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Habitual Entrepreneurship

Empirical Analysis of the Population and Characteristics of Serial and Portfolio Entrepreneurs in Germany

Diplomarbeit 2007 118 Seiten

BWL - Allgemeines


Table of Contents





1.1 Problem Statement and Research Objective
1.2 Structure of the Thesis

2.1 Typology of Entrepreneurs
2.2 Habitual Entrepreneurs
2.2.1 Serial Entrepreneurs
2.2.2 Portfolio Entrepreneurs
2.2.3 Fallen Entrepreneurs

3.1 Literature Review
3.1.1 Population of Habitual Entrepreneurs
3.1.2 Characteristics of Habitual Entrepreneurs
3.1.3 Performance of Habitual Entrepreneurs and their Ventures
3.2 Theoretical Framework
3.3 Analytical Set-up
3.3.1 Premises [31]
3.3.2 Dependent Variables [31]
3.3.3 Independent Variables [32]

4.1 Research Design
4.2 Data Collection
4.3 Declaration of Variables
4.4 Analysis
4.4.1 Sequence of the Analysis
4.4.2 Methods of Analysis
4.5 Results
4.5.1 Sample Comparison [42]
4.5.2 Population of Habitual Entrepreneurs in Germany
4.5.3 Characteristics of Habitual Entrepreneurs in Germany
4.5.4 Performance of German Habitual Entrepreneurs and their Ventures
4.6 Interpretation and Discussion

5.1 Summary
5.2 Critical Reflection - Limitations of the Study
5.3 Future Research Perspectives



List of Figures

Figure 1: Different Types of Entrepreneurs

Figure 2: Different Types of Serial Entrepreneurs

Figure 3: Different Types of Portfolio Entrepreneurs

Figure 4: Theoretical Framework

Figure 5: Mean Comparison of Starting Age

Figure 6: Mean Comparison of Gender

Figure 7: Mean Comparison of Academic Degree

Figure 8: Mean Comparison of Number of Ventures and Total Employees

Figure 9: Mean Performance Relative to Number of Ventures

Figure 10: Total and Realised Gain per Year Relative to Number of Ventures

Figure 11: Total and Realised Gain per Y ear Relative to Active Years

Figure 12: Total and Realised Gain per Year Relative to Classification

Figure 13: Welfare Gain and Employees per Company Relative to Classification

List of Tables

Table 1: Overview of the Population of Habitual Entrepreneurs

Table 2: Overview of Characteristics of Different Types of Entrepreneurs

Table 3: Overview of Performance Differences of Different Types of Entrepreneurs ...

Table 4: Frequencies of the Classification Variable

Table 5: Frequencies of Fallen Entrepeneurs

Table 6: Overview of the Population of German Entrepreneurs

Table 7: Mean Comparison of Entrepreneurial Types' Characteristics

Table 8: Crosstabulation Parental Occupational Status and Classification

Table 9: Crosstabulation Employment Status and Classification

Table 10: Overview of the Characteristics of German Entrepreneurs

Table 11: Anova Analysis of Classifications and Characteristics

Table 12: Mean Comparison of Last and First Evaluation

Table 13: Mean Comparison of Last and Mean Evaluation

Table 14: Mean Comparison of Classifications and Performance Indicators

Table 15: Anova Analysis of Classifications and Performance Indicators

Table 16: Explanatory Power Regression Model I

Table 17: Explanatory Power Regression Model II

Table 18: Explanatory Power Regression Model III

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

1.1 Problem Statement and Research Objective

Georg Ludwig Braun, chairman of the German chamber of commerce and industry, underlines with the postulation “Deutschland braucht eine neue Gründerzeit“[1] the importance of entrepreneurial activities for the German economy due to its high degree of industrialisation, the strong focus on services, a general lack of natural resources, as well as the general current economic situation. This result of the DIHK Gründerreport 2006 corresponds with the widespread acknowledgement that fostering entrepreneurship is one part of the recipe for success to combine economic growth with social compati­bility and is an important pillar for a sustainable welfare gain and a key success factor to ensure the international competitiveness of a country[2]. The value created by entrepre­neurs in society clearly exceeds the generally perceived importance of this sector for the economy and, relative to its size, outperforms any other functional area in business in terms of sustainability.[3] In particular, entrepreneurship constitutes an important role regarding the employment market by creating sustainable employment opportunities. [4] Despite its apparent economic importance and increasing scientific devotion, the field of entrepreneurship within the area of business sciences is quite young and only a modest level of academic legitimacy has been achieved. Some authors even claim that “the study of entrepreneurship is still in its infancy” [5] .[6] Additionally, certain concerns are frequently brought forward that the existing entrepreneurship research is very frag­mented and that the respective specialists make very little use of their colleagues' work.[7] Therefore, no generally accepted nomenclature has been established yet and different definitions, as of the fundamental term entrepreneur, are applied, resulting in misleading and barely comparable results.[8] However, in the last decades research in the respective areas has grown rapidly, meanwhile providing a considerable and presentable coverage of different topics and areas, having brought forward several theories and concepts.[9] Nevertheless, there are still many blank fields left which urge for exploration. Unfortunately, the general situation in terms of available data is deficient and thus hinders the development of comprehensive theoretical frameworks, leading to several effects. For example, politicians cannot foster entrepreneurship in the most efficient way, as there is no general agreement which group of entrepreneurs or type of ventures are the most welfare gaining ones. Also, neither is it clear yet which entrepreneurial abilities are the most important ones, nor how they can be acquired or conveyed.[10] A wide range of possible research fields can be identified. Generally, acknowledged scholars as Shane/Venkataraman (2000) postulate to focus the research on the actual core of entrepreneurship, the entrepreneur himself.[11] In accordance with this point, several authors further have agreed on focusing on multiple founders, so-called habitual entrepreneurs, supposably providing the best insights and the most valuable information about the field of entrepreneurship. As one of the precursors to this idea, MacMillan expressed that researching anything else than habitual entrepreneurs actually leads to misleading results and besides, in any other research area, it is always the professionals and/or power users acting as the research objects.[12] Thus, to this day, many scholars started to work on the respective areas and confirmed MacMillans view.[13] More re­cently, Sarasvathy introduced a further extension of the concept: entrepreneurial re­search should shift its focus from the singular relation between one firm and the entrepreneur to a multilateral one. Thus, the firms are to be considered instruments of the entrepreneur who is the actual research object of the present study.[14] Hence, the aim of this explorative study is to reduce the gaps in the research area of entrepreneurship, allowing for the above-mentioned concepts.[15] This is accomplished by firstly providing another step into the direction of a comprehensive and widely accepted typology, presenting a new concept. Secondly, a thorough literature review of the actual state of research is provided. Thirdly, an empirical analysis will help to improve the general understanding of entrepreneurship as well as habitual entrepreneurs in Ger­many. The actual research perspective is three-fold, shedding light on the population and characteristics as well as performance of German habitual entrepreneurs and their ventures, whereas the focus is set on habitual entrepreneurs and the respective subtypes.

1.2 Structure of the Thesis

Having outlined the problem statement and deduced the respective research objective in the preceding section, the structure of the thesis will be outlined next.

The following paragraph, chapter two, provides a basis for the subsequent analysis by assessing the concepts and definitions for the course of the analysis. Within this scope, a coherent and stringent nomenclature will be developed, including existing concepts as well as new ideas.

Chapter three is dedicated to the theoretical foundation of the thesis. Firstly, an over­view of the already existing and relevant literature will be given, illustrating the current state of research regarding the population and characteristics of habitual entrepreneurs as well as the performance of them and their ventures (section 3.1). In this context, the lack of empirical research in the field of habitual entrepreneurship in general and espe­cially in Germany is illustrated, disclosing the apparent contradictions within the exist­ing studies. Afterwards, the theoretical framework of the study will be deduced and illustrated, constituting the cornerstone of the empirical analysis (section 3.2). The chapter will conclude with the illustration of the analytical setup of the study (section 3.3), including the depiction of the respective premises as well as the derivation of dependent (section 3.3.2) and independent variables (section 3.3.3).

Chapter four addresses the actual empirical analysis underlying this study. Section 4.1 gives information about the research design whereas section 4.2 illustrates the collection of the subsequently analysed data. In section 4.3 the within the scope of the analysis used variables will be declared. The analysis of the collected data will be described afterwards (section 4.4), followed by a comparison of the sample and the demonstration of the results being on hand (section 4.5), ending with an interpretation and discussion of the results, including a derivation of hypotheses which are to be challenged by future research.

The fifth and last chapter of the thesis summarises the key findings of the empirical analysis (section 5.1). Afterwards, a critical reflection and present limitations of the study will be provided. Lastly, light will be shed on future research perspectives.

Within the study, illustrative and explanatory tables and figures will ensure an utmost comprehensibility. Additional information as well as intermediary results are included in the appendices.

2 Concepts

In the following chapter, the basic theoretical concept for the present study is estab­lished. Firstly, various definitions of the term entrepreneur will be outlined, disclosing apparent inconsistencies. Afterwards, a general overview of the entrepreneur typology will be given. Subsequently, a coherent nomenclature for entrepreneurs, focusing on habitual founders, will be derived from existing literature, complementing necessary extensions.

2.1 Typology of Entrepreneurs

At first glance at the existing typology the very central term entrepreneur itself attracts attention. To explain the actual meaning of this word the semantic as well as the etymo­logic origin might deliver first indications. The apparent French roots of the term go back to the 14th century; the verb entreprendre, meaning “getting things done,” coined the term, which, up to the 16th century, was used to describe high risk takers. The actual terms entrepreneur and entrepreneurship were used for the first time by the Irishman Richard Cantillon (1680 - 1734) and the Frenchman Jean-Baptiste Say (1767-1832).[16] Since then, diverse definitions and concepts have been developed by a variety of au­thors. Actually, when it comes to the definition of the term entrepreneur, several au­thors, although it seems to be almost impertinent, refer to a quite pinpointing allegory of the search for the heffalump, described in a famous children’s book by A.A. Milne: The heffalump was an important character in the tale who any other character in the play reported having seen; however, everyone describes the heffalump in a completely dif­ferent way.[17] It appears that the search for an all-embracing definition of the entrepre­neur equals the hunt for the heffalump - anybody involved in the search comes up with his own description, whereas none equals the other and everybody describes another part.[18]

Even though Cantillon provided the first explanations of an entrepreneur in the 18th century, Schumpeter is regarded by several authors as important precursor in the field of entrepreneurship, as he is in so many other areas. In his ground breaking work from 1934 he defined an entrepreneur as follows: “The entrepreneur is the innovator who implements change within markets through the carrying out of new combinations. The carrying out of new combinations can take several forms” [19] In this context, the entre­preneur moves the market away from equilibrium. However, although the allocation of resources is also emphasised by Schumpeter's definition, managers of companies are explicitly not the same as entrepreneurs, which causes first problems for a general ac­ceptance and leading to first inconsistencies. Thirty years later, Penrose (1959) intro­duced another definition, describing the entrepreneur as an “[...] identifier of opportunities within the economic system.”[20] He agrees with Schumpeter, that managers are not necessarily equal to entrepreneurs. The famous management specialist Drucker (1985), derived his own definition of an entrepreneur as someone who “searches for change, responds to it and exploits it as an opportunity”.[21] After all, Table 19 in the appendix gives an overview on several more definitions of the term entrepreneur, intro­duced or applied by researchers in the field of entrepreneurship. However, despite the numerous attempts, even more definitions can be found.[22] Looking at all these concepts, it is apparent that there is no universal or common definition for an entrepreneur, yet. Several different foci are set, including the exploitation of changes, the ability to antici­pate future developments, the creation of companies, and the carrying out of new inno­vations. Many of the present definitions just cover different aspects and characteristics of the entrepreneur, some are even contradictive.[23] Some are at odds with each other, whether it is just a constitutive element for an entrepreneur to establish, or also to inherit or purchase a venture. In addition, some authors introduced further differentiations by the amount of time an entrepreneur is involved in certain businesses, while others focus

18 Other allegories like the one of Gartner (2001) can be found, comparing entrepreneurship with an elephant. After all, the same message is conveyed, that the very same object is again and again de­scribed and illustrated in completely different ways. on how many businesses and entrepreneur has started.[24] All in all, a very heterogeneous construct of definitions can be found.[25]

Hence, several researchers such as Westhead et al. (2005b) followed the approach not to develop their own definition, causing even more complexity and inconsistencies, but refer to several different definitions, combining the main essences. However, despite the great variety of definitions and concepts, the differentiation within the groups of experi­enced and inexperienced entrepreneurs is deficient. In spite of the previously high­lighted importance of the group of entrepreneurs, no lean and stringent subtypes can be found. Many studies dealing with the topic of habitual entrepreneurship account for the differentiation between serial and portfolio entrepreneurs. Unfortunately, this categori­sation does not appear to suffice. Several subtypes can be identified, however barely any study accounts for them. Some authors mention that certain hybrid types of serial and portfolio entrepreneurs exist but do not account for this fact sufficiently.[26] Ucbasaran (2004) introduced a further differentiation of habitual entrepreneurs, distin­guishing between experienced and expert entrepreneurs, according to the number of businesses owned. However, this concept still has to be elaborated and is not finished yet.[27]

Disregarding the apparent inconsistencies and caveats among the great variety of differ­ent definitions, the majority of authors have agreed on that entrepreneurship does not only include the pure creation of new businesses.[28] Furthermore, the inheritance and the purchase of already existing businesses are considered as entrepreneurial activities.[29] Taking the above illustrated findings into account, the following typology can be de­rived: While searching through the existing literature, several types of entrepreneurs can be identified, disregarding any definition in particular. Each type describes another step in the development of an entrepreneur, considering different experience-states and different types of behaviour. Figure 1 illustrated the mostly mentioned and most coher­ent types, combining the ideas and concepts of several authors into one nomenclature.[30]

Apparently, entrepreneurs are strictly divided into groups of inexperienced, also called novice, and experienced ones, so-called habitual entrepreneurs, whereas the later ones are focused by this study. Next, an overview of the inexperienced entrepreneurs with short descriptions of each type will be provided.

The beginning of the above illustrated consecutive and successive typology is consti­tuted by the so called aspiring entrepreneurs. These entrepreneurs have not started any venture and are not entrepreneurially involved with any business. However, they al­ready understand the concept of entrepreneurship and have begun to explore this field and hence are comprehended by the concept. Nevertheless, they do not have any plans at this stage to create their own company or become entrepreneurially active. Although this type of entrepreneur is not being mentioned that frequently in the literature, it de­scribes an important milestone within the development of an individual into the direc- tion of an entrepreneur.[31]

The next successive group is represented by the nascent entrepreneurs. These individu­als have already left the state of aspiring entrepreneurship and have concrete plans to become an entrepreneur indeed, or are just about to start a business or potentially being in the process of launching their first venture. However, these individuals do not have their own business, yet, nor do they have any other kind of entrepreneurial experience.[32] The sequenced group, within this typology the first one with actual business experience, is the one of the novice entrepreneurs. However, their experience is limited to one entrepreneurial venture. For example, novice entrepreneurs did not have any kind of business ownership experience before, neither as a founder, nor as an inheritor, nor as a purchaser and hence belong to the group of inexperienced entrepreneurs, as they started their first venture without any prior practically gained knowledge. However, they are currently having or already have had their first experience within the field of entrepre-neurship.[33]

Before elaborating on the different types of habitual entrepreneurs, the transient novice entrepreneurs have to be related to the group of inexperienced founders. The transient novice entrepreneurs are single-time entrepreneurs who are considering serial or portfo­lio entrepreneurship for the first time. They are sort of the aspiring or nascent entrepre­neurs of the habitual founders, and are about to transform into experienced entrepreneurs.[34]

Apart from the illustrated and described groups, more differentiations could be applied, creating further subgroups of entrepreneurs with certain characteristics. A differentia­tion which can be found in quite a few of the existing studies is the integration of the type of entrepreneurship. For example, the entrepreneurial activity can either mean the creation / inheritance / purchase of a new business, or it can take place within an exist­ing company. The latter group comprises management buy-outs (MBO) and buy-ins (MBI) as well as corporate entrepreneurship (CE).[35] Whereas the terms MBO and MBI are quite self-explanatory - the management of the company is purchasing the whole business or outside managers purchasing a significant stake of a company, replacing the actual management - the term of CE shall be explained shortly: Basically, two main directions of CE can be identified: Firstly, new business is created by taking advantage of market developments (e.g. new products, processes, technological and administrative innovations). Secondly, entrepreneurial ventures can be undertaken by changing or redefining the actual business concept, the organization or other fundamental changes.

However, these fields of corporate entrepreneurship are considered as autonomous fields and not especially researched within the scope of this study.[36] Looking at the habitual entrepreneurs, some scholars differentiate between re-starters (entrepreneurs who failed in their first venture) and prior successful entrepreneurs.[37] Additionally, the motivation for the entrepreneurial ventures can be separated (e.g. opportunity moti­vated, income motivated, exit motivated).[38] Also, a differentiation between voluntary or involuntary/accidental (serial) entrepreneurs could be added, differentiating whether an individual has been forced into single or multiple entrepreneurship or whether the step was taken deliberately.[39]

Although including some of the differentiations in the further analysis would deliver certain valuable information, most of them will be disregarded in the following empiri­cal analysis. A too detailed differentiation into to many groups would inevitably lead to very equivocal results and require rather complex and fanciful data collection methods, which unavoidably would diminish the quality of the other foci of this exploratory study. Nevertheless, further elaboration on the suggested typology, including new de­terminants, is to be realised within future research. However, as far as the data set al­lows for it, the types of entrepreneurs will be differentiated and separated as far as possible. Whether the developed typology is too detailed or more sub-groups should be added will be evaluated within the scope of the analysis, too.[40]

Having illustrated the first part in Figure 1, the remaining typology regarding the ex­perienced founders, so-called habitual entrepreneurs, will be explained next, starting off with a short overview of habitual entrepreneurship in general, afterwards providing a detailed description of the nomenclature, including its subgroups.

As the illustrated typology implies, habitual entrepreneurs are, roughly said, business founders who have already experienced some kind of entrepreneurial activity, success­ful or not, and have at least undertaken a second venture. Those businesses could be started successively or simultaneously, or both.[41] The first type is the one of the so- called serial entrepreneurs, the latter type the one of so-called portfolio entrepreneurs,constituting the two major sub-groups of habitual entrepreneurs.[42] Basically, when searching for a general definition of habitual entrepreneurs, the same problems as in the case of the definition of the term entrepreneur are encountered. No generally accepted definition of habitual entrepreneurs has been established, yet.[43] As one of the precursors in the area of habitual entrepreneurship, MacMillan (1986) describes these business generators as individuals who fancy the excitement of generating new businesses but get bored soon after the phase of the actual starting.[44] In addition, MacMillan argues that those entrepreneurs are the only ones, who are actually able to acquire certain ex­perience and consequently are the only objects who are worth studying. Donckels et al. (1987) formulated the definition of habitual entrepreneurs as follows: "Multiple busi­ness starters are entrepreneurs who, after having started a first company, set up or participate in the start-up of (an) other firm(s)".[45] On the other hand, some authors as Kolvereid/Bullvag (1992) formulated their working definition in a narrower sense, for example postulating that habitual entrepreneurs had to have experience in multiple business start-ups, and additionally currently are involved in at least two business or just consider the establishment of a company and not the inheritance of the purchasing as a constitutive element. Building on previous works Westhead et al. (2003) formulated the definition in another way: “[...] habitual entrepreneurs are individuals with prior mi­nority or majority business ownership experience either as a business founder, an in­heritor or a purchaser of an independent business who currently own a minority or majority equity stake(s) in an independent business that is either new, purchased or inherited.”[46] After all, the following developed typology will be based in accordance with Westhead/Birley (1993), based on the concept of Donckels et al. (1987) and Westhead et al. (2003), as there does not seem to be a reason to further restrict the defi­nition of habitual entrepreneurs as e.g. Kolvereid/Bullvag (1992) suggests.[47] The basic idea of the concept apparently lies in the sequential or the simultaneous own­ership of or involvement in two or more businesses, both of which are ensured by the applied definition.[48] The partly very difficult and complex differentiation between serial and portfolio entrepreneurs and the respective subtypes, so far lacking in the literature of entrepreneurship, will be elaborated in the next section. However, anticipatory said, a differentiation by time cannot be the measurement of choice. Determining the type of an entrepreneur by how long he is involved in a business or for how long he has not started a venture inevitably results in imprecise results. As the opportunity recognition process might take from just a few minutes up to several months or longer, declaring an entre­preneur after a certain period of time as not active anymore might be incorrect, which is why a different measure will be identified and applied.

In the search for the why of habitual entrepreneurship a variety of theoretical bearing points can be found. After all, several reasons or motivations for entrepreneurs to be­come habitual founders are identified by different studies. Some authors, such as Mac­Millan, suggest that some entrepreneurs have their best skills exactly in starting a company and hence, in addition with a certain attraction to the connected excitement, become habitual entrepreneurs.[49] Others identify entrepreneurs reluctant to further foster a particular company based on fiscal / tax constraints which thus try to compensate by rather investing into new ventures than.[50] Another clear reason for habitual entrepre­neurship can be found in the business sector and region in which an entrepreneur is active. In certain areas and industries, the optimal size of a company is not reached by growing a company as big as possible, but by keeping a venture on a certain small or medium size, which provides the highest efficiency in the respective industry.[51] Fur­thermore, there is evidence that no particular factor leads to habitual entrepreneurship but that it just happens and is a quite accidental development.[52]

2.2 Habitual Entrepreneurs

Having illustrated a general overview of the prevalent typology of entrepreneurs and provided the theoretical foundation of habitual entrepreneurs, the following three sec­tions will be dedicated to the detailed elaboration on and illustration of the nomencla­ture of different types of habitual entrepreneurs.

2.2.1 Serial Entrepreneurs

The first group to be illustrated within the group of habitual entrepreneurs is the one of the so called serial entrepreneurs. Several definitions and working concepts for serial entrepreneurs can be found, which partly leads to contradictive results.[53] However, the basic idea of the concept is always very similar. An entrepreneur had at least one prior entrepreneurial experience, but before embarking on a new venture, the previous one is abandoned and the entrepreneur forms another business.[54] Despite its simplicity this concept has been extended into many directions, including many subtle differentiations. After Hall (1995) introduced the differentiation between different types of habitual entrepreneurs, namely portfolio and serial founders, some authors postulated that in addition to the entrepreneur’s lack of involvement, the preceding should be closed down.[55] Others formulated the definition in a broader sense, just postulating that the entrepreneur is not involved in the preceding company any more.[56] The following defi­nition, developed by Westhead et al. (2005b), describing serial entrepreneurs as “indi­viduals who have sold/closed a business which they had a minority or majority ownership stake in, and they currently have a minority stake in a single independent business that is either new, purchased or inherited.”[57] This definition will be used as a starting basis for further elaborations. Additional differentiations which can be found, for example by motivation or by success of the entrepreneur, are not to be considered.[58] In the following section, a new typology, illustrated by Figure 2, will be developed.

A new approach regarding certain sub-types, which so far have not been clearly struc­tured, will be included, adding pure and hybrid types of founders. The first part of Fig­ure 2, illustrating the pure serial entrepreneurs, shows an exemplary development of a serial entrepreneur. On the one hand, the dark blue circlet represents a venture in which the entrepreneur is involved in, fully committed to, and actually has decision-making power. This company can be a purchased, an inherited, or an established one. Although some other authors disagree, being involved into a business gestation process does not count as a constitutive indicator for an entrepreneur.[59] Regarding the inheritance and the purchasing of a business, additional requirements have to be met in order to be counted as an entrepreneurial activity, as the pure possession of a business does not suffice. In such a case it is necessary that the individual is carrying out the day-to-day business of the company, thus actively managing the business. The German Commercial Code (HGB) defines this day-to-day business in §§ 116 (1), 51 (1) HGB as those activities, which the general business of the respective kind brings along.[60] Apparently, and in accordance with §§ 116 (2), 51 (2) HGB, extraordinary activities as selling or purchas­ing machinery or real-estate does not count as a constitutive determinant; however, regarding the typology, these activities can be executed in addition to the day-to-day business. This prerequisite goes along with an adequate level of information, requiring that the individual is in contact with other executives or leading employees of the com­pany several times a week. All in all, to be counted as an active entrepreneur, an indi­vidual has to be actively involved in the management of a company. This might include making key decisions as well as being in contact with key persons, organising day-to­day activities and meetings and also basic maintenance tasks as e.g. hiring personnel or ordering necessary supplies. Summing up, the entrepreneur is keeping the business running and steers determines the future development of the company. Thus, according to the previously illustrated prerequisites, business angels and pure investors are not considered entrepreneurs in the sense of this typology.

As a further issue, the active involvement demands an adequate period of time.[61] A one day engagement apparently cannot be count as a constitutive factor of an entrepreneur. However, the length of such an adequate period of time varies from case to case, which

is why no general limit can bet set.[62] Moving a way from the very problematical time measurement, an entrepreneur should have influenced the position and the development of a venture significantly. Unfortunately, in the case of purchased or inherited compa­nies, this determinant cannot be considered as necessary. Apparently, no single, fix determinant can be applied, but a mixture of several very soft facts have to be consid­ered, which is why in the following the previously illustrated general active participa­tion in the management of the company is applied as the measure of choice.[63] In reference to Figure 2, the light blue circlet with the dotted line represents the counter part to the actively in the management engaged entrepreneurs. In such a case, the share­holder has a stake in the venture, which is why he is endowed with shareholder rights, however he is not actively engaged in the management of the business. This detail has not been regarded by the so far existing typologies. However, it stresses an important point: As already mentioned, most definitions assume that an entrepreneur has com­pletely left a company and / or the business is shut down. However, there is a very reasonable possibility that a company founder leaves the operational part of a business to devote himself to another venture, but keeps stake in his previous company, as he either wants to ensure a certain cash-inflow for his private life or expects the value of the company to rise significantly with the prospect to sell his stake later on. Apparently, such an involvement does not require a great amount of time from the entrepreneur and does not endow him necessarily with key decision making rights, which is why he still is considered a serial entrepreneur and can be described as an ordinary shareholder.

In Figure 2, the red dotted horizontal line illustrates any sort of closing or exiting of a company, being just an ordinary leave or closing down a company completely. Due to the characteristics of the typology, this leave or exit excludes the previously described leave out of the operational business, still holding a stake in the company. If directly after such an exit-mark a new circlet appears and there is no blue-connection line to a previous venture, the creation of a new venture is represented.

Looking at the characteristics of the illustrated pure serial entrepreneur, it becomes apparent at first glance why this type of entrepreneur is named in the way it is. The ventures are arranged in a line, building a series of businesses. In the case of the pure type, no simultaneous involvements in any other business can be found, which corre-

sponds with the most of the existing definitions. In the illustrated development the entrepreneur establishes a company, retreats from this venture after a certain period of time, and then exits the company. Afterwards, a new venture is undertaken, but there is always just one engagement at a time. However, there is more to serial entrepreneurs than the pure type.[64]

In the second half of Figure 2, the hybrid serial entrepreneur is illustrated. At this point, the concept of the mere stake-holding entrepreneur has to be considered. As it can be seen in the illustration, the hybrid serial entrepreneur can be involved in two or more businesses at the same time and still belong to the group of serial entrepreneurs. The basic idea of this concept is that, even though the entrepreneur is involved or has stakes in several companies, he just might be completely devoted to one single business, con­sequently, presuming that this business is one out of a series of ventures, constituting the prerequisite for being a serial entrepreneur.

Apparently, the in Figure 2 illustrated developments could vary from case to case. For example, the hybrid serial entrepreneur could exit the first business completely, just keeping a share in the second company as illustrated, or vice versa. Furthermore, the variation in time is not proportional. Thus, the suggested typology does not consider time issues, but rather the mere sequence of the process.

The most difficult question arising out of this concept is how to evaluate whether an entrepreneur is fully committed to one business or to multiple ventures, hence where to set the limit and which indicator to apply. Several variables could be thought of: Does the entrepreneur have a leading position in the business, e.g. as CEO? Does he have significant decision-making power? Does he participate on certain boards? However, due to the great variety of constellations, a fixed single indicator would be very difficult to identify. For example, someone could be significantly involved in the decision proc­esses of a business without being a part of particular boards or acting as the CEO, which, according to the previously mentioned possible indicators, would lead to con­flicting results. Hence, after careful consideration, only one measure seems to be sensi­ble as well as applicable. Taking the initial concept of serial entrepreneurs into consideration, the determining factor has to be the amount of time an entrepreneur invests into one company. No matter which positions a person has or on which boards he is actively involved, the question to which business the entrepreneur is committed to remains unanswered. Remaining in the executive board of a company might be a com­mon step for a founder of a company, although he already dismissed the operating activities in favour of a new venture. However, if he invests most of his to entrepreneu­rial activities devoted time into one business, one reasonably can assume that he practi­cally is just involved in this venture. Summing up, the following definition can be derived:

An entrepreneur who already established / purchased / inherited a business before his present active involvement is to be referred to as a serial entrepreneur, as long as more than 75% of the to entrepreneurial activities devoted time is dedicated to one single business, disregarding whether he has additional stakes or any position in one or multiple other companies.

The limit of three-fourths, or 75%, is supposed to combine the fact that the entrepreneur actually is just involved in one business, however he might also be active in several other activities simultaneously, without investing to much time into them. Accounting for the introduced pure and hybrid types, the following extension of the definition has to be added:

A serial entrepreneur who is exclusively committed to one venture is to be referred to as a pure serial entrepreneur. A serial entrepreneur com­mitting more than 75% of his to entrepreneurial activities devoted time to one business, though having a stake or being involved in other busi­nesses, is to be referred to as an hybrid serial entrepreneur.

Looking at the characteristics of hybrid serial entrepreneurs, several aspects typical for portfolio entrepreneurs, being explained in the next section and illustrated by Figure 3, can be found. Exactly the differentiation between pure portfolio founders and hybrid serial entrepreneurs has not been realized in literature yet and is a suggestion of this study to proceed in the development of a coherent typology. So far, only the pure play­ers have been considered, whereas the hybrid types barely have been mentioned and not researched at all.[65] The practicability of this differentiation will be challenged within the scope of the subsequent empirical analysis.

2.2.2 Portfolio Entrepreneurs

The second group of entrepreneur types illustrated in Figure 1 is the one of the portfolio entrepreneurs being further depicted in Figure 3.

Figure 3: Different Types of Portfolio Entrepreneurs

Abbildung in dieser Leseprobe nicht enthalten

Source: Own compilation

Note: The illustrated developments are only exemplary.

Before starting with a detailed description, it is important to mention how a portfolio entrepreneur can be defined in general. Once more, several concepts can be identified, whereas again, after careful consideration, the concept of Westhead et al. (2003) has been considered as a very practical starting base.[66] According to him, portfolio entre­preneurs “[...] are individuals who currently have minority or majority ownership stakes in two or more independent business that are either new, purchased and / or inherited’’[67] Concepts as from Hall (1995) go in the same direction; however it appears that the differentiation does not seem to be detailed enough.[68] As in the case of the serial entrepreneurs, no further differentiation, e.g. by motivation, time span, or success will be applied nor illustrated in the following elaboration.

Figure 3 provides an overview of the typology within the group of portfolio entrepre­neurs. Basically, the notation of the illustration of serial entrepreneurs holds true for the portfolio entrepreneurs, as symbols and premises remain the same, whereas Figure 3 illustrates just an exemplary development which could vary in time or sequence. To start off with the often mentioned type, light has to be shed on the group of pure portfo­lio entrepreneurs. Looking at the second half of Figure 3, it is obvious where the main difference between the concepts of serial and portfolio entrepreneurs lies. Instead of working on one venture after the other, portfolio entrepreneurs work on several ventures at the same time. In contrast to the serial entrepreneurs, a portfolio entrepreneur, disre­garding whether hybrid or pure type, invests less than 75% of his to entrepreneurial activities devoted time to one single business.

The pure type, as illustrated, is a habitual entrepreneur who, previously being either being aspiring, nascent, novice or serial entrepreneur, gets involved in two or more companies at the same time. In contrast to the hybrid type, it does not occur that the hybrid portfolio entrepreneur falls back to being actively involved in less than two ventures. Once more, the business could be inherited, purchased or established from scratch.[69] In the case of purchasing or inheriting a company, as described in section 2.2.1, the entrepreneur has to actively participate in the day-to-day business of the com­pany and has to be highly informed. Otherwise, all business angels or venture capital­ists, investing into several companies at the same time, would be counted as portfolio entrepreneurs, which apparently would lead to misleading results.[70] Thus, due to the illustrated requirements, those investors, mainly being involved into §§ 161 (2), 51 (2) HGB extraordinary activities, are once more explicitly not counted as entrepreneurs.[71] Furthermore, having a stake in several companies or just being involved in business gestation processes does not suffice to become a portfolio entrepreneur.[72] In reference to Figure 3, the pure portfolio entrepreneur might leave, close down or open an existing / additional business, or arbitrarily leave the operational part of the company, though continue to hold a stake in the business. In the case of the pure type, the entrepreneur is always involved in two or more businesses, as mentioned above.

Apart from the pure type, a hybrid type of portfolio entrepreneurs can be identified. As in the case of the serial entrepreneur, the group of the hybrid portfolio entrepreneurs is included in the concept. In contrast to the pure portfolio entrepreneur, it might occur

that the hybrid type closes or exits so many companies that he actually regresses to the state of a serial entrepreneur. However, as long as the portfolio entrepreneur intends and tries to create further businesses, he should be addressed as portfolio entrepreneur, still. This detail adds time consideration to the concept which so far was absent in the exist­ing typologies. Any other approach would omit that closing down or selling a company might be, in economic terms, a necessary and reasonable action. The hybrid portfolio entrepreneurs are depicted in the second half of Figure 3. As mentioned earlier, whether the entrepreneur has a certain position within a company, or in which time span the different companies are founded are not taken into consideration. Combining the previ­ous findings, the following definition can be derived.

An entrepreneur who already founded / purchased / inherited a busi­ness before his present active involvements is to be referred to as a portfolio entrepreneur, as long as he is actively involved in two or more of his ventures simultaneously, whereas no more than 75% of his to entrepreneurial activities devoted time is to be dedicated to one single business.

Apparently, the in this definition mentioned limit of 75% is according to the one of the serial entrepreneur. Regarding the pure and hybrid portfolio entrepreneurs, the follow­ing essence can be deduced.

A portfolio entrepreneur being continuously and actively involved with two or more businesses simultaneously is to be referred to as the pure portfolio entrepreneur or the pure type. A portfolio entrepreneur who is temporarily involved in less than two companies is to be referred to as a hybrid portfolio entrepreneur or hybrid type.

As in the case of the serial entrepreneurs, the practicability of the developed concept will be challenged within the scope of the empirical analysis. In the following, a typol­ogy extension regarding the often disregarded topic of time-span differentiation will be introduced, topping off section two.

2.2.3 Fallen Entrepreneurs

The introduced typology for inexperienced as well as habitual entrepreneurs provides a coherent, stringent and thorough nomenclature. However, there are further issues which have not been structured and cannot be answered by the typology presented so far. Thus, in the following section, it will be elaborated on extending the previously devel­oped typology by introducing the concept of the so called fallen entrepreneurs. Al­though shortly addressed in section 2.2.2, a by the so far existing research mostly disregarded topic is the one of the time-span consideration. Most of the existing defini­tions and typologies focus on a snap-picture evaluation, just looking at the current situation of the entrepreneur. The consideration of the time-span observation has not been addressed yet in literature and hence breaks new grounds. The introduction of the hybrid portfolio entrepreneur was a first step to account for this issue; however, another problem might be at hand. How to address a novice, portfolio or serial entrepreneur when it happens that, either by closing or by selling businesses, an entrepreneur looses all his stakes and / or investments in companies, or - in the case of serial and portfolio entrepreneurs - all except for one, and hence actually does not posses the characteris­tics of the respective group any longer. Is this individual still to be addressed as an (habitual) entrepreneur, or not? Does he fall back from being a portfolio or serial entre­preneur to the state of a novice? To solve this problem in a with the suggested typology coherent way, the following detail shall be added to the already developed concept, including another type of annotation: An entrepreneur who ends up with less invest­ments or involvements in ventures than his entrepreneurial type actually requires re­mains in his entrepreneurial state (inexperienced or habitual entrepreneur, including the respective sub-types), as long as he intends to continue to be entrepreneurially active, i.e. to continue to commit time to entrepreneurial activities by inheriting, purchasing or starting businesses. If he actually does not intend to do so and quits his entrepreneurial career, he will remain in his entrepreneurial category. However, he will be marked as retired, annotated by a “f ” and will be referred to as a fallen entrepreneur of his respec­tive group.[73] The rationale behind this concept is the following. Firstly, an individual who had the experience of being a novice, serial or portfolio entrepreneur acquired certain knowledge and does not lose it out suddenly if for some reason he stops being involved in ventures. Thus, it is most reasonable to continue addressing this entrepre- neur accordingly to his former type. Apparently, a fallen entrepreneur of any type can also return to his original, active, state by resuming his entrepreneurial activities. Sum­ming up, the following definition will be added to the previously introduced concept.

Entrepreneurs who end up with fewer business involvements than their actual type requires are to be addressed as they were previously, unless they are not planning to start / inherit / purchase further ventures. In this case, these individuals are to be referred to as fallen entrepreneurs of their respective group and are to be annotated with a “f”.

Besides, a differentiation by time could also be possible. However, this would be much more difficult to implement, as no general time span can be defined, after which an entrepreneur without any entrepreneurial activity should be considered as retired or fallen.

3 Theoretical Foundation

Having illustrated the research objective of this thesis and provided a basis for the fur­ther course of analysis by developing a coherent typology, the following sections will allow for the theoretical foundation of the empirical analysis. First, a comprehensive overview over the existing literature will be provided, describing afterwards the theo­retical framework of the analysis to elaborate on the analytical set-up subsequently.

3.1 Literature Review

As presented in the problem statement, it is intended with this study to deliver another piece of research, helping to close the gap regarding the lack of entrepreneurship re­search, whereas the focus is set on the population, characteristics and performance of habitual entrepreneurs. Hence, the relevant, due to the relative young area of this re­search area quite limited, literature will be reviewed, providing the prevailing results of each area respectively.[74]

3.1.1 Population of Habitual Entrepreneurs

Several scholars aimed at researching the population of entrepreneurs within a society and the share of habitual entrepreneurs of all founders. Curiously, different studies came to extremely different results, reaching from about 20%, Reynolds/White (1997), up to over 50%, Aldrich/Zimmer (1986).[75] Turning to the focus of this thesis, the habitual entrepreneurs, a similar situation is at hand. Barely any information about the popula­tion of habitual entrepreneurs in Germany can be found, whereas a better state of infor­mation is available in other countries, especially in Great Britain. Table 1 gives an overview of the vastly deviating results of several studies.

Table 1: Overview of the Population of Habitual Entrepreneurs

Abbildung in dieser Leseprobe nicht enthalten

Source: Own compilation according to: Westhead /Wright (1999), p.158; Westhead /Birley (1993), p.1; Ucbasaran et al. (2003a), p. 7.

Apparently, analyses exploring the extent of the phenomenon of habitual entrepreneur­ship, looking at the establishment of businesses by individuals with prior founding experience, came to deviating results. From 11.5% up to 51.8% of all founders already had several entrepreneurial experiences. However, looking at these somehow contradic- tive results, the question for the reason of those significant differences arises. It can be


1 “Germany needs a new period of promoterism ”, DIHK (2007).

2 Cf. Westhead et al. (2005b), p. 109; OECD (1998), p. 11; Sternberg et al. (2006), p. 1.

3 Cf. Sarasvathy (2004b), p. 708; Sarasvathy (2004a), pp. 519-522.

4 Cf. Sternberg et al. (2006), p. 1.

5 Wright et al. (1998), p. 29.

6 Cf. Harrison/Leitch (2005), p. 353.

7 Cf. Ucbasaran et al. (2001), p. 57.

8 Cf. Harrison/Leitch (2005), p. 353; Campbell/Spicer (2005), pp. 223-246; Shane/Venkataraman (2000), p. 218; Low/MacMillan (1988), p. 140.

9 Cf. Gartner et al. (2006), p. 321.

10 Cf. KfW (2007), p. 1; Ucbasaran et al. (2006), p. 210.

11 Cf. Shane/Venkataraman (2000), pp. 217-218; Gartner (2001), p. 30.

12 Cf. MacMillan (1986), pp. 241-243.

13 Cf. Westhead/Wright (1998b), p. 175; Kirschenhofer/Lechner (2005), p. 2; Carter (1998), p. 17.

14 Cf. Sarasvathy (2004b), pp. 713-716.

15 Cf. Klandt/Müller-Böling (1993), p. 81.

16 Cf. KFE Arlberg (2002); Elkjær (1991), pp. 805-815; Utsch et al. (1999), p. 33.

17 Cf. Ensley et al. (2000), p. 59; Kilby (2003), pp. 13-20; Hull et al. (1980), pp. 11-13; Mitchell et al. (2002), p. 96.

18 Cf. Ucbasaran et al. (2006), pp. 3-7; Westhead/Wright (1998b), p. 173.

19 Schumpeter (1934), pp. 63-64.

20 Cf. Penrose (1959), p. 5.

21 Cf. Drucker (1985), p. 1.

22 Cf. Gartner (1989), pp. 48-58.

23 Cf. Sharma/Chrisman (1999), p.13.

24Cf. Ucbasaran et al. (2006), pp. 3-7; Westhead/Wright (1998b), p. 173.

25 Cf. Shane/Venkataraman (2000), p. 218.

26 For example an entrepreneur might be classified as a serial entrepreneur although he simultaneously has a stake in two companies; the next section will include an elaboration on this problem.

27 Cf. Ucbasaran et al. (2006), p. 205.

28 Cf. Wright et al. (1998), p. 5; Reynolds et al. (1994), pp. 443-447.

29 Cf. Cooper/Dunkelberg (1986), pp. 53-55; Reynolds et al. (1994), pp. 443-447; Wright/Robbie (1997), p. 229.

30 Entrepreneurial ventures within existing companies, considered as intrapreneurship, are considered to be an independent field and hence are not considered explicitly by this typology.

31 Cf. Rotefoss/Kolvereid (2005), p. 109.

32 Cf. Westhead et al. (2005b), p. 3; Wagner (2006), p. 4; Westhead/Wright (1999), p. 157; Wagner (2006), p. 4; Ucbasaran et al. (2001), p. 59.

33 Cf. Westhead et al. (2005a), p. 393; Westhead et al. (2003), p. 188; Ucbasaran et al. (2001), p.59; Westhead/Wright (1998b), p. 173.

34 Cf. Westhead et al. (2005b), pp. 128-129.

35 Cf. Wright/Robbie (1997), pp. 229-230; Zahra (1995), pp. 225-226; Bull (1989), pp. 263-266.

36 Cf. Ucbasaran et al. (2001), pp. 63-64; Zahra/Garvis (2000), pp. 469-471; Sharma/Chrisman (1999), pp. 12-14; Guth/Ginsberg (1990), pp.5-7; Zahra (1993), pp. 321-323; Zahra et al. (1999), pp. 6-8.

37 Cf. Wagner (2002), p. 5; Metzger (2006a), p. 6.

38 Cf. Wright/Robbie (1997), pp. 235-238; Jacobsen (2004), pp. 193-198;

Cf. Carter et al. (2004), pp. 481-484.

39 Cf. Kirkwood (2003), p. 1.

40 See section 5.3 for further research perspectives.

41 Cf. Hall (1995), pp. 218-222.

42 Cf. Rosa/Scott (1999), p. 21.

43 Cf. Wright et al. (1998), p. 6; Starr/Bygrave (1991), p. 22; Westhead/Birley (1993), pp. 356-360.

44 Cf. MacMillan (1986), p. 242.

45 Donckels et al. (1987), p. 48.

46 Cf. Westhead et al. (2003), p. 189.

47 Cf. Westhead/Birley (1993), p. 3; Donckels et al. (1987), p. 48; Westhead et al. (2003), p. 189.

48 Cf. Ucbasaran et al. (2006), pp. 3-5.

49 Cf. Carter et al. (2004), p. 483; MacMillan (1986), p. 242.

50 Cf. Donckels et al. (1987), p. 48.

51 Cf. Rosa/Scott (1999), pp. 23-26.

52 Cf. Interview No. 1, 20/02/2007 with Rasenberger, see appendix, pp. 87-90; Interview No. 2, 20/02/2007 with Heydenreich, see appendix, pp. 91-94.

53 Cf. Ucbasaran et al. (2006), p. 5; Stokes/Blackburn (2001), p. 25.

54 Cf. Westhead/Wright (1998b), p. 176; Beresford (1996), pp. 1-5; Cf. Hall (1995), pp. 217-230.

55 Cf. Metzger (2006b), p. 6; Metzger (2006a), p. 1.

56Cf. Westhead/Wright (1998b), pp. 176-177; Grichnik et al. (2006), p. 4.

57 Cf. Westhead et al. (2005b), p. 111.

58 Cf. Metzger (2006b), p. 6; Westhead/Wright (2001), p. 338.

59 Cf. Alsos/Kolvereid (1998), pp. 101-112.

60 §§ 116 (1), 54 (1) HGB: ”[...] alle Handlungen, die der gewöhnliche Betrieb des Handelsgewerbes der Gesellschaft mit sich bringt“.

61 Cf. Interview No. 2, 20/02/2007 with Heydenreich, see appendix, pp. 91-94.

62 Cf. Interview No. 2, 20/02/2007 with Heydenreich, see appendix, pp. 91-94.

63After all, this consideration belongs into the determination of the actual definition of the term entre­preneur, which is not the focus of this thesis.

64Cf. Westhead/Wright (1998b), 178.

65Cf. Westhead/Wright (1998b), p. 178.

66 Cf. Westhead et al. (2003), p. 189.

67 Cf. Carland et al. (2000) pp. 2-4.

68Cf. Hall (1995), pp. 217-220; Hall describes portfolio entrepreneurs as “category of habitual owners in which the owners own more than one business at a time”.

69 Cf. Alsos/Kolvereid (1998), pp. 101-112.

70 See 2.2.1 for a more detailed description of the respective requirements.

71 Activities after §§ 161 (2), 51 (2) HGB are mainly purchase or disposal of real estate, applying for loans and other extraordinary investments with long term effects.

72Cf. Alsos/Kolvereid (1998), pp. 101-112.

73 Annotation for the three groups of fallen entrepreneurs: Typical/ Atypical Portfolio Entrepreneur!, Typical/ Atypical Serial Entrepreneur! and Novice Entrepreneur!.

74Especially Metzger and Grichnik are to be named, being the only ones who recently started provid­ing research in the respective areas in Germany.

75Cf. Shane/Venkataraman (2000), p. 218.


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European Business School - Internationale Universität Schloß Reichartshausen Oestrich-Winkel
Habitual Entrepreneurship Empirical Analysis Population Characteristics Serial Portfolio Entrepreneurs Germany



Titel: Habitual Entrepreneurship