Handbook of Organizational Behavior_2 ppt

16
Entrepreneurial Phenomena in
a
Cross-National Context
Urs
E.
Gattiker
Aal6org University, Aalborg, Denmark
John
Parm
Ulhsi
The Aarhus
School
of
Business, Aarhus, Denmark
1.
Introduction
International trade is thriving, and the demand for job creation through the founding of new
firms is increasing and becoming a political hot topic.
A
response by researchers to these devel-
opments has resulted
in
a rise
in
cross-national studies assessing and comparing attitudes toward
technology and how these attitudes relate to the effective use of technology (e.g., Gattiker and
Nelligan, 1988; Earley and Stubblebine, 1989). Also, how cross-national differences and similar-
ities
in
management systems may influence the possible success of high-technology start-ups

has been investigated (e.g., Goslin et al., 1993). Others have appraised and compared the efforts
of countries to keep their workers abreast of new technology-related developments, thereby
assuring that workers' skill levels match the requirements
of
the workplace caused by innovation
(e.g., Muszynski and Wolfe, 1989). The literature has primarily focused on these issues
in
large
tirms. For instance, Adler (1998) proposed that having a less rigid bureaucracy and using control
as a tool
of
enablement instead of coercion will help larger firms to remain innovative. Zahra
and Garvis
(1
998) reported that large
U.S.
firms exhibiting international corporate entrepreneur-
ship show better performance than other large firms do.
Some studies have addressed
how
structural changes
in
an economy, through mergers and
plant closures (e.g., Baldwin and Gorecki, 1990) and the formation of new companies (e.g.,
Birley and McMillan, 1992), tend
to
influence national employment levels
as
well as economic
growth. Much of the research investigating the formation of new companies has concentrated

on the personal characteristics of entrepreneurs (e.g., see Brockhaus, 1982, for an extensive
review of this literature), asking what makes them different from other people. In contrast
to
this traits approach, the ecological approach (often called the rates approach) focuses on how
social, economic, and political conditions may influence variations
in
the number of foundings
The authors would like
to
thank Woody Clark and Robert Golembiewski for their insightful comments
made
on
an earlier draft of this chapter as well as
H.
Shawyer for her editorial assistance. The
usual
disclaimers apply.
389
390
Gattiker and Ulhai
over time (Aldrich and Wiedemayer. 1990; Hannon
and
Freeman, 1977). Such studies investi-
gate
firm
foundings based on the operation of four processes: variation. selection. retention, and
diffusion.
There is an extensive literature on how variation, retention, and diffusion promote or
hinder organizational genesis (e.g., Mitchell, 1989; Singh et al., 1986; Wiewel and Hunter,
1985). This chapter is based on the assumption that all economic activity is embedded

in
social
relations and that social relations can play an important role
in
influencing the establishment
of business relations and the running of a business (Granovetter. 1985). Embeddedness means
that between most actors there are two or more types of ties;
in
addition to, for instance, advice
relations, there may be other types of social exchanges or bonds between actors. Several ties
between two or more actors mean that the relationship is dynamic and multiplex. The exchange
of information is subject to social norms, rules, structures, and
so
on that are influenced by
various other ties within the social network of the individual.
Without an appropriate theoretical framework,:k researchers encounter great difficulty
in
understanding why one country’s small and medium-sized enterprises may have the necessary
skills to succeed while another country’s may not. Moreover, interpreting how social networks
may affect
a
new venture’s profitability and growth is also difficult. This chapter attempts to
inject some order into the cross-nationaJ debate and how cross-national concerns may affect
skills as well as entrepreneurial activity and innovation. In Section I1 the authors selectively
review and evaluate the current status of research dealing with cross-national issues relating to
firms, and develop
a
new framework integrating cross-cultural psychological, anthropological,
and sociological thought. Section
TI1

sketches out how skills, innovation. and entrepreneurship
may help
in
further explaining the founding of new businesses. Section IV discusses what is
important for success
in
the entrepreneurial process, focusing on social networks. Finally, Sec-
tion V outlines conclusions and implications for decision makers as well as the most promising
directions for future research.
II.
Cross-National
Issues
Existing cross-national comparisons indicate numerous differences
in
the detinition of work
(England and Harpaz, 1990),
in
self-rating of performance compared with supervisory ratings
by Taiwanese and
U.S.
workers (Farh et
al.,
1991
),
and
in
organizational cornmitment levels
in
Japan and the United States (e.g., Luthans et al., 1985; Near, 1989) as well as between the
United States and Canada (Cohen and Gattiker, 1992).

How
managerial hierarchies may differ
between U.S. and European high-technology start-ups has also been investigated (e.g Goslin
et
al.,
1993). In addition, conceptual models concerning how cross-national issues affect technol-
ogy transfer (e.g., Kedia and Bhagat.
1988)
and training effectiveness (e.g., Black and Menden-
hall, 1990) have been offered.
Although such research and theoretical work provides important insight into these issues.
it
often fails to explain or account for the behavioral differences between groups of employees.
In part, this difficulty is perpetuated by the concept of culture, which can be defined
in
various
ways. Even if the researcher were to choose a well-elaborated concept of culture, its successful
application
in
the field would be constrained by the scarcity of financing. time. and human
resources. (Compare Adler,
1982.)
Moreover. differences
in
human and social perceptions and
interpretations would make the interpretation of findings difficult (e.g., Baghat and McQuaid,
*
The
term
.fi-nnzc.~.ork

is used interchangeably
with
the term
r~oclel
throughout
this
chapter.
Entrepreneurial Phenomena
391
1982). In this section, a framework that integrates cultural contributions from the fields of organi-
zational behavior, psychology. anthropology, and sociology is developed. The objective is to
develop
a
model for cross-national research that takes into consideration budgetary and time
constraints. This model allows for a thorough understanding of the differences and similarities
reported between samples.
A.
The
Meaning
of
Culture
Any society may be thought of as having a variety of cultural “themes,” rather than being
a single and homogenous culture. These themes are composed of various interpretations and
heterodoxies of the core culture-in addition to any incursions-that may have developed
around the core, as
by
ethnic groups. Cultural diversity
in
countries has been increasing due to
the globalization of business via, for example, subsidiaries

in
foreign countries and
a
more
variegated workforce due to the entry of guest workers. immigrants, and refugees. Cross-national
studies about individual and organizational phenomena are concerned with the systematic study
of the behavior and experience of organizational participants
in
different cultures.
A
brief discus-
sion
of
the most pertinent cultural issues is given below. For an extensive review, see also
Triandis
(1
977).
Anthrupology.
Most anthropological studies typically contain one or more of the following
crdtural cleriwtiws:
symbols
(including language, architecture, and artifacts),
myth,
ideational systems
(including ideology and values), and
ritual
(including traditions).
While anthropologists and sociologists continue to debate the correct usages and
meanings of these concepts, most studies treat them only as motivational factors
for individuals and groups (Silverman, 1970).

Another important dimension of cross-cultural research has been cultural stability, about
which the common view is that less stability encourages cultural diversity and
change. Goldstone (1987) suggested that cultural diversity favors innovation.
In
con-
trast. enforcement of
a
state of orthodoxy, which perpetuates
old
models, is likely
to result
in
society’s hostility toward innovation and risk taking.
A
tolerance of
pluralism therefore enhances openness toward these two elements. For organiza-
tions, this means that cultural instability encourages innovation and adaptation,
while orthodoxy reduces tolerance for new ideas and therefore hinders innovation
(Perry
and
Sandholtz, 1988).
Sociology and organization theory.
Much of organization theory using a sociological
framework has paved the way for the “culture-free hypothesis.’’ (See Hickson et
al., 1974; Hickson and McMillan, 1981
.)
This hypothesis suggests that cultural dif-
ferences-or contextual variables-may have little if any effect on such organi-
zational structure variables as size, specialization. and formalization (e.g., Miller,
1987).

As
Meyer and Scott (1983.
p.
14) emphasized, however, the role of institu-
tional environments, defined as “including the rules and belief systems as well as
the relational networks that arise
in
the broader societal context,” will influence
organizational structure and behavior. For instance, Maurice et al. (1980) show that
organizational processes develop within an institutional logic that is unique to a
society. While structure, specialization, and technology may appear similar across
countries, their interpretation and application may therefore differ according to the
national context (e.g., Hofstede, 1984). Research indicates that concern about trans-
ferability of concepts, models, theories, and frameworks across national boundaries
is
growing (e.g., Hofstede, 1984; Katz et al., 1999). Cross-national studies on techno-
392
Gattiker
and
UlhDi
logical issues allow for the transcending
of
limits
in
one society while establishing
the generalizability (or the limitations) of a theory and/or model (Kohn. 1989). Re-
searchers try to use inductive logic to understand the similarities and dissimilarities
between populations
in
order to explain different results (Bhaghat and McQuaid,

1982).
Ps~clzology.
Like sociologists. psychologists have recently questioned the ability of theo-
ries and concepts to enable researchers to generalize beyond one context. whether
tirln or country. Specifically, most organizational theories and research have origi-
nated
in
North America (i.e., the United States and to a very small extent, Canada).
In consequence. cultural issues tend to be addressed primarily from a North Ameri-
can point
of
view, and for better or worse, the approaches propagated there predomi-
nate (e.g Moghaddam, 1987). As
a
result, Europeans who have tried to move to-
ward
a
European social psychology have rejected this North American dominance.
This separale development is partly due to European social psychology's greater
ernphasis on cooperation and conflict, conformity, philosophy of science. political
underpinnings of science. criticisms of science, and racial and ethnic issues (Fisc11
and Daniel. 1982).
A dominant North American framework, especially
in
cross-cultural psychology and man-
agement, is that proposed
by
Triandis and Vassiliou
(
1972). These authors posed

the distinction between
srhjectilye
and
objective
czrltrwe.
and, although researchers
have made considerable efforts
in
applying these concepts
in
various studies (e.g
Pepitone and Triandis. 1987), wide applicability
has
been difficult. Subjective cul-
ture is defined
as
a group's characteristic way of perceiving its social environment.
For example, office workers could differ in their attitudes toward computers based
on demographic characteristics such as gender (e.g., Gattiker et
al.,
1988). Objective
culture could be detined
as
a country's ecology and infrastructure. Accordingly,
Canada's Nunavut (Inuit
for
"our
land," which became a territory
in
April 1999)

which covers
a
fifth
of the country's land mass and contains about
23,000
inhabit-
ants, does not offer visitors cities with street vendors or cafes due to its climate and
low population density.
Due
to
weather conditions
in
spring (thawing of ice) and
fall
(freezing). roads through rivers may not be passable.
Triandis
(
1977, p.
134)
suggested several sets of variables that should help
in
classifying
subjective culture. (See Table
l.)
A
slhjectiw
crrlture
study can be classified into five groups
of variables, and as Table
I

outlines,
objective
cra1tlu-e
can be measured using two groups of
variables.
Table
1
Classifying Cultural Variables: Objective and Subjective Culture
Subjective culture
work)
1.
Subsisterice
system
(methods
of
exploitation
of
the ecology to survive;
e.g.,
industrial
2.
C~lltuml system
(human-made environment)
3.
Social system
(patterns of interaction; e.g roles)
LC.
Inter-indivitirtnl system
(e.g social behaviors)
5.

lmii~idud
systenz
(e.g perceptions. attitudes, and beliefs)
1.
Ecology
(e.g
,
the physical environment. resources, geography, climate, fauna, and Bora)
2.
Objective portion
of
he
cl~11u1-d system
or
irlf,.ustr-ltctut-e
(e.g roads, tools,
and
factories)
Objective culture
Source:
Adapted
from
Triandls
(1977.
p
144).
Entrepreneurial Phenomena
393
Often cultural moderators are used to interpret findings, such as data from studies assessing
attitudes, about the subjective culture-for example, the political system and market (Farh et

al., 1991) or formal and/or legal/political support structures for worker participation
in
firms
(Heller et al., 1988, p.
224). Unfortunately, what Triandis calls objective culture is not directly
measurable,
so
its relationship and possible moderating effect on subjective culture cannot be
assessed (e.g., formal and/or legal structures for worker participation and their effects upon
satisfaction) (Heller et al., 1988, Chap.
5).
The reader can thus either accept the interpretation
given by the authors or use his or her own. In either case, a comprehensive understanding of
“why” and “how” these differences occurred is not possible.
This problem is not only prevalent for researchers. Many students attending college away
from home write papers dealing with managerial and organizational issues based primarily on
U.S grounded models and studies. North American ethnocentrism (i.e., the tendency by scholars
to overlook the applicability of their concepts and theories beyond their own country and/or
culture) will thus extend into the training of future managers from those learning about manage-
rial and organizational issues through North American “tinted glasses.”
B.
Defining Culture: An Interdisciplinary Approach
In summary, the current and widely utilized frameworks for studying cross-national issues tend
to operationalize culture by either 1) determining its degrees of stability and orthodoxy or
2)
using a temporal continuum
to
assess subjective culture. In the context ofthis chapter, the authors
assume that
culture represents both a stability-seeking force and alz

individllal/erzvironnzerztul
or
dynamic dinzension
(objective/subjective continuum, using Triandis’s terminology).
As
Figure
1
reflects
1.
The
x
axis (horizontal) is a continuum that ranges from the micro focus (i.e., the
individual)
to
the macro perspective (i.e., the environment) of
a
culture.
2. The
y
axis (vertical) represents the level of stability of the culture ranging from
low
stability [e.g., approximate subjective (opinions)] to high stability [e.g., innate subjec-
tive (cognitive style)].
The left rectangle represents the individual dimension
of
Figure
1,
hence its location is
to
the

left
(x
axis
=
micro focus), and the stability of these factors decreases from heredity down
to
opinions (y axis). For instance. public opinion polls show that the electorate changes support
for a government rapidly and frequently, depending upon the latter’s most recent decision. In
contrast, people’s beliefs are relatively stable and resistant to change (e.g Rokeach,
1980).
This
example shows that when we try to comprehend culture from a micro perspective, we must
accept that an individual’s opinions are less stable than his or her beliefs. Moreover, while we
can generally measure genetic factors such as eyesight and reproductive behavior without any
major problem,
it
is far more difficult to assess opinions comprehensively. It follows that while
opinions are
upproximute.
heredity and genetic factors are
innate
or givedstable. Changes occur
as a result of genetic mutations over generations (Plomin and Neiderhiser. 1992), while a per-
son’s political opinions may shift due to the president’s last speech on national TV.
The right rectangle
in
Figure
1
graphically illustrates the environment. At the top of the
vertical angle is the natural environment, and at the bottom, the human-made one. Similarly,

while the natural parts of the environment, such as topography and climate, are stable over
generations and centuries until the next natural disaster, population density and infrastructure,
including roads and cities, are continuously changing as the result of human actions and policies.
-
Heredity and genetics
-
Cognitive style
and abilities
-
Beliefs
-
Values
-
Attitudes
-
Opinions
A
C
MODERATORS
-
Myths
-
Symbols
-
Rituals
-
Norms
-
Ideational
systems

C
‘L
B
Gattiker
and
Ulh0i
-
Topography
-
Climate
-
Population density
-
Infrastructure
-
Economic
&
political
system
Micro
Micro-Macro
Continuum
Macro
Figure
1
Relationship between the micro-macro continuum and the degree of cultural stability. The
micro dimension is represented by the individual whose attitudes and opinions are likely to change fre-
quently during his or her lifetime (low cultural stability); i.e., what is “cool” and “in” today may be
“out“ totnorrow. The macro side represents the natural and human-made environment. While topography
may remain stable over thousands of years, a political system can change several times within a century

(e.g Germany and Yugoslavia).
AI-I-OM?
A
symbolizes the influence of the natural environment upon the
individual. For instance, a change in climate may lead to the survival of only those individuals whose
genetic makeup. as the result of favorable mutations over generations, has adapted them for survival.
Arrow
B
symbolizes the
bicfirectionnl
relationship between the approximate factors,
such
as the individual’s
beliefs, values. attitudes. and opinions, and the human-made environment. as represented by the infrastruc-
ture and the economic, legal. and political system
of
a country.
Wuvr
C
illustrates the intermediary effect
of cultural moderators upon the approximate individual factors and the human-tnade environment. For
instance. myths and symbols about fertility and manhood may influence how a society values offspring.
A
positive societal view
of
fertility will result in an increase
in
population density
if
the children survive

and become adults. High population density and a political system that provides negative reinforcement
for childbearing may help to establish a norm of small families. The People’s Republic of China under
Communist leadership has followed this path. thereby making small families (even those without male
offspring) more acceptable than
in
the past. The literature does not support the view that cultural moderators
and the natural environment affect innate individual factors. This does not mean that
a
certain topography
and climate may not foster certain myths and symbols, however. For instance. the
Inuit
language contains
various labels for snow. and
Inuit
fairy
tales
likewise reflect the importance
of
snow and ice
Slrbcdtrues.
Subcultures may develop within a country. For instance, immigrants may
live
in
their own neighborhoods (e.g., Chinatown
in
San
Francisco or Berlin’s Kreuz-
berg with primarily Turkish residents). Subcultures
can
also

go beyond traditional
social differences, however. Youngsters across race, social status. and/or religious
beliefs may form ad-hoc subcultures based on cultural intolerance and uniformity.
The
latter may define which clothing, music,
and
linguistic expressions are accept-
able
for
its members, such as being a “rapper” and/or
a
“skateboard dude.” Certain
Entrepreneurial Phenomena
395
groups on the Internet may have developed new subcultures with their own values,
beliefs, ideologies, attitudes, and artifacts. For instance, when communicating with
each other, German and French individuals may be communicating
in
a foreign
language.
How
this may affect the content, flow of experience, and evaluation of
the process by all parties has not been researched; nevertheless, the increased use
of
the Internet makes this an important issue. Unfortunately, the authors are not
aware of research that has addressed either how language may affect the perceived
flow of experience
in
communication and information systems by an individual or
how individuals differ

in
their evaluations based on language and semantics.
Organizational
culture.
Similar to subcultures, organizations may also develop their own
cultures, with rituals and norms that are peculiar to
a
firm, within a national culture
(Isaac, 1993). Various factors may influence and shape organizational culture, such
as the physical design of the work environment, organization structure, and manage-
ment systems and procedures, as well as selection and promotion decisions (Schein,
1983). Moreover, technology and structure (Pennings and Gresov, 1986). as well
as reward systems and organizational rites relating to status and power (e.g., Beyer
and Trice, 1987), directly or indirectly affect and shape corporate culture. Kunda
(l
992) found that the organization's ideology articulates a system of normative con-
trol (p. 91).
In general, the literature on organizational culture has contributed very little to the under-
standing
of
the process of culture creation, maintenance, and change. The predominant approach
taken by researchers
in
the field has been to investigate organizational culture simply to enable
one to better describe or change the current culture. Moreover, such efforts have often been
based on the assumption that the distilled guidelines (i.e., the outcome of such research) are
universally applicable. The limitations of such an assumption need to be critically evaluated,
however. Specifically, using such findings to develop guidelines for best practices has been
criticized (Gattiker, 1998).
Diversity of new organizational forms is growing. For example, flat and unbureaucratic,

as
well
as
entrepreneurial structures may develop. Additionally, project-based organizational
structures and network forms evolve
to
permit organizational and individual learning. These
forms all imply that the faith
in
finding models. or what is also called "good" theory-which
can be applied universally. as suggested by some (e.g., Kohn,
1989)"should
be questioned.
These theoretical trends point to a fundamentally new conceptualization. Gattiker (1998)
suggested that instead of sensing organizations as being
in
temporary static states, it might be
more fruitful to perceive them as an ongoing process. Accordingly, organizing is a continuous
and dynamic process whereby ad-hoc adjustments and fixed configurations such as best practices
may be an anomaly, and instead continuous fine-tuning may be necessary (Gattiker, 1990).
Schein (1983) has pointed out the importance of the entrepreneur
in
understanding the
interrelationship between culture creation and enterprise creation. The implications thereof seem
to be that the entrepreneurial enterprise creation process is intimately linked to the process
of
organizational culture creation.
The above suggests that a firm's culture indicates a system
of
normative control (e.g., the

ropes to skip): nevertheless, as outlined in Figure
1,
natural and human-made cultures do have
some influence upon organizational culture. For instance, an icy climate
in
the Canadian north,
such as the Nunavut territory, will make Friday afternoon pool parties
2
la Silicon Valley un-
likely.
A
more autocratic and hierarchical management structure enables a manager to have a
secretary pick up his or her dry cleaning and stay at work longer. In a more participatory and
egalitarian work environment, a secretary might first refuse to type some handwritten text be-
396
Gattiker
and
Ulhoi
cause
it
is private stuff (even though
it
is not!), and that secretary would probably not even be
asked to pick up the
boss’s
dry
cleaning.
In summary, researchers as well as professionals dealing with cross-national issues must
be aware that
I)

various methodological and measurement approaches for assessing culture
(national and/or firmwide) make comparisons across studies difficult; 2) the unidisciplinary
approach
to
measuring culture (in which psychologists ignore sociologists and vice versa) im-
pedes understanding of cross-national issues and phenomena: and 3) ethnocentrism exacerbates
the issues raised under points
l
and
2.
The use of an interdisciplinary approach. such as that
outlined
in
Figure
l,
is a small but important step
in
the right direction.
111.
Entrepreneurship, Innovation, and Culture
Increased internationalization of trade and business has made the replicating of research across
national boundaries a paramount issue. For instance, free movement of labor augments work-
force diversity. Recent data show that the percentage of foreign workers increased from 1986
to 1996
in
all OECD member countries. In some instances, every third (Luxembourg) or fifth
(Australia and Switzerland) worker is
a foreign citizen or foreign-born national (Immigration.
Sept. 26, 1998). Not only have cross-national differences gained
in

importance for success
in
business, but intracultural differences have also increased with the rising percentage of foreign
workers (e.g., almost one
in
nine of the total workforce
in
the greater London area is a foreign
citizen) (Emp1oyment:A new
mix,
Sept. 26, 1998).
Free movement of capital encourages firms to locate
in
various countries to increase effi-
cient allocation of resources. An entrepreneur may locate
in
Denmark to obtain government risk
capital at low or ‘*zero” cost instead of staying
in
Singapore, where financial support may be
harder to obtain, or vice versa. In spite of cross-cultural differences, (e.g., government financing
regulations for new ventures), intracultural differences may
also play an important role
in
how
individuals acquire and maintain the skill levels required to be innovative while passing success-
fully through the various stages
of
the entrepreneurship process. (Compare Cox and Nkomo,
1993.) This will be further outlined below.

A.
Skills
A working definition of skills was provided by Adams
(
1987)
in
a review of human motor skills
research. He proposed three defining characteristics:
“(l)
skills are a wide behavioral domain
in
which behaviors are assumed
to
be complex:
(2)
skills are gradually learned through training;
and
(3)
attaining a goal is dependent upon motor behavior and processes” (Adams. 1987.
p.
43).
Table
3
provides Adams’ definition of skill, while Table 3 presents a categorization
of
Table
2
Detining Skills
Skills are
leamcd

beimiol-s
required for the achievement of desirable performance levels when doing
job-related tasks necessitating the use
of
technology. while the content and type
of
skill required
for
doing
a
job is
in
part a
relational
phetzonmot?
(i.e,, how many and what type
of
people have
or
do
not
have the necessary skills). (Compare Gattikcr.
1991;
1992.)
General-ope
skdls
are transferable
to
another job or organization. while
Jit-ln-specIJic

skills
are usually
obtained through on-the-job training and performing job-specific tasks. Firm-speci
tic
skills should
increase productivity with the firm while their transferability is limited.
while attaining on-the-job training (Gattiker, 1995)
General-type skills are more likely to be obtained
in
an educational setting than within the firm
or
Entrepreneurial Phenomena
397
Table
3
Seven Skills Categories Listed
in
Descending Order of Transferability
Transferability of skills to another job and/or organization decreases as follows:
Tacit skill5
are acquired through practice and experience and cannot be articulated explicitly; they
include the person's knowledge about how to avoid errors and overcome imperfections
in
the
work system, and are tied inseparably to the individual; they cannot be communicated directly
to somebody else and are difficult to observe and measure.
To
basic (reading, writing. and arithmetic).
To
social

(e.g interpersonal skills and the person's ability to organize his or her own efforts and
To
cotxeptual
(including planning, assessing, decision making about task- and people-related
To
teciuzology
(encompasses appropriate use of technology. such as
a
computer, thereby
To
rechrzical
(physical ability to transform an object or item of information into something
To
a person's
tusk
skills
(usually job-specific. such as doing the weekly petty cash report).
In
their longitudinal study, Kohn et al.
(1983)
found that
itttellectual%e.ribilin'
is greatest after
completing formal education. Generally
it
tends to decrease during a person's work life due to further
specialization and limited exposure to non-work-related subjects. This might suggest that
a
person
'S

nzost
innovative
phase
itz
life
would be shortly after finishing the formal education and thus early on
during one's work life.
task performance, and possibly that of his or her peers and subordinates),
issues, and judging or assessing tasks done by self or others).
preventing breakdowns/accidents).
different).
Note. The above
is
adapted from Gattiker
(
1990a,
Chap. 12;
I990b)
and also Gattiker and Wdloughby
(1993).
In
each
position, the mdividual acquires additlonal skills through formal and informal ways. Tacit skills wdl change
as
one's
experlence and practice of the various
skills
increases during his
or
her worklng life.

skills listed
in
descending order of transferability. (See also Gattiker 1990a, Chap. 12: 1990b.)
In this context, tacit skills represent the knowledge of the individual attained through formal
and informal education, experience, and life
in
general. This also applies to craft-based technol-
ogy,
in
which tacit knowledge and experience may play an important part
in
success. This is
in
contrast
to
science-based technology, whereby success relies highly on formal education and
explicit knowledge.
Knowing and understanding one's need to adjust when working
in
a different culture is
important. The successful adaptation to such an environment, while applying and interpreting
verbal and written communication signals appropriately in this new cultural context, however,
is a result of one's tacit skills. (Compare Berry et al., 1989.)
A
narrower definition suggests
that tacit skills consist of officially and actually required skills for the job, actually used skills
for doing job-related tasks, and skills acquired through preliminary training (e.g., Leplat, 1990).
The definition given in Table
3
builds upon Polanyi's work (1962).

Studying European firms. Ulhai and colleagues (1996) reported that when major change
programs such as integrated environmental management systems are introduced, new skills are
required, necessitating extensive additional training for employees. Unfortunately, such training
may not be available within the formal education system at that time (Ulhai et al 1996).
It may, however, be necessary
to
differentiate between education and training when trying
to understand the interrelationship between acquiring skills through formal education
or through
on-the-job-training. Majchrzak and Cotton
(1
988) suggested that training be defined as an im-
provement in a person's technical skills, while education be defined as the improvements accom-
plished
in
a person's understanding and comprehension. Others (e.g., Fossum et al., 1986) follow
these lines of reasoning by stressing that training follows formal education and includes a learn-
398
Gattiker
and
Ulhoi
ing component. Continuous learning or lifelong learning
in
today’s rapidly changing work envi-
ronment does, however, suggest that both additional education and training for skills upgrading
appear necessary to protect an employee’s employability (e.g., Gattiker, 1994).
The above indicates that people have a set
of skills that require continuous upgrading
to
stay abreast

of
new developments. This may occur through on-the-job training and attending in-
house or out-of-house training/seminars and/or courses (e.g university programs taught during
evenings and/or weekends) (e.g., Gattiker, 1994). Since Gary Becker’s formulation of human
capital theory (1964). economists assume that general training provides workers with skills that
are useful
in
more than one job or
firm
(e.g., Becker, 1964. p. 19). While general skill training
increases the employee’s potential productivity
in
a competing firm, specific training tends
to
be on-the-job training, which will presumably increase future productivity for the firm (e.g.,
Barron et al., 1987). (See Table
2.)
This suggests that
it
is best for an individual to make an effort to secure additional general-
type training for maintaining or improving skills. (See Table
3.)
Because general-type skills are
transferable
to
another work environment and make
a
worker more attractive for poaching by
another firm. the employee’s bargaining power is
also

increased. Kohn et
al.
(
1983, p. 106)
reported that depending upon substantive complexity at work (i.e., the degree to which the work
requires thought and independent judgment),
a person’s intellectual flexibility (i.e one’s actual
intellectual performance
in
an interview to questions asked to reveal both cognitive problems
involving well-known issues and his or her handling of perceptual and projective tests) is
al”
fected. The research by Kohn et al. (1983) suggests that intellectual flexibility may be highest
shortly after completing formal education.
It
is reduced
to
some degree depending upon the
complexity of one’s work and the length
of
time one has been
in
the workforce. Research on
discoveries by eminent scientists would suggest (Anderson, 1989) that a person may have the
greatest cognitive and creative potential to
be
innovative early on
in
one’s career. Nevertheless,
while one’s intellectual flexibility may be reduced, general-type skills training can help. (Corn-

pare Kohn et al., 1983.)
B.
Innovation
Table 4 provides a definition for the process of innovation. If we assume that an individual may
have the greatest level
of
intellectual flexibility toward the end of one’s formal education, we
may wonder how this might affect a person’s potential for innovation and creativity. Before
discussing this
in
more detail, however, some general issues
about
innovation must be addressed.
Voss
(1988) argued that the study and literature of innovation
as
well
as
the diffusion of
innovation could be split into two areas of research and inquiry. One studies the process of
innovation, while the other focuses primarily on the diffusion and adoption of innovations
(Voss.
1994). While the focus here is primarily on the process of innovation required for launching
new firms (having identified
;L
market need and trying
to
satisfy
it).
subsequent entrepreneurial

success does, however. necessitate rapid diffusion and adoption of new technology. Table
3
outlines innovation
in
more detail and provides a definition.
Christensen
( 1998) pointed out that
a
dominant design may emerge that tends to result
in
marked shifts
of
innovation.
A
particular technological approach will follow the pattern of
an
S
curve, flattening as certain natural limits might apply (e.g., physical limits
to
magnetic
storage of computer data on hard disks). Moreover, discontinuous innovation requires a depar-
ture from existing knowledge,
so the technology is perceived as being new, and markets may
still have
to
be developed (Gattiher, 1990, Chap.
1).
Typically the timeframe here is long-term,
with a high risk for failure and a greater potential for substantial returns on investment (McDer-
mott, 1998). In this context we are interested

in
discontinuous as well as continuous innovation
Entrepreneurial Phenomena
399
Table
4
Innovation and Applied Creativity as a Process
~
The
process
of
innovation
represents a sequence of events.
At
the root lies an initial need recognition
or discovery. followed by a development phase involving networks and internaVexterna1 support,
and finally. communication to diffuse the idea.
object: physical or intellectual. The idea becomes a reality once a prototype or model of the
innovation
is
available. which
in turn
can be touched or experienced.
An invention
or
the
adoption
of
a
new

practice, product,
or
process
may represent the
succes@l
probleln solutio/?.
which
in
turn verifies the technical feasibility and/or demand originally recognized
(i.e.,
necessih
is the mother of all inventions).
which will facilitate
a
new firm’s possible growth. (See also Table 5.)
product or pladstrategy as the final outcome.
recognition, creativity is applied during a development phase to turn the idea into a tangible object.
Technical developzent
is
needed
for
completirzg the idea
by turning
it
into a concrete and tangible
A successful problem solution will likely accelerate the
chfSusion
and
adoption
of

a new tecltrtology.
Applied creativit?,
refers
to
finding or solving a problem solution, culminating
in
an actual creative
Based on the above,
applied creativity is
usually
required in art ittnovation process.
After problem
~~ ~ ~
~
Note. There are numerous ways
of
defining innovation and creativity. Here we have developed one way
of
defining
the terms. focusing In particular on the process the individual innovator or group
of
people or creative mind(s)
all
have
to go through.
and its potential effect upon entrepreneurship success. Also of interest here is whether innovators
might be entrepreneurs
as
well (or vice versa),
or

if the innovator has to team up with an entrepre-
neur for a better chance of success
in
a new venture. These issues will be outlined below.
C.
Entrepreneurship
Business and engineering schools often represent a rather narrow perception of the entrepreneur:
a single individual who has an idea, starts a business, and owns the business. In the technology
domain, however, entrepreneurs with an idea are often part of a team. Success paired with rapid
growth during the first few years requires additional equity and risk capital, which in
turn
will
often push the ownership by the entrepreneuds) below
50%
(e.g., Beyers et al., 1998; Gartner
and Starr, 1993). The definition provided
in
Table
5
takes these factors into consideration.
The definition
in
Table
5
does not exclude partnerships or other collective action, but
focuses on the initiating and executing person. (Compare Gartner et al., 1994.) Moreover, entre-
preneurial activity is often initiated by more than one individual, thereby permitting entrepre-
neurs to complement and strengthen important skills and competencies. While there might exist
numerous definitions
of

the term entrepreneurship, Moore and Buttner
(l
997) suggested that an
index of ownership appears to be a helpful indicator for defining an entrepreneur. Accordingly,
an entrepreneur rarely owns the firm
in
full. Instead, he or she might hold a substantial minority
stake
in
the new firm (e.g.,
10%
and up), making up the largest single shareholder or the majority
together with his or her partners.
Some have also suggested that a distinction must be made between novices or “average”
or “typical” entrepreneurs and experienced founders. The habitual entrepreneur starts new busi-
nesses and usually moves on after a few years (McMillan 1986). Research on the latter is lacking,
although one study by Kolvereid and Bullvig
(l
993) reported no significant differences
in
com-
pany growth. There were differences
in
how social networks were used, however. Nonetheless,
using growth in size may not be as good a performance measure as returns on investment and
a firm’s cash flow (Leleux and Muzyka, 1993).
400
Gattiker and Ulhoi
Table
5

The Entrepreneurship Process
An entrepreneur is defined as the person (or the group of people) who has the idea for the venture and
E~?tt.epre~~ertrshil,
is
the process
of
estchlishing
n
jrm
by
an
intiiviclrtnl
or
a
grorcp
of
people.
Entrepreneurship represents a sequence
OS
events, at the
root
of
M7hich lies
an
irliticrl
men
01-
mcrrket
cienzancl
r-ecogrzitiou

or
discove/y.
followed by a development phase involving support from the
entrepreneur’s social network and others (e.g., informal advice, feedback. and suggestions; see also
phases
1-2
in
Table
6).
Finally, the entrepreneurship process requires the communication of the idea
to secure human and financial resources required for starting he firm.
While entrepreneurship may involve the establishment
of
any kind
of
business.
in
our context we are
primarily interested
in
cases which innovative efforts (product and/or process) are required and
a
substantial technology component is part
of
this process (e.g., research and development activities
involving science and/or engineering graduates).
Corporate entrel,i.eneui-sllip
or
iiatrap/.eItelcrsllip
applies

to
individuals’ process of recognizing
an
initial
need or market demand, followed by
a
development phase involving support for the corporate
entrepreneur(s) from superiors. management. and colleagues/team members. Corporate
entrepreneurship has gathered attention
in
part due
to
larger firm’ interest
in
decreasing product
cycles from bringing ideas from the research and development stage
to
being sold
in
old
or
new
markets, while assuring that
the
firm is adjusting to change ahead of its competitors. Here a
firm
may decide to establish
a
new profit center, a subsidiary. or invest
in

a new venture by some
of
its
former employees embarking on serving a market demand that might not necessarily be part
of
the
corporation’s core competencies.
who carries out the founding of the business and has a
Jubstantial stake in thle.finu’s equity.
Note: Large
firms
may strlve to facihtate change and innovation
in
certaln
parts
of
the
firm.
Thls does
not
mean,
however. that the whole organization
is
now becoming entrepreneunal, but a new
spirit
may
help
in
tearing down
certain divlsional and territorial walls,

all
making the
firm
become
more
responstve to new ideas and change
Because entrepreneurship is a process (compare Table
5),
it is necessary to discuss this
process
in
some detail. In other words, the entrepreneur and his or her partners
will
pass through
different phases before and after starting their venture. This is discussed below.
D.
The Stages
of
the Entrepreneurship Process
An entrepreneur may have to deal with different issues, depending upon where he or she stands
as
far as establishing or running a new venture is concerned. To address this issue, Wilken
(1979, pp. 64-65) suggested that an individual thinking about founding
a
business will
pass
through three phases or stages of entrepreneurship. We have expanded Wilken’s
(1
979) three
phases

in
Table 6 by suggesting an additional
four-
stages,
namely
4
through 6.
While the literature may generally assume that success is reflected by passing through all
stages as outlined
in
Table 6,
an
individual may decide to get royalties from
a
patent instead
of starting production. (See phase
3.)
Generally, research ignores such people, and
in
return the
entrepreneurship literature does not address this issue (e.g., Brockhaus, 1982). In phase
3,
the
entrepreneur may still depend heavily upon the innovation milieu or on others for support. know-
how, and much more at low cost.
An entrepreneur may
also
decide to abandon
a
business because of

a
lack of skills or
because one cannot find
a
partner with the complementary skills needed to improve the chances
for success. In phase
5.
complementary skills and know-how for synergy effects may
also
be
secured by finding additional investors. Naturally this may result
in
a shift
in
ownership from
the entrepreneur to others. Similarly, research is lacking addressing the issue of phase
4,
whereby
the individual may decide to
sell
the tirm after
I
year
to
make
a
profit or to move on to start
another business (habitual entrepreneur) (Kolvereid and Bullvig. 1993). In phase
5,
firms that

Entrepreneurial Phenomena
Table
6
The Seven Stages of the Entrepreneurship Process
40
1
~
~~~~____
An individual thinking about founding and running a business
will
pass through the following seven
stages or phases of entrepreneurship:
1.
2.
3.
4.
5.
6.
7.
A
perception phase during which business ideas and opportunities are perceived and motivation
is
created (e.g during one's studies
or
at one's current job)
The planning phase, such as acquiring the necessary resources to set up a business (e.g., toward
the end of one's studies or while still holding a job) and putting
in
an
application for a patent

if
feasible
The establishment phase and start-up phase. which represent the beginning of operations or else
the decision not to launch but instead sell the patent or give a license to somebody else
The pregrowth phase (e.g., years 1-2 after start-up), when the firm has not yet overcome initial
problems and typically is dependent on some support (e.g., the incubating milieu or
entrepreneurs' contacts with knowledgeable others through social networks; see Table
8)
at low
cost
The abortion/shift
in
ownership phase, when some entrepreneurs may not survive the post
incubator phase and decide
to
abort the project or possibly find new partners (e.g., capital,
management, and distribution), hence distribution of ownership might change or the firm ceases
to exist
The early growth phase/postincubator phase (e.g., years
3-5),
during which the new venture is
entering a fast growth period (e.g turnover and human resources) and leaves the technology
park
The slower growth phase/management challenge period (e.g., years
6 and beyond) when the
firm's "maturity" or "age" is characterized by the use of routines and established procedures
for running operations (degree
of institutionalization) while the entrepreneur
is
focusing on

certain activities only
Through all of the above phases, the entrepreneur is going through a learning process and must assure
that he or she acquires the necessary entrepreneurial, innovative, and technological competencies
in
order to succeed. (See Table 2.) What may help considerably
is
the social network available to the
entrepreneur. (See Table
7.)
Note: The above stages apply to corporate entrepreneurs insofar
as
they
also
have to pass through stages
I
through
3.
During the latter stages. internal resources must be secured.
If
management gives the go-ahead and the financial and
human resources needed
for
the new venture/division/profit center have been secured, subsequent steps are passed
through.
have successfully survived the first
5
years of their existence by growing and making
a
profit
for their owners now have to cope with the natural pains due to growth (e.g., cash flow and the

capital needed
to
finance growth) and align managerial and organizational structures to cope
with the firm's increasing size
in
turnover, personnel, and assets.
E.
Skills, Innovation, and Entrepreneurship: High-Technology
Firms and Young Entrepreneurs
Based on the literature discussed
in
the previous sections.
it
seems obvious that a person's
intellectual flexibility with one's general skills acquired during formal education may enable
a
person to recognize a need for a successful problem solution. (Compare, Table
4.)
In turn, the
individual may go through the process to establish
a firm, which
in
turn
offers a successful
problem solution to the market. Adoption of the innovation and its market diffusion may also
help the firm
to
grow
in
size and profitability.

Universities have started entrepreneurship programs, primarily
in
engineering and business
schools, and the latter's graduates have been responsible for business start-ups ranging from
402
Gattiker and Ulhoi
consulting to store to manufacturing operations. Our understanding of entrepreneurship by grad-
uating students is not very extensive, however (Bryant, 1999). Moreover, the limited knowledge
we have is primarily from business school graduates starting their new ventures during or shortly
after graduating (Bryant, 1998). Unfortunately, we know little about high-tech start-ups by teams
of students during their last semester or just after completing studies
in
science and engineering
programs (Gattiker and Ulhgi, 1998).
As far
as
the above limits are concerned, we
also
have limited knowledge about how
certain training programs
in
the sciences and engineering might facilitate innovative efforts and
the founding of new businesses by recent graduates. Founding
a
new business right after success-
ful
completion of formal university education may be easier for an individual since family,
financial, and other commitments are lower. A graduate is less likely to have
a
mortgage or

have adjusted
to
a certain lifestyle. In turn, early
in
a
firm’s life cycle, an entrepreneur’s income
requirements may be lower than they would be
a
decade after completing college. Unfortunately,
our insights into these kinds of reasons are very limited. (See Section
IV.)
Finally, based on their extensive literature review, Moore and Buttner (1997) concluded
that the number of well-structured. scholarly studies on women entrepreneurs is still small. In
conclusion, researchers interested
in
entrepreneurship, innovation, and skill acquisition must be
aware that
1
)
various approaches
to
measuring thcse do exist and thus make comparisons across
studies difficult,
2)
an approach linking innovation, skills. and entrepreneurship issues and the
possible foundation of a new business is lacking, and
3)
cross-national issues are rarely ad-
dressed. The section below will try to shed some more light upon these issues and propose
a

more integrative approach using the definitions and frameworks as oullined
in
Sections I1 and
111.
IV.
Developing Skills and Competencies for Entrepreneurial Agility:
The Example of Social Networks
Media coverage has suggested that successful entrepreneurs are
a
breed apart. While personality
and sociocultural variables have been used extensively to distinguish between successful and
unsuccessful entrepreneurs, these variables explain only
a
small part of who might succeed
with
a
new venture (Beyers et al 1998). If future success and competitive advantage
of
new
entrepreneurial enterprises stem primarily from difficult-to-imitate resources (Teece, 1987: Wer-
nerfeldt, 1984; Barney, 1986; Prahalad and Hamel, 1990; Collis and Montgomery, 1995), then
there is a need to know more about what they consist
of
and how they can be further cultivated.
Beyers et
al.
(1
998) suggested that researchers should focus attention upon “other people” with
“whom the entrepreneur spends time and how they respond”
(pp.

1-5).
This
in
turn will permit
the study of how social networks may
in
fact help the person to secure vital input during [he
competition for scarce resources.
Another concern is how cross-national and intracultural differences may affect entrepre-
neurship as well as social networks (e.g., membership, interaction, and closeness). Naturally.
political systems
as
well
as
the general economic climate have an influence on the entrepreneur-
ship process (e.g., the availability of risk capital from government sources. generous tax provis-
ions for investors. and also the general level
of
risk aversion among investors/venture capital-
ists). In the present context, however, we are more interested
in
how social networks may
influence the overall entrepreneurship process.
A.
Social Networks and the Entrepreneurship Process
Entrepreneurs require capital. skills, hard work. and some luck. Complementary assets are
also
required. Entrepreneurs basically rely on three distinct yet mutually dependent types of assets.
Entrepreneurial Phenomena
403

1.
Entrepreneurs must have an original idea, which must be creative and innovative
enough to satisfy customer demand.
2.
Financial, legal, and accounting resources are necessary to protect property rights and
provide the capital needed to invest
in
the necessary facilities for running the business
while a prototype is constructed or built.
3.
Entrepreneurs need access to social networks that can provide strategically important
information and the know-how required to secure scarce resources. (See point
2
above.)
The first two types of assets represent human and financial capital and have been studied to
some extent. The third type of asset, access to social networks, appears to have been pretty
much ignored
in
the entrepreneurship and innovation literature (Greve and Gattiker, 1998). En-
trepreneurs use social relations to further develop knowledge and routines and to establish vari-
ous business relations. The social environment surrounding the individual entrepreneur can be
seen as systems of social networks
in
which the number and properties of ties
in
the network
tend to determine the access to other critical resources necessary to realize the entrepreneurial
idea. Social networks tend to cluster according to the actual content and purpose
of the social
interactions

in
question (e.g., industrial sectors, geography, professions, and leisure activities).
We assume that all economic activity is embedded
in
social relations that may play an
important role
in
influencing the establishment of business relations and the running
of
a business
(Granovetter, 1985). During the process of securing economic and other resources, the individual
will use information and make important judgments and decisions about establishing a new
venture. (Compare Table
7.)
Entrepreneurial decisions are made
in
a cultural, social. and emo-
tional context rather than
in
economic-contracting relations (Borch, 1994;
Stan-
and MacMillan,
1990). Accordingly, the properties of one's search efforts and the social network may affect
one's success
in
acquiring information and other resources necessary for establishing a business
(Cooper et al., 1995).
Table
7
suggests that all economic activity is embedded in social relations. Several ties

between two actors means that the relationship is multiplex. The exchange
of
advice may be
subject to social norms, rules, structures, power, and
so on that are tied to other ties
in
the social
network. Granovetter (1973) argued that weak ties are more advantageous with respect to getting
nonredundant information. Weak ties are characterized by short exchanges of information, ca-
sual acquaintances, and low frequency
of interaction. These relations may occur
in
several differ-
ent social settings, and sometimes weak ties will be developed into stronger ties (Nohria, 1992).
Table
7
Social Networks and the Entrepreneurship Process
Social
nemwrk
artalysis
shows what actions and structures are used
to
enable entrepreneurs
to
establish
The entrepreneur uses
social
nefivorkdrelations to acquire information and to make sense
of
firms and gain legitimacy in

a
market that is governed by social norms as well as market forces.
information (e.g., an acquaintance in the legal or accounting profession). Often information and
know-how obtained through one's social network may require limited resources (e.g., financial), but
be invaluable
to
the entrepreneur.
We assume that all economic activity is
ernbedded
in
social
relations
that may play an important role
in influencing the establishment of business relations and the running
of
a business.
Embeddedness
means that there are more than one type
of
tie among most members of a social
network. For instance,
in
addition to advice relations, there may be other types of social exchanges
or bonds between actors, such as playing golf together, having graduated from the same high school,
or having their children attending the same grade together.
Note: The above definitions also apply to corporate entrepreneurshlp. Nonetheless,
for
a
corporate entrepreneur
a

larger
social network and the abillty to draw upon experts' advice may come from within the
firm
itself.
404
Gattiker and Ulhoi
depending on the densities of social networks and relations between actors,
as
explained by
Granovetter’s
(
1973) forbidden triangle.
Weak ties mean that the network persons may not know each other, and that is the basis for
getting nonredundant information. Research following Granovetter’s (1973) article has basically
supported his theory (Granovetter, I982), but he
also
notes that strong ties have some advantages
because they are more readily available. It is one thing
to
get information through network
contacts and quite another to get important resources and commitments from your actors. Receiv-
ing resources and comn1itments requires trust. Trust is defined
as
confidence
in
others’ moral
integrity or goodwill
in
dealing with unpredictable issues (Ring and Van de Ven, 1994). This
is based

OD
interactions that produce social-psychological bonds of mutual norms, sentiments.
and friendship. Trust-based relations develop over time
if
there is
l.
Frequent interaction
2. Some affection or liking
in
the relationship
3.
A history of interaction (Krackhardt, 1992)
Lack of trust may be a reason for failing to establish long-term relations or strong ties. Axelrod
(1984) supports this by showing how establishing cooperation means that actors take long-term
relations and continued exchange into consideration.
B.
Entrepreneurship Phase and Composition
of
Social
Networks
To start any economic activity entrepreneurs need capital, skills. and labor. To mobilize their
own and complementary assets, they need information and contacts who are willing
to
provide
them with resources. These contacts are the social capital of the entrepreneurs. It is the network
position and characteristics of the network that provide these resources. which may determine
entrepreneurial success (Burt, 1992). Accordingly, social capital can be expressed as the number
of direct anti indirect ties or the degree of centrality of an actor. Indirect ties, while sometimes
being important to getting access to resources. are less visible and harder to study than direct
ones.

Most entrepreneurs use personal contacts to get access to information (Cooper, et al
1995). The entrepreneur needs to get access
to
information and resources. Contacting people
and talking to them will take some time; therefore, access
to
nonredundant information sources
may increase the efficiency of networks
in
terms of information gained and time used (Burt,
1992). This assumes that an entrepreneur is able to choose social relations and optimize a net-
work. Optimizing depends
on
two conditions, however.
1.
Information
is
perfectly tied to individuals and is distinguishable from information
2. Entrepreneurs know what information they are looking for and thus select what they
held by other individuals.
need.
These two simple assumptions cannot be met
in
most cases. Actors have a bounded knowledge
about the networks
of
which they are a part (Hikansson and Johanson, 1993). At most, they
can perceive their direct relations and a few of their relations’ connections. We therefore assume
that existing social relations will play a major role
in

existing network profiles and activities.
which means that existing structures will shape the use of relations and the forming of new
relations (Aldrich et
al.,
1990). hence for an individual ready to receive
a
college degree and
participate
in
a venture. the social relations developed and nurtured during study are important.
Unfortunately. fellow students may not be able to provide the information and resources one
needs; professors can help, but will likely not suffice
to
build the social network of contacts
A
4
I
Entrepreneurial Phenomena
405
(weak and strong, primary and secondary ties) needed to succeed when competing for scarce
resources. In turn, building relations with knowledgeable others by being
in
contact with entre-
preneurs, incubators, and more might facilitate one's passing through the various stages of en-
trepreneurship and on to subsequent success with a new venture.
C.
Ties and Interaction
All networks are composed of both strong and weak ties (Scott 1991). and the relations of
any one actor may also know each other from other networks, which means that networks
are interconnected or clustered. This has some implications for both access to information and

resources, because legitimacy, social support, and trust may be traded for redundancy.
Social networks are often clustered, depending on the content of interactions. For example,
one cluster may consist of business people representing a particular industry. Entrepreneurs need
to position themselves within one
or
more clusters that may provide legitimacy and resources
that facilitate the founding and running of a new venture. This implies a search for-and use
of-social relations that may reduce the risk of decisions by providing knowledge that improves
that ability of the entrepreneurs to assess the viability of their ventures (Birley, 1985). Entrepre-
neurs may also establish long-term business relations through their networks (Borch, 1994).
A young entrepreneur might be able to bring to a new venture the capability
to
draw a
low salary by,
for instance, having no debts and being used to a simple and inexpensive lifestyle
as experienced during one's student days. In contrast,
a
more mature entrepreneur may have a
need for a greater income (e.g., family obligations), but this disadvantage may be offset by
having worked
in
an industry for some time and having developed a very important social
network with contacts holding various key positions. This seems apparent when looking at small
consulting firms. Often founded with the help of experienced professionals, the entrepreneurs
have access to extensive networks and contacts
in
an industry they might have worked
in
for
years before going out on their own, hence for

a
young entrepreneur, developing the appropriate
social network during education becomes a paramount issue for succeeding
in
the entrepreneurial
tournament for scarce resources.
From career mentoring, we know that individuals' mentors change during their work life
(e.g Campbell and Heffernan, 198 1). It seems quite reasonable to infer that entrepreneurs need
social networks with members having different skills and contacts appropriate to the stage at
their entrepreneurial activities. For instance, before starting a venture, access to legal and finan-
cial know-how might be crucial. In phase
4
the entrepreneur might require tax and investment
law advice to deal with issues pertinent to going to the stock market to raise equity. Accordingly,
using
a
longitudinal approach to study entrepreneurship (compare Table
8)
might illustrate that
the composition
of
one's social networks will change over time, due to changing needs for
knowledge, advice, and support for helping one's venture grow.
D.
Acquiring
Skills
Through Education
In our context, we are primarily interested
in
individuals who either alone or as part of a group

(see Table
5)
start a firm involving technology or science-based knowledge. Innovation thus
requires the creative use of scientific know-how. Hopefully this
in
turn will result
in
a creative
problem solution.
For educators, the question is if entrepreneurship, innovation, and creativity can be taught.
Most entrepreneurship programs teach students much about the entrepreneurship process and
the steps required
until
a business is opened, as well as the business skills required for managing
a new business during its early phases of gestation. If, however, we assume that many ideas
I
".
""
.,j
.

"""-
406
Gattiker and
Ulhoi
Table
8
Research Issues and Selected Propositions
The research issues listed below requlre a
longitlrdinnf

design.
whereby individuals passing through the
entrepreneurship phases (see Table
6)
are followed while passing through gestation to realization and
successful growth of the new venture. Also. while investigating social network Issues, data must not only
be gathered from the entrepreneurs themselves, but most important. also from
~~zetnbers
of
elltwprerleurs'
socinl
networks
1.
Do
habltual entrepreneurs dlffer from novice entrepreneurs by
a. Startmg a new busmess
in
more complicated fields (e.g advanced technology)
b. Achieving positwe cash flow for new firms quicker
c. Having more loosely
knit
social networks,
d. Using their social networks more extensively
stages by
a. Exhlbiting stronger ties
in
denser networks during phases 1-3;
b. Having from phases
3-5
2.

Do
social networks differ (e.g
in
size, embeddedness, and skills) across the various entrepreneurship
1.
The size of dense networks (i.e number of members) being reduced
2.
The number of loose network ties increase
competitors or entrepreneurs
in
related industries)
in
contrast to
1.
General skills (e.g., legal and accountmg)
2.
Famtly ties (e.g a sibling who runs a business or a family friend) increase significantly
3.
After controlling for such factors as having secured patents, financial resources. or risk capital at low
cost from government and/or private investors during phases
2
and
3,
do successful entrepreneurs (as
measured by their film's growth, positive cash flow, and profitability) differ from less successful ones
a. Having brought
in
"professional" management to run certain parts of operations (e.g accounting
b. Havlng succeeded
in

permitting each partner to focus on activities related to his or her strengths
c. Permitting partners who are habitual entrepreneurs (or due to other reasons) to sell their share
in
d. Remaining actively involved with the
firm,
while having a sizeable minority share
e. Permitting managers and workers to purchase shares at favorable conditions
4.
After controlling for such factors as having secured patents.
financial
resources, or rlsk capital at low
cost from government and/or prlvate investors during phases
2
and
3,
do successful entrepreneurs (as
measured
by
their firm's growth, positive cash flow. and profitabillty) differ from less successful ones
c.
In
phases
4
and
5
network members who have business-field-related skills (e.g., possibly
by
and administration)
(e.g innovation. management, and/or production)
the firm, thereby reducing ownership

to
fewer or different individuals and shareholders
by
a.
b.
C.
Continuously innovating. resulting
in
subsequent
1.
Product
2.
Process innovations during phases 1-3 to phases
4-5
Having received support from Innovation nl~lieus and Incubators, influencing positively their
1.
Administratwe procedures
2.
Equity, finance. and ownership agreements that are
to
the advantage of the entrepreneur(s)
Spending more time
in
1.
Phases 1-3
on
developing social networks compared to phases
4-5
2.
Phases

3-5
on maintaining networks cornpared to phases
1-3
5.
Besldes controlling for ecological factors (e.g financing, equity, support from innovatlon milieus. risk
capital). some traits-related issued may also have to be controlled for if not investigated specifically.
addressing such issues
as
a. Are ventures started soon after completion
of
college or other education more likely to be
successful than others (i.e., timeliness of human capital acquired)
b.
Do
sociodemographic factors such as age. marital status, and gender (e.g possible bias and
discrimination) effect success rates for new ventures
c. Are certain educational programs more successful than others
in
providlng entrepreneurs with
support during the innovatlon process (phases
l-2),
while letting them acquire the
sk~lls
that
facilitate success passing through the various subsequent entrepreneurial phases?
The above issues should all be investigated to determine if intracultural and cross-national differences can
be found.
Note The above list
of
research issues and selected proposltions for further

study
is nerther complete nor llsted
In
order
of
importance.
Entrepreneurial Phenomena
407
come from the laboratory and should be transferred from there to the business world, traditional
business schools may not reach the science and engineering students working and tinkering
in
university and industrial laboratories.
Social networks
and
secrlring
of
resources.
While support
in
one's educational setting
might be limited,
it
will be easier for the new or potential entrepreneur to secure
scarce resources while obtaining important information from family members and
their own social networks
if
his or her parents are entrepreneurs. Greve and Gattiker
(1
998
j

reported that entrepreneurs whose parents own their own business are more
likely to tap into their parents' social networks and obtain valuable sources this way.
For an engineering student who does not have entrepreneurs
in
the family, things might
look different. Accordingly, for educators and policy makers, the question is whether
certain educational activities can help a science or engineering student to develop
a social network that increases the probability of success
in
the entrepreneurial tour-
nament. One step would be to have access to one or two mentors who have just
gone through phases 1 through
3
of the entrepreneurship process for support, advice,
and access to their own networks. The literature suggests that career mentors help
one's progress in the corporate hierarchy (Gattiker and Larwood. 1990); thus, similar
effects might occur for potential entrepreneurs. Having an idea is important, but it
is difficult to make
it
palatable to less knowledgeable others who are not as immersed
in
the scientific field.
To
illustrate, a person with legal expertise or an entrepreneur
in
another field may lack the deep scientific know-how to understand without careful
explanation what an innovation might be all about. In turn, he or she represents an
important hurdle for possible subsequent success
in
the entrepreneurship tournament

for securing scarce resources. If this person does not understand, how might those
providing the risk capital ever be able to comprehend and thus feel comfortable
investing in the new venture?
Cre-eatirity.
Coming up with a successful problem solution during one's studies requires
some creativity. In an extensive literature review, Kabanoff and Rossiter (1994)
pointed out that for science, business, and management education, training can be
used to increase creativity. (See Table
4
for a definition of the term.) Kabanoff and
Bottger (1992) reported that in a 10-week MBA course using a control group, cre-
ativity
in
task solutions increased for the group while the control group's scores
remained the same. Here and
in
other studies, training efforts can help in improving
subjects' levels of creativity for finding solutions for problems. Since necessity often
is the mother of inventions, some training
in
using one's cognitive abilities
in
order
to become more creative seems important. Having a creative idea that leads to an
innovative problem solution does not necessarily culminate
in
the founding of a
successful start-up, however.
E.
Some

Research
Questions
The above indicate that while social networks are important, our understanding of how they
might affect innovative and entrepreneurial efforts is limited. Using samples from four different
nations-Italy, Norway, Sweden, and the United States-Greve and Gattiker (1998) showed
the importance of having stronger ties in denser clusters to access business clusters providing
an entrepreneur with resources. As pointed out previously, the assumption that an entrepreneur
is a single warrior with an idea who starts a firm alone might be a misconception. In the technol-
ogy domain, however, entrepreneurs having an idea may often be part of a team. Finally, success
408
Gattiker
and
Ulhui
paired with rapid growth during the first few years requires additional equity and risk capital,
which
in
turn
will often push ownership
by
the entrepreneur(s) below
50%
(e.g., Beyers et al.,
1998; Gartner and Starr, 1993).
Of interest here is how network activities, the position
of
entrepreneurs
in
social networks.
and the structure of social networks are correlated with the different phases of the process that
entrepreneurs go through. By recognizing the social processes behind establishing and running

firms, entrepreneurs may get a clearer picture of the importance of establishing and using social
relations to get access to information, complementary resources. and distribution channels.
Table 8 outlines some of the research questions raised by this chapter. What is important
here is the longitudinal design of research
to
address the issues outlined and the cross-national
comparisons to see if the theory allows for generalization beyond one country or region (Kohn.
1989). Accordingly. answers to these questions will help us to increase our understanding of
both the innovative and the entrepreneurial process, while helping interested students become
successful entrepreneurs after completing their studies.
V.
Implications and Conclusions
The extensive study of entrepreneurial phenomena
in
a cross-national research framework deal-
ing with innovation, training, skills, and social network issues is too new, and the systematic
investigation of its application to organizational settings is
too
limited, for a comprehensive
theory about its applicability
in
the entrepreneurship process across countries. In fact. its differ-
ent effects and cultural factors (see Fig.
1).
all influencing the entrepreneurial process, may
never enable us to come up with
the
theory,
or even
a

theory.
As
a
result, the propositions set
forth here (see also Table
S)
were not derived from a generally accepted theory. Instead, they
were pieced together from various disciplines (including. but not limited to. sociology, organiza-
tion studies, psychology research dealing with skill acquisition, culture. innovation, and entrepre-
neurship), and extrapolating only when
it
seemed reasonable.
The propositions outlined
in
this chapter serve as building blocks for the development of
a
less atomistic. more conceptual theoretical framework dealing with the entrepreneurship pro-
cess and the interrelationship between culture and learningltraining. Moreover. the framework
presented must be subject to review, critique, and discussion over an extended period of time
before gaining general acceptance.
Business. public decision makers, and researchers have examined cross-cultural issues.
learning and training, and entrepreneurship
in
isolation without addressing their interrelation-
ship. Although cross-national research is important, organizational research must surpass ordi-
nary boundaries to understand the phenomena investigated. Simply researching the learning and
innovation issues for new firms and entrepreneurs without addressing cross-national concerns
will be unlikely to help
us
in

better understanding these phenomena.
A.
Implications for Researchers
The inherent context specificity of organizational culture requires various methodological and
measurement approaches
in
order
to
secure
a
sufficient degree of sensitivity within the overall
research model. By nature. the room for extensive cross-comparisons and generalizability of
results is limited (Bhaghat and McQuaid, 1982).
A
unidisciplinary approach to culture interpreta-
tion and measuren~ent will impede the possibilities for an adequate understanding of cross-
national differences and issues.
Entrepreneurial Phenomena
409
The standard textbook approach to entrepreneurship assumes that the entrepreneur is a
single. hard-nosed individual with a special innate creativity who starts a business. This rather
narrow and incomplete approach tends to leave out any attention to the role and importance of
other complementary skills, competencies, and insights contributing to the overall success of
the entrepreneur. Moreover, how the entrepreneur's social network
in
the form of direct and
indirect personal ties might help
in
the entrepreneurial phases is unclear.
Research focusing on entrepreneurship, innovation, learning, skill acquisition. and net-

working capabilities is important. Such work must realize, however, that there is no single
approach or model available that is capable of
fully
accounting for the interrelations between
important factors during the overall process of business formation.
Researchers need to pay more attention to these factors, including both direct and indirect
personal ties of the entrepreneur and other external contextual differentiating factors, when try-
ing to understand the entrepreneurial process from idea to successful growth phase. Only then
can researchers thoroughly assess the viability of the propositions.
A
narrow focus can lead to
reinventing the wheel rather than the advancement of our knowledge
in
an important area of
scientific endeavor.
Cross-national research dealing with entrepreneurship should use the framework presented
in
Figure
I.
Measuring objective and subjective dimensions of culture as well as moderators
will permit
a greater understanding of
why
differences
in
attitudes and behaviors (e.g., continu-
ous education efforts by firms and employees) may exist, and how and why they might help
in
explaining founding and failing rates of new ventures.
Solving the issues suggested above requires less specialized training of doctoral students

and more joint research by junior and established scholars coming from various disciplines.
Research should be determined by its impact upon the thinking and research of others rather
than by its large numbers of publications per period. Doing research within the framework of
Figure
I
while testing technological competence and the propositions outlined here requires
more time, patience, and resources than is currently given by the publish-or-perish game. The
"quick-fix" approach will drive research into further oblivion and result
in
esoteric topics
of
little interest and help to society at large.
B.
Practical Implications
Entrepreneurs need to become more aware of the role and relative importance of their social
networks and personal ties, including how they can improve their rather bounded knowledge
about the actual constituents of their networks.
Networks are of vital importance for entrepreneurs, hence entrepreneurs need to position
themselves
in
close connectivity and proximity to strategically important clusters of network
partners. These partners can provide and help maintain the legitimacy, skills, and resources
needed for launching a new venture. Equally important, to found and run a new business venture,
entrepreneurs also have to recognize that the relationship between the actors
in
the network is
multiplex and dynamic and subject to changes
in
social norms, rules, structures, and power.
Not realizing that these critical social mechanisms may dramatically hinder the relative success

of the outcome
of
participating in such networks. Accordingly, what may appear as a rather
loose or weak social network today may very well develop into a strong network tomorrow
(and vice versa).
Finally, various countries' concerns about the founding of new businesses
in
comparison
to other nations may be important, but without addressing cross-national similarities and con-
cerns,
it
may have little meaning. People who are being laid off during an economic downturn
are more likely to become self-employed than a person with secure employment. Moreover, not
4
10
Gattiker
and UlhDi
finding
a
job after graduation may again encourage a person to start up
a
firm. especially
if
declaring personal bankruptcy
in
case of failure is made easy (e.g.,
as
in
the United States).
Nevertheless, this may not mean either that more full-time and long-term positions are created

or that demand is increased for high-skilled labor. Without studying the issues addressed
in
this
chapter. comparing founding rates of new businesses may be of little consequence and may not
explain phenomena such
as innovation. patent rates, and entrepreneurship.
C. Implications for Educators
Assuming that much of the creative potential comes from engineering and science laboratories,
traditional business schools face a challenge. Unless such educational schools can get access
to
these resources (e.g.,
if
a campus has an engineering faculty), business schools face a strategic
disadvantage from their competitors who have close and productive links to laboratories. Science
faculties with close links to business schools, thereby supporting an interdisciplinary culture for
collaboration. and mixing different elements (both technical as well
as business issues) to enable
students to study both science and business, will be at an advantage.
This chapter
also
indicates that the entrepreneur needs
to
continuously upgrade his or her
skills
to
stay abreast of new technological development. To secure this outcome, additional
general-type training for maintenance and/or improvement
of
the entrepreneur's skills seems
to be the most appropriate strategy. This

in
turn
should compensate for the decreasing degree
of flexibility
in
intellectual capacity that parallels the increasing number
of
years since university
graduation
of
the
entrepreneur.
Educators also face the challenge of enabling individuals to acquire the skills needed to
excel as innovators and/or entrepreneurs. Learning about accounting or marketing might be
important. but
it
is not necessarily the decisive skills/ingredients needed to start up a high-
tech company. Here educators might be challenged to offer programs enabling innovators (e.g
engineering and science students) to establish the interpersonal relationships and friendships
with people who have business savvy (e.g., social science and business students). In turn, net-
works that are needed to start up a new venture
by
enabling the innovator to team up with an
entrepreneurial individual might be formed. Finally. while business schools have encouraged
their faculty
to
consult with business to keep abreast their changing needs for know-how and
much more, innovators and entrepreneurs require a learning environment tuned to their issues.
We do not expect
a famous basketball or football team to be coached by an individual who

has never played the game,
so
why
do
we expect this from people teaching innovation and
entrepreneurship?
D.
Conclusion
For
all
that we already know, there is still much more
to
be explored and synthesized. If we
want
to
guide future research and policy on innovation and entrepreneurship. we must meet the
challenges regarding cross-national issues. training, skills. innovation, and success during the
various entrepreneurial phases. (Compare. Tables
6
and
7.)
Although we have increased our knowledge of the entrepreneurship process and social
networks as well as cross-national differences,
a
great deal remains to be discovered and synthe-
sized. To guide future research on and policy development for facilitating the start-up of new
firms, we must develop a better understanding of the various entrepreneurial phases
a
new ven-
ture will have

to
pass through
in
order to succeed. Uncovering the subtler aspects and facets
of
this process and how social networks, training, skills, and innovative processes might be
interrelated, requires additional investigation. This chapter has provided us with important infor-
Entrepreneurial Phenomena
41
1
mation about these issues and outlined the utility of theories from various disciplines
to
explain
entrepreneurial phenomena such as social networking, training, and innovating. Developing this
approach further will help entrepreneurs succeed, while creating the new jobs required
to
main-
tain or even improve current living conditions for many.
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