Schumpeter revisited: Faster, Better, Cheaper - Con đường thành công doanh nhân và IPO

University of Louisville ThinkIR: The University of Louisville's Institutional Repository Electronic Theses and Dissertations 5-2019 Schumpeter revisited : faster better cheaper as grounds for entrepreneurial success and a path to an IPO. Charles Raymond Olsavsky University of Louisville Follow this and additional works at: https://ir.edu/etd Part of the Entrepreneurial and Small Business Operations Commons Recommended Citation Olsavsky, Charles Raymond, "Schumpeter revisited : faster better cheaper as grounds for entrepreneurial success and a path to an IPO. Electronic Theses and Dissertations.18297/etd/3183 This Doctoral Dissertation is brought to you for free and open access by ThinkIR: The University of Louisville's Institutional Repository. It has been accepted for inclusion in Electronic Theses and Dissertations by an authorized administrator of ThinkIR: The University of Louisville's Institutional Repository.

This title appears here courtesy of the author, who has retained all other copyrights. For more information, please contact thinkir@louisville. SCHUMPETER REVISITED: FASTER BETTER CHEAPER AS GROUNDS FOR ENTREPRENEURIAL SUCCESS AND A PATH TO AN IPO By Charles Raymond Olsavsky B., Youngstown State University, 1979 J., University of Akron, 1987 M., University of Michigan (Ann Arbor), 2012 A Dissertation Submitted to the Faculty of the College of Business of the University of Louisville in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Entrepreneurship Entrepreneurship Department College of Business University of Louisville Louisville, Kentucky May 2019 Copyright 2019 by Charles Raymond Olsavsky All rights reserved SCHUMPETER REVISITED: FASTER BETTER CHEAPER AS GROUNDS FOR ENTREPRENEURIAL SUCCESS AND A PATH TO AN IPO By Charles Raymond Olsavsky B., Youngstown State University, 1979 J., University of Akron, 1987 M., University of Michigan (Ann Arbor), 2012 A Dissertation Approved on April 15th, 2019 by the following Dissertation Committee: Dr. Andrew Manikas Dr.

Jeff Guan ii DEDICATION This dissertation is dedicated to my family including my wife Linda Olsavsky and our kids Bethann Olsavsky Chas Olsavsky Amber Parker and Stephanie Blubaugh for their support through a difficult time. iii ACKNOWLEDGEMENTS I would like to thank my wife Linda Olsavsky for all of her patience, hard work and support. Due to my handicaps and her IT skills, she provided help and support that was much greater than the usual support of a spouse. I would like to thank my dissertation chair, Dr.

Fiet for his hard work, patience and valuable guidance through the dissertation process. I would also like to thank my other committee members for assistance and comments: Dr. Garrett, especially for his comments on producing publishable articles; Dr. Manikas, especially for his guidance on Dr.

Hammer research; and Dr. Juan, especially for his guidance on research methodology. I would also like to thank Dr. Kenney and Dr.

Martin (both at UC Davis) for giving me access to their database Firm Database of Emerging Growth Initial Public Offerings (IPOs) from 1990 through 2015. I could not have completed the dissertation without the database. iv ABSTRACT SCHUMPETER REVISITED: FASTER BETTER CHEAPER AS GROUNDS FOR ENTREPRENEURIAL SUCCESS AND A PATH TO AN IPO By Charles Raymond Olsavsky April 15, 2019 Current entrepreneurship research focuses on two types of entrepreneurial firms: (1) the firms that develop innovative novel products or services arising from technological innovation; and (2) the firms that develop innovative novel products or services arising from recognition of an opportunity in existing conditions, no type of change required. A third type of business founder has been largely ignored in the modern entrepreneurship research - - the founder who enters a competitive market with no novel product or service that he or she invented.

I refer to this founder in a competitive market as a performance entrepreneur. This dissertation presents theory to argue that there are high growth opportunities in certain competitive markets and analyzes the prevalence of performance entrepreneurs among US IPO firms. Of particular interest is the performance entrepreneur who enters a new competitive market recently enabled by new technology. I present theoretical arguments (under a resource based view(RBV)) that the majority of high growth firms are performance entrepreneurship firms, not firms with innovative new products.

Joseph Schumpeter opined in 1942 that technological advances were becoming too complex for entrepreneurial firms. Michael Hammer opined through v the 1990s and early 2000’s that many business opportunities would arise through efficiency as a result of technological changes. I utilize these opinions and theories to advance my theory. In a stratified research effort, I reviewed SEC filings of over 500 firms that went through IPOs in the 1995-2015 period.

IPO firms are firms very successful firms that have achieved high growth and are generally considered to be at the pinnacle of entrepreneurship. My interest is the business ventures pursued by successful firms. The research showed that over 80% of these firms were performance entrepreneurship firms, not firms that had developed high technology products or services. This research is important because it shines a light on an important group of entrepreneurs who have been largely ignored in the modern entrepreneurship, even though they figured prominently in the traditional entrepreneurship.

vi TABLE OF CONTENTS PAGE ACKNOWLEDGMENTS .v LIST OF TABLES .1 LITERATURE REVIEW AND HYPOTHESIS EVELOPMENT.39 DISCUSSION AND CONCLUSIONS .71 vii LIST OF TABLES TABLE PAGE 1. Background and Breadth of Database. Excluded Firms from Database. Database Variable Sources…………….

Random Selection Process. Percentage of Firms in Different Classes. Percentage of Tech-Maker Confidence Levels……. Test Comparing Tech-Maker and Performance Entrepreneurship.

Test Comparing Kirznerian and Performance Entrepreneurship. Test Comparing Tech-Maker and T. Enabled Performance Entrepreneurship.70 viii CHAPTER I INTRODUCTION Current Theory That We Know There is an emphasis in the modern entrepreneurship research on business founders who have a novel product or service. In the last 15 years, a debate of entrepreneurship researchers has been whether entrepreneurs “discover” opportunities to start businesses or whether entrepreneurs “create” opportunities to start businesses (Alvarez et al.

The discover or create debate centers on business founders with novel products or services. Concerning the creation process, Alvarez and Barney (2007, p. 15) describe entrepreneurial opportunities as “created, endogenously, by the actions, reactions, and enactments of entrepreneurs exploring ways to produce new products or services (Baker and Nelson, 2005; Gartner, 1985; Sarasvathy, 2001; Weick, 1979).” Turning to discovery, the discovery process generally involves entrepreneurs who are able to see new opportunities in the markets that nonentrepreneurs cannot see (Alvarez & Barney, 2007; Kirzner, 1973). Kirzner refers to the skill to see new opportunities as “alertness” (Kirzner, 1973, p.

The concept of alertness really does not apply to a business founder entering a competitive market that many see the opportunity for, especially if her or his plan is simply to perform better than the competition. Thus, (1) the creation view expressly requires a novel product or service and (2) the discovery view requires a novel product or service, or some other novelty that was discovered by alertness. 1 In an article published in a leading management journal for theoretical research, the Academy of Management Review (AMR), Ramoglou and Tsang (2016) propose that the discover/create debate can be solved by referring to entrepreneurial efforts as actualization rather than discovery or creation. In doing so, they clarify the requirement of a new product or service in order for activity to be entrepreneurial.

Ramoglou and Tsang (2016, p. 411) define entrepreneurial opportunity as “the propensity of market demand to be actualized into profits through the introduction of novel products or services.” Thus, once again a novel product or service is required in a modern definition concerning entrepreneurship. Ramoglou and Tsang (2016) note that “entrepreneurship” can include introducing a product that is novel to one market, but not novel globally. However, they point out that their definition of entrepreneurship does not include typical innovative efforts in a competitive environment such as innovative cost-cutting.

They state that under their definition of entrepreneurship, all innovation is not entrepreneurial, only innovation that produces novel products or services. Various leading scholars have responded to the Ramoglou and Tsang (2016) article in the Dialogue section of AMR. Further, Davidsson (2017) responded with an article in Journal of Business Venturing Insights. All of the critique of the Ramoglou and Tsang (2016) article concerns philosophical points, not an objection to the requirement for novel products or services.

Consequently, much of the entrepreneurship research community apparently concurs with the concept that entrepreneurship requires a novel products or service. Looking at entrepreneurship through another lense, often entrepreneurship researchers put entrepreneurship into two categories: (1) Schumpeterian; and (2) 2 Kirznerian (Foss & Klein, 2010; Shane, 2003). The term Schumpeterian entrepreneurship is named after the economist Joseph Schumpeter and refers to entrepreneurship that arises out of some type of change, usually technological but possibly political, economic, or social change (Schumpeter, 1934; Shane, 2003). A classic example of Schumpeterian entrepreneurship is an entrepreneurial pharmaceutical firm inventing and commercializing a new breakthrough drug.

The term Kirznerian entrepreneurship is named after the Austrian economist Israel Kirzner and refers to entrepreneurship concerning alertness to arbitrage type opportunities- - no technological or societal change required (Shane, 2003). Under the Kirznerian definition, entrepreneurship is the act of discovering, or being alert to, opportunities that others fail to realize. It often contains an element of surprise (Kirzner, 1997). The discovery entails discovering an opportunity that was right under the nose of everybody, but everybody failed to recognize before now (Kirzner, 1997).

A classic example of Kirznerian entrepreneurship is an entrepreneur inventing a simple new product that leaves many kicking themselves, saying “why didn’t I think of that”. The Kirznerian notion of entrepreneurship as defined by modern scholars does not absolutely have a strict requirement of a novel product or service like the modern concepts of creation and actualization, but it certainly includes and anticipates ventures with creative new products (cf. Foss & Klein, 2010; Shane, 2003). Similarly, while Schumpeterian entrepreneurship as defined by modern scholars arguably could include a venture with a launch other than a launch with a technologically innovative new product, the innovative new product launch is certainly a focus of the modern Schumpeterian entrepreneurship definition (cf.

Foss & Klein, 2010; Shane, 2003). 3 Arguably, the emphasis on novel products and services in the literature is justifiable by theory. Alvarez and Barney (2007, p.14) cite Barney (1986) in opining theory that “In a setting where everyone could potentially become aware of and exploit an opportunity, it would be difficult for anyone to generate sufficient profits from actually producing new products or services.” In other words, it is difficult to make money in a competitive market. This difficulty in a competitive market arguably makes founders of businesses in competitive markets less interesting than founders with novel products or services.

Research Results That We Know With the emphasis on firms launched with novel products and services, a critical event of entrepreneurship is discovering a novel product or service. Also, a critical point in time is when the discovery is made. In the modern entrepreneurship literature, entrepreneurship has been defined as the discovery, evaluation and exploitation of opportunities to introduce future goods and services (Venkataraman, 1997). This definition highlights the importance of the discovery of a novel product or service because exploitation (benefitting from) follows their discovery.

Following this logic, there has been extensive research concerning the characteristics of the persons who launch these firms with novel products or services. There has been over two decades of research concerning the differences between these entrepreneurs and nonentrepreneurs (Alvarez &Barney, 2007; Busenitz & Barney, 1997). What We Do Not Know In the modern entrepreneurship literature, regardless of whether one is talking about discovering, creating, actualizing, Schumpeterian or Kirznerian, there are two basic themes 4 to the literature: (1) a new product or service and (2) avoiding competition. Kirznerian entrepreneurs avoid competition via arbitrage conditions.

The usual Schumpeterian entrepreneurs avoid competition via technological innovation. The competition avoidance meshes well with the theory of both (1) Alvarez & Barney (2007) and (2) Barney (1986) that it is hard to make money on a venture when many can see the venture opportunity. Certainly, it is advisable to avoid competition when possible.