Upload
i042986
View
223
Download
0
Embed Size (px)
Citation preview
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
1/39
HOW DO ORGANIZATIONS COME INTO EXISTENCE?
TOWARDS AN EVOLUTIONARY THEORY OF ENTREPRENEURSHIP
Pierre-Yves Gomez
EM Lyon
BP 174, Ecully Cedex 69132
France
Email: [email protected]
Thierry Volery
EM Lyon
BP 174, Ecully Cedex 69132
France
Email: [email protected]
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
2/39
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
3/39
- 3 -
How do organizations come into existence? This question at the root of entrepreneurship still
puzzles researchers and it is yet to be answered in a totally satisfactory manner (Gardner, 1985).
Early research in entrepreneurship tried to tackle this question by focusing on the psychological
characteristics of business founders (Brockhaus, 1980; DeCarlo & Lyons, 1979; McClelland,
1961). This lead to an endless list of characteristics associated with the entrepreneur but it failed
to explain the process of organization formation. A response to the limited success of the trait
approach has been to view enterprise creation in context. One way of doing this is to apply a
more aggregate level of analysis and to look for environmental variables that can explain variations
in the rate of new enterprise formation (Aldrich, 1990). In that respect, social, economic, political,
infrastructure development, and market emergence factors (Moran & Ghoshal, 1999; Specht,
1993) can significantly influence the entrepreneurs intention. Overall, these approaches, albeit
giving interesting insight into the factors leading to entrepreneurship and new ventures from a
macro-social point of view, do not throw light on the process of organization emergence from a
micro-social point of view.
Researchers have traditionally centered on profit being the rationale of the existence of
organizations (Casson, 1992; Knight, 1921). From this point of view, organizations emerge
because they aim to and succeed in realizing profit. However, every day experience shows that
there are many non profitable business ventures which are established only to fail later, or that
some firms emerge despite a negative profit rate. Profit, therefore, cannot be a discriminating
factor to explain the coming of firms into existence. This suggests a separation between the
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
4/39
- 4 -
emergence of organizations and their survival. By focusing on profit, the classical economic view
emphasizes the problem of survival and underestimates the genesis of organization, thus failing to
explain comprehensively why and how new organizations emerge.
The basic assumption of this article is that a evolutionist perspective can better tackle this
phenomenon than an economic one. In the first part of the paper we identify a fundamental
paradox that exists in the economic literature due to the discontinuous nature of the entrepreneurial
process. We show why an evolutionary point of view could help to resolve that paradox. In part
two, we propose a framework of the entrepreneurial process drawn from Campbells (1965)
seminal work on evolutionary theory. This framework outlines a basic definition of the
entrepreneur and describes the stages of the evolutionary process as projection, selection and
retention (Baum & McKelvey, 1999) in order to put together numerous empirical evidence
collected by research in entrepreneurship. Finally, we try to evaluate our framework and suggest
various research perspectives on its basis.
PART 1: PARADOX IN THE ENTREPRENEURIAL PROCESS
Economic and managerial literature recognizes that the entrepreneurial action is typically
characterized by a discontinuity in economic process (Gartner, Bird, & Starr, 1992). This action
creates a rupture in the existing business state of the world to give birth to a new organization. It is
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
5/39
- 5 -
a jump from non-existence to existence, from potential to real without other continuity in the
process but the role played by a specific individual the entrepreneur.
From resource holders to stakeholders
The entrepreneurial action presents a somewhat ambiguous nature in that it is both one which
generates a discontinuity in economic order by creating new ways of realizing value, and at the
same time, it is one which ensures continuity in economic order by combining different economic
resources which existed before. This ambiguous dimension of the entrepreneurial action is a way
of understanding from a micro-evolutionary point of view what Schumpeter (1934) coined
creative destruction from a macro-evolutionary point of view. At the center of the
entrepreneurial process lies the transformation of resource holders into stakeholders.
Fundamentally, we can identify three steps in this process as shown in figure 1.
Insert Figure 1 about here
OA represents the pre-organization period as defined by Katz and Gartner (1988). This is the
stage where the nascent entrepreneur realizes or sees to use Penroses word (1959) that there
is a potential opportunity to be exploited. He or she perceives an anomaly (Vesper, 1980) or
under-exploited potential in the marketplace (Kirzner, 1973). At this stage, the entrepreneur
clearly shows an intention a cognitive representation of both means and end to set up a
business venture (Bird, 1988; Tubbs & Ekelberg, 1991).
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
6/39
- 6 -
AB describes the rupture in the economic scenario (plan). The entrepreneur not only estimates
potential value, but also decides to create favorable conditions to realize it and jumps from
business state of the world 1 where resource holders are, to business state of the world 2 where
the future organization is supposed to combine the interests of stakeholders. In doing so, he or she
creates a discontinuity for he imagines a scenario which still does not exist for the other actors.
BC is the process of the formation of the organization, where the entrepreneur works towards
bringing the resources together, creating the product, attracting customers or hiring employees.
BC stage of the process can be said to be concerned with the transformation of independent
resource holders into stakeholders. Resources holders move along the path BC, pulled along by
the sheer will and energy of the entrepreneur, who in his entrepreneurial vision has already
achieved point C. According Katz & Gartner's definition (1988), point C in figure 1 is the
threshold where a new organization has come into existence and is sustainable in business state of
the world 2. One can claim, of course, that the three stages are not sequential and may interact
(Reynolds & Miller, 1992). This claim allows better understanding of empirical observations but
does not change the nature of the process.
Most of the studies have thus focused on the characteristics of the entrepreneur and on one
particular stage of the entrepreneurial process: the psychological characteristics of business
founders (Brockhaus, 1980; DeCarlo & Lyons, 1979; Gartner, 1985; McClelland, 1961),
personal characteristics (Stanworth, Blythe, & Stanworth, 1989; Reynolds, 1991), previous work
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
7/39
- 7 -
experience (Storey, 1982; Ronstadt, 1988), family background (Krueger, 1993; Mathews &
Moser, 1996), gender (Buttner & Rosen, 1989; Kolvereid, Shane, & Westhead, 1993), and
education (Brockhaus & Nord, 1979; Storey, 1982). It doing so, researchers fail or simply avoid
building a complete framework to understand the logic of the entrepreneurial process leading from
point O to C (Low & MacMillan, 1988). The claim of this article is that the lack of general
framework is due to a fundamental paradox inherent in the very nature of the entrepreneurial
process.
The Entrepreneurial Paradox
As noted above, the entrepreneur both creates discontinuity by his way of seeing new
opportunities and continuity by his commitment. In order to understand the logic of this process
one question must be answered: how can we evaluate the output of the entrepreneurial process
before the organization is created (Baumol, 1982) ? This question is crucial to understanding the
rationale that resource holders use in judging whether they want to become stakeholders or not.
The answer to this question is based on a paradox.
On the one hand, at point O (figure 1), the entrepreneur is an individual who sees abnormality
(Penrose, 1959) or opportunities (Kirzner, 1979) and the possible jump to the business state of
the world 2 by combining resources in order to create value. In this process he tries to give value
to products, services, or processes which are often initially opposed by market forces in the
business state of the world 1. This view supposes that opportunities exist somewhere (but where?)
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
8/39
- 8 -
before the process of firm creation, and are seen by nobody but an astute entrepreneur. This
underestimates the creation of opportunities by entrepreneurs. As Christensen (1997)
remarked, the creative process is not only a question of seeing abnormality in the market but it is
also the ability to maintain it against the doubts and suspicions of market players. This is
particularly true in the case of radical innovations. These are based on disruptive technologies and
often present teething problems that spoil the customers bottom line. The creation of the new
organization is the last step in a dynamic process of overcoming resistance to economic change
and moving on to a different plane business state of the world 2. From this point of view, the
evaluation of the entrepreneurial process escapes the market forces before it is ended, i.e. an
organization is created in a business state of the world 2. On the contrary, the new organization
contributes to create or simply to maintain the market. This can be called the genetic problem.
On the other hand, traditional literature suggests that the entrepreneurial process is evaluated as
efficient if it gives rise to a profitable organization (Cole, 1968). Using a biological metaphor, we
could say that the organization must be viable for the struggle of life in a competitive environment.
An entrepreneur is an individual who captures potential benefits to deliver new value. His or her
ideas must create an organization which fits its competitive environment and generates profit,
hence creating incentives for resource holders to invest in the nascent venture. Thus, normal
methods of evaluation must be used to assess the entrepreneurial project, by comparing it to other
organizations which already evolve in business state of the world 2. From this point of view, the
evaluation of the entrepreneurial process is left to the market forces. This can be called thefitness
problem.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
9/39
- 9 -
The confrontation between the genetic and the fitness problem creates a paradox in studying the
entrepreneurial process. Indeed, there is on the one hand abnormality linked to the purpose until
the organization is created in a new business state of the world (say, 2) and, on the other hand,
normal evaluation by profit maximization according to the rules of the market as if the
organization was already created. This paradox questions the evaluation of the entrepreneurs
action during the organization formation process and thus places the genetic problem in
opposition to the fitness problem. The further the final business state of the world of the new
organization is from that of the resource holders, the more difficult it is to solve the paradox.
The Knight-Casson Framework
Knights (1921) seminal work is perhaps the most accomplished and well regarded attempt at
bringing a solution to the entrepreneurial paradox. Knight put forth the notions of risk and
uncertainty. He noted that the role of the entrepreneur consists of turning uncertainty into risk. At
the beginning of the entrepreneurial process, resource holders feel uncertainty. They cannot
evaluate the future output for it does not refer to normal rules of evaluation and they have no
similar examples which can help them to make a comparison. The role of the entrepreneur consists
therefore in giving them reasons to consider the future organization as profitable. In doing so, the
organization becomes certain according to Knight, i.e. it can generate profit ([a ; + b])
according to a given probability which defines a risk (p[0 ; 1]). Consequently, evaluation [e
{(pi; I)}] is possible for the potential organization within a competitive environment . Uncertainty
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
10/39
- 10 -
thus gives way to risk. Casson (1982) completed the framework from a classical microeconomic
perspective and suggested that the resource holders calculate their profit as ifthe organization was
already existing in business state of the world 2 in order to decide whether or not to bring their
resources in. The evaluation of the risk is therefore possible as the calculation resulting in a trade-
off between risk and interest.
Within the Knight-Casson framework, the entrepreneur is an individual who reveals information on
future possibilities of creating value and then effectively realizes value. Similarly, Knight (1921)
describes the entrepreneur as an agent who is willing to be responsible for discretionary decisions.
Profit is then the reward for exercising the entrepreneurial function. Alongside this theoretical
approach (cf. Kirzner, 1979; Marshall, 1961; Schumpeter, 1934) the entrepreneur is ontologically
an outstanding being, whose personal qualities explain his or her ability to transform uncertainty
into risk by creating confidence in the future. This seminal framework has become classical and
still inspires many studies in entrepreneurship. This explains why the literature focuses on the
entrepreneur rather than on the entrepreneurial process, and attempts to define the social raison
dtre of the entrepreneur. Nevertheless, it does not really solve the entrepreneurial paradox.
First, the entrepreneur appears as a deus ex machina, who succeeds in managing the
entrepreneurial process because it is gifted by very definition with the qualities of an
entrepreneur. This looks rather tautological as it does not explain how the entrepreneur acts in
order to turn uncertainty into risk. We come back to the genetic problem. The Knight-Casson
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
11/39
- 11 -
approach makes clearer the nature of the entrepreneur but it does not solve the question of the
contentof his role in the evolution from O to C in figure 1.
Secondly, the Knight-Casson approach tries to solve the entrepreneurial paradox by removing
one of its two terms: the role of abnormality in the entrepreneurial process. The raison dtre of
the entrepreneur is reduced to making people aware of potential profit. This approach neglects the
fact that the entrepreneur is first and foremost an individual who invents a new way of realizing
value often considered as abnormal by the resource holders (Spinosa, Flores, & Dreyfus,
1997). How can those resource holders be convinced that the entrepreneurs idea will generate
profit in business state of the world 2 while it is by definition impossible to assess in business state
of the world 1? Consequently, the Knight-Casson approach underestimates another type of
uncertainty which arises from the ignorance amongst resource holders concerned with the
entrepreneurial project about what each of them will do. Indeed, the emergence of the
organization depends strongly on how the set of resource holders will act, and more precisely if
they will all act in the same way. The role of the entrepreneur consists therefore in creating
commitment from all resource holders until they become stakeholders. This suggests that the final
business state of the world 2 in figure 1 is path-dependent to the very entrepreneurial process. No
firms can be thought without taking into account its genesis which determines the combination
between resource holders and consequently its final shape.
This suggestion is consistent with empirical observations which show that between 10% and 50%
of new organizations fail in the first five years after their launch, depending on the definition of
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
12/39
- 12 -
failure used (Brderl, Preisendrfer & Ziegler, 1992; Everett & Watson, 1998). The Knight-
Casson approach, because it subordinates the genetic problem to the fitness problem, leaves the
following question unsolved: why do so many unviable organizations come into existence?
Resource holders are pulled into an organization formation process which in the end does not yield
any profit and fails. What is the rationality of the resource holders in such a case? Are they
systematically less rational than economists? The fact that all organizations that are formed are not
necessarily viable, calls for a framework which can explain the logic of the entrepreneurial process
as one which is not totally determined by the ex posteconomic performance.
The Need For an Evolutionary Framework
The entrepreneurial paradox is intrinsically dependant on how time is considered in the dynamics
of entrepreneurship. As pointed out by ODriscoll and Rizzo (1985) the way of considering time is
crucial in solving this kind of paradox since abnormality is an ex ante point of view (before the
organization is actually created) while efficiency appears ex post (after its creation). Ex ante
reasoning operates a forward projection and assumes that abnormality is a static situation
alongside the dynamic process, while ex postreasoning observes the process from the point of
view of the final competitive environment.
To some extent, the entrepreneurial paradox exists because one wants to understand the behavior
of the entrepreneur and resource holders as if they were reasoning and acting in a static and
necessary world, while they are concerned with a dynamic and contingent process. The
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
13/39
- 13 -
entrepreneurial process both determines the future competitive environment and creates the
entrepreneur since nobody can be called an entrepreneur before he or she is involved in an
entrepreneurial process. Calculation, anticipation and scenario building can provide the rationale
for these choices but they do not explain how and why different choices end up giving rise to an
organization. If the abnormality and perspectives for profit are produced during the
entrepreneurship process, then the fitness is indeterminate before the end of the process.
As a consequence, we need to pay more attention to the genetic problem than to the fitness
problem. Organizations come into existence according to a genetic process which needs to be
understood on its own. Metaphorically, organizations can be observed, just like organisms coming
into existence are observed by a biologist. Of course, fitness is crucial to give meaning to the
process but it cannot be interpreted as the engine of the process itself. This separation is the basis
of the evolutionist paradigm as evidenced by the neo Darwinian synthesis (Mayr, 1985). That is
why we suggest using it in order to revisit the entrepreneurial process from an evolutionary
perspective.
PART TWO: AN EVOLUTIONARY FRAMEWORK FOR THE
ENTREPRENEURIAL PROCESS
From part one, we conclude that any framework that seeks to explain the entrepreneurial process
must achieve two targets: (1) explain both continuity and discontinuity in the process, and (2)
resolve the entrepreneurial paradox of abnormality versus profit maximization. In order to avoid
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
14/39
- 14 -
the same criticism that is directed towards the Knight-Casson approach we must (1) define the
entrepreneur as someone else than a deus ex machina, but rather as part of the dynamics
influenced by evolution, and (2) understand the entrepreneurial process per se independently of
the viability of the organization, and consequently explain why firms emerge even if they fail later.
Our approach is based on Campbells (1965) work in evolutionary theory and its blind-variation-
selection-and-retention logic. Evolutionary theorists have not paid enough attention to
entrepreneurship (Aldrich & Fiol, 1994). Instead, evolutionary research has focused primarily on
environmental discontinuities. Drawing on, for example, the population ecology perspective the
emergence of new business ventures can be seen as blind variation in the process of economic
growth, which selects and retain the fittest firms. (Greenfield & Strickon, 1986; Hannan &
Freeman, 1977). In doing so, researchers consider the entrepreneurial process as a black box
from a macro social perspective. Yet, Aldrich & Kenworthy (1999:31) argued that: Researchers
need to turn their attention to nascent entrepreneurship and the founding process at the
organizational level of analysis, not only to understand more about the process and activities
leading to organizational emergence but also to complement existing population-level theories.
We precisely aim to unravel this black box mystery in the second part of this article by examining
the entrepreneurial process from a micro social perspective. In this respect, we consider the
entrepreneurial process as the by-product of an evolutionary process whom the result is a blind
variation at the macro social level.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
15/39
- 15 -
In this second part, we outline an evolutionary framework, by suggesting and discussing a
definition of the entrepreneur and a series of six propositions. This framework operates under the
assumption that during the entrepreneurial process, the space-time dimension in which the
entrepreneur and resource holders operate is different at the beginning of the process yet become
identical at its end. The initial time lag constitutes an initial blind variation, and involves an exchange
of energy between the entrepreneur and the resource holders. This generates an evolutionary
process through the selection and retention of resources until their progressive convergence in the
same space-time dimension.
Revisiting the Entrepreneur
From an evolutionist point of view, the entrepreneurial process can be perceived as a catalysis
(Kets de Vries, 1970) synthesizing independent resource-holders to result in a new self-regulating
system of stakeholders. For clarity, we classify the resources involved in the process into three
categories: economic resources including workers, knowledge, plant, and machines, finance
providing the future organization with a mean of positioning its input and output at the right point in
time for optimum impact and consumers who allow the organization to enter a new cycle of
production and thus make the organization viable.
The catalysis of the resourcesdoes not suppose an addition but rather a new combination and
transformation of resource holders. Before entering into the entrepreneurial process, each of these
resources had a certain potential value. Having become a part of the entrepreneurial process,
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
16/39
- 16 -
these resources are a part of an interdependent system and their value is dependent upon the
simultaneous presence of each other. The quality of the combination of resources determines
whether the value of the sum is higher or lower than the sum of values.
We suggest considering the entrepreneur as a type of resource amongst others in the
entrepreneurial process. The entrepreneur can be seen as a source of energy that acts from the
beginning of the process and disappears at the end, when the entrepreneur evolves to become a
manager in the newly formed organization (Shaver & Scott, 1991). Just like a chemical agent,
the capability of forging links which synthesize independent resources is the specific contribution
of the entrepreneur to the process. The action of this resource relates to the other resource-
holders and develops relationships with them, therefore leading them to work towards the
common process of catalysis which finally gives way to a new organization.
Definition: The entrepreneur must be considered as a resource amongst others, which
provides the entrepreneurial process with a factor of catalysis by forging relations between
independent resource holders.
Evidence and support for this approach are provided by the literature on networks, which shows
the entrepreneur as an individual who taps into a pool of resources to create his new organization
in a competitive environment (Carsud, Gaglio, & Olm, 1987; Johannisson, 1990). Hence the
entrepreneurial process defines entrepreneurs themselves as a resource. The more this individual
acts to gather resources and synthesize them, the more he becomes an entrepreneur and
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
17/39
- 17 -
becomes himself synthesized within the process. This definition allows us to escape from the
tautology that describes entrepreneurs as those who support entrepreneurship. In our view,
entrepreneurship is concerned with the conjunction and convergence of resources in which the
entrepreneur plays a role amongst others as a factor of catalysis and is retrospectively defined
by the process. The following six propositions aim to refine the content of the role and action of
the entrepreneur and the coherent mechanism of catalysis.
Defining blind variation as a projection
Time lag and accumulation of energy. Central to the definition previously outlined is the role of
the entrepreneur as a chemical factor of catalysis who brings resource holders together. This
role requires both a high level of energy and the ability to sustain temporal tension (Bird, 1992:
12) to stretch between a vision of what could be and current conditions. The notion ofprojection
(Gomez & Korine, 1999) is the key concept for understanding the specific role of the
entrepreneur. Generally speaking, projection means that people sometimes already acts as if
the future already existed. This disruptive behaviors create perturbation in the economic world.
Projection is a blind variation, a mutation or an anomaly in the normal dynamics of business.
The mechanism of this mutation can be due to the entrepreneurs inherent characteristics, or
behavioral traits, the circumstances in which he or she may be, or an accident, or simply a mistake
and possibly a combination of these (Aldrich & Kenworthy, 1999). Whatever its origin, it is
sufficient to assume that the mutation consists of an alteration of the entrepreneurs space-time
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
18/39
- 18 -
dimension. The space is modified because the entrepreneur acts in another state of business
world. Time is different because the entrepreneur projects him or herself in to another state of the
world and hence thinks and acts at another level from other resources which are still in the
present. This variation creates a virtual time lag between them. As a consequence, two space-
time dimensions simultaneously co-exist and are confronted: that of the entrepreneur and that of
the other resource holders.
The entrepreneur does not only see an anomaly (Gartner, 1985) he acts a-normally. As a
mutant, the entrepreneur is abnormal. Thus, he tries to transform the vision and the behaviors of
other resources in order to make them act in his own space-time. In other words, entrepreneurs
are individuals who try to reduce their abnormality by making others as abnormal as they are. This
is the proper specificity of their action as catalyst. The time lag provides the entrepreneur with
the amount of energy required to change the space-time position of others. We will call it
Transforming Energy or ET.
Proposition 1. The entrepreneurial process is characterized by an initial lag between
entrepreneurs space-time and the space-time of the other resources which charges the
entrepreneur with Transforming Energy.
This proposition is consistent with a large amount of evidence and observations that describe
entrepreneurs as both visionary and full of energy (Gilder, 1992), resilient (Mc Clelland, 1961),
and possessing the ability to convince people that they are right (Aldrich, 1999). This is also
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
19/39
- 19 -
consistent with the classical Schumpeterian opposition between inventor and entrepreneur. A
visionary without energy is an inventor or a dreamer. As a result of projection, the entrepreneur is
the one who acts in the future and because he is consequently charged with the energy to carry
along other resources in doing so. According to our proposition this energy does not come from
specific characteristics of a superman or superwoman but simply from a blind variation, an
anomaly that exists because an actor does not act in the same space-time dimension as the others.
The entrepreneurial process and the genesis of organizations can be revisited as a process of
exchange of energy between the resources holders as we will show further.
Reduction of time lag and expenditure of energy. Whatever the reasons which lead to the
initial blind variation, the important issue in our framework is the energetic effect of the
entrepreneur and how it triggers selection and retention of resources. This is indeed the condition
for the resources to come together in the same space-time. Transforming Energy ET accumulated
will be expended in selecting resources (DS) and retaining them (DR), such that ET=DS+DR. Once
again, the entrepreneur is not a deus ex machina but a resource which has accumulated energy
and discharges it in taking part in the entrepreneurial process. Accumulation and expenditure of
energy during the process first produces and then reduces the initial time lag. This explains why the
entrepreneur disappears at the end of the process: more often than not, when his transforming
energy is exhausted and he or she becomes, if successful, a manager.
Note that the more entrepreneurs project themselves into the future the more Transforming Energy
they accumulate. Indeed, a large gap in the space-time dimension involves a radical change in
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
20/39
- 20 -
viewing the environment and acting in the entrepreneurial space-time. As a consequence, the
entrepreneur will expend more energy DS and DR in order to select and retain other resources.
Proposition 2: The entrepreneurial process leads to an expenditure of Transforming Energy
in order to fill the initial time lag and triggers selection and retention of resources.
The dynamics of accumulation and expenditure of energy due to time lag opens new perspectives
to understand success versus failure in entrepreneurship as we will show in the following sections.
Defining Selection
From the Knight-Casson point of view, the entrepreneur can and must rationally choose the right
resources in order to achieve his project. This assertion is not consistent with empirical
observations showing that more often than not, selection of resources depends a lot on the
environment of the entrepreneur, his culture and personal network (Aldrich, 1999) or the social
environment (Specht, 1993) in general. It has also been noted that in many cases entrepreneurs
start their new ventures by tapping into their personal circle of friends and relatives (Reynolds,
1997). The social and economic context of entrepreneurs exists before their projection. They
adapt their targets to the resource holders they feel they are able to mobilize (Aldrich &
Kenworthy, 1999). This is perfectly rational or at least reasonable for, as said before, the
entrepreneur expends a quantity DS of his total Transforming Energy ET in order to select
resources.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
21/39
- 21 -
The more difficult it is to find and attract resources, the higher the expenditure of energy DS and
DR. As a result, the entrepreneur rationally tends to limit the expenditure of Transforming Energy
by focusing on the resources that are the easiest to find. In Simons (1954) words, satisfying is
more realistic than pure maximization. Thus, rather than a pure economic choice, selection is
highly dependant on circumstances and the social environment of entrepreneurs which constitutes
the initial conditions of the entrepreneurial process.
Proposition 3: The social and economic environment of the entrepreneur constitutes the
initial conditions for the process and defines the level of energy DS the entrepreneur
expends in order to select resources.
Proposition 3 could explain why the entrepreneurial process often ends up with few synthesized
resources which progressively increase after the organization is created (Lumpkin & Dess, 1996).
Conversely, this could also explain why so many organizations are created although they are not
viable and then fail after a certain period of time. Synthesized resources are sufficient to set up a
new organization but they might not be adequate for it to survive in a competitive environment. As
a consequence, training programs and advice must help entrepreneurs enlarge their networks in
order to decrease the energy ES expended to select resources and to provide them with more
opportunity to find the most efficient. Network relationships and contacts are indeed not only
useful to identify opportunities and obtain the initial resources, they are also crucial to sustain the
business venture through the infancy stage (Low & MacMillan, 1988).
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
22/39
- 22 -
Propositions 1, 2 and 3 help to understand the specific role of the entrepreneur from an
evolutionary point of view using Campbells logic (1965). Time lag provides an explanation about
the reason why one of the resources involved in the process the entrepreneur produces
Transforming Energy in order to select and retain others until they become stakeholders in a new
organization. The question that remains is how this expenditure of energy produces a mechanism
involving the catalysis between resources. In order to answer this question, we must refine the
notion of retention of resources.
Defining Retention
The entrepreneurs action during the st age of retention consists of two dimensions. Firstly, the
entrepreneur acts in order to change the resources space-time dimension. This involves an
expenditure of energy in order to replace the current way of thinking and acting of resource-
holders with an acceptance of another space-time so that they act accordingly. Since something
must be destroyed in the current resource holders state of the world to trigger their shift, let us
call it destructive energy and refer to it with the notation it DR.
Secondly, the entrepreneur simultaneously acts so as to create relationships between resources
holders until they become stakeholders. This expenditure of energy can be called creative energy
and noted DR+. Thus, the total energy DR expended in order to retain resource holders and turn
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
23/39
- 23 -
them into stakeholders is a combination of destructive and creative energy such as DR = DR+ +
DR_.
Proposition 4: During the entrepreneurial process, retention consists of both destructive
and creative energy.
This proposition is derived from Schumpeters (1934) classical analysis of entrepreneurship as
creative destruction recalled in part 1. Existence of both discontinuity and continuity is re-
interpreted as expenditure of both destructive and creative energy and is a consequence of initial
time lag. The following propositions 5 and 6 aim to refine the mechanism of this energy
expenditure.
Understanding destructive Energy: the Role of Uncertainty. We suggest that the
entrepreneur first approach the resource holders with a intriguing assertion; he or she present a
new business idea, a prototype, some evidence of financial commitment, a potential profit. The
simple why not question arises for the resource holders. The entrepreneur believes in his project
and act consequently expending energy to prove he is right. In doing so he obligates resource
holders at least to consider the possibility that he is effectively right. This provides the entrepreneur
with destructive potential of the state of business of resources. Whatever their final choice may be,
resource holders have made a step towards the entrepreneurs space-time dimension to consider
his present as their possible future, and this triggers their commitment within the entrepreneurial
process.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
24/39
- 24 -
Though this may sound contrary to the notion studied in Knights work that the entrepreneur
provides asolution to uncertain situations, we assert that entrepreneurs first create uncertainty
in an economic world. They bring about a discontinuity in the resource holders space-time
dimension and make them face uncertainty. Resource holders do not know how to evaluate the
entrepreneur's action, and therefore do not know how to reciprocate it. But they remain
challenged by a possible commitment. This is the reason why we suggest that retention begins with
destructive energy ER-which produces a disequilibria in the social game and invokes uncertainty
into the process.
Proposition 5: Expenditure of destructive energy DR_ by the entrepreneur creates
uncertainty which enables other resources holders to enter the entrepreneurs space-time.
This proposition is consistent with empirical observations which show that generosity is a
fundamental characteristic of the entrepreneur (Gilder, 1992; Spinosa et al. 1997). According to
our framework, this generosity is not (only) considered as an ethic value or a personal quality.
Paradoxically, generosity typifies the expenditure of destructive energy DR_ . It is a unilateral outlay
of energy to compensate for the time lag. These one-sided actions create a rupture in the normal
space-time and discontinuity and as a consequence force resource holders to modify their own
view on the future.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
25/39
- 25 -
Understanding creative Energy: How to create Certainty about the Future? Resource-
holders have then two alternatives available to them. They may decide that they are not attracted
by the entrepreneurial purpose, in which case they give up the game, and the entrepreneurs ideas,
visions or perspectives for profit are not reciprocated. Then retention fails and the entrepreneurial
process cannot move any further. On the other end, they may enter the game and commit their
resources. However, they do not like to commit to an uncertain situation. Why must they trust the
entrepreneur? As Low and Srivatsan (1995) showed, this question leads back to the Knight-
Casson paradox since there is an asymmetry of information about the real skill of the entrepreneur
and the quality of his purpose before the organization come into existence.
This difficult question can receive new light if we consider that the uncertainty fundamentally stems
from the asymmetry of information about whether or not other resource-holders will also
participate in the entrepreneurial process. The value of each resource, once committed to the
system, is dependent upon the value and contribution of other resources. Therefore, the
propensity of a resource holder to commit is affected by the simultaneous commitment of other
resource holders.
As a consequence, we suggest that the entrepreneur turns uncertainty into risk by signaling to each
resource holder the commitment of others. As defined in the starting point of the framework, the
entrepreneurs activity mainly consists of forging relations between resource-holders. By
expending energy, entrepreneurs do not only create a discontinuity in the resource-holders space-
time, they also convey information and signals that could convince each resource-holder that the
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
26/39
- 26 -
otherresource-holders are also willing to commit their resources. The entrepreneurs skill lies in
his or her capacity of enactment (Weick, 1979) For example, the entrepreneur may spend time
and energy explaining the business plan to the banker. By doing so, he or she would succeed in
either obtaining financial support in principle from the banker, or at least the attention of the
banker. This signals to the other resource holders that the banker is interested in investing time,
and possibly capital into the new venture. Because they trust the banker, this will reduce the level
of uncertainty for them, and they will be willing to take the new venture more seriously. As the
resource holders begin to respond by committing their resources new signals are transferred by
the entrepreneur. Consequently, if each resource holder believes that the others will contribute to
the new venture, he will in turn commit to the new venture, and thus, the new organization
becomes self-fulfilled and ends as a self-regulated system. As noted by Low and Srivatsan
(1995:75), to some extent, all ventures are self-fulfilling prophecies.
Proposition 6: Expenditure of creative energy by the entrepreneur operates as a transfer of
information about the commitment of resource-holders in progress until the system
becomes self-regulated into an organization.
What role does profit play in this process? Each resource-holder has his own interest and view in
mind about the entrepreneurial process. The prospect of future profit operates as an argument
during the stage of retention when the entrepreneur plays the role of catalyst. Each resource-
holder can estimate and discuss the viability of the forthcoming organization from his own point of
view and, as a consequence, the opportunity of their own gain. However, the crux of the problem
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
27/39
- 27 -
lies in the necessary simultaneous behaviors of all the resource holders. Each of them can expect
this viability of the future organization for egotistic reasons, but no one can calculate rationally
the viability of the forthcoming organization before knowing the degree of commitment of the other
resource holders. The fact that other resource-holders seem to believe in the future viability of the
venture is crucial in their decision to commit and make it self-fulfilling. Amongst others signals,
anticipation of profit indicates a potential commitment of resource holders.
According to our framework, the entrepreneurial process is ruled by its own evolutionary
mechanism. Anticipation of viability of the future organization plays a role as a common
denominator in order to rally resource holders. Nevertheless, the genetic and fitness processes are
separated and the mechanism of organization genesis is described independently to its final
success or failure. Figure 2 summaries the six propositions which constitute our framework.
Insert Figure 2 about here
CONCLUSION
This paper sheds light on the process of organization formation from a new perspective drawing
from evolutionary theory. Based on Campbells (1965) seminal work, our framework helps to
clarify the mechanism leading to the emergence of organizations. It opens the black box of
entrepreneurial process viewed as a blind variation and it shows that this process can be
sequenced as a blind variation, selection, and retention. Once the organization is created, the
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
28/39
- 28 -
competitive pressure operates and eliminates the weakest, as natural selection operates in a
Darwinian perspective. Our framework helps to explain why so many organizations are created
but disappear after a short period of time. In such a case, entrepreneurs succeed in synthesizing
resources but the new organization does not survive in its environment. Using the biological
metaphor, it could be said that economic evolution and growth is the consequence of many blind
variations which finally succeed in surviving or not. As for species, this profusion which leads to
success as well as to failure is the even condition of global evolution. This is the reason why the
understanding of the genetic process of organization must consequently be observed on its own.
This separation allows us to overcome the Knight-Casson paradox. Economic rationality is not the
normal way to evaluate the abnormality of entrepreneurship. Our framework points out that
the entrepreneurs action stems rather from an appropriate expenditure of energy than an
appropriate economic calculation. Table 1 summarizes the differences between the classical
economic view on entrepreneurship and the one supported by our evolutionist framework and it
suggests questions which could be revisited from this perspective. The third column of the table
allows us to underline that the classical economic perspective makes it difficult to interpret some
empirical results of entrepreneurship. In that respect, our evolutionist view is an attempt to provide
a framework to the empirical evidence.
Insert table 1 about here
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
29/39
- 29 -
From a practical perspective, as the entrepreneurial process revolves around three stages
(projection, selection, and retention), it is important that the entrepreneur devotes his/her energy in
a well-balanced fashion on those three steps for the organization to emerge. It would be
insufficient to be a visionary architect focusing on the projection stage, thus identifying an
opportunity and defining an excellent business idea, but failing to identify the resources and to get
their commitment to set up the business venture. Conversely, it would be fruitless to be a
contractor with an established network of resource holders and good networking skills, but
without the initial vision and appeal of a good business idea.
Accordingly, we can make three recommendations to foster entrepreneurship:
Create conditions and build spaces where projection is possible and where one can be a
visionary architect without feeling ashamed. This can be achieved by developing
network settings where individuals can exchange ideas and identify opportunities. Indeed
opportunities do not drop from the sky; they are created as a result of ongoing
relationships and exchanges.
Minimize the cost of selection. The nascent entrepreneur should spend a minimum amount
of energy to find the adequate resource holders bankers, venture capitalists, suppliers,
qualified staff, and adequate premises to launch the business venture.
Allow the entrepreneur to focus his energy on retention during which resources holders
become stakeholders in the emergent venture. These stake holders then have a collective
interest in the business venture and commit themselves to it, ensuring in turn its successful
launch. Conversely, potential resources holders such as venture capitalists, employees,
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
30/39
- 30 -
and suppliers must keep in mind that their own commitment during the process is part of
the success in the genesis of the organization, but does not necessarily ensure its survival in
the long term.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
31/39
- 31 -
REFERENCES
Aldrich, H.E. 1999, Organizations evolving, London: Sage Publications.
Aldrich, H.E. 1990, Using an ecological perspective to study organizational founding rates,
Entrepreneurship Theory and Practice , 14: 7-24.
Aldrich, H.E., & Fiol, M.C. 1994, Fools rush in? The institutional context of industry creation,
Academy of Management Review, 4: 645-670.
Aldrich, H.E., & Kenworthy, A.L. 1999, The accidental entrepreneur: Campbellian antinomies
and organizational foundings, in J.A. Baum & B. McKelvey (Eds.), Variations in
organization science: 19-33, Thousand Oaks, CA: Sage Publications.
Baron, R.A. 1998, Cognitive mechanisms in entrepreneurship: Why and when entrepreneurs think
differently than other people, Journal of Business Venturing, 13: 275-294.
Baum, J.A., & McKelvey, B. (Eds.) 1999, Variations in organization science, Thousand
Oaks, CA: Sage Publications.
Baumol, W.J. 1982, Toward operational models of entrepreneurship, in J. Ronen (Ed.),
Entrepreneurship: 29-48, Lexington, MA: Lexington Books.
Bird, B.J. 1988, Implementing entrepreneurial ideas: The case for intention, Academy of
Management Review, 13: 442-453.
Bird, B.J. 1992, The operation of intentions in time: The emergence of the new venture,
Entrepreneurship Theory and Practice , 17: 11-20.
Brockhaus, R.H. 1980, Risk taking propensity of entrepreneurs, Academy of Management
Journal, 23: 509-520.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
32/39
- 32 -
Brockhaus, R.H., & Nord, W.R. 1979, An exploration of factors affecting the entrepreneurial
decision: Personal characteristics vs. environmental conditions, Proceedings of the
Academy of Management: 364-368.
Brderl, J., Preisendrfer, P. & Ziegler, R. 1992, Survival chances of newly founded business
organizations, American Sociological Review, 57: 227-242.
Buttner, E.H., & Rosen, B. 1989, Funding new business ventures: Are decision makers biased
against women entrepreneurs, Journal of Business Venturing, 4: 249-261.
Campbell, D.T. 1965, Variation and selective retention in socio-cultural evolution, in H.R.
Barringer, G.I. Blanksten & R.W. Mack (Eds.), Social change in developing areas: A
reinterpretation of evolutionary theory: 19-48, Cambridge, MA: Schenkman.
Carsud, A.L., Gaglio, C.M., & Olm, K.W. 1987, Entrepreneurs-mentors, networks, and
successful new venture development: An exploratory study, American Journal of Small
Business, Fall: 13-18.
Casson, M. 1982, The entrepreneur: An economic theory, Totowa, NJ: Barnes & Noble
Books.
Christensen, C.M. 1997, The innovators dilemma, Cambridge, MA: Harvard Business Press.
Cole, A.H. 1968, Meso-economics: A contribution from entrepreneurial history, Explorations in
Entrepreneurial History, 6: 3-33.
DeCarlo, J.F., & Lyons, P.R. 1979, A comparison of selected personal characteristics of minority
and non-minority female entrepreneurs, Journal of Small Business Management, 17:
22-29.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
33/39
- 33 -
Everett, J., & Watson, J. 1998, Small business failure and external risk factors, Small Business
Economics, 11: 371-390.
Gartner, W.B. 1985, A conceptual framework for describing the phenomenon of new venture
creation, Academy of Management Review, 10: 696-706.
Gartner, W.B, Bird, B.J., & Starr, J.A.1992, Acting as if: Differentiating entrepreneurial from
organizational behavior, Entrepreneurship Theory & Practice, 16: 13-31.
Gilder, G. 1992, Recapturing the spirit of enterprise, San Francisco: ICS Press.
Gomez, P.Y., & Korine, H. 1999, The leap to globalization: An economic explanation and a
management framework, SLRP WP62/1999, London: London Business School.
Greenfield, S.M., & Strickon, A. 1986, Entrepreneurship and social change, Lanham, MD:
University Press of America.
Hannan, M.T., & Freeman, J. 1977, The population ecology of organizations, American Journal
of Sociology, 82: 929-964.
Johannisson, B. 1990, Economies of overview: Guiding the external growth of small firms,
International Small Business Journal, 9: 32-44.
Katz, J., & Gartner, W.B. 1988, Properties of emerging organizations, Academy of
Management Review, 13: 429-441.
Kets de Vries, M. F. R. 1970, The entrepreneur as catalyst of economic and cultural
change, unpublished doctoral dissertation, Harvard University, Graduate School of
Business Administration.
Kirzner, I. 1973, Competition and entrepreneurship, Chicago: Chicago University Press.
Kirzner, I. 1979, Perception, opportunity and profit, Chicago: University of Chicago Press.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
34/39
- 34 -
Knight, F.H. 1921, Risk, uncertainty and profit, New York: Houghton Mifflin.
Kolvereid, L., Shane, S., & Westhead, P. 1993, Is it equally difficult for female entrepreneurs to
start businesses in all countries?, Journal of Small Business Management, 31: 42-51.
Krueger, N. 1993, The impact of prior entrepreneurial exposure on perceptions of new venture
feasibility and desirability, Entrepreneurship Theory and Practice , 18: 5-21.
Low, M.B., & MacMillan, I.C. 1988, Entrepreneurship: Past research and future challenges,
Journal of Management, 14: 139-161.
Low, M.B., & Srivatsan, V. 1995, What does it mean to trust an entrepreneur? in S. Birley &
I.C. MacMillan, International entrepreneurship: 59-78, London: Routledge.
Lumpkin, G.T., & Dess, G.G. 1996, Clarifying the entrepreneurial orientation construct and
linking it to performance, Academy of Management Review, 21: 135-172.
Marshall, A. (1961), Principles of economics , 9th edition, New York: MacMillan.
Matthews, C.H. & Moser, S.B., 1996, A longitudinal investigation of the impact of family
background and gender on interest in small firm ownership, Journal of Small Business
Management , 34(2): 29-43.
Mayr, E., 1985, The growth of biological thought: Diversity, evolution, and inheritance,
London: Belknap Press
McClelland, D. 1961, The achieving society, Princeton, NJ: Van Nostrand.
Moran, P., & Goshal, S. 1999, Markets, firms, and the process of economic development,
Academy of Management Review, 3: 390-412.
ODriscoll G.P., & Rizzo, M.J. 1985, The economics of time and ignorance, London:
Blackwell.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
35/39
- 35 -
Penrose, E.T. 1959, The theory of the growth of the firm, New York: Wiley.
Reynolds, P.D. 1991, Sociology and entrepreneurship: Concepts and contributions,
Entrepreneurship Theory and Practice , 16: 47-70
Reynolds, P.D., & Millier, B. 1992, New firm gestation: Concept, birth, and implications for
research, Journal of Business Venturing, 7: 405-417
Reynolds, P.D., & White, S. 1997, The entrepreneurial Process: Economic growth, men,
women, and minorities, Westport, CT: Quorum.
Romanelli, E. 1989, Organization birth and population variety: A community perspective on
origins, in B.M. Staw & L.L. Cummings (Eds.), Research in organizational behavior:
211-246, Greenwich, CT: JAI Press
Ronstadt, R. 1988, The corridor principle, Journal of Business Venturing, 3: 31-40.
Shaver, K.G., & Scott, L.R. 1991, Person, process, choice: The psychology of new venture
Creation, Entrepreneurship Theory and Practice , 16: 23-46
Schumpeter, J.A. 1934, The theory of economic development, Cambridge, MA: Harvard
University Press.
Simon, H.A. 1954, Administrative behavior, New York: The Free Press.
Specht, P.H. 1993, Munificence and carrying capacity of the environment and organization
formation, Entrepreneurship Theory and Practice, 17: 13-23.
Spinosa, C., Flores F., & Dreyfus, H. 1997, Disclosing new worlds, Cambridge, MA: MIT
Press.
Stanworth, J., Blythe, S. & Stanworth, C. 1989, Who becomes an entrepreneur? International
Small Business Journal, 8: 11-22.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
36/39
- 36 -
Storey, D.J. 1982, Entrepreneurship and the new firm, London: Croom Helm
Tubbs, M.E., & Ekelberg, S.E. 1991, The role of intentions in work motivation: Implications for
goal-setting theory and research, Academy of Management Review, 16:180-199.
Vesper, K.H. 1890, New venture strategies, Englewood Cliffs, NJ: Prentice Hall.
Weick, K.E. 1979, The social psychology of organizing, Reading: Addison-Wesley.
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
37/39
- 37 -
FIGURE 1
The key steps of the entrepreneurial process
Stages ofthe Process
Time
Identification of opportunities
Generation of ideas Identification of resource
holders
Bringing the resources together Development of product /service Generating stakeholders
O
A
B
C
Organization
creation
Business stateof the world 1
Business state
of the world 2
Rupture
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
38/39
- 38 -
FIGURE 2
The entrepreneurial process from an evolutionary perspective
0
Initial lag between
the entrepreneurs
space- time and the
space-time of other
resource holders
BLIND VARIATION
or PROJECTION
This mutation
charges the
entrepreneur with
Transforming
Energy
The entrepreneur
expands the
Transforming
Energy to select
and retain resources
RETENTION
SELECTION
The entrepreneur expands
creative Energy transferring
information about the
commitment of other
resource holders
The entrepreneur expands
destructive Energy to
create uncertainty
The organization
becomes self- fulfilled
and comes
into existence
Stages of the
Entrepreneurial
process
Time
Business state
of the world 1
Business state
of the world 2
8/8/2019 How Do Organizations Come Into Existence - Towards an Evolutionary Theory of Entrepreneurship
39/39
- 39 -
Table 1Comparison between classical economic and evolutionist approach of entrepreneurial
process
Classical EconomicApproach
Evolutionist Approach
Result of research
Matching theEvolutionist Framework
Central factor forentrepreneurial
process
The existence of
potential opportunitiesfor profit is the reason
why new organizationsare created.
The fitness explains the
genesis of theorganization
Time lag between people
who do not act in the samespace-time dimension is
the engine for newentrepreneurial ventures.
The fitness and the genesis
obey two distinctmechanisms
Most new ventures comeinto existence but do not
survive (Brderl,Preisendrfer & Ziegler,
1992; Everett & Watson,1998; Reynold & White,
1997)
Opportunities
The entrepreneur seesand realizes
opportunities whichpotentially exist before
the entrepreneurialprocess
The entrepreneurial processcreates the conditions for
the existence and thedevelopment of what will be
seen ex postasopportunities
The existence of neworganizations and the
creation of value are pathdependant (Aldrich, 1999;
Low & MacMillan, 1988)
Role of profitSearch for profit is theengine for
entrepreneurship
Profit is an argument forconvincing resource holders
to commit in the process
Most entrepreneursconsider profit as a
consequence rather thana cause of the
entrepreneurial venture
(Johannisson, 1990; Ketsde Vries, 1970)
Nature of theentrepreneur
The entrepreneur is
gifted with specialqualities
The entrepreneur is theproduct of an accident a
blind variation in thedefinition of common
business space-time
The success of
entrepreneurs is notcorrelated with social,
cultural or psychologicalfactors but depends of
appropriate conditions forexpending energy (Baron,
1998; Gartner, 1985)
Uncertainty
In the economic game,
the entrepreneur turnsuncertainty into risk
In the economic game, the
entrepreneur generatesboth uncertainty and risk
The entrepreneur uses
asymmetric informationabout the commitment of
resource holders (Low &Srivatsan, 1995;
Romanelli, 1989)