Academic journal article Journal of Small Business Management

Outsider Assistance as a Knowledge Resource for New Venture Survival

Academic journal article Journal of Small Business Management

Outsider Assistance as a Knowledge Resource for New Venture Survival

Article excerpt

An emerging theory of outsider assistance as a knowledge resource suggests that new ventures obtain a unique blend of tacit and explicit knowledge through the judicious use of outside assistance. Using data from a longitudinal study of one outsider assistance program at a point in time four to eight years beyond the provision of startup counseling assistance, we present evidence supporting the theory. Results suggest that the ventures studied enjoyed survival rates in excess of those in the general population. More importantly, logistic regression analysis indicates a positive, curvilinear relationship between survival and the time spent in venture preparation under the direction of an outside counselor, a proxy measure of new knowledge acquired. We conclude with a discussion of the directions future research should take to test more fully the relationships implied by the theory.

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Over the last 20 years, a considerable body of research has accumulated in the United States that suggests outsider assistance can have a substantial impact on new venture startup, survival, and performance (Chrisman and Katrishen 1994; Nahavandi and Chesteen 1988; Pelham 1985; Robinson 1982). For example, outsiders may assist entrepreneurs to develop an effective network (Hansen 1995), to build a management team (Rice 2002), to raise capital (Bygrave and Timmons 1992), and to prepare a business plan (Smeltzer, Van Hook, and Hutt 1991). Much of the research conducted has focused on the Small Business Development Center (SBDC) because of the ubiquitous nature of the program, its extensive clientele, and the large amount of resources expended on it. (1)

Recently, Chrisman and McMullan (2000) found that the impact of the SBDC's counseling interventions appeared to persist over a period of three to five years with a disproportionately large number of firms not only surviving but also doing well in terms of growth in both sales and employment. In that study recipients also reported that their ventures contained a disproportionate number of innovations. However, some have suggested that these findings may be a result of positive self-selection or, in other words, unique attributes of the entrepreneurs or ventures studied that make them more likely to be successful but are not captured even in matched sample comparisons (Storey 2000).

In contrast to the U.S. experience, the results of studies of different program interventions created in Britain to assist entrepreneurs have been less positive (Storey 1994; Stanworth and Grey 1991). For example, Storey (1994) observes, "... The more justifiable inference from robust research in this area is that it is difficult to isolate an impact which training has upon small business performance .... considerable doubts over the effectiveness of small business training have to be registered and contrasted with 'received wisdom'...." (pp. 292-293).

Some Swedish scholars have used business and strategic startup classes as control variables in studies of determinants of venture startup, survival, and profitability (Dahlqvist and Davidsson 2000). The findings of those studies again raise important questions about the elements that might be useful for effective program design. Drawing on the European experience Davidsson (2002a) concluded:

  "As regards more mundane entrepreneurs there are several studies that
  show weak, zero or even negative correlation between taking startup
  courses or counseling on the one hand, and successfully launching
  and/or running a business on the other (Dahlqvist and Davidsson 2000;
  Dahlqvist, Davidsson, and Wiklund 2000; Honig and Davidsson 2000;
  Maung and Ehrens 1991; Tremlett 1993). This is double embarrassing,
  for it may be interpreted as showing that a) those who have
  entrepreneurial talent do not come and take the courses or counseling,
  and b) those who actually come are not turned into successful
  entrepreneurs" (P. … 
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