Entrepreneurship →
- 18 May 2009
- Research & Ideas
The Unseen Link Between Savings and National Growth
Professor Diego Comin and fellow researchers find a little observed link between private savings and country growth. The work may offer a simple interpretation for the East Asia "miracle" and for failures in Latin America. Q&A. Key concepts include: Companies in poor countries must attract FDI to gain access to "frontier technologies" that drive productivity and growth. Savings become key to attracting these investors, who expect the local company to have colateral in the deal. A 10 percent increase in the savings rate over the previous 10 years leads to an increase in the average growth rate over the next 10 years of 1.3 percent. Developing countries should consider policies that foster domestic savings. Closed for comment; 0 Comments.
- 01 May 2009
- What Do You Think?
Do Innovation and Entrepreneurship Have to Be Incompatible with Organization Size?
Like a good case study, this month's question divided respondents nearly down the middle, says professor Jim Heskett. Can managers lead both a large, established organization and encourage intrapreneurial effort inside it? Readers weighed in. (Online forum now closed. Next forum begins June 5.) Closed for comment; 0 Comments.
- 27 Apr 2009
- Research & Ideas
Building Businesses in Turbulent Times
An economic crisis is a charter for business leaders to rewrite and rethink how they do business, says Harvard Business School professor Lynda M. Applegate. The key: Don't think retrenchment; think growth. Key concepts include: Companies that survive the financial crisis by identifying and exploiting innovation will serve as economic growth engines in the future—and will be the industry leaders of tomorrow. This is a time of unprecedented opportunity to rethink offerings, markets, business processes, and organizational structure—and to improve them to achieve growth. Success will depend on leaders who are able to stabilize the company as they identify and exploit opportunities, find new market niches, create innovative new offerings, and restructure and reposition. Closed for comment; 0 Comments.
- 24 Apr 2009
- Working Paper Summaries
Corporate Social Entrepreneurship
Accelerated organizational transformation faces a host of obstacles well-documented in the change management literature. Because corporate social entrepreneurship (CSE) expands the core purpose of corporations and their organizational values, it constitutes fundamental change that can be particularly threatening and resisted. Furthermore, it pushes the corporation's actions more broadly and deeply into the area of social value creation where the firm's experiences and skill sets are less developed. The disruptive social innovations intrinsic to the CSE approach amplify this zone of discomfort. Fortunately, the experiences of innovative companies such as Timberland and Starbucks show how these challenges may be overcome. Key concepts include: Values-based leadership, the synergistic generation of social and economic value, and strategic cross-sector alliances are key ingredients to achieving a sustainably successful business. For companies to move their corporate social responsibility (CSR) activities to the next level, they need to rethink their current approaches to CSR, tapping into the creativity of each individual. Like all entrepreneurship, CSE is about creating disruptive change in the pursuit of new opportunities. It combines the willingness and desire to create joint economic and social value with the entrepreneurial redesign, systems development, and action necessary to carry it out. Closed for comment; 0 Comments.
- 06 Apr 2009
- Research & Ideas
Cheers to the American Consumer
The willingness by American consumers to adopt new products, processes, and services more rapidly than those in other countries may be the most important enabler of entrepreneurship and innovation in America, says marketing professor John Quelch. Key concepts include: America's "venturesome consumer" may be the most important enabler of entrepreneurship and innovation in the United States. Six characteristics separate consumers and entrepreneurs in America from those in other countries. Closed for comment; 0 Comments.
- 23 Feb 2009
- Research & Ideas
Creative Entrepreneurship in a Downturn
Entrepreneurs, take heart. True, the global economic malaise removes opportunities and precious resources—but also adds them in new and interesting ways, argues HBS senior lecturer Bhaskar Chakravorti. In this Q&A he identifies reasons for optimism, and shows how entrepreneurs can think differently about bad news. Key concepts include: There are three fundamental decisions facing any business in good times and bad: where to play, how to deliver, and how to win. Entrepreneurs should systematically identify "downturn needs," including necessities and affordable luxuries, substitutions for previous products and services, and products that deliver value for money. To serve these needs, look for downtime resources that might be available at relatively low cost. Think business model, says Chakravorti. Consider the unintended consequences of cost cutting, and instead focus holistically on the interconnected parts of your entire business model. Closed for comment; 0 Comments.
- 20 Feb 2009
- Working Paper Summaries
When Does Domestic Saving Matter for Economic Growth?
The researchers begin with a simply stated question: Can a country grow faster by saving more? Long-run growth theories imply that a country can grow faster by investing more in human or physical capital or in R&D, but that a country with access to international capital markets cannot grow faster by saving more. Domestic saving is therefore not considered an important ingredient in the growth process because investment can be financed by foreign saving. From the point of view of standard growth theory, the positive cross-country correlation between saving and growth that many commentators have noted appears puzzling. HBS professor Diego Comin and colleagues develop a theory of local saving and growth in an open economy with domestic and foreign investors. Key concepts include: Domestic saving is more critical for adopting new technologies in developing rather than developed economies. Familiarity with the technology frontier reduces its cost of adoption. Advanced countries readily adopt the frontier technology, but for countries far from the technology frontier, it is too expensive to adopt such technology without outside help. Entrepreneurs in these countries need to rely on foreign investors. However, domestic entrepreneurs may not deliver on their input contribution unless they have invested sufficient capital in the project. This co-investment is in turn financed out of domestic saving, highlighting the role of domestic saving in economic growth. Closed for comment; 0 Comments.
- 09 Feb 2009
- Research & Ideas
Uncompromising Leadership in Tough Times
As companies batten down the hatches, we need leaders who do not compromise on standards and values that are essential in flush times. Fortunately, such leaders do exist. Their insights can help other organizations weather the current crisis, says HBS professor Michael Beer. Q&A. Key concepts include: The CEOs in high commitment, high performance (HCHP) organizations are quite different in personality, background, and leadership style. But they are similar in what they see as the purpose of the firm. Among employees at large, there is a danger that commitment to an organization can undermine work-life balance. Successful CEOs are good role models. In addition to open and honest communication and continued investment in HCHP management practices, corporations need to develop an a priori set of policies in advance of the crisis that will minimize damage from restructuring and downsizing and maintain employee dignity and commitment. Closed for comment; 0 Comments.
- 02 Feb 2009
- Research & Ideas
The Success of Persistent Entrepreneurs
Want to be a successful entrepreneur? Your best bet might be to partner with entrepreneurs who have a track record of success, suggests new research by Paul A. Gompers, Josh Lerner, David S. Scharfstein, and Anna Kovner. Key concepts include: Previously successful entrepreneurs are significantly more likely to lead successful new ventures than first-timers or those who previously failed. Successful entrepreneurs are adept at selecting the right industry and time to start new ventures. Suppliers and customers are more likely to back a person with previous successes. Closed for comment; 0 Comments.
- 04 Dec 2008
- Working Paper Summaries
Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
Some places, like Silicon Valley, seem almost magically entrepreneurial with a new start-up on every street corner. Other areas, like declining cities of the Rust Belt, appear equally starved of whatever local attributes make entrepreneurship more likely. Many academics, policymakers, and business leaders stress the importance of local conditions for explaining spatial differences in entrepreneurship and economic development. This paper uses data from the U.S. Census Bureau to characterize these entry relationships more precisely within the manufacturing sector. Key concepts include: Local costs and relevant natural advantages (e.g., coastal access, energy prices) are very important for new manufacturing start-ups. Manufacturing start-ups are particularly drawn to cities with suitable labor forces in terms of occupational distributions. This labor dependency holds across all sizes of start-ups. New start-ups are drawn to areas with smaller, more entrepreneurial suppliers. Local customers are less important for manufacturing startups. Measures of general entrepreneurial culture did not predict manufacturing entry well. Closed for comment; 0 Comments.
- 03 Dec 2008
- Working Paper Summaries
Performance Persistence in Entrepreneurship
All else equal, a venture-capital-backed entrepreneur who starts a company that goes public has a 30 percent chance of succeeding in his or her next venture. First-time entrepreneurs, on the other hand, have only an 18 percent chance of succeeding, and entrepreneurs who previously failed have a 20 percent chance of succeeding. But why do these contrasts exist? Such performance persistence, as in the first example, is usually taken as evidence of skill. However, in the context of entrepreneurship, the belief that successful entrepreneurs are more skilled than unsuccessful ones can induce real performance persistence. In this way, success breeds success even if successful entrepreneurs were just lucky. Success breeds even more success if entrepreneurs have some skill. Key concepts include: There is evidence for the role of skill as well as the perception of skill in inducing performance persistence. Closed for comment; 0 Comments.
- 21 Nov 2008
- Working Paper Summaries
Applicant and Examiner Citations in U.S. Patents: An Overview and Analysis
The ready availability of patent citation data has been a tremendous boon to applied research on knowledge and innovation. The role of examiners in the generation of patent citations has been thought to potentially complicate these analyses, but has been difficult to study. Taking advantage of a change in the way patent citation data has been reported starting in 2001, this paper summarizes basic facts on examiner citations, and provides a descriptive analysis of factors associated with citations in a patent. Key concepts include: Patent citations reflect the complicated interaction of applicant and examiner strategies, capabilities, and incentives. Examiner shares are highest in fields where intellectual property tends to be fragmented (computers and communications, for example), and lowest in fields where patents have been shown to be more important in appropriating returns to research and development (such as biomedical and chemical patents). The most prolific patentees tend to have very high shares of examiner citations. Examiner citation shares are especially high for foreign firms. Closed for comment; 0 Comments.
- 03 Nov 2008
- HBS Case
Economics of the Ethanol Business
What happens when a group of Missouri corn farmers gets into the energy business? What appears to be a very lucrative decision quickly turns out to be much more risky. Professor Forest Reinhardt leads a case discussion on what the protagonists should do next. From HBS Alumni Bulletin. Key concepts include: The case examines the complex political and economic underpinnings of the ethanol industry. By investing in corn-based ethanol, farmers reduce their exposure to corn prices, but at the expense of exposure to the oil market. The case promotes greater understanding of the way materials and energy flow in the modern U.S. agricultural system. Closed for comment; 0 Comments.
- 31 Oct 2008
- Working Paper Summaries
Technology, Identity, and Inertia through the Lens of ‘The Digital Photography Company’
Why do established firms find some technological change so challenging? While existing research has identified numerous sources of inertia in established firms exploring new technological domains, identity is a critical piece of the puzzle. As the core essence of an organization, identity directs and constrains action. The routines, procedures, capabilities, knowledge base, and beliefs of an organization all reflect its identity. So when a technology is identity-challenging to an organization—when pursuing it would violate the core beliefs of both insiders and outsides about what the firm represents—organizations face significant obstacles to adopting it. This study by Tripsas highlights the importance of recognizing and evaluating the tradeoffs associated with technological opportunity and organizational identity. Key concepts include: Identity serves as a lens that filters a firm's technical choices. It influences what gets noticed, how it is interpreted, and what action is taken. Opportunities that challenge identity may simply pass by unnoticed. The self-reinforcing dynamics among internal identity, external identity, organizational action, and the industry and technological context create a strong impediment to change. Closed for comment; 0 Comments.
- 16 Oct 2008
- Working Paper Summaries
Opening Platforms: How, When and Why?
It is crucial for firms that create and maintain platforms to select optimal levels of openness. Decisions to open a platform entail tradeoffs between adoption and appropriability, and opening a platform can spur adoption by harnessing network effects, reducing users' concerns about lock-in, and stimulating production of differentiated goods that meet the needs of user segments. At the same time, opening a platform typically reduces users' switching costs and increases competition among platform providers, making it more difficult for them to appropriate rents from the platform. This paper describes research on factors that motivate managers to open or close mature platforms. Key concepts include: Absent careful definitions, it is not possible to make general statements about the attractiveness of open versus closed platform strategies. Platform openness occurs at multiple levels depending on whether participation is unrestricted at the demand-side user (end-user), supply-side user (application developer), platform provider, or platform sponsor levels. These distinctions in turn give rise to multiple strategies for managing openness. Forces tend to push both proprietary and shared platforms over time toward hybrid governance models typified by central control over platform technology and shared responsibility for serving users. Closed for comment; 0 Comments.
- 06 Oct 2008
- Research & Ideas
Updating a Classic: Writing a Great Business Plan
Harvard Business School professor William A. Sahlman's article on how to write a great business plan is a Harvard Business Review classic, and has just been reissued in book form. We asked Sahlman what he would change if he wrote the article, now a decade old, today. Key concepts include: A business plan can't be a tightly crafted prediction of the future but rather a depiction of how events might unfold and a road map for change. The people making the forecasts are more important than the numbers themselves. What matters is having all the required ingredients (or a road map for getting them), not the exact form of communication. The best money comes from customers, not external investors. Closed for comment; 0 Comments.
- 28 Jul 2008
- Research & Ideas
Making the Decision to Franchise (or not)
Owners operating outlets across multiple markets have a variety of organizational models to choose from, including franchising. The decision is one of the most important they will make. A new Harvard Business School study looks at how 420 convenience store chains organized to serve diverse customers. Key concepts include: Even firms that have a standardized business face the challenge of serving customers with different preferences and behaviors when that model is stretched across multiple markets. By choosing to franchise, the firm minimizes exposure to risk in a relatively unfamiliar market; as a tradeoff, it also gives up some measure of control. Chains that don't franchise employ fewer corporate and supervisory staff relative to the number of store-level employees. Early evidence from ongoing research indicates that unit sales are lower for firms that expand into multiple markets without franchising or providing some incentive system for local managers. Closed for comment; 0 Comments.
- 24 Jun 2008
- Working Paper Summaries
Bank Structure and the Terms of Lending to Small Businesses
Access to "soft information" and the greater sensitivity of decentralized banks to the local institutional environment can have both positive and negative consequences for small firms. Hence there may be a dark side to decentralized bank lending in certain instances. This paper argues that the same ability of decentralized banks to act on soft information also makes them more responsive to the local environment when setting terms of their loans. While this can be beneficial for small businesses in competitive markets, it also implies that the organizational structure of decentralized banks might allow them to better exploit their market power in concentrated banking markets by restricting credit or charging higher interest rates from small businesses. Key concepts include: According to the findings, small firms and those with greater "soft information" were more likely to get larger loans from decentralized banks, particularly in environments where the legal enforcements of financial contracts were relatively weak. On the other hand, decentralized banks were also more likely than centralized banks to cherry-pick the best firms, give smaller loans, and charge higher interest rates in concentrated banking markets. The relative benefit of decentralized bank structures for small business lending may therefore depend critically on the institutional and competitive environment in which banks are located. Public policy should consider promoting competition between decentralized banks in order to truly achieve the benefits associated with credit access for small businesses or those with more "soft information." Closed for comment; 0 Comments.
- 14 May 2008
- Research & Ideas
Getting Down to the Business of Creativity
Business leaders must manage and support creativity just as they would any other asset. Harvard Business School professors Teresa Amabile, Mary Tripsas, and Mukti Khaire discuss where creativity comes from, how entrepreneurs use it, and why innovation is often a team sport. From the HBS Alumni Bulletin. Key concepts include: People have their best days and do their best work when they are allowed to make progress. Whenever a firm introduces a truly novel product, suppliers, complementary producers, distribution channels, and consumers must often develop new capabilities, beliefs, and behaviors for the product to succeed, creating a challenge for the innovator. The perception exists that creative businesses can just start up, when in fact it takes a while for an entire ecosystem to actually generate an industry. Closed for comment; 0 Comments.
Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion
From Silicon Valley to Herzliya, Israel, venture capital firms are concentrated in very few locations. More than half of the 1,000 venture capital offices listed in Pratt's Guide to Private Equity and Venture Capital Sources are located in just three metropolitan areas: San Francisco, Boston, and New York. More than 49 percent of the U.S.-based companies financed by venture capital firms are located in these three cities. This paper examines the location decisions of venture capital firms and the impact that venture capital firm geography has on investments and outcomes. Findings are informative both to researchers in economic geography and to policymakers who seek to attract venture capital. Key concepts include: The success rate of venture capital investments in a region is an important determinant of venture capital firms' decisions to open new branches. While venture capital firms in San Francisco, Boston, and New York City outperform, their outperformance is not driven by local investments. While their performance in investments everywhere is better than that of their peers based in different cities, the outperformance is particularly striking outside the cities where they have offices. Interestingly, some of the performance disparity between local and nonlocal investments disappears when a venture firm does more than one investment in a region, suggesting that as the marginal monitoring cost falls, venture capital firms may reduce their expected success rate for investment in a distant geography. Closed for comment; 0 Comments.