphasize the tangible infrastructure such as sound legal systems, transparent capital markets, advanced telecommunications and transportation systems, etc. Sound legal systems, capital markets, and other structural features are necessary prerequisites for technopreneurship; however, what I am calling the intangibles of entrepreneurship are the sufficient conditions that allow, specifically, for Schumpeterian entrepreneurship to thrive in a locality. Often, governments attempt to promote technopreneurship by injecting risk capital. They distribute these funds through small business development centers, and several regions and countries have even attempted "public" venture capital funds. However, my hypothesis is that if only risk capital is injected, it flows straight to low-quality entrepreneurship. Focusing on only risk capital, the investing government assumes that the risk capital itself will create all other prerequisites for growth. This is a major supposition. If risk capital is expected to produce extraordinary wealth, it must be accompanied by seven other intangibles, including, access to novel ideas, role models, informal forums, region-specific opportunities, safety nets, access to large markets, and executive leadership.   

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Title: Economic Implications of Exaptation

Source:  Journal of Evolutionary Economics. Vol. 14(1) 69-85
Authors: N. Dew, S. Sarasvathy and S. Venkataraman  
Date: 2004 
Format: Research Paper Series 

Accounts of economic change recognize that markets create selective pressures for the adaptation of technologies in the direction of customer needs and production efficiencies. However, non-adaptational bases for technological change are rarely highlighted, despite their pervasiveness in the history of technical and economic change. In this paper the concept of exaptation  a feature co-opted for its present role from some other origin  is proposed as a characteristic element of technological change, and an important mechanism by which new markets for products and services are created by entrepreneurs. Exaptation is shown to be a missing but central concept linking the evolution of technology with the entrepreneurial creation of new markets and the concept of Knightian uncertainty.  

  

 

Title: Managing Variety for Assembled Products: Modeling Component Systems Sharing 

Source: Manufacturing and Service Operations Management, Volume 5, No. 2, pp. 142-156  
Authors: K. Ramdas, M. Fisher and K. Ulrich  
Date: 2003 
Format: Research Paper Series 

  

Component sharing  using the same version of a component across multiple products  is an approach adopted by many assembled product manufacturers to achieve high final product variety with lower component variety and cost. This paper presents a methodology for determining which versions of a set of related components should be offered to optimally support a defined finished product portfolio. We develop optimization models that determine which versions of each component should be introduced and which of these versions each product should use so as to minimize design and production costs. This approach is appropriate for components with a relatively low impact on consumers' perceptions about product differentiation, which can be shared across a set of products if they meet the most stringent performance requirements in the set. We illustrate our procedure on automotive braking systems, but also discuss it applicability to other components and industries. Finally, we consider organizational issues and identify three conceptually different approaches to component sharing: a coordinated projects approach that requires higher-level organizational echelons above the individual project, a project-by-project approach that does not, and a hybrid partially coordinated approach. We use our model to show that the gain from the coordinated projects approach relative to the project-by-project approach is increasing in the number of component versions in consideration and warrantee and complexity costs, but does not vary systematically with product demand variability. Further, we use our model to highlight the risk of using simplistic heuristics to determine design sequence within a component system in a partially coordinated approach. We find that this approach is not always superior to the project-by-project approach, despite requiring greater coordination.  

  

Title: Managing Product Variety: An Integrative Review and Research Directions

Source: Production and Operations Management, Volume 12, No. 1, pp. 79-101 
Authors: K. Ramdas  
Date: 2003 
Format: Research Paper Series 
 

Variety management has emerged as a crucial dimension of successful business practice. In this paper, I first provide a framework for managerial decisions about variety. Variety-creation decisions determine the amount, type, and timing of end-product variety, while variety-implementation decisions focus on the design and operation of internal processes and a supply chain to support a firm's variety-creation strategy. I organize variety-related decisions into four key decision themes in variety creation: (1) dimensions of variety, (2) product architecture, (3) degree of customization, and (4) timing; and three key decision themes in variety implementation: (1) process capabilities, (2) points of variegation, and (3) day-to-day decisions. I describe each theme and review the relevant literature on each theme, with a focus on research that provides insight to problems faced in practice. Finally, I identify untapped avenues for future research that would be of value to the practicing manager, paying special attention to interdependencies among decision themes.    

Title: Components Sharing in the Management of Product Variety: A Study of Automotive Braking Systems 

Source: Management Science, Vol. 45, No. 5 
Authors: K. Ramdas, M. Fisher and K. Ulrich 
Date: 2003 
Format: Research Paper Series 
  

Product variety in many industries has increased steadily throughout this century. Component sharing  using the same version of a component across multiple products  is increasingly viewed by companies as a way to offer high variety in the marketplace while retaining low variety in their operations. Yet, despite the popularity of component sharing in industry, little is known about how to design an effective component-sharing strategy or about the factors that influence the success of such a strategy. In this paper we critically examine component sharing using automotive front brakes as an example. We consider three basic questions: (1) What are the key drivers and tradeoffs of component-sharing decisions? (2) How much variation exists in actual component-sharing practice? and (3) How can this variation be explained? To answer these questions, we develop an analytic model of component sharing and show through empirical testing that this model explains much of the variation in sharing practice for automotive braking systems. We find that the optimal number of brake rotors is a function of the range of vehicle weights, sales volume, fixed component design and tooling costs, variable costs, and the variation in production volume across the models of the product line. We conclude with a discussion of the general managerial implications of our findings.  

  

Title: Entrepreneurship as a science of the artificial 

Source: Journal of Economic Psychology, Volume 24, Issue 2, Pages 203-220  
Authors: S. Sarasvathy  
Date: 2003 
Format: Research Paper Series 
 

This essay connects four key ideas from Herbert Simon's "Sciences of the Artificial" to recent research on entrepreneurial expertise: (1) natural laws constrain but do not dictate our designs; (2) we should seize every opportunity to avoid the use of prediction in design; (3) locality and contingency govern the sciences of the artificial; and, (4) near-decomposability is an essential feature of enduring designs. The essay is based on a series of conversations and emails with Simon about the empirical findings of my doctoral dissertation that involved a protocol analysis study of expert founder-entrepreneurs.  

  

Title: Doctoral education in the field of entrepreneurship

Source: Journal of Management, Vol. 29(3), 309-331 
Authors: S. Venkataraman and C. Brush  
Date: 2003 
Format: Research Paper Series 
 

Current perceptions and practices in doctoral education in the field of entrepreneurship are explored. The paper developed from efforts of a Task Force formed by the Entrepreneurship Division of the Academy of Management in response to several important observations: growing demand for faculty in entrepreneurship, growing membership in the division, more participants in doctoral and junior faculty consortia, increasing attention to entrepreneurship education at all academic levels, and the implementation of more doctoral seminars and programs in the field. Using a process outlined in Summer et al. [J. Manage. 16 (1990) 361], the Task Force addressed the following questions: (1) What is the current state of doctoral education in entrepreneurship? (2) How should doctoral education in entrepreneurship be designed? Recommendations are presented.  

  

Title: Three views of entrepreneurial opportunity 

Source: In Handbook of Entrepreneurship, Zolton Acs (ed.). Boston, MA: Kluwer Academic Press, 141-160 
Authors: S. Venkataraman,S. Sarasvathy, N. Dew and R. Velamuri 
Date: 2003 
Format: Research Paper Series 
 

For almost 50 years now, following the trail of issues raised by economists such as Hayek, Schumpeter, Kirzner and Arrow, researchers have studied the economics of technological change and the problem of allocation of resources for invention (invention being the production of information). The bulk of this literature simply assumes that new technical information will either be traded as a commodity or become embodied in products and services (hereafter called "economic goods"), without addressing any specific mechanisms or processes for the transformation of new information into new economic goods or new economic entities (such as new firms and new markets). It is inside this gap that we begin our quest for the concept of an "entrepreneurial opportunity."    

Title: Stakeholder value equilibration and the entrepreneurial process 

Source: Special Issue of the Society for Business Ethics. The Ruffin Series #3  
Authors: S. Venkataraman
Date: 2002 
Format: Research Paper Series 
 

In this lecture I wish to explore the possibility of a useful dialogue between the fields of entrepreneurship and business ethics for mutual benefit. Although these two fields have much to offer each other, they have developed largely independent of each other. I wish to argue that entrepreneurship has a role to play in stakeholder theory and, relatedly, that stakeholder theory enriches our understanding of the entrepreneurial process.    

Title: Invisible Men and Women: Inner City Entrepreneurs and the Strategies They Employ to Survive and Grow 

Source: 2001 Business School Inner-City Leadership Conference Best Paper Award. 
Authors: G. Fairchild  
Date: 2001 
Format: Research Paper Series 
 

   

Title: A Cross-Functional Approach to Designing Multiple Product Line Extensions with Components Sharing

Source: Management Science, Vol. 47, No. 1, pp. 22-36 
Authors: K. Ramdas and M. Sawhney 
Date: 2001 
Format: Research Paper Series 
  

Variety management has emerged as a crucial dimension of successful business practice. In this paper, I first provide a framework for managerial decisions about variety. Variety-creation decisions determine the amount, type, and timing of end-product variety, while variety-implementation decisions focus on the design and operation of internal processes and a supply chain to support a firm's variety-creation strategy. I organize variety-related decisions into four key decision themes in variety creation: (1) dimensions of variety, (2) product architecture, (3) degree of customization, and (4) timing; and three key decision themes in variety implementation: 1) process capabilities, (2) points of variegation, and (3) day-to-day decisions. I describe each theme and review the relevant literature on each theme, with a focus on research that provides insight to problems faced in practice. Finally, I identify untapped avenues for future research that would be of value to the practicing manager, paying special attention to interdependencies among decision themes.  

  

Title: Causation and Effectuation: Toward a Theoretical Shift from Economic Inevitability to Entrepreneurial Contingency 

Source: The Academy of Management Review, Vol. 26, pp. 243-263 
Authors: S. Sarasvathy  
Date: 2001 
Format: Research Paper Series 
 

In economics and management theories, scholars have traditionally assumed the existence of artifacts such as firms/organizations and markets. I argue that an explanation for the creation of such artifacts requires the notion of effectuation. Causation rests on a logic of prediction, effectuation on the logic of control. I illustrate effectuation through business examples and realistic thought experiments, examine its connections with existing theories and empirical evidence, and offer a list of testable propositions for future empirical work.    

Title: Strategy and entrepreneurship: Outlines of an untold story 

Source: In Handbook of Strategic Management, Michael Hitt, R. Edward Freeman, and Jeffrey Harrison, (Editors), MA: Blackwell Publishers, 650-668, 2001 
Authors: S. Venkataraman and S. Sarasvathy  
Date: 2001 
Format: Research Paper Series
 

In his book "Invention," Professor Norbert Wiener (1993), commenting on the relative importance accorded to individuals and institutions in historical narratives of science and inventions, asks us to imagine Shakespeare's "Romeo and Juliet" without either Romeo or the balcony. The story is just not the same. He likens much of the study of the economic history of science and accounts of inventions as "all balcony and no Romeo." The balcony for Norbert Wiener captures the context in which the story unfolds  the culture, the institutions, the constraints and the catalysts that move the plot forward and thicken it. Romeos, for Wiener, play the leading parts in the story, because there is a strong fortuitous element to inventions and there is no inevitability that a possible discovery will be made at a given time and space. Take away either one, Romeo or the balcony, and the whole story falls apart. In a similar vein, we would liken studies of strategic management to "all balcony and no Romeo." But if we accuse strategic management of being "all balcony and no Romeo," strategic management scholars could legitimately accuse entrepreneurship of being "all Romeo and no balcony."    

Title: Report on the Seminar on Research Perspectives in Entrepreneurship 

Source: Journal of Business Venturing, 15(1): 1-58. (Participating authors: Kenneth Arrow, Morton Kamien, Mancur Olson, Donald Sexton, Herbert Simon, and S. Venkataraman) 
Authors: S. Sarasvathy
Date: 2000 
Format: Research Paper Series 
 

November 14, 1997, Graduate School of Industrial Administration, Carnegie Mellon University, Pittsburgh, Pennsylvania: Herbert Simon, the chairman of the panel, opened the proceedings by laying out the ground rules and objectives. He explained that the seminar was meant to be primarily a conversation among the participants with some inputs from the audience a conversation, not to settle on a theory of entrepreneurship, but to determine some important research questions in trying to understand entrepreneurship, which he defined as the origins of new economic activity.    

Title: The promise of entrepreneurship as a field of research 

Source: Academy of Management Review. Vol. 25 (1): 217-226 (Reprinted in the Foundations of Entrepreneurship, Scott Shane (ed.), Edward Elgar Press, 2002) 
Authors: S. Venkataraman and S. Shane 
Date: 2000 
Format: Research Paper Series 
 

To date, the phenomenon of entrepreneurship has lacked a conceptual framework. In this note we draw upon previous research conducted in the different social science disciplines and applied fields of business to create a conceptual framework for the field. With this framework we explain a set of empirical phenomena and predict a set of outcomes not explained or predicted by conceptual frameworks already in existence in other fields.   

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Title: Network effects and technology adoption in US telecommunications 

Source: Strategic Management Journal, Vol. 19 (11), 1045-1062 
Authors: S. Venkataraman and S. Majumdar 
Date: 1998 
Format: Research Paper Series 

  

This paper examines variations in the adoption of new technology by firms operating in a network-based industry: telecommunications. These variations are explained as a function of three network effects: the first is the conversion effect, driven by operations-related increasing returns to scale; the second is the consumption effect, driven by demand-side increasing returns to scale; the third is an imitative effect. We expect the conversion effect to be felt more strongly during earlier phases of a technology's evolution, while a strong consumption effect is felt throughout. The imitative effect is also expected to be felt throughout. These hypotheses are examined with respect to electronic switching adoption in the local operating sector of the U.S. telecommunications industry. An analysis of the variations in adoption levels of the 40 largest firms over a period lasting from 1973 to 1987 supports our expectations, except for the imitative effect.  

  

Title: Hostile environmental jolts, transaction set and new business development 

Source: Journal of Business Venturing, Vol. 13 (3), 231- 255  
Authors: S. Venkataraman, and A. Van de Ven 
Date: 1998 
Format: Research Paper Series 

In this exploratory study, we examine empirically the effects of environmental jolts on the evolution of the set of relationships that entrepreneurs have with their customers and suppliers (which we call the transaction set). We believe that understanding how turbulence in the environment affects the ability of entrepreneurs to hold on to their existing relationships or to add new relationships is fundamental to understanding the evolution and growth of an organization from a start-up to a stable, wealth-creating enterprise in the long-run.  

Using longitudinal data spanning 7 to 10 years from five start-up firms, we investigate three questions on the connection between environmental jolts and changes in the transaction set of the firm. First, do environmental jolts during the early life of the firm induce significant reductions in the set of relationships of a new, small firm? Second, are entrepreneurs able to add new relationships in greater numbers than the exit of old relationships following a jolt? And, third, do start-ups enjoy a "honeymoon" period when environmental jolts do not induce significant reductions in the set of relationships after a jolt? 

 Our study yielded several findings that may be of interest to entrepreneurs, academics, and incubator managers. First, environmental jolts have a significant impact on the exits of relationships from the transaction set of a new, small firm, but not necessarily on the entry of new relationships into the set. Thus, although liabilities of newness and small size seem to affect the ability of entrepreneurs to hold on to their existing relationships during environmental jolts, these jolts do not seem to affect the entrepreneur's ability to add ties, at least in the very early life of the firm. Second, the level of reduction after environmental jolts seems to be less severe during the early life and greatest during the adolescent period. Further, entries of new relationships decrease with each succeeding jolt. 

  

Title: The distinctive domain of entrepreneurship research 

Source: in Advances in entrepreneurship, firm emergence and growth, Vol. III, J. Katz (ed.). JAI Press, Vol. 3, 119-138 [Reprinted in the Foundations of Entrepreneurship, Scott Shane (ed.), Edward Elgar Press, 2002] 
Authors: S. Venkataraman
Date: 1997 
Format: Research Paper Series 
  

Title: Anticipating Reactions: Factors That Shape Competitor Responses

Source: Day, G. S. and Reibstein, D. J. (eds.). Wharton on Dynamic Competitive Strategies. New York: John Wiley & Sons, 198-219 
Authors: S. Venkataraman, M. Chen and I. MacMillan 
Date: 1997 
Format: Research Paper Series 

 

Title: Choice of organizational mode in new business development: Theory and propositions 

Source: Entrepreneurship: 2000, D. Sexton and R. Smilor, (eds.). Upstart Publishing, Chicago: Illinois  
Authors: S. Venkataraman and I. MacMillan 
Date: 1997 
Format: Research Paper Series 

 

Title: Innovation, Competitive advantage and rent: A Model and test 

Source: Management Science, March 1996, Vol. 423 (3), 389-403 
Authors: R. McGrath, S. Venkataraman, M. Tsai and I. MacMillan 
Date: 1996 
Format: Research Paper Series 

Four antecedents, it is argued, are necessary precursors for a firm to capture rents from innovation. The antecedents are causal understanding; innovation team proficiency; emergence and mobilization of new competences; and creation of competitive advantages, each of which are conceptually distinct and precisely defined in the paper. These constructs are linked together in a stage model and subsequently operationalized and tested using LISREL. Substantial support is found for the central thesis, that achieving each of the four antecedent processes increases the predicted rents from an innovation project.  

 

Title: Extraordinary feats of entrepreneurial enterprise: Strategies of sustained rapid growth 

Source: Proceedings of the fourth global conference on entrepreneurship. S. Birley and I. C. MacMillan (eds.). Routledge. 
Authors: S. Venkataraman and T. Kraemer 
Date: 1996 
Format: Research Paper Series 

Four antecedents, it is argued, are necessary precursors for a firm to capture rents from innovation. The antecedents are causal understanding; innovation team proficiency; emergence and mobilization of new competences; and creation of competitive advantages, each of which are conceptually distinct and precisely defined in the paper. These constructs are linked together in a stage model and subsequently operationalized and tested using LISREL. Substantial support is found for the central thesis, that achieving each of the four antecedent processes increases the predicted rents from an innovation project.  

 

Title: Cultural differences in innovation championing strategies 

Source: Journal of Management, Vol. 21 (5).  
Authors: S. Venkataraman, S. Shane and I. MacMillan 
Date: 1995 
Format: Research Paper Series 

 

This study examines the relationship between national culture and national preferences for innovation championing strategies for a sample of 1,228 individuals in 30 countries. The study finds that the more uncertainty avoiding a society is the more people prefer champions to work through organizational norms, rules and procedures to promote innovation. The more power distant a society is the more people prefer champions to focus on gaining the support of those in authority before other actions are taken on an innovation rather than on building a broad base of support among organization members for new ideas. The more collectivist a society is the more people prefer champions to seek cross-functional support for the innovation effort.

  

Title: Developing an entrepreneurship game for teaching and research 

Source: Simulation and Gaming, Vol., 25 (3), 386-404 
Authors: S. Venkataraman, M. Low and V. Srivatsan 
Date: 1994 
Format: Research Paper Series 

An entrepreneurship game that is based on solid theory has significant potential to inform entrepreneurship research and enhance classroom experiences. However, developing a game that succeeds at both teaching and research is a difficult task. This article describes one such attempt, which has achieved initial indications of success on both counts. The article describes the game and its theoretical underpinnings. It discusses the value of the game for teaching and provides an example of its research potential. Lessons learned while developing the game are discussed.  

  

Title: The effects of liabilities of age and size on autonomous sub-units of established firms in the steel distribution industry 

Source: Journal of Business Venturing, Vol. 9 (3): 189-204 
Authors: S. Venkataraman and M. Low 
Date: 1994 
Format: Research Paper Series 

Title: The effects of cultural differences in new technology championing behavior within firms 

Source: Journal of High Technology Management Research, Vol. 5 (2), 163-181  

Authors: S. Venkataraman, S. Shane and I. MacMillan 
Date: 1994 
Format: Research Paper Series 

Title: The advantage chain: Antecedents to rents from internal corporate ventures

Source: Journal of Business Venturing, Vol. 9 (5), 350-369  

Authors: S. Venkataraman, R. McGrath and I. MacMillan 
Date: 1994 
Format: Research Paper Series 

   

 

Title: New technology adoption in US telecommunications: The role of competitive pressures and firm-level inducements 

Source: Research Policy, Vol. 22, 521-536 
Authors: S. Venkataraman and S. Majumdar 
Date: 1993 
Format: Research Paper Series 
 
 

Title: The design of information technology planning systems for varying organizational contexts 

Source: European Journal of Information Systems, Vol. 2(1), 23-35 
Authors: S. Venkataraman, V. Sambamurthy and G. DeSanctis 
Date: 1993 
Format: Research Paper Series 

The conduct of IT planning processes has been a dominant managerial concern in organizations. Yet, current IT planning research offers little guidance on the types of planning actions and behaviour that are appropriate to organizational contexts. The motivation of this paper is to extend the existing literature by addressing the following major question: How should organizations design IT planning systems to manage the conduct of their IT planning processes? The paper seeks to address this question by (i) identifying key organizational forces that affect the IT planning processes, (ii) articulating some of the key dimensions of IT planning systems and (iii) elaborating upon propositions for linking designs of IT planning systems with organizational context. The concepts and the propositions are expected to provide significant guidance for further research and practice.    

Page 6

Title: Renegade and rational innovation championing strategies in global corporations

Source: Academy of Management, Best Paper Proceedings, August, 85-89 
Authors: S. Venkataraman and S. Shane
Date: 1993 
Format: Research Paper Series

   

This study examines how national cultural values influence the preferences of managers in 28 countries for resolving the tension of whether to promote innovation inside (rational championing) or outside (renegade championing) organizational norms, rules and procedures. The study finds that managers in individualistic, high power-distant and uncertainty accepting societies prefer renegade strategies, while managers in collectivist, low power-distant and uncertainty avoiding societies prefer rational championing.  

  

 

Title: Some central tensions in the management of corporate venturing

Source: In S. Birley and I. MacMillan (eds.), Proceedings of the second global conference on entrepreneurship, 177-199  
Authors: S. Venkataraman, S. Shane, R. McGrath and I. C MacMillan 
Date: 1993 
Format: Research Paper Series 

Title: The outcomes of corporate venturing and corporate renewal: An assessment framework 

Source: PDMA Proceedings, 13-21  

Authors: S. Venkataraman, R. McGrath and I. MacMillan 
Date: 1993 
Format: Research Paper Series 

Title: Championing behavior: A study of large Japanese organizations 

Source: Frontiers of Entrepreneurship Research, 427-436  

Authors: S. Venkataraman, T. Ohe, S. Sano, S. Honjo, S. Shane and I. MacMillan 
Date: 1993 
Format: Research Paper Series 
 

  

Title: Progress in research on corporate venturing 

Source: D. L. Sexton (ed.), State of the art in Entrepreneurship Research, 487-519, Boston, MA: PWS-Kent publishing 
Authors: S. Venkataraman, I. MacMillan and R. McGrath 
Date: 1992 
Format: Research Paper Series 
 
 

Title: Measuring outcomes in corporate venturing: An alternative perspective 

Source: Academy of Management, Best Paper Proceedings, August, 85-89 
Authors: R. McGrath, S. Venkataraman and I. MacMillan 
Date: 1992 
Format: Research Paper Series
 
 

Title: Desirable disappointment: Capitalizing on failures in new corporate ventures 

Source: Frontiers of Entrepreneurship Research, 537-551 
Authors: S. Venkataraman, R. McGrath, I. MacMillan and O. Boulind 
Date: 1992 
Format: Research Paper Series 
 
 

Title: Starting up in a turbulent environment: A process model of failure among firms with high customer dependence 

Source: Journal of Business Venturing, Vol. 5 (5), 277-295 
Authors: S. Venkataraman, A. Van de Ven, J. Buckeye and R. Hudson 
Date: 1990 
Format: Research Paper Series 

This paper proposes a process model on how new and small organizations may fail. Based on prior research, the paper builds a foundation for a process model, and then elaborates it inductively by explaining how and why significant reversals and shifts occurred between 1983 and 1985 in the entrepreneurial, organizational, and ecological conditions of ten new educational software companies. The process model states that all organizations engage in transactions with others in the normal conduct of business, and it is inevitable that a certain proportion of these transactions fail. The probability of transaction failures is a product of the failure rate at the level of the organizational population, as well as the kinds of transactions in which individual firms engage. New and small firms in a turbulent environment represent a subset of the organizational population particularly vulnerable to the chance occurrence of a failed transaction.  

Because of liabilities of newness and small size, these firms lack legitimacy. Furthermore, in many industries there is an absence of tangible physical assets that entrepreneurs can use as collateral to attract valuable resources and customers. In such situations, entrepreneurs often use transactions with key external constituencies as a surrogate to attract other resource constituents, thus giving rise to a leveraged set of transactions. This leveraging strategy, however, makes the set of transactions of the firm tightly coupled. And when any one transaction in a tightly coupled set fails, the set often collapses. Hence, a small business firm in this situation fails when a transaction in which it is highly dependent or leveraged happens to fail. The very strategies that contributed to overcoming the problems of liabilities of newness and small size turn out to be the root causes of failure. The experiences of the courseware companies are generalized to a process model of failure of new small businesses in turbulent environments. 

Title: Process of new business creations in different organizational settings 

Source: H. Angle, and M. Scott-Poole (eds.). Research on the Management of Innovation, 221-297, New York, NY: Harper and Row 
Authors: S. Venkataraman, A. Van de Ven, D. Polley and R. Garud 
Date: 1989 
Format: Research Paper Series

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