Academic journal article Entrepreneurship: Theory and Practice

Entrepreneurial Processes of Business Cluster Formation and Growth by 'Habitual' Entrepreneurs

Academic journal article Entrepreneurship: Theory and Practice

Entrepreneurial Processes of Business Cluster Formation and Growth by 'Habitual' Entrepreneurs

Article excerpt

Macmillan in 1986 set us a challenge. "To really learn about entrepreneurship, let's study habitual entrepreneurs", which he defined as "someone who has had experience in multiple business startups, and simultaneously is involved in at least two businesses" (MacMillan, 1986, p. 241)(1) In taking up this challenge, most research on habitual entrepreneurs has been exploratory, in which the construction of "groups" and "typologies" has played a central role. Earlier studies concentrated particularly on genetic comparisons between novice and habitual entrepreneurs (Birley & Westhead 1993; Kolveried, Shane, Starr & Westhead & Bullvag, 1991; Kolvereid & Bullvag, 1993). These have been supplemented by refining definitions of sub-types of habitual entrepreneurs, such as portfolio and serial entrepreneurs,(2) and by comparing characteristics these sub-types (Westhead & Wright, 1998a, b). These have included rural/urban dimensions, and sources of finance (Wright, Robbie, & Ennew, 1995, 1997). In these studies there has been a focus on group differences, group characteristics, qualities and predictors. Statistical differences between groups or types have provided the primary empirical evidence for debate within the broader context of entrepreneurship theory and practice.(3)

A weakness of these approaches, however, is an absence of research on entrepreneurial processes on the creation or establishment(4) of multiple ventures by habitual entrepreneurs. Habitual entrepreneurs may be a "type," characterized by the fact that they found more than one business, but the creation of multiple businesses by an entrepreneur is also a process. The implication of the term "habitual entrepreneur" is that this is a continuing entrepreneurial process in which the entrepreneur is constantly identifying and evaluating new opportunities and creatively accessing resources to put ideas into practice and make them succeed. Over time a significant 'portfolio' of surviving ventures (acquired or founded) can be built up.

This, however, is not necessarily the only possible strategy or process to explain the creation of multiple ventures. There is a parallel management literature that examines multiple ventures and their management in terms of routine corporate managerial strategies. In this focus, 'routine' processes of diversification lead to the acquisition or creation of new subsidiaries. As the number of subsidiaries grows, corporate groups of companies are formed under the control of a holding company. The processes in which subsidiaries are formed, added to the group, and managed are not viewed as entrepreneurial, but as ways of maximizing managerial efficiency. Fry (1993), for example, presents a textbook account of how diversification can be managed and structured by setting up subsidiaries and boards of directors, and why such structures can be more efficient in addressing cost factors, taxation, and personnel issues, and can offer clearer control of diverging businesses. He states "separating two ventures clearly makes each exist on its own merits. This helps solve one of the main problems of multiple venture organisations, the unwarranted mixing of assets, personnel, expenses and attention between one or more businesses" (Fry, 1998, p. 333). How far is it possible to reconcile these contrasting views of multiple venturing, one that explains multiple venture creation in terms of the entrepreneurial creativity of habitual entrepreneurs and the other that sees most new multiple ventures as routine corporate management practice?

In resolving this issue, there is a fundamental unit of analysis problem (Scott 1990; Birley & Westhead, 1993, Scott & Rosa, 1996a, b; Rosa & Scott, 1998; 1999). The problem arises from focusing on the venture or firm rather than the entrepreneur as the primary unit of analysis when discussing entrepreneurial processes and performance. This is betrayed in previous studies of habitual entrepreneurs discussed earlier. …

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