Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author. A CONFIGURATION STUDY BASED ON PERFORMANCE OF NASCENT VENTURES A thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Management at Massey University, Palmerston North, New Zealand. Jeremy Basil Zwiegelaar 2017 ii iii ABSTRACT This research provides explanations for the reasons why one group of entrepreneurs start a venture early, while a second group starts later to create their venture. It also considers what factors contribute to some entrepreneurs quitting the venture early while others quit later. There is a dearth of studies that have explicitly considered the performance for both starting and quitting over time from the same dataset. There are methods limitations when analysing nascent entrepreneurs developing new ventures which are limited by a focus on mainly regression analyses. Research is sparse for uncovering types of new venture by examining similar contexts of new venture performance from a multidimensional view. Data from a sample of nascent entrepreneurs (people in the process of setting up a venture) were analysed over a six-year period. An initial sample of 1135 nascent entrepreneurs was drawn from a US dataset, and then the second, and last years’ interviews were used to assess their progress. There were 690 early starters amongst this group and 248 respondents were later starters. There were 219 respondents who quit their venture early compared to 51 who quit their venture later. The thesis focuses on explaining the relative importance of a variety of factors affecting performance for new ventures by explaining causal relationships beyond the correlation analyses perspectives. These factors are organised in terms of Gartner's (1985) framework of new venture creation. This framework suggests that start-up outcomes depend on the characteristics of the individual(s) starting the venture, the organisation that they create, the environment surrounding the new venture, and the process by which the new venture is started. The research also considers the strategy which is not part of Gartners framework but considered important to understanding performance outcomes for nascent entrepreneurs. The research applies the method fuzzy sets qualitative comparative analysis (fsQCA), (Ragin, 2008) to compare nascent entrepreneurs and explores links between various configurations of attributes known as domains and new venture performance which is a contribution to knowledge on new ventures performance. This is important as the method provides better explanations of the combination of sets necessary to create recipes for performance. The results show for both early and late starters that when high need for achievement is coupled with better access to financial resources, and the absence of external support, then starting a new venture is likely to occur. This suggests that for nascent entrepreneurs, they need to have entrepreneurial personality trait need for achievement which is a iv trait showing the propensity to be entrepreneurial, or be engaged in entrepreneurial activities and a clear access to financial resources. External support is not as relevant to starting new ventures when financial resources and need for achievement are present. The overall findings for configurations based on early versus late quitters suggest that unlike the later quitters, early quitters were limited in relation to financial resources and external support. The early quitters had a high need for achievement, at least moderate levels of specific human capital, limited external support and limited access to financial resources. In contrast, the late quitters had higher levels of specific human capital, higher levels of entrepreneurial intensity but limited external support which suggests that they were able to quit later because they had other options, such as other ventures or employment available to them. Keywords: new venture performance, qualitative comparative analysis, configurations, asymmetry, new ventures, fsQCA v ACKNOWLEDGEMENTS The research focuses on explaining the combination of factors affecting new ventures performance for those who start and those who eventually quit their venture from survey data. The Panel Study of Entrepreneurial Dynamics (PSED) in the United States was used for this research project. The survey focuses on new ventures and collected information on the respondents who were in the process of creating new ventures. I would like to thank the team of researchers and funders who made this data available to a wider audience by disseminating the data on the PSED website. I would like to thank my supervisors, Dr Marco van Gelderen who stuck with this project all the way through from the outset and provided helpful feedback on the initial research proposal, the data analyses and drafts of the various chapters of the thesis. Thank you for facilitating discussions with researchers who are experts on particular aspects of the research process where I was struggling. Thank you to Prof. Martina Battisti who heard the initial germ of research ideas and then later agreed to join the supervisory panel. Thank you also for not always just considering my academic wellbeing, but helping in other aspects of the research journey as well. Thank you Prof. Lorraine Warren who agreed to step in as supervisor very late in my candidacy. Your feedback on the writing and the tips on adding pictures to help the reader was an invaluable contribution. Thank you for providing guidance on the PhD process overall, as well. Thank you to my supervisors who were on the original panel Prof. David Deakins and Dr Karl Pajo who supported my research project and provided advice and guidance to steer the project. Overall, I appreciate the effort and dedication of all the supervisors who were instrumental in ensuring that my candidacy remained on track. I would like to acknowledge the Venture and IT School at Wellington Institute of Technology who supported my research by providing time off work to pursue this research project. In particular, I would like to thank Mick Jays and Marcia Johnson. To my colleagues, Michael Keith, Xanthia Bollen, Cyril Peters and Greg Broughton, thank you for listening to me bleat on about the project. Thank you also to Dr James McKay who read and provided feedback on drafts of my chapters. vi I would like to acknowledge the assistance of Prof Hans Guesgen, Chair in Computer Science at Massey University who provided me with an understanding of the logic and use of Set Theory. This understanding helped me to set up my data, and also interpret the analysis and results. I am also indebted to Dr Elisabeth Berger of Hohenheim University Germany, who provided information on the utility of QCA for analysing configuration research. Thank you for the advice and guidance about the software options available. Thank you to the support staff at Massey University who worked behind the scenes. Thank you to Dr Greg Gilbert who provided assistance with my writing. Thank you for your time reading and providing feedback about ways to simplify my writing. There were some little gems that I will remember. Thank you to Sharryn Middleton and Brigit Eames for arranging administrative support for simple things such as application forms for conferences etc. I would also like to acknowledge the staff at Massey who created the helpful guides and processes to make PhD life easier. I would like to thank my wife, Sharon Graves, who allowed me to spend countless days and weekends writing the thesis. I know that I have to make up for a lot of time missed. Thank you for being there for me throughout this process. I know I have a lot of washing up to do amongst other things that were neglected. Thank you so much for your understanding. Thank you to my family, Daphne Zwiegelaar and Basil Zwiegelaar, Danielle Smith, Richard Smith, Rebekah Smith and Anthea Zwiegelaar, for your support and encouragement throughout the research process. vii Table of Contents ABSTRACT .............................................................................................................................................................. III ACKNOWLEDGEMENTS ........................................................................................................................................ V TABLE OF CONTENTS ........................................................................................................................................ VII LIST OF TABLES .................................................................................................................................................... XI LIST OF FIGURES ............................................................................................................................................... XIII CHAPTER 1 THESIS INTRODUCTION ..................................................................................................... 1 1.1 INTRODUCTION .......................................................................................................................................................... 1 1.2 BACKGROUND TO THE RESEARCH ....................................................................................................................... 2 1.3 RESEARCH PROBLEM AND RESEARCH QUESTIONS ........................................................................................ 5 1.4 DESIGN OF THE STUDY ............................................................................................................................................ 8 1.5 RESEARCH QUESTIONS: .......................................................................................................................................... 9 1.6 RESEARCH FRAMEWORK FOR THE THESIS ...................................................................................................... 10 1.7 SIGNIFICANCE OF THE STUDY .............................................................................................................................. 15 1.8 ORGANISATION OF THE THESIS .......................................................................................................................... 17 1.9 CHAPTER SUMMARY .............................................................................................................................................. 20 CHAPTER 2 NASCENT ENTREPRENEURS AND ENTREPRENEURSHIP ............................... 21 2.1 CHAPTER INTRODUCTION ..................................................................................................................................... 21 2.2 NASCENT ENTREPRENEURSHIP ........................................................................................................................... 22 2.2.1 History of New Venture Creation ................................................................................................................... 22 2.2.2 Entrepreneurial Teams ...................................................................................................................................... 24 2.3 INDIVIDUAL- THE NASCENT ENTREPRENEUR ................................................................................................ 28 2.4 BACKGROUND TO NASCENT ENTREPRENEURS ............................................................................................. 30 2.4.1 Need for achievement ......................................................................................................................................... 30 2.4.2 Entrepreneurial intensity .................................................................................................................................. 32 2.4.3 Human capital ........................................................................................................................................................ 33 2.4.4 Specific human capital ....................................................................................................................................... 35 Entrepreneurial and industry experience .................................................................................................................................................. 35 2.5 ORGANISATION- STRATEGY OF THE NASCENT ENTREPRENEUR ............................................................... 38 2.6 THE ENVIRONMENT DOMAIN .............................................................................................................................. 41 2.6.1 Munificent environment..................................................................................................................................... 41 2.6.2 Environmental dynamism ................................................................................................................................. 42 2.6.3 Identifying a venture opportunity ................................................................................................................. 44 2.6.4 Acquiring financial resources.......................................................................................................................... 45 2.6.5 Building an organisation ................................................................................................................................... 46 2.7 NEW VENTURE PERFORMANCE .......................................................................................................................... 47 2.7.1 Performance based on progress ..................................................................................................................... 48 2.7.2 Financial measures of performance ............................................................................................................. 49 2.7.3 Outcome measures of performance .............................................................................................................. 50 2.8 CHAPTER SUMMARY .............................................................................................................................................. 55 viii CHAPTER 3 THE CONFIGURATION APPROACH – USEFULNESS AND ASSUMPTIONS 57 3.1 CHAPTER INTRODUCTION ..................................................................................................................................... 57 3.2 BACKGROUND TO THE CONFIGURATION APPROACH .................................................................................. 57 3.2.1 The universal approach ..................................................................................................................................... 58 3.2.2 The contingency approach ............................................................................................................................... 60 3.2.3 The configuration approach ............................................................................................................................ 63 3.3 ASSUMPTIONS FOR CONFIGURATION STUDIES .............................................................................................. 67 3.3.1 The assumption of fit ........................................................................................................................................... 67 3.3.2 The assumption of reductive mechanisms ................................................................................................. 68 3.3.3 The assumption of equifinality ....................................................................................................................... 69 3.4 CHAPTER SUMMARY .............................................................................................................................................. 70 CHAPTER 4 CONFIGURATION APPROACH IN ENTREPRENEURSHIP RESEARCH ....... 71 4.1 CHAPTER INTRODUCTION ..................................................................................................................................... 71 4.2 CRITERIA FOR CHOOSING STUDIES OF NEW VENTURE CONFIGURATIONS ............................................ 72 4.2.1.1 Specifications of the configuration approach in the context of new ventures 1989-2017 ............................ 83 4.2.2 Making sense of configuration domains ..................................................................................................... 83 4.2.3 The Person (Nascent Entrepreneur) ............................................................................................................ 86 4.2.4 The Resources ......................................................................................................................................................... 96 4.2.5 The Strategy ............................................................................................................................................................ 97 4.2.6 The Environment ................................................................................................................................................ 100 4.3 CONFIGURATION METHODS, SAMPLE AND SOURCE OF DATA .............................................................. 102 4.4 STUDY OUTCOMES .............................................................................................................................................. 105 4.5 FRAMEWORKS FOR NEW VENTURES ............................................................................................................. 108 4.6 CHAPTER SUMMARY ........................................................................................................................................... 110 CHAPTER 5 QUALITATIVE COMPARATIVE ANALYSIS ........................................................... 112 5.1 CHAPTER INTRODUCTION .................................................................................................................................. 112 5.2 SET THEORY .......................................................................................................................................................... 113 5.2.1 Two set theoretic analytic illustrations ................................................................................................... 114 5.2.2 Creating Sets from data .................................................................................................................................. 117 5.2.3 Fuzzy Sets .............................................................................................................................................................. 118 5.3 WHAT IS QUALITATIVE COMPARATIVE ANALYSIS? ................................................................................. 119 5.3.1 Advantages of QCA ............................................................................................................................................ 119 5.3.2 Studies using QCA for Configuration Analysis ...................................................................................... 121 5.4 DESCRIPTION OF THE ARTICLES ...................................................................................................................... 133 5.4.1 Study designs used ............................................................................................................................................. 133 5.4.2 Theory and typologies...................................................................................................................................... 134 5.4.3 Samples ................................................................................................................................................................... 136 5.4.4 Performance outcomes .................................................................................................................................... 138 5.5 CHAPTER SUMMARY ........................................................................................................................................... 139 CHAPTER 6 METHODOLOGY ............................................................................................................... 141 6.1 CHAPTER INTRODUCTION .................................................................................................................................. 141 6.2 STUDY DESIGN ...................................................................................................................................................... 142 6.3 EPISTEMOLOGY ..................................................................................................................................................... 142 6.4 SAMPLE STRATEGY .............................................................................................................................................. 143 6.4.1 Panel Study of Entrepreneurial Dynamics ............................................................................................. 144 6.4.2 Participants/ respondents ............................................................................................................................. 146 6.4.3 Missing and Excluded Data from the Sample ....................................................................................... 147 6.4.4 Extreme Scores .................................................................................................................................................... 147 6.4.5 Demographic Information of Participants............................................................................................. 148 ix 6.4.6 Context of Entrepreneurship in United States of America .............................................................. 151 6.4.6.1 Growth in the Economy ............................................................................................................................................................... 152 6.4.6.2 Entrepreneurial Activity .............................................................................................................................................................. 154 6.5 ANALYSIS STRATEGY ......................................................................................................................................... 158 6.6 RESEARCH FRAMEWORK FOR THE STUDY OF NASCENT ENTREPRENEURS PERFORMANCE ........ 161 6.7 MEASURES FOR THE CONFIGURATION STUDY............................................................................................ 163 6.8 DEPENDENT VARIABLE- VENTURE START-UP ............................................................................................ 163 6.9 INDEPENDENT VARIABLES- PERSON (NE) ................................................................................................ 165 6.9.1 Entrepreneurial Intensity ............................................................................................................................... 166 6.9.2 Need for Achievement ...................................................................................................................................... 166 6.9.3 Specific Human Capital ................................................................................................................................... 167 6.10 INDEPENDENT VARIABLE- FINANCIAL RESOURCES DOMAIN ............................................................. 167 6.11 INDEPENDENT VARIABLE- ENVIRONMENT DOMAIN .............................................................................. 167 6.11.1 Munificence Scale ............................................................................................................................................ 168 6.11.2 Dynamism Scale ............................................................................................................................................... 168 6.12 INDEPENDENT VARIABLES- STRATEGY DOMAIN (ORGANISATION) .................................................. 169 6.13 ANALYTICAL PROCEDURES ............................................................................................................................ 169 6.14 PHASE 1- CLUSTER ANALYSIS FOR THE FSQCA ANALYSIS ................................................................. 169 6.14.1 Wave 2 Analysis................................................................................................................................................ 171 6.15 PHASE 2- FUZZY SETS QUALITATIVE COMPARATIVE ANALYSIS (FSQCA) .................................... 173 6.15.1 Calibration of Fuzzy Sets ............................................................................................................................. 173 6.15.2 Truth Table Analyses ..................................................................................................................................... 174 6.15.3 Standard Analysis............................................................................................................................................ 175 6.15.4 Phase 3- Sensitivity Analyses ..................................................................................................................... 176 6.16 ETHICAL CONSIDERATIONS ............................................................................................................................ 177 6.17 SUMMARY OF THE METHODOLOGY CHAPTER ......................................................................................... 178 CHAPTER 7 RESULTS FOR EARLY AND LATE STARTERS ..................................................... 179 7.1 CHAPTER INTRODUCTION .................................................................................................................................. 179 7.2 DESCRIPTIVE STATISTICS FOR PERFORMANCE OF STARTERS ................................................................ 179 7.3 RESULTS OF THE SETS ANALYSES .................................................................................................................. 185 7.3.1 Results for Early Starters ............................................................................................................................... 185 7.3.2 Results for later starters ................................................................................................................................. 188 7.4 CHAPTER SUMMARY OF EARLY AND LATE STARTERS ............................................................................ 191 CHAPTER 8 RESULTS FOR EARLY AND LATE QUITTERS ...................................................... 192 8.1 CHAPTER INTRODUCTION .................................................................................................................................. 192 8.2 DESCRIPTIVE STATISTICS AND CORRELATIONS FOR EARLY AND LATE QUITTERS ........................ 192 8.2.1 Results for Early Quitters ............................................................................................................................... 197 8.2.2 Results for Late Quitters ................................................................................................................................. 198 8.3 SUMMARY OF RESULTS FOR EARLY AND LATE QUITTERS ..................................................................... 200 8.4 CHAPTER SUMMARY OF EARLY AND LATE QUITTERS ............................................................................ 201 CHAPTER 9 DISCUSSION OF CONFIGURATIONS ........................................................................ 202 9.1 CHAPTER INTRODUCTION .................................................................................................................................. 202 9.2 CONFIGURATIONS BASED ON STARTERS ...................................................................................................... 202 9.2.1 Configurations based on early starters .................................................................................................... 205 9.2.2 Configurations based on late starters ...................................................................................................... 208 9.3 OVERALL FINDINGS FOR STARTERS ............................................................................................................... 210 9.4 CONFIGURATIONS BASED ON QUITTERS ....................................................................................................... 212 9.4.1 Early Quitters ....................................................................................................................................................... 215 9.4.2 Configurations based on Late Quitters .................................................................................................... 218 x 9.5 OVERALL FINDINGS FOR QUITTERS ................................................................................................................ 223 9.6 CHAPTER SUMMARY ........................................................................................................................................... 225 CHAPTER 10 CONCLUSIONS AND RECOMMENDATIONS ....................................................... 226 10.1 CHAPTER INTRODUCTION ............................................................................................................................... 226 10.2 CONTRIBUTIONS TO KNOWLEDGE................................................................................................................ 226 10.2.1 Starting Early versus Starting Later ...................................................................................................... 227 10.2.2 Quitting Early versus Quitting Later ...................................................................................................... 229 10.3 IMPLICATIONS FOR PRACTITIONERS, ACADEMICS AND POLICY MAKERS ......................................... 233 10.4 STUDY LIMITATIONS ........................................................................................................................................ 235 10.5 FUTURE DIRECTIONS ......................................................................................................................................... 238 10.5.1 Areas for Future Research ........................................................................................................................... 239 10.5.2 Implications for conducting Research on New Ventures .............................................................. 240 10.6 THESIS SUMMARY ............................................................................................................................................. 241 REFERENCES ....................................................................................................................................................... 244 APPENDIX A: INFORMATION ON THE TOPIC MODULES IN THE SURVEY .......................................... 291 APPENDIX B: OUTLINE OF VARIABLES USED IN THE STUDY ................................................................ 293 APPENDIX C: STEPS FOR ANALYSING THE FUZZY SETS (RIHOUX & RAGIN, 2009) ......................... 300 xi LIST OF TABLES TABLE 1 ORGANISATION OF THE THESIS ........................................................................................................................................................ 19 TABLE 2 VARIOUS PERFORMANCE MEASURES USED IN NASCENT ENTREPRENEUR STUDIES .............................................................. 51 TABLE 3 CONFIGURATIONS STUDIES ON NEW VENTURES WITH DOMAINS ............................................................................................. 74 TABLE 4 PERSON DOMAIN FOCUS .................................................................................................................................................................. 87 TABLE 5 ARTICLES ON QCA IN ENTREPRENEURSHIP/ VENTURE .......................................................................................................... 123 TABLE 6 DATA COLLECTION STRATEGY OVERVIEW ................................................................................................................................. 145 TABLE 7: DEMOGRAPHIC INFORMATION OF RESPONDENTS .................................................................................................................... 149 TABLE 8 FURTHER DEMOGRAPHIC INFORMATION OF STUDY PARTICIPANTS ...................................................................................... 150 TABLE 9 INDEX OF THE ENTREPRENEURIAL ACTIVITY OF THE UNITED STATES BETWEEN 2005- 2011 ..................................... 155 TABLE 10 OUTLINE OF THE ANALYSIS STRATEGY ..................................................................................................................................... 161 TABLE 11 PERFORMANCE STATUSES OF THE NASCENT ENTREPRENEURS ........................................................................................... 165 TABLE 12 FINAL CLUSTER CENTRES FOR WAVE 2 ................................................................................................................................... 171 TABLE 13 DESCRIPTIVE STATISTICS AND CORRELATION COEFFICIENTS FOR WAVE 2 STARTERS* ................................................. 180 TABLE 14 DESCRIPTIVE STATISTICS AND CORRELATION COEFFICIENTS FOR WAVE 6 STARTERS* ................................................ 183 TABLE 15 DESCRIPTIVE STATISTICS AND CORRELATION COEFFICIENTS FOR WAVE 2 QUITTERS* ................................................. 193 TABLE 16 DESCRIPTIVE STATISTICS AND CORRELATION COEFFICIENTS WAVE 6 QUITTERS* ......................................................... 195 TABLE 17 CONFIGURATIONS OF ENTREPRENEUR TYPES THAT LEAD TO EARLY AND LATE VENTURE START-UPS ...................... 204 TABLE 18 CONFIGURATIONS OF EARLY AND LATE QUITTERS ................................................................................................................ 213 TABLE 19 OVERVIEW OF INTERVIEW SCHEDULE MODULES ................................................................................................................... 291 TABLE 20 ENTREPRENEURIAL INTENSITY .................................................................................................................................................. 293 TABLE 21 NEED FOR ACHIEVEMENT ........................................................................................................................................................... 293 TABLE 22SPECIFIC HUMAN CAPITAL .......................................................................................................................................................... 294 TABLE 23 FINANCIAL RESOURCES ............................................................................................................................................................... 294 TABLE 24 EXTERNAL SUPPORT .................................................................................................................................................................... 295 TABLE 25 MARKET COMPETITION ............................................................................................................................................................... 296 xii TABLE 26 TECHNOLOGY AND INNOVATION STRATEGY ............................................................................................................................ 296 TABLE 27 CUSTOMER FOCUS STRATEGY .................................................................................................................................................... 297 TABLE 28 ANOVA OF THE WAVE 2 CLUSTER GROUPS ........................................................................................................................... 299 xiii LIST OF FIGURES FIGURE 1 GARTNER’S FRAMEWORKOF NEW VENTURE CREATION (GARTNER, 1985)........................................................................... 13 FIGURE 2 RESEARCH MODEL FOR THE STUDY OF NASCENT ENTREPRENEURS’ PERFORMANCE ............................................................. 14 FIGURE 3 GARTNER’S FRAMEWORK OF NEW VENTURE CREATION (GARTNER, 1985) .......................................................................... 27 FIGURE 4 MODELS OF THE DIFFERENT APPROACHES ................................................................................................................................... 58 FIGURE 5 DIRECT EFFECTS BASED ON UNIVERSAL APPROACH .................................................................................................................... 61 FIGURE 6 EXAMPLE OF THE CONTINGENCY APPROACH ................................................................................................................................ 61 FIGURE 7 ANALYSIS OF DOMAINS IN NASCENT ENTREPRENEURSHIP CONFIGURATIONS ........................................................................ 85 FIGURE 8 VENN DIAGRAM IDENTIFYING CAUSAL CONDITIONS WHEN SHARED BY AN OUTCOME ....................................................... 115 FIGURE 9:VENN DIAGRAM ASSESSING WHETHER CASES WITH SIMILAR CAUSAL CONDITIONS SHARE SIMILAR OUTCOMES ........... 115 FIGURE 10 QUARTERLY REAL GROWTH RATE (SEASONALLY ADJUSTED ANNUAL RATES) .............................................................. 152 FIGURE 11- UNEMPLOYMENT RATE, IN PERCENT BETWEEN 2006 AND 2011 .................................................................................. 154 FIGURE 12 RESEARCH MODEL FOR THE STUDY OF NASCENT ENTREPRENEURS’ PERFORMANCE ....................................................... 162 FIGURE 13 RESULTS OF THE CLUSTER ANALYSES ...................................................................................................................................... 172 FIGURE 14 CONFIGURATION OF EARLY STARTERS FOR WAVE 2 .............................................................................................................. 186 FIGURE 15 CONFIGURATION OF LATE STARTERS FOR WAVE 6 ................................................................................................................ 189 FIGURE 16 CONFIGURATIONS FOR EARLY QUITTERS FOR WAVE 2 ........................................................................................................ 197 FIGURE 17 CONFIGURATIONS OF LATE QUITTERS FOR WAVE 6 ............................................................................................................ 199 xiv