BEYOND PIONEERS AND FOLLOWERS:

A TYPOLOGY OF ENTREPRENEURIAL BEHAVIOR

FOR SURVIVING IN A HOSTILE ENVIRONMENT.

ANDREA LANZA

SDA Bocconi Graduate Business School

8, Via Bocconi – 20136 – Milan

phone: +39-025836 6869

fax: +39-025836 6888

and

Università della Calabria at Arcavacata

Via P.Bucci – Arcavacata Campus – 87036 – Rende (CS)

phone: +39-0984 49 2268

fax: +39-0984 49 2288

email: andrea.lanza@sdabocconi.it

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INTRODUCTION

Entrepreneurship, entrepreneurial and intrapreneurial behavior, and new venture creation

constitute research issues of different scholarly fields (Amit, Glosten & Mueller, 1993; Zahra,

Jennings & Kuratko, 1999; Hitt, Ireland, Camp & Sexton, 2002). Yet, to date, it should be

noted that not all the streams of research in the broad entrepreneurship domain have received

adequate attention and empirical contributions. Appropriate attention has been devoted, for

example, to entrepreneurial behavior for emerging firms (Katz & Gartner, 1988),

implementation of entrepreneurial ideas (Bird, 1988) and assessment of entrepreneurship-

performance relationship (Zahra & Covin, 1995). Less emphasis, however, has been put on

the identification of effective entrepreneurial behavior in the firm’s survival perspective

(Miller & Friesen, 1983; Romanelli, 1989; Zahra, 1993).

This question seems to be, instead, at the very heart of entrepreneurship as a research domain

(Low & MacMillan, 1988; Davidsson, Low & Wright, 2001). The identification of those

business behavior leading to firm’s survival, in fact, represents a crucial issue in

entrepreneurship research from two points of view: that regarding the outcomes of the

entrepreneurial process (Davidsson & Wiklund, 2001; Ucbasaran, Westhead & Wright,

2001); and the one concerning the link between context and process of entrepreneurial activity

on the one hand, and entrepreneurial success on the other hand (Aldrich & Martinez, 2001).

And for ‘many are called but few are chosen’ (Aldrich & Martinez, 2001: 41), it is of the

utmost importance to understand under which circumstances entrepreneurs succeed in

creating lasting organizations; since entrepreneurs are socially important not because they

exist, but because they succeed in creating organizations and/or new business enterprise, and

eventually wealth (Low and MacMillan, 1998; Aldrich & Martinez, 2001).

This means, in turn, to understand what can be considered an effective entrepreneurial

behavior, under different environmental conditions (Johnson & Van de Ven, 2002). Effective

entrepreneurship, in fact, regards both the ways opportunities are exploited and the outcome

of this exploitation, since it is the outcome of entrepreneurial actions that determines the

contribution of entrepreneurship at societal level to wealth creation (Low & MacMillan, 1988;

Davidsson & Wiklund, 2001).

Fundamental contributions on entrepreneurship research consider one crucial element for

understanding entrepreneurial success to be the social context in which entrepreneurs develop

their efforts (Low & MacMillan;1988; Van de Ven, 1993; Schoonhoven & Romanelli, 2001).

The societal issue in entrepreneurship research has a twofold meaning. The first, just

mentioned, concerns the contribution of entrepreneurship at societal level. The second regards

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the impact of the social context on entrepreneurship (Van de Ven, 1993). Yet, Gnyawali and

Fogel (1994) have argued that an integrated and comprehensive framework is not available

for studying the impact of environmental conditions on entrepreneurship. Besides, addressing

the social context as a main part of the environmental conditions influencing entrepreneurship

requires taking into account that entrepreneurial actions are affected by the national (Shane &

Kolvereid, 1995; Delmar & Davidsson, 2000) as well as the regional (Bruno & Tyebjee,

1982; Keeble, Potter & Storey, 1990; Reynolds, Miller & Maki, 1991; Van de Ven, 1993)

environment.

Drawing from the different streams of research that have identified sources of effectiveness in

entrepreneurial behavior, this paper aims at highlighting what are the most appropriate types

of entrepreneurial behavior for firms striving to survive in a hostile environment, also

considering that effective entrepreneurial behavior modes are those that grant firm survival in

such an environment (Miller & Friesen, 1984; Gartner, Starr & Baht, 1999; Aldrich &

Martinez, 2001). More precisely, the purpose of this paper entails the identification of

effective entrepreneurial behavior for firms situated in a hostile environment at both the

national and the regional level of analysis. This enquiry on effective entrepreneurial behavior

for hostile environments is conducted on a two step-approach. The first step regards the

identification of the sources of effectiveness of entrepreneurial action, conducted via an

careful review of extant literature. On the basis of this review, the second step concerns

designing and conducting a research design on firms striving to survive in hostile

environment.

The paper is organized as follows. The next section deals with entrepreneurial effectiveness,

entrepreneurial behavior and hostile environment. Then, entrepreneurship literature is

reviewed in order to identify sources of entrepreneurial behavior effectiveness. Subsequently,

research design and methods are described. This is followed by a presentation of results, and

discussion of main implications stemming from results. The final section highlights directions

for extending research on effective entrepreneurial behavior in hostile environments.

IDENTIFYING EFFECTIVE ENTREPRENEURIAL BEHAVIOR

AND LINKING IT TO HOSTILE ENVIRONMENT

The ‘Effectiveness Issue’ in Entrepreneurship Research

Extant research showed that 34-50% of business in the United States discontinues after two

years and 50-71% meet a similar fate after five years (Shapero & Giglierano, 1982; Cooper,

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Woo & Dunkelberg, 1988). Though, it could be difficult to understand why, in similar

conditions, some organizations exit, while others continue their business, unless it is taken

into account that successful entrepreneurship (and then lasting organizations), entail the

integration of entrepreneurial context and process (Low & MacMillan, 1988).

Gimeno, Folta, Cooper & Woo (1997) propose the concept of threshold of performance,

which determines new ventures survival (or exit). According to these scholars, firms with low

thresholds may choose to continue (i.e. to survive), despite comparatively lower performance,

while firms with higher performance may choose to exit due to higher thresholds. This is

determined mainly by industry- and human capital-effects. Yet, it should be noted that

environmental munificence, in an apparently counter- intuitive relationship, may have a

positive effect on exit, since a benign environment provides good alternative entrepreneurial

opportunities. Hence, low performing firms are lead to continue in hostile environment,

because of the lack of either entrepreneurial or job alternative opportunity. While it is

accepted that the adoption of an appropriate entrepreneurial behavior can help a firm survive

(Aldrich & Martinez, 2002), firms with equal performance may differ in thresholds of

performance and, consequently, survival cannot be assumed as a mere performance-

dependent variable (Gimeno et alii, 1997, McGrath, 1999). The link between survival and

entrepreneurial effectiveness seems, therefore, to require a further analysis and a careful

review of extant literature.

Early contributions to the identification of effective entrepreneurial behavior, in fact, had

already been developed by authors who, referring to entrepreneurship as a minor stream of

strategic management (Mintzberg, 1973; Miles & Snow; 1978), had pointed out that an

effective entrepreneurial behavior represented an innovative, proactive and risk taking

strategic posture. Besides such studies, other typologies shared a similar approach, in order to

explain and predict effective entrepreneurial postures (Miller & Friesen, 1978; Miller, 1983;

Smith & Miner, 1983; Zahra; 1993). In this vein, Dess, Lumpkin & Covin (1997), drawing

from Hart (1992), have explored the nature of entrepreneurial strategy making and argued that

this is a distinctive strategy-making mode that combines features of a command mode – bold,

directive, opportunity seeking style – with aspects of the generative mode – risk taking and

experimentation.

Further contributions have undertaken a research approach aimed at the development of a

typology (Lumpkin and Dess, 1996; Gartner, Starr and Bath, 1999; Ucbasaran, Westhead and

Wright, 2001; Davidsson & Wiklund, 2001; Johnson & Van de Ven, 2002). Lumpkin & Dess’

(1996) definition of entrepreneurial orientation (EO) through five dimensions addresses the

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point of defining what constitutes entrepreneurship: autonomy, innovativeness, risk taking,

proactiveness and competitive aggressiveness. Gartner et al.’s (1999) study on predicted

pattern of survival, instead, focuses on four broad categories of analysis: individual

characteristics; entrepreneurial behavior; strategy; and environment. Drawing from literature,

Ucbasaran et al (2001) focused their contribution on a classification of types of entrepreneurs:

nascent (individuals considering the establishment of a new business); novice (individuals

with no prior business ownership experience); habitual (individuals with prior business

ownership experience); serial (individuals who have sold/closed their original business and at

a later date have established or purchased another one); and portfolio (individuals who have

retained their original business and at a later date have established or purchased another

business). In a slightly different perspective, Davidsson & Wiklund (2001), combining new

enterprise outcome at individual- and societal- level, identify four type of entrepreneur: hero

enterprise (big-time entrepreneurs who create value for the society through the introduction of

new combination while creating personal wealth); robber enterprise (entrepreneurs who do

not create value for the society while creating personal wealth); catalyst enterprise (failed

entrepreneurs whose ideas are successfully developed by others); genuine failures (failed

business attempts that lack any spillover effect).

Finally, linking different theoretical perspectives to entrepreneurial profiles, Johnson & Van

de Ven (2002) highlighted four types of successful entrepreneurs: opportunist (individuals

whose ability is to recognize opportunity, in a population ecology perspective); risk taker

(individuals able to develop capabilities quicker than anyone else, in an evolutionary

perspective); pioneer (individuals blazing new trails for others to follow, in an a new

institutional perspective); industry architect (individuals that create and/or negotiate rules and

resources that will define the industry, in an industrial community perspective).

Yet, for entrepreneurs do not constitute a homogeneous entity and entrepreneurship is not a

single action event, insights stemming from these theoretical studies, while providing useful

prescriptions may lack of an empirical support as regards actual entrepreneurial effectiveness

in hostile environments. Therefore, it could be appropriate to carry out research efforts in

order to discover whether different types of effective entrepreneurs in hostile environment do

exist.

In essence, these important studies and extant contributions on effective entrepreneurial

behavior notwithstanding, what may need further clarification is the comprehension of the

ultimate reasons of entrepreneurial effectiveness in a hostile environment. This may require

the development of an integrative framework, which may lead to understand, in a non-

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reductionist way, what entrepreneurial behavior can be considered effective especially for

hostile environments. Such a purpose may be reached, for example, by observing from either

a narrower and focused theory-driven perspective (Low & MacMillan, 1988), or from a

broader literature review-based approach (Amit, Glosten & Mueller, 1993), the pattern of

behavior in a sample of survivor firms drawn from a hostile environment.

The latter approach is chosen, that relying on a literature review, in order to understand how

certain entrepreneurial actions lead to firm survival in a hostile environment. That is, it seems

appropriate first to carry out research efforts whose design considers the many roots of

entrepreneurial effectiveness, as posed by extant literature. Then, research programs taking

survived firms situated in hostile environment as the unit of analysis should be conducted.

This approach may offer new insights on how entrepreneurs strive to survive in such an

environment, the meanwhile avoiding any reductionist approaches, whether in dychotomic

(i.e., pioneers vs followers - Covin & Slevin, 1999; innovators vs. reproducers – Aldich &

Kenworthy, 1999) or in classificatory form (Miller, 1983; Lumpkin & Dess, 1996; Ucbasaran,

Westhead & Wright, 2001).

Identifying the roots of effective entrepreneurial behavior

Covin, Slevin & Heeley (1999) empirically showed that in a hostile environment pioneers and

followers perform differently with respect to pricing, product line breadth, market breadth,

advanced process technology and purchasing advantage and, moreover, followers perform

better than pioneers with respect to product line breadth, advanced process technology and

purchasing advantage. This suggests that follower firms (those negatively associated with

innovation, risk propensity and achievement) too can be entrepreneurial (i.e. they know how

to exploit an opportunity in a given context) even more than pioneers (those mostly associated

with innovation, risk propensity and achievement). Covin et al. (1999), in essence, argue that

in order to be entrepreneurial a business behavior need not to be necessarily conceived of as

innovative, risk taking and so forth. Instead, it can rely on cost leadership while

deemphasizing innovation and risk taking. A similar conclusion is also reached by others

scholars (Dess, Lumpkin, & McGee, 1996; Zahra, Jennings and Kuratko, 1999).

Hence, if a follower conduct outperforms a pioneer one in a given context, innovation does

not lead to competitive advantage in that context, which could sound like a paradox for the

entrepreneurship literature even if this may happen under specific circumstances (Teece,

1987). Thus, instead of understanding why followers conduct their business better than

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pioneers, a more important issue may concern the discovery of who else (if any) outperforms

pioneers in that context.

In essence, what seems to require further attention from scholars and researchers is not the

question whether, for instance, imitative or risk-averse behavior can be considered

entrepreneurial. Rather, it should be explored how (that is through which behavior)

enterprising individuals succeed in identifying and exploiting business opportunities (Casson,

1982; Shane & Venkatraman: 2000) in hostile environments.

It is therefore argued that in order to identify the source of effectiveness for entrepreneurial

behavior, a research approach has to be undertaken that is neither a theory-driven approach

based on a given perspective, nor on a review of extant typologies. Drawing from studies and

contributions on entrepreneurial action effectiveness, instead, the purpose of this research

effort is to obtain a detailed list of variables referred to the entrepreneurship research domain.

Hence, in order to identify the source of effective entrepreneurial behavior through a non-

reductionist approach, a review of the main streams of research in the entrepreneurship field

of research has been carried out (Table 1). The purpose of this review is to identify the many

attributes of entrepreneurial behavior from different theoretical perspectives.

Entrepreneurship as firm behavior. Scholars in this perspective highlighted the nexus of

relationship among three streams of research (the what, why, and how issues in

entrepreneurship literature), in order to identify the source of entrepreneurial effectiveness

amongst the strategic management choices; the organizational characteristics; and the internal

and the external factors (Covin & Slevin, 1989; Stevenson & Jarillo, 1990).

Networking and relational capabilities. This stream of research is focused on the

entrepreneur’s capability to access to external resources through the leverage of his/her social

and relational network (Jarillo, 1990; Starr&MacMillan, 1990; Dubini&Aldrich, 1991).

New Venture Survival (1): threshold of performance perspective. This perspective draws

attention to the issue of new ventures’ performance in the same context. New ventures in the

same context with equal economic performance may choose differently with regard to either

exit or continue a business according to their threshold of performance and to human capital

and personal economic factors, and to switching and opportunity costs (Gimeno, Folta,

Cooper&Woo, 1997).

New Venture Survival (2): liability of newness and population ecology. Scholars in this stream

of research highlighted the importance for start-ups of understanding environmental

conditions and adapting competitive strategies and management behavior to these conditions

(Stinchcombe, 1965; Carrol & Delacroix, 1982; Romanelli, 1989).

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Austrian Theories. This perspective is focused mainly on opportunity exploration and

identification as core entrepreneurial capabilities. Austrian economists argued that economic

equilibrium approaches to market analysis does not comprehend adequately the role of

individuals, since individuals have information and knowledge that create idiosyncratic

resources. This is the origin of a disequilibrium on markets, which, in turn, provides

opportunities for achieving equilibrium through human economic action. Entrepreneurship,

hence, has its origin in a disequilibrium context (Kirzner, 1973; 1979; Shane, 2000).

Innovation theories. Schumpeter (1936) is the most important scholar in this perspective. His

contribution highlighted the importance of the individual in pursuing innovation (through new

goods and services, new processes, new source of raw materials, re-organization of an

industry). Further contributions in this perspective argued that innovation may be extended to

technological transfer and timing in new product launch (Baumol, 1993).

Psychological Theories. Scholars in this stream of research argue that personal psychological

characteristics and attributes are the main factors accounting for the decision to exploit an

entrepreneurial opportunity. They assume, therefore, that such characteristics and attributes

are stable in some individuals and not in others. The more entrepreneurs show them, the more

it will be likely they will exploit identified entrepreneurial opportunities (McClelland, 1961;

Begley & Boyd, 1987; Busenitz & Barney, 1997).

Neoclassical Equilibrium Theories. This perspective highlights the perfect distribution of

knowledge and information. Since transactions are carried out without misalignments, no one

can discover opportunities. Therefore the source of entrepreneurial behavior has to be

identified in the proclivity of individuals for uncertainty bearing and risk propensity

(Khilstrom&Laffont, 1979).

Corporate entrepreneurship / intrapreneurship. Scholars in this stream of research shed light

on those characteristics that allow the development of entrepreneurship in an established

company. These characteristics may concern tolerance of ambiguity, strategic management

competencies, organizational structure (Burgelman, 1983; Kanter, 1985; Brazeal, 1993).

Entrepreneurship as marketing orientation. This perspective emphasizes marketing

competencies as determinants of effective entrepreneurial behavior. More precisely, scholars

in this stream of research highlight the importance of information and knowledge concerning

market dynamics and customer needs (Morris & Paul, 1987).

Opportunity cost. This stream of research assumes that the lower the opportunity cost that

individual will bear in a given context, the more likely they are to undertake entrepreneurial

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activity. Scholars adopting this perspective, therefore, hypothesized a correlation between low

opportunity costs and the decision to become entrepreneur (Amit, Muller, & Cockburn, 1995).

External financial support / Venture capitalist role. Scholars in this perspective highlights the

importance of venture capitalists in the development of entrepreneurial activity, emphasizing

the crucial role of VC, besides financial support, in reducing information asymmetry and

adopting effective strategic choice (Amit, Brander & Zott, 1998; Fried, Bruton & Hisrich,

1998; Cable & Shane, 1997).

Entrepreneurial Orientation / Entrepreneurial Posture. This perspective draws attention to a

bundle of individual and firm attributes characterizing the entrepreneurial activity. Studies in

this stream of research stressed the importance of innovation, personal characteristics, and

marketing and strategic management cho ices (Morris & Paul, 1987; Covin & Slevin, 1989;

Lumpkin & Dess, 1996).

Risk taking propensity. Scholars adopting this perspective emphasize the proclivity to take

risks as the main determinant of the decision to become an entrepreneur. Risk taking

propensity, therefore, is the main variable to take into account in order to understand how

entrepreneurs value business scenario and opportunity (Brockhaus, 1980; Palich&Bagby,

1995).

Real Options. This perspective draws attention to the importance of forward reasoning about

the outcome of entrepreneurial activity. Since failure brings damage from both the social and

the economic point of view, it is argued that a real options reasoning helps identifying those

investments whose conditions and performance are favorable (McGrath, 1999).

Table 1 summarizes the content of the review. The first column reports the stream of research

within (or related to) the entrepreneurship scholarly field; the second column highlights

authors and researchers in each perspective; the third column identifies the attributes of

entrepreneurial behavior in each perspective.

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Insert table 1 about here

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The different perspectives highlighted in Table 1 have been grouped on the basis of their

research purposes. The goal is to identify a scale of items that aims to cover the broad

spectrum of research interests in the entrepreneurship field of research (De Vellis, 1991).

Table 2 summarizes this effort. More precisely, column 1 reports the groups of streams of

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research, while column 2 lists the array of entrepreneurial effectiveness items emerged from

the review.

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Insert table 2 about here

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The general purpose of the review is to identify a list of item referring to effective

entrepreneurial behavior, in order to eventually conduct an exploratory factor analysis (Kim

and Muller, 1978). The final goal of the exploratory factor analysis is to develop a scale by

means of which to assess how much each item has been important for firm’s survival (De

Vellis, 1991).

Hostile Environment

Entrepreneurship is a context-specific phenomenon (Van de Ven, 1993; Lumpkin&Dess,

1996; Schoonhoven& Romanelli, 2001). In this perspective, the environment constitutes an

important factor affecting management processes from, at least, two different perspectives:

industrial competitive dynamics (Porter, 1980; 1985) and institutional (North, 1990; Baumol,

1993).

The former deals with a narrower concept of environment, that concerning benignity vs.

hostility (in terms of business viability and competitive conditions) in the context of inter- and

intra- industry competitive processes. In this vein, for example, Rumelt (1987) empirically

showed that across-industry variance in profit rate is smaller than within-industry variance,

over a thirty year pattern. This testifies the presence of within- industry differences in fit,

which, in turn, means that it is possible to ascertain product-market strategies characterized by

different consonance with the opportunity-and-constraint bundle posed by the competitive

environment. Thus, the lower level of inter- industry variance shows that, on average, the

benignity of an environment supports many industries, but not all the firms usually profit

from this benignity.

Environment, therefore, matters. In this vein, for example, Zahra (1993) argues that in case of

fierce rivalry (and hence in a hostile environment from the industrial organizations

perspective) companies are forced to innovate in both products and processes, explore new

markets and find novel ways to compete and differentiate; while Covin et al. (1999) observe

that hostile environments pose constant threats to the viability of business operations and

require different entrepreneurial capabilities in both pioneers and followers.

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Though, the concept of hostile environment as tough industry competitive conditions not

always proved to be consistent with the presence of a low rate of survival among start-ups and

established entrepreneurial firms (Stinchcombe, 1965; Carroll, 1984). In fact, Romanelli has

empirically showed that competitive conditions (measured through change in market demand

and competitive concentration) are unrelated to the mortality of young firm (1989: 385).

The institutional perspective, on the other hand, represents a broader level of analysis for

entrepreneurship-related issues (Gerschenkron; 1966; Lipset, 1988; Baumol, 1993), since the

institutional environment creates and provides the cont ext wherein entrepreneurial processes

are carried out. North (1981; 1990) and North & Thomas (1973) have observed that

institutions are the rule of the game that each country sets for economic competition. History

shows that countries characterized by stronger enforcement rules on property rights and lower

transaction costs constitute benign environment for business processes (North, 1990). These

countries, in fact, allow for more efficient exchanges among organizations, thus representing

munificent environments compared to those countries which have higher transaction costs and

lower enforcement on property rights.

The analysis of why some institutional environments perform better than other has been

observed, in turn, from, at least, three different perspectives: economics; economic history

and sociology, and government science.

Researchers in the economics field have observed that entrepreneurial behavior is affected by

the rules of the game (North, 1990; Baumol, 1993). Baumol (1993) has conducted an historic

illustration starting from Ancient Rome and reaching contemporary economies (also

examining Medieval China, Earlier and Later Middle Ages, Fourteenth Century Europe) to

address his main thesis: the allocation of entrepreneurial activities is oriented by the

institutional settings (the rules of the game) the entrepreneur has to cope with. In a quite

different perspective, Barro (1997) highlights the relationship between the institutional-

political environment (operationalized through the concept of democracy, i.e. the enforcement

of political rights and property rights) and growth. Barro’s argument takes for grant that, in

democracy, growth is obtained through entrepreneurial activities carried out by private and

public companies, rather through government-owned firms. Barro’s findings (1990: 59)

confirm the ‘Lipset hypothesis’ concerning the ‘democracy-growth’ relationship, mainly for

those places showing an increase in democracy, while the same relationship dose not provide

a compelling evidence for more advanced democratic regime, more concerned with income

distribution. The recently Nobel laureate Amartya Sen concurs to this view (1999), and gives

to it a stronger argument. Since democracy supports growth, even when this relationship

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appears less evident due to income distribution, it still constitutes a fundamental point for

future growth. In fact, an income distribution represents a reduction in poverty, and as a

result, in capability deprivation (Sen, 1999: 87), which represent a major hurdle in pur suing,

among others, employment and entrepreneurial opportunities.

Scholars in the second perspective point out that an institutional environment is shaped by

ruling institutions, whose domain (i.e., laws and public order enforcement) can either enforce

or destroy trust and public faith. For example, Padgen (1988), in a historical study on the

Kingdom of Naples, has observed that institutions can destroy trust at the broader level of an

entire country, thus hampering every business process. Gambetta (1988), in a very similar

vein, has pointed out that in southern Italy building distrust is a business per se, managed by

people whose business is to create distrust among populations, with the purpose of acting,

eventually, as trust dealer and, ultimately, as business processes ‘enabler’. In a slightly

different view, Lipset (1988), recalling the Weberian approach to economic development,

observed that within the Americas the Latin America’s value system - deeply permeated by

Iberian culture – does not encourage the pursuit of entrepreneurial activity, while English-

speaking Protestant culture rooted in the United States and Canada fosters it.

Finally, authors in the last perspective observe that institutions show patterns of performance

consistently with the degree of civic-ness rooted in populations. In this vein, Putnam (1993)

has empirically showed that institutions in southern Italy perform worse than those in central

and northern Italy, because of a lack of civic-ness due to historical reasons. In either case

(historical-sociological and government science), North’s analysis seems to provide a

compelling argument: those environments characterized by higher levels of transaction costs -

due to a lack of social capital, trust and civic-ness - constitute hostile contexts for business

and, consequently, for entrepreneurship.

Therefore, in this paper I address the concept of environmental conditions in the broader

perspective of the institutional environment, assuming this as the context where

entrepreneurial efforts, behavior and performance take place.

METHODS

Procedures and Sample

The research has been carried out through Factor Analysis. Factor Analysis as a research

method refers to statistical techniques whose objective is to represent a set of variables in

terms of a smaller number of hypothetical factors (Alwin, 1973; Mulaik, 1972). Since

entrepreneurship is neither a homogeneous entity, nor a single action, knowing its underlying

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dimensions is a crucial task for scholars and researchers. Factor Analysis may be used as a

means for ascertaining the minimum number of hypothetical factors (that is, entrepreneurial

behavior), and as a way of exploring the data for data reduction purpose. Since the purpose of

this paper is to identify a pattern of effective entrepreneurial behavior drawing from a detailed

list of variables deriving from entrepreneurship domain, Factor Analysis represents the most

appropriate technique for the accomplishment of this task.

Research design consisted of two phases. In phase 1 an Exploratory Factor Analysis has been

performed as research method, for it refers to statistical techniques whose objective is to

represent a set of variables in term of a smaller number of hypothetical factors (Alwin, 1973;

Mulaik, 1972). Exploratory Factor Analysis is extremely important in providing a rigorous

means of conceptualizing unobservable constructs and the theoretical nomological networks

in which the constructs are embedded. Advanced step in data reduction, then, involves finding

easily interpretable factors, while keeping the number of factors and covariance structure

fixed (Kim & Mueller, 1978). Therefore, a rotation has been carried out, and precisely a

Varimax rotation, because it gives clearer separation of the factors and a more invariant

pattern of factors compared to other rotation methods (Kaiser, 1958). The purpose of the

exploratory factor analysis was to highlight a pattern of entrepreneurial behavior, emerging

from firms that survived in a hostile environment.

Phase 2 consisted of a Confirmatory Factor Analysis, in order to test the goodness of fit of the

typology emerged from phase 1. To perform this test the method of analysis was structural

equation modeling (LISREL 8.5 - Jöreskog and Sörbom, 1996). The two most popular ways

of evaluating model fit are those involving ?2 statistic and the so-called goodness-of- fit

indexes that supplement the ?2 test (Hu & Bentler, 1995). The ?2 test was the most popular test

of fit because it seemed as if its use could make confirmatory factor analysis free of the many

subjective decisions that were historically associated with exploratory factor analysis (e.g., he

number of factors or the choice of rotational method – Jöreskog, 1969). Problems associated

with goodness of fit ?2 test were then recognized (Jöreskog, 1993). One of these has

concerned the sample size issue, that is the underlying statistic for the ?2 test holds as sample

size gets arbitrarily large. Therefore, the ?2 test may not be a good guide to model adequacy

(Hu & Bentler, 1995). Growing dissatisfaction with the ?2 test has led to the generation of

adjunct fit indexes (Hoyle, 1995), which are used as test of model adequacy. Adjunct fit

indexes vary between zero and 1.0, 0.90 is widely accepted as a value such indexes must

exceed before a model can be viewed as consistent with the observed data from which it was

estimated. Goodness-of- fit indexes treated in this paper are CFI (Comparative Fit Index) GFI

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(Goodness of Fit Index) and AGFI (Adjusted Goodnessof fit Index) provided by LISREL

(LISREL 8.5 - Jöreskog and Sörbom, 1998). CFI is a an Incremental FIT Index, while GFI

and AGFI are Absolute Fit Indexes (Hu and Bentler, 1995). The former measures the

proportionate improvement in fit by comparing a target model with a more restricted baseline

model. The latter directly assess how well an a priori model reproduces the sample data. The

use of different types of adjunct fit indexes is recommended (Tanaka, 1993; Hoyle, 1995).

The sample in this research has been drawn through a judgement sampling procedure, a type

of sampling used in order to select a sample to meet specific criteria (Emory & Cooper, 1991;

Kerlinger; 1986; Dess, Lumpkin & Covin, 1997). Firms selected had to meet four specific

criteria: revenues bigger than 500.000 euro; older than 6 years; employing more than one

employee and being located in Calabria. Two further points will be addressed with respect to

company age and geographic location. Researchers use to consider firms 6 years and younger

as new ventures (Brush, 1995; Zahra, Ireland & Hitt, 2000). Likewise, Bantel (1998) has

observed that firms failing the achievement of a sustained market position by the age of 5

have rapidly become extinct.

Dun and Bradstreet database selected 307 manufacturing and service firms meeting these

criteria in Calabria. Questionnaires were sent to all 307 firms. Respondents were 213

(response rate of 69.3%). A t-test comparison of the average number of employees, annual

sales revenue and age of responding firms with the same data for nonresponding firms

revealed no difference between these two groups, thus the sample appears to be representative

of the population from which it was drawn. Sample size issue has been addressed drawing

from MacCallum, Widaman & Lee (1989) criticism to generic rules of thumb regarding either

the ‘n must at least be 100’ or the ‘ratio of n to p’ (such as 5:1 or 10:1) rule. Their research

indicated several conditions for which whether n= 40 or n=400 were nearly good. As far as

the sample size is concerned, Iacobucci (1994: 308) has observed ‘the answer to the question

how many subjects? is not so simple as a pat response. Rather, smaller samples will suffice if

the factor pattern is clear’.

Control variables

According to Dess et al. (1997), the entrepreneurial behavior as strategy making can be

affected by organizational size and industry type. Though, I assume that size does not affect

entrepreneurial behavior, since the same entrepreneurial behavior can be showed whether by

small or large firms. Likewise, in so far as industry type is concerned (manufacturing or

services), it is argued that industry does not affect entrepreneurial behavior, since both a

15

manufacturing and a service firms are supposed to be able to assume the same entrepreneurial

behavior.

Measures

In so far as the measurement of environment hostility is concerned I assume the first level of

analysis at the country level. Therefore, a country profile-index as a measure of munificence

is chosen in order to assess a country’s munificence (Casson, 1990; Bartholomew, 1997;

Busenitz, Gòmez, & Spencer, 2000). More precisely, I chose the Fraser Institute Index of

Economic Freedom, especially the Economic Freedom Index for Europe, since I pose that the

performance of a country, with respect to Economic Freedom, represents an appropriate

measure of environmental economic munificence (or hostility).

The Economic Freedom Index considers seven parameters, each subdivided in sub-

parameters. Seven parameters are: size of government; economic structure and use of

markets; monetary policy and price stability; freedom to use alternative currencies; legal

structure and security of private ownership; freedom to trade with foreigners; freedom of

exchange in capital markets. Since I maintain that entrepreneurial survival in hostile

environment is not just a matter of braveness, I argue that countries with higher performance

on Economic Freedom Index are better environments for business, but I also observe that in

countries showing a poor Economic Freedom performance, such as Italy, Italy’s wealthiest

region (i.e., Lombardia) shows a net firm birth-rate lower than that of far poorer region (i.e.,

Calabria). Hence, all of Italy is a hostile environment for business (Italy ranks 14th among

EU15 Economic Freedom Rating and 31st in the Global Economic Freedom Rating); but

poorer regions outperform wealthier regions in new firms creation rate (Istat, 20001).

Therefore, it is not a matter of new venture creation; rather, it seems that the key tenet is who

(which firm) survives in a hostile environment and how it (the same firm) approaches the

survival path. Besides, environmental hostility assessment has been deepened to the regional

level, in order to identify within the Italian context an even more hostile environment. The

region chosen for this research purpose is Calabria. Calabria showed the lowest levels of

civicness in Putnam’s research (1993), thus constituting the most hostile environment for

business from the institutional perspective. The most recent surveys, though conducted

following a different approach compared to Putnam’s research, confirmed Calabria’s extreme

institutional hostility (Censis, 2002).

The questionnaire asked each entrepreneur to answer each question on a 7-point Likert scale,

in order to obtain a pattern of data from which, eventually, to draw a subsystem of factors.

16

The typical question was: ‘To what extent has the following variable helped your firm’s

survival?’. Responses ranged from 1 ‘Not at all important’ to 7 ‘Extremely important’.

Conducting subjective measurement of firm survival based on entrepreneurs’ perception is

consistent with prior research in the field of entrepreneurship (Dess, Lumpkin & Covin, 1997;

Covin, Slevin & Heeley, 1999). Moreover, prior research has indicated that subjective

measures can be consistent with objective measures, thus enhancing reliability and validity

(Dess & Robinson, 1984; Venkatraman & Ramanujan, 1987).

Results

An Exploratory Factor Analysis (Varimax Rotation Method; Maximun Likelihood factor

extraction method – Alwin, 1973) has been performed on the 40 items scale reported in Table

2. Underperforming items (i.e.: factor loading < .40 on at least one factor – De Vellis, 1991)

have been eventually discarded, and the final list of items consisted of 16 items. These items

performed adequately on at least one factor (factor loading > .40). A second Factor Analysis

has been performed on these 16 items. From this analysis a four factors structure clearly

emerged. Table 3 reports the descriptive statistics for the 16 items, while Table 4 and 5

reports the results of the Exploratory Factor Analysis.

-----------------------------------

Insert Table 3 about here

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Insert Table 4 about here

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Insert Table 5 about here

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Four significant factors emerged from the factor analysis according to the Kaiser criterion

(eigenvalue>1 - Table 4). All variables had significant factor loadings on at least one of the

four factors (i.e. > 0.40), thus performing better than the rule of thumb considering factor

17

loadings less than .30 as not substantial (Kim & Mueller, 1978). Furthermore, Kaiser’s MSA

(measure of sample adequacy), which measures the extent to which variables are appropriate

for factor analysis was 0.709, indicating a satisfactory level, since 0.8 is considered

meritorious and 0.9 marvelous. Yet, the 16- item scale (Table 3) highlighted room for

improvement, since two items (Relationship with brokers; and Proactiveness) showed cross-

loadings. Therefore, it has been shortened to 14 items (Table 5). The shortened scale showed

the best fit, meeting or exceeding the .90 threshold on a wide range of goodness-of- fit

measures: χ2 = 102.25 (67 df); goodness of fit index (GFI = .94); adjusted goodness- of- fit

index (AGFI = .90); comparative fit index (CFI = .95). 3

The interpretation of factor loadings highlights a typology of entrepreneurial behavior (Tables

4 and 5). The first factor includes variables such as: ‘Access to R&D consortia (V15); ‘Access

to other’s technology’ (V13); ‘Marketing and customer knowledge’ (V16) ‘Access to skilled

human resources’ (V14). Though less intuitive, this behavior seems to recall a business

conduct far from innovative and risk oriented; rather it seems to show a proclivity toward the

imitation of other firms’ behavior. Therefore it is defined imitative behavior.

The second factor includes variables such as: ‘Inter- firm co-operation deals’ (V10); ‘Access

to financial support’ (V11); ‘Access to trade consortia’ (V12); ‘Relationships with parts and

components suppliers’ (V9). These variables seem to identify a behavior oriented toward

cooperation and relationship development. Therefore, it is defined relational behavior.

The third factor suggests the orientation towards the exploitation of emerging opportunities in

both purchasing and selling markets, via advantages in distribution. Variables with high

significant loading resulted: ‘Geographic, Time and Information advantages related to

purchasing markets’ (V6); ‘Geographic, Time and Information advantages related to selling

markets’(V5); and ‘Distribution related advantages’(V3). These variables may indicate an

orientation towards a behavior that can be conceived of as arbitraging-oriented. Thus, this

behavior is defined arbitraging

The fourth factor includes variables such as: ‘Innovation through new product and process

development’ (V1); ‘Personal goal achievement’(V2); and ‘Entrepreneur’s risk propensity’

(V4). This behavior results from a synthesis of both schumpeterian and personal

characteristics of the entrepreneur. Therefore, in order to emphasize both innovation and

personal features it is defined self-referential behavior.

The four factors respect an important criterion, because each of them report an eigenvalue

greater than 1.0 (Kim & Mueller, 1978). The factor structure is also consistent with the

constraints posed by the more conservative factor analysis researchers (Iacobucci, 1994), who

18

state that best estimates for factor loadings are obtained when p (the number of variables) is 3

or 4 times r (the number of factors).

Summarizing, effective entrepreneurial behavior in hostile environment seems to be more a

matter of relational and imitative capabilities than a question of arbitraging and self-relational

behavior, as, instead, a large body of past and present studies claims. This, in turn, opens up

new intriguing research perspectives, linking, for example, entrepreneurship to social capital

and networking capabilities in local geographic context. The next section will discuss the

findings.

DISCUSSION

The goal of this paper was to determine what can be considered as an effective entrepreneurial

behavior in a hostile environment. Research findings allowed for the identification of an

original entrepreneurship typology, resembling the important strands in this field of research

and offering an original mind-set on entrepreneurial behavior in a hostile environment. Each

type of the typology is here discussed with respect to its theoretical foundation and

management implications.

Relational behavior. Relational behavior is a business conduct characterized by a proclivity to

relationships with other institutions in the environment, with the purpose of: cooperation, risk

sharing, shared access to resources and markets. The importance of social relationships in

business processes has been appropriately remarked (Granovetter, 1973; 1985; Coleman;

1990; Burt, 1992), and empirically ascertained (Gulati, 1995) and explained in entrepreneurial

settings (Uzzi, 1997). Social relationships can affect both business performance and

management processes effectiveness. For example, Ring & Van de Ven (1992; 1994) pose

that cooperative interorganizational relationships constitute a source of competitive

advantage; while Saxenian (1991; 1994) argues that the location of a firm in a context

positively oriented towards inter-organizational cooperative behavior has a positive impact on

business development; and Dyer and Singh (1998) affirm that inter-organizational

relationships constitute a source of idiosyncratic rents, that is rents accruing to the inter- firm

relational setting and not achievable by each firm sharing the relationship competing alone by

itself.

Besides, Dyer (1996a; 1996b) found empirical support for buyer-supplier relationship as a

source of competitive advantage in the context of automobile industry, comparing US and

Japanese automakers’ components and spare parts procurement practice; and Kogut, Walker

and Shan (1995) have empirically shown, in the context of the semiconductor industry, that

19

cooperation between incumbent and entrant firms fosters both competitive strength (in terms

of network centrality) of the former and start-up entry (in terms of entry in an industry sub-

field). In a similar vein, Powell et al. (1996) found support for the view that networks of

collaboration among biotechnology firms have a strong impact on firms’ entry and growth.

Finally, Baron & Markman (2000) have observed that, besides social capital, what affects the

entrepreneurial performance are entrepreneurs’ social skills, that is their capability in creating

social relationships with the purpose of business development. However, the impact of a

positive attitude towards inter-firm relationships goes beyond the conquest of competitive

advantage per se. In fact, Jarillo (1989) argues that networking practices are a way to

overcome problems related to resource that a firm needs but does not control and that the

ability to exploit resources that are outside the entrepreneur’s control is a constant of

entrepreneurial management; while Larson (1992) observes that network dyads constitute a

very effective organizational form for entrepreneurial success; and likewise Lorenzoni &

Ornati (1988), in a study conducted in the textile manufacturing area of Prato (Italy),

empirically show that small firms fail to grow over certain thresholds and rely on a network of

collaborations (named constellation), in order to capture resources.

In a slightly different perspective, Starr & MacMillan (1990) highlighted how corporate

entrepreneurs develop social contracting capabilities in order to acquire resources, goods and

services; and Gartner et al. (1999) hypothesized that those entrepreneurs who spend more

efforts on acquiring resources and help (i.e., relationships with investors, dealing with

distributors, acquiring technical expertise, relationships with financial institutions) increase

their firm’s survival chances. Though these hypotheses find only partial empirical support,

they allow gaining insight about the impact of inter-organizational relationship management

on entrepreneurial survival. Finally, besides competitive advantage conquest and resource

access, another important variable as far as firm survival is concerned is the access to

financial support (Bygrave & Timmons, 1992; Fried & Hisrich, 1994). In fact, financial

institutions, whose primary goal is to support both start-up and established firms, often play

an important role even in business development, thus supporting not only financially

borrowing firms (Fried, Bruton & Hisrich, 1998).

Arbitraging Behavior. Arbitraging behavior regards a business conduct characterized by

investment opportunity exploitation (Kirzner, 1973), deriving, for example, from purchasing

goods at a price and selling the same goods in a different market at a different price. Baumol

(1993) argues that the entrepreneurial conduct is often characterized by a rent-seeking

20

orientation, which can be assumed as arbitraging entrepreneurial talent (although

unproductive in Baumol’s view). Arbitraging competence is fundamental for survival in

hostile environments since, as Kirzner (1973) sets out: only a few alert people will discover a

given opportunity. Why does this happen? Shane & Venkatraman observe that – although the

null hypothesis is blind luck – entrepreneur’s ‘information corridors’ and ‘cognitive

properties’ allow for search, identification and exploitation of opportunities.

Scholars in the strategic management field answered this question referring to arbitraging

capabilities in terms of first-mover advantages (Lieberman & Montgomery, 1988), which

allow for entrepreneurial rent appropriation (Rumelt, 1987). The concept of ‘first mover

advantages’ (Lieberman and Montgomery, 1988) highlights, among other dimensions,

preemption of inputs factors, and location in geographic and product characteristic space.

Researchers in this field also referred to this concept as proactiveness (Amit et al., 1993;

Lumpkin & Dess, 1996). In essence, an arbitrage opportunity is an investment strategy that

guarantees a positive payoff in some contingency with no possibility of a negative payoff

(Ross, 1976). Economics and financial theorists assume arbitrage absence, since this

argument is consistent with: a)equilibrium; b)single agent rationality; and c)the ‘Law of One

Price’ (Ross, 1976); but they recognize that this is compelling only ignoring production.

Therefore, the introduction of production of real goods creates arbitraging opportunities

(Dybvig & Ross, 1982).

21

Then, drawing from economics and finance, it is possible to conceive of entrepreneurship in

terms of arbitraging capabilities. This is also consistent with Baumol’s (1990) main criticism

to Schumpeterian view of entrepreneurship. This criticism concerns the Schumpeterian view’s

paucity of insights on policy. Baumol then suggests that, at least, a working model for the

comprehension of entrepreneurship should encompass a minor extension, concerning the

allocation of entrepreneurial resources. Such resources could be used, aside from five

schumpeterian categories of innovation, to technology transfer from one geographic location

to another and rent-seeking behavior through information and time advantage exp loitation

(i.e., ‘unused legal gambit that is effective in diverting rents to those who are first in

exploiting it’ – Baumol, 1990: 897).

Allocation choices also require analyzing and understanding the context of allocation. With

respect to this point, Gunther McGrath, MacMillan & Venkatraman (1995) argue that

comprehension (understanding what combinations of resources will allow to achieve an

objective) and deftness (executing cleverly in light of comprehension) are the antecedents to

competence at the firm level.

Thus, an arbitraging behavior, meant as the exploitation of a business opportunity based on

market inefficiencies that results from information, time and geographic asymmetries

(Drucker, 1985), is an effective entrepreneurial behavior, requiring context comprehension

and deft task accomplishment. Opportunity exploitation also requires fast decision making,

which does not necessarily mean the use of less information than slow decision making. This

is consistent with Eisenhardt’s (1989) fast strategic decision making process, a process that

uses more, not less, information than the slow strategic decision making one. Fast strategic

decisions, hence, are often based on a large endowment of information. Yet, getting useful

information about competitors and industry dynamics is not a widespread capability. In fact,

Baumol (1993) observes that firms use patents, secrecy and other means to prevent diffusion

of ideas and information. Hence, those who succeed in getting high-value information before

competitors can exploit this advantage in several ways. Burt (1992; 1997) defines this

advantage as tertius gaudens position, since it allows for arbitraging rents stemming from

information asymmetry. Burt’s perspective (the structural holes one) sheds lights on two

important points: interpersonal relationships as a source of rent (for instance, relationship with

dealers), and network position-related advantages (e.g., distribution advantages).

Imitative Behavior. Imitative behavior is the replication of an extant technology and its

embodiment in products and services (Baumol, 1993). Teece, Pisano, & Shuen observe that

22

imitation is simply technology replication performed by a competitor, through strategies such

as reverse engineering and ‘vistas to product techno logy’ (1997: 524).

Baumol (1993: 157) argues that imitation has to be conceived of as an entrepreneurial act

(and to some extent innovative), in that it pursue, at least, a kind of novelty, that concerning

the adaptation of extant product to new market segment requirement. Imitation represents,

more than innovation, a viable entrepreneurial behavior under specific conditions. Especially

in mature markets and in advanced industry life cycle stages, conservative (i.e., risk-averse)

strategic postures have resulted a more effective behavior for new ventures (Covin & Slevin,

1990). Besides, Teece (1987) has observed that innovation not always leads to competitive

advantage and rent appropriation. For these to occur, in fact, it is required the exploitation of

complementary assets which, if not held, may eventually cause rapid dissipation of rents.

Thus, firms holding complementary assets can profit from innovation carried out by firms not

holding such assets, just imitating the underlying technology (Teece et al., 1997). Hence,

imitative behavior has to be considered an entrepreneurial behavior since it grants survival

and better performances to firms that adopt it (Baumol, 1993).

This is also consistent with Miles & Snow (1978), who in a seminal work on effective

competitive behavior hypothesized a typology entailing among others (defender, prospector

and reactor) the analyzer strategy type, a behavior conceived of as the conduct of a firm

seldom ‘first in’ with new product or service. Rather, via careful observations of innovative

firms in areas compatible with its current operations, analyzers are frequently ‘second in’ with

a more cost-efficient product or service.

Analyzer’s competencies are hypothesized to be general management, production, applied

engineering and marketing/selling. Furthermore, Covin et al. (1999) have shown that in

hostile environments followers perform better than pioneers as far as purchasing capabilities

and access to advanced process technology are concerned. Though not confirmed by results of

a subsequent empirical research (Snow & Hambrick, 1980: 330), analyzer strategy constitutes

an effective competitive behavior rooted in imitative rather than in innovative attitudes. In

essence, what allows imitation is principally access to other’s technology via acquisition

(Zahra & Covin, 1993) or access through cooperative actions, such as R&D consortia (Ouchi

& Kremen-Bolton, 1988; Baumol, 1993).

Besides analyzer’s capabilities, and access to advanced technology, adopting an imitative

behavior requires effective marketing competencies (market and customer knowledge) and

distinctive human capital capabilities. The former refer to marketing differentiation strategy

(Miller, 1986), which relies on selling, advertising and service capabilities (Miller & Friesen,

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1984; Dess, Lumpkin & Covin, 1997), rather than on a pure innovative attitude. Human

resource-based competencies, instead, are those related to the effective accomplishment of

organizationally social constructed activities (Kogut & Zander, 1992), such as

transformational competencies (those organizational capabilities required to advantageously

convert inputs into outputs – Lado, Boyd and Wright, 1992). Among such competencies,

Lado and Wilson (1994) identify entrepreneurial talent as the dis tinctive competency of

skilled human beings; and Nahapiet & Ghoshal (1998) put forth that intellectual capital,

which is a firm’s capability to build socially constructed knowledge on the basis of

individuals’ competence, is a source of competitive advantage. Finally, Burton (2001) has

pointed out that a new venture’s capability to recruit the appropriate people is crucial to firm’s

success.

Self-referential Behavior. Self- referential behavior is a business conduct characterized by an

autonomous and autocratic personal orientation, shaped by personal goal achievement,

innovativeness and risk propensity. Lumpkin & Dess observe that ‘entrepreneurship

flourished because independently minded people elected to leave secure positions in order to

promote novel ideas or venture’ (1996: 140). Accordingly, among the most frequently cited

reasons for explaining entrepreneurship are: independence (Bull & Willard, 1993); autonomy

(Miller, 1983; Lumpkin & Dess, 1996); and autocracy (Shrivastava & Grant, 1995). This is

also consistent with entrepreneurial-strategy making modes (Mintzberg, 1973; Bourgeois &

Brodwin, 1984; Hart, 1992).

The concepts of independence, autonomy and autocracy refer to the endogenous and self-

referential spirit of individuals in pursuing a goal. Lieberman & Montgomery (1988)

highlighted the endogenous nature of first-mover opportunities (a mix of proficiency and

luck), even though entrepreneurs often perceive great opportunities that ultimately prove

disappointing. The final outcome of venturing notwithstanding, the comprehension of the

endogenous (firm-specific) nature of entrepreneurship constitutes a key question for scholars

and researchers. In fact, Hansen & Wernerfelt (1989) have shown that the endogenous

‘organizational factor’ explains about twice as much variance in firms’ performance as the

exogenous ‘economic factor’. Specifically, an important variable related to the former is

‘emphasis on goal achievement’, which measures firm’s attitude towards goal achievement. A

strong goal achievement behavior, hence, provides a firm with a higher chance to get superior

performance.

24

Thus, the dimension of entrepreneurship concerning its endogenous nature lead to the

definition of a behavior by means of the following features: proactiveness; need for

achievement; risk taking propensity; and attitude to innovation.

With respect to the first, drawing upon Miller & Friesen (1982) and Miller’s (1978; 1983)

seminal work on entrepreneurship dimensions scholars and researchers have observed that

proactiveness, conceived of as the capability of seizing new opportunities and anticipating

market change (Morris & Paul, 1987; Lieberman & Montgomery, 1988; Covin & Slevin,

1989; Venkatraman, 1989). Lumpkin & Dess have further clarified the concept, posing that

proactiveness can be observed through a continuum: in this sense, the opposite of

proactiveness is passiveness, rather than reactiveness (1996:147).

As far as need for achievement is concerned theoretical and experimental studies posed that,

those entrepreneurs with a high need for achievement show above-average performance

(McClelland, 1967; Begley & Boyd, 1987). These studies constitute the cornerstones of

psychology perspective on entrepreneurship. In fact, drawing from these contributions an

increasing body of research (Amit et al., 1993) has provided empirical evidence and

theoretical advances. The common character of all these contributions can be identified in the

search for a psychological explanation that accounts for entrepreneurs’ diversity. For

example, Baron (1998) argues that entrepreneurs think differently than other people, due to an

undeniable interrelation between man’s feelings and thought; while McGrath, MacMillan &

Scheinberg (1992) show that, at least, entrepreneurs think differently than career

professionals.

As regards the third, the issue of risk propensity has been addressed in other fields of social

sciences too. For example, widespread economics knowledge (e.g., Brealy & Myers, 1981)

suggests that risk and return are positively correlated, while Covin & Slevin (1990) have

shown that the entrepreneurial strategic posture (a posture characterized by risk taking) is a

more effective new venture’s behavior in emerging markets and introduction industry life

cycle stage. Further studies have analyzed the role of risk in explaining rates of return

(Fiegenbaum & Thomas, 1988) and differences in profitability (Aaker & Jacobson, 1987),

and in predicting organizational performance (Bloom & Milkovich, 1998).

Even if risk taking propensity can be assumed to be randomly diffused (Sexton & Bowman,

1985), in hostile environments entrepreneurs with a strong belief in their ability to achieve a

goal will judge and perceive lower failure possibility than entrepreneurs with weaker belief in

25

their capabilities will (Brockhaus, 1980). In fact, Cooper et al. (1988: 103) found a

noteworthy degree of optimism for entrepreneurs’ perceptions of their chance of success1.

Finally, there is the theme of product and process innovation as the most effective way to

express entrepreneurial capabilities (Schumpeter, 1936; Lumpkin & Dess, 1996; Covin,

Slevin & Heeley; 1999; Shane & Venkatraman, 2000). Innovation is at the very heart of

entrepreneurial activity. Hence, its theoretical validity as a measure for self- referential

behavior as entrepreneurial behavior needs little, if not at all, theoretical background

(Schumpeter, 1936; Lumpkin & Dess, 1996).

Implications for research

The identification of a typology of entrepreneurial behavior rooted in the field of study of

entrepreneurship opens up further research issues. These issues can be drawn from each of the

types identified by the typology emerged from the research, and can be further explored with

respect to, at least, two important settings: industry characteristics (life cycle stage;

competitive pressure; concentration) and institutional-economic environment characteristics

(benign vs. hostile). Thus, it should be very interesting to assess whether industries in

different stages of their life cycle and characterized by different levels in competition, show

different patterns of entrepreneurial behavior or confirm the typology proposed in this paper.

Moreover, in a more restrictive sense, it should be intriguing to measure whether the pattern

of common factors emerged in this research is confirmed. Another issue to address should be

represented by the impact of a benign environment on the construct pattern, in order to control

whether in a non-hostile environment the proposed typology presents a similar pattern in

factor loadings.

Limitations

A limitation for this study was the methodology used, since the empirical test of hypotheses

were based on data from a field study. This may result in unknown sample bias, which may

cause some limitations on the reliability and generalizability of findings. The sampling

methodology, judgemental sampling (Emory and Cooper, 1991; Kerlinger; 1986; Dess,

1 The entrepreneurs were asked: ‘What are the odds of your business succeeding?’. They were given 11 choices, ranging from 0 chances in 10 to 10 in 10): 95% of the research sample (N=2994) declared an odd of success of 5 out of 10 or better, and 81% odds of 7 out of 10 or better (mean = 8.1). Asked about any business like theirs odds of succeeding (the entrepreneurs were asked: ‘What are the odds of any business like your succeeding?’; likewise, they were given 11 choices, ranging from 0 chances in 10 to 10 in 10), the sample perceived a lower optimism (mean = 5.9). This may lead to think that risk propensity is to some extent a ‘post hoc’ rationalization of genuine, unaware and ‘ignorant’ optimism.

26

Lumpkin & Covin, 1997), can also constitute a source of limitations for reliability, since the

sample was selected for the purpose of hypotheses testing in hostile environment.

CONCLUSION

Attempting the identification of an entrepreneurship typology on the basis of an exploratory

factor analysis performed on a 40- item list covering the main streams of research on

entrepreneurship may constitute an effort consistent with what was requested in the most

recent contribution on entrepreneurship (Shane & Venkatraman, 2000; Davidsson, Low &

Wright, 2001). On the other hand, the identification of a typology of entrepreneurial behavior

suggests new research questions.

With respect to this point, for example, what may result noteworthy is the importance of a

relational entrepreneurial behavior in a hostile environment compared to that of the

innovation-oriented behavior (self-referential), thus raising a puzzling question whether social

capital (Coleman, 1990) can enhance entrepreneurial performance. Scholars in the sociology

field (Swedberg, 2000) observed, in fact, that the entrepreneurship phenomenon has important

roots in the social sciences. Still, to date, little attention has been given to the impact of social

capital on entrepreneurship; with the exception of those scholars (Lorenzoni & Ornati, 1988;

Starr & MacMillan, 1990; Larson, 1992; Baron & Markman, 2000) whose studies provided

insightful evidence of the nexus between institutional environment, interorganizational

relationships and entrepreneurship.

Hopefully, the development of the theorizing process with respect to the effectiveness of

entrepreneurial behavior in relation to environmental conditions will help entrepreneurs to

accomplish their duties at both the societal and economic levels.

27

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35 Table 1 Main streams of research within the entrepreneurship field and entrepreneurial behavior’s attributes / sources of influence

Theoretical perspective/Stream of research Author/s entrepreneurial behavior attributes / sources of influence Entrepreneurship as firm behavior Covin&Slevin (1991); Stevenson and Jarillo (1991) External resources, Strategic management choices,

organizational characteristics Networking and relational capabilities

Jarillo (1990); Starr&MaCMillan (1990); Dubini&Aldrich

(1991); Larson (1991)

Social networks; external resources

New Venture survival: Threshold of performance perspective

Gimeno, Folta, Cooper& Woo (1997)

Awareness of threshold of performance and human capital, employment opportunities, switching and opportunity costs.

New Venture survival: Liability of newness and population ecology

Stinchcombe (1965); Carrol&Delacroix (1982); Romanelli (1989)

Awareness of liability of newness, capability of tailoring competitive strategies to environmental conditions

Austrian theories

Kirzner (1973; 1979); Shane (2000) Opportunity recognition and exploitation

Innovation theories

Schunpeter (1936); Baumol (1993) Innovation

Psychological theories Mclelland (1961); Begley&Boyd (1987); Busenitz&Barney (1997)

Entrepreneur’s psychological characteristics

Neoclassical equilibrium theories

Khilstrom&Laffont (1997)

Personal characteristics, risk taking propensity

Corporate entrepreneurship / intrapreneurship

Burgelman (1983); Kanter (1985); Brazeal (1993)

Management competencies, strategic management choices; organizational characteristics

Entrepreneurship as marketing orientation

Morris&Paul (1987)

Market knowledge; customer knowledge;

Opportunity cost

Amit, Muller&Cockburn (1995)

Opportunity cost

External financial support / VC role

Amit, Brander e Zott (1998); Fried, Bruton&Hisrich

(1998); Cable&Shane (1997)

External financial support / venture capitalists’ role

Entrepreneurial orientation / Entrepreneurial posture

Morris&Paul (1987); Lumpkin&Dess (1996)

Covin and Slevin (1989)

Innovation; personal characteristics; strategic management choices;

Real Options

Gunther McGrath (1999) Real options reasoning

Risk taking propensity

Brockhaus (1980); Palich&Bagby (1995)

Risk taking propensity

36

37 Table 2 Items selected for exploratory factor analysis

Theoretical perspective Items Personal characteristics / risk propensity / neoclassical equilibrium theories / entrepreneurial orientation and posture

entrepreneur's proactiveness; personal goal achievement; entrepreneur's autocracy; entrepreneur's autonomy; entrepreneur's risk propensity; entrepreneur's values; entrepreneur's creativity; entrepreneur's education; entrepreneur's need of self-employment

Internal factors / Intrapreneurship / General management/ strategic management /opportunity costs valuation theories

organizational organicness; organizational culture; venture profitability; threshold of firm performance clearly known; law regulations; organizational innovation; personal financial funds; delegation of authority; opportunity cost valuations

Networking and external resource access theories

access to R&D consortia; role of venture capitalist; access to skilled HR; relationships with brokers relationship with suppliers; inter-firm cooperation deals; inter-firm resource sharing deals; relationship with universities; access to other's technology; access to financial support; belonging to a local population of firm; access to trade consortia

Marketing orientation approach

market and customer knowledge; price advantage; distribution related advantage

Schumpeterian and Austrian theories; Real Options

product or process innovation; geographic, info, and time advantage on selling markets; geographic, info, and time advantage on selling markets purchasing market; introduction of a new business; new source of raw materials; reorganization of industry; entrepreneur’s previous job related to the venture; real options reasoning

38

Table 3 Descriptive statistics and correlations* Variables (N=213)* Mean S.D. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Innovation (new product and process development) 3,95 2,63

-

Personal goal achievement

3,38 2,23 0,41**

-

Distribution related advantages 3,42 2,11 0,14* 0,26**

-

Entrepreneur’s risk propensity 2,14 1,63 0,30** 0,40** 0,13*

-

Geo., Time and Info. Adv. in selling markets 4,69 2,05 0,05† 0,15* 0,30** 0,07†

-

Geo., Time and Info. Adv. in purchasing markets 3,79 1,98 0,11† 0,28** 0,51** 0,14* 0,54**

-

Proactiveness 4,11 2,21 0,17* 0,50** 0,31** 0,16* 0,35** 0,33* - Relationship with brokers 3,79 2,08 0,11† 0,32** 0,21** 0,11† 0,25** 0,37** 0,46** - Relationship with suppliers

2,49 1,89 0,10† 0,09† 0,20** 0,13* 0,03† 0,13* 0,18** 0,39** -

Inter-firm cooperation deals 1,87 1,45 0,03† 0,22** 0,13* 0,05† 0,06† 0,07† 0,28** 0,27** 0,38**

-

Access to financial support 1,51 1,19 0,06† 0,21** 0,14* 0,04† 0,14* 0,16* 0,28** 0,28** 0,43** 0,47**

- -

Access to trade consortia 2,27 1,83 0,13† 0,32** 0,23** 0,12† 0,14* 0,20** 0,36** 0,43** 0,35** 0,49** 0,49**

-

Access to other’s technology 4,05 2,13 -0,07† 0,01† 0,05† 0,00† 0,10† 0,09† 0,12† 0,03† -0,15* 0,16* 0,03† 0,00†

-

Access to skilled HR 5,47 1,81 0,09† 0,16* 0,06† 0,04† 0,16* 0,06† 0,18** 0,16* -0,25** -0,03† -0,16* 0,00† 0,39**

Access to R&D consortia 4,36 2,07 -0,15* -0,01† 0,09† -0,08† 0,03† -0,08† 0,11† 0,02† -0,13* -0,14* -0,09† -0,29** 0,31** 0,41** Marketing and Customer

Knowledge 4,24 2,14 -0,10† 0,05† 0,04† -0,12† -0,12† -0,13* 0,15* 0,02† -0,07† 0,06† -0,02† -0,11† 0,44** 0,29**

0,63**

∗∗ p<.01; ∗ p<.05; † p< .1;

39

Table 4 Results of explorative factor analysis Initial Non rotated

pattern Rotated pattern

Common Factor

Total

% Var.

% Cumul.

Total

% Var.

% Cumul.

Total

% Var.

% Cumul.

Relational 3,75 23,45 23,45 3,19 19,92 19,92 2,19 13,72 13,72 Imitative 2,46 15,37 38,82 1,92 12,01 31,93 1,89 11,83 25,55 Arbitraging 1,71 10,68 49,50 1,16 7,23 39,16 1,75 10,93 36,48 Self-referential 1,40 8,77 58,26 1,02 6,37 45,53 1,45 9,04 45,53 5 0,98 6,13 64,40 6 0,86 5,37 69,77 7 0,74 4,65 74,42 8 0,70 4,39 78,81 9 0,65 4,08 82,89 10 0,55 3,47 86,36 11 0,51 3,18 89,54 12 0,43 2,71 92,25 13 0,38 2,37 94,63 14 0,33 2,06 96,69 15 0,29 1,82 98,50 16 0,24 1,50 100,00

40

Table 5 Factor loadings of 14 items Entrepreneurial Typology Item

Imitative

1 Relational

2 Arbitraging

3 Self-referential

4 16.Market and customer knowledge ,835 15.Access to R&D consortia ,736 13.Access to other’s technology ,472 14.Access to skilled HR ,411 10.Inter-firm cooperation deals ,682 12.Access to Trade Consortia 637 11.Access to Financial support ,616 9.Relationship with suppliers ,531 6. Geographic, Time and Information advantages related to purchasing markets ,713 5.Geographic, Time and Information advantages related to selling markets ,699 3.Distribution related advantages ,521 2.Personal goal achievement ,810 12.Innovation (new product and process development) ,611 4.Entrepreneur’s risk propensity ,415