through the venture creation process (Arend, 2014; Davidsson, 2015; Shane, 2012). External enablers have previously been addressed either as the context for ...
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CHARACTERISTICS, ROLES AND MECHANISMS OF EXTERNAL ENABLERS IN NEW VENTURE CREATION PROCESSES: A FRAMEWORK PER DAVIDSSON School of Business, QUT GPO BOX 2434, Brisbane 4001, Australia JAN RECKER School of Business, QUT FREDERIK von BRIEL School of Business, QUT INTRODUCTION There is broad agreement that new technologies, regulatory changes, demographic trends, and changes to the socio-cultural, economic, and natural environments are disequilibrating forces with important influence on entrepreneurial action and success (Alvarez & Barney, 2013; Dimov, 2011; Ramoglou & Tsang, 2015; Shane, 2012). There is also increasing consensus that new venture creation is a process rather than an event (Cornelissen & Clarke, 2010; Leyden & Link, 2015; McMullen & Dimov, 2013). Yet, there has been limited progress in developing theoretical concepts and statements regarding more precisely how such disequilibrating changes—henceforth “external enablers” (Davidsson, 2015)— enable entrepreneurial initiatives through the venture creation process (Arend, 2014; Davidsson, 2015; Shane, 2012). External enablers have previously been addressed either as the context for a study (e.g., Barreto, 2012; Fischer & Reuber, 2011; Shane, 2000; Sine & Lee, 2009) and/or as ingredients in “entrepreneurial opportunities” (e.g., Grégoire, Barr, & Shepherd, 2010; Grégoire & Shepherd, 2012; Shane, 2000). Although individual studies offer interesting ideas and findings, they tend to be fragmented, context-specific, or focus more on variance in agents than the workings of the enabler itself. No coherent and effective framework for theorizing the characteristics, roles and mechanisms of external enablers has so far been offered. Therefore, this paper develops a theoretical framework for the venture-level study of the influence of external enablers on emerging businesses. We outline how varying characteristics of enablers influence market potential and strategic actionability; how enablers provide a range of supply- and/or demand-facilitating mechanisms, and how these mechanisms may relate differently to triggering, shaping, and success-driving roles across the venture creation process. Our framework removes some constraints of the “objective, pre-existing opportunity” conceptualization, thereby allowing researchers with a strong interest in the importance of objective, external factors (as per “Discovery Theory”) to extend their research into issues of process and outcomes. For those who already embrace a dynamic, process-oriented and agentic view of new venture creation (as per “Creation Theory”) our framework offers a way to add systematic attention to objective, external factors to their theorizing. For researchers who take interest in individual instances of societal change from a historian-like vantage point our framework facilitates theorizing across such instances of seemingly different nature, as well as about the micro-level, entrepreneurial processes which are triggered by and give specific shape to macro-level changes.
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FRAMEWORK COMPONENTS: CHARACTERISTICS, MECHANISMS, AND ROLES Characteristics of External Enablers By characteristics we mean facts about the basic nature of an enabler. Characteristics of enablers do not vary by process stage or (objectively) across agents within the relevant spacetime context. In the introduction we already mentioned different types of enablers, e.g., New Technology; Regulatory change, etc. Below we add characteristics that are likely to have greater theoretical potential. Scope of External Enablers. Within each type of enabler there is variation in along several dimensions. Sectoral scope concerns the range of industries potentially affected by an external enabler whereas spatial scope refers to the geographical area affected by the enabler. For example, the deregulation that made possible satellite radio in the US (Navis & Glynn, 2010) and cross-regional expansion of banks in Portugal (Barreto, 2012) are low on both dimensions. Limited to the world of physical artifacts, 3D-printing is lower than crowdfunding on the sectoral dimension but equal in spatial scope. The World Wide Web may be the quintessential example of being high on both sectoral and spatial scope. An enabler’s temporal scope refers to the duration of enablement. For example, global warming will affect economic life for generations whereas El Niño/La Niña is cyclical. The temporal scope of new technologies can vary dramatically because of subsequent technological progress. There may also be reason to consider the socio-demographic scope of external enablers, i.e., the range of individuals whose circumstances are potentially affected by the enabler. This may vary from “all human beings” to niche groups like schoolchildren or people suffering from a particular ailment. In all, the implications for timing and scaling decisions of entrepreneurs make scope a theoretically important characteristic of external enablers. The Onset of External Enablers. How enablers first come into existence influences the feasibility of proactive behavior and the attainment of first- (or later-) mover advantages (Lieberman & Montgomery, 1998). Not all enablers qualify as “environmental jolts” (Sine & David, 2003); some develop in a slow and measured manner. Hence, gradual vs. sudden is one dimension of variance in the onset characteristic. The onset can also vary according to its predictability before the fact. Demographic shifts like an aging population are arguably the quintessential example of onset that is both gradual and predictable. Terrorist attacks and political upheavals belong in the opposite corner. Exploitation of these is impossible to prepare for in specific detail but can be achieved by entrepreneurs who swiftly introduce products appealing to the associated fears and sentiments (Ramoglou & Tsang, 2015). Social movements are gradual but do not necessarily follow very predictable courses. For example, the drift or growth of veganism into the mainstream was hard to predict a couple of decades ago. Alertness, knowledge and luck relating to the identification of the onset of external enablers have strong implications for their timely adoption and for eventual. This makes onset a relevant concept to integrate in future theorizing about external enablers in new venture creation. Mechanisms of External Enablers We refer to the specific ways in which external enablers can facilitate the initiation, development and success of new ventures as their mechanisms. A tentative list of enabling
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mechanisms is displayed in Table 1. From top to bottom, the list runs from mainly supply- to mainly demand-related mechanisms, adding the issue of value appropriation in the last entry. ==================== Table about 1 here ===================== The list in Table 1 provides theorists with a first step in the deeper analysis of functional communalities across enablers as well as the differential functions of any particular enabler. For example, compression mechanisms can reside not only in time-saving technologies but also in regulatory reforms that “cut red tape”. The same two types of enabler can provide enclosing mechanisms, enhancing the venture’s repeat sales, market share, and/or profit margins (cf. Amit & Zott, 2001). These two types and also changes to the natural environment can provide conservation as well as (resource) expansion and substitution. The case of combining NASA’s extended attention span training technology with the learning needs of children with ADHD (Grégoire & Shepherd, 2012) may be regarded as a example of the combination mechanism. The same natural disaster triggering increase in local human (volunteer) resources as well as an inflow of external resources, both triggered by the same natural disaster can be seen as a nontechnological example (Shepherd & Williams, 2014). In order to reach deeper in theorizing we need further insights into and conceptualization of how enablers interrelate with each other, with other circumstances, and with agents in producing derived enabling mechanisms, as well as how enabling mechanisms combine in contributing to venture creation success. The set of concepts in Table 1 can also be of help for business practitioners in identifying what mechanisms a particular enabler can potentially offer, and for what type of venture. Starting from a given, emerging venture, specification of desirable mechanisms can help identification of the enablers that can provide them. Roles of External Enablers Our notion of roles refers to the higher-order functions of external enablers that situate them at different stages of the venture creation processes. Sometimes with and sometimes without conscious agency, roles are derived from lower-order mechanisms and encapsulate both type and scope of enablers. We discuss three roles: triggering, shaping, and driving success. The Triggering Role. A major role of external enablers is to entice prospective agents to initiate processes of new venture creation. This occurs through more or less correct anticipation of some (but not necessarily all) mechanisms that enablers relevant to the prospective venture can provide. The triggering role is arguably the most thoroughly examined in prior empirical research and theorizing due to the concentration within “Discovery Theory” research on recognition/evaluation of “entrepreneurial opportunities”. Despite considerable progress (e.g., Baron, 2006; Baron & Ensley, 2006; Grégoire et al., 2010; Grégoire & Shepherd, 2012; McMullen & Shepherd, 2006; Wood & Williams, 2014; Wood et al., 2014) this literature has developed more propositions and hypotheses pertaining to the entrepreneurial agent than to (the objective conditions constituting) opportunities themselves (Davidsson, 2015: 678). Therefore, the triggering role is well worth revisiting through the explicit lens of external enablers. The Role of Driving Success. Due to the de facto emphasis on the triggering role in “Discovery Theory” research, relatively little is known about how the mechanisms of external
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enablers become sufficiently activated and strong enough to help bringing the process to a successful outcome. One key premise of our framework is that, when successfully activated, the mechanisms in Table 1 will contribute to greater success chances than if the same emerging venture had not benefitted from these mechanisms. However, entrepreneurial agents do not have perfect ability to correctly identify enablers and their mechanisms. The focus on anticipated mechanisms leads to neglect of factors not considered by the agent but which nonetheless contribute to a successful outcome. The distinction between the emphasis given to mechanisms in triggering on the one hand, and the extent to which they contribute to driving success on the other hand is arguably one of the theoretically and practically most important questions conceivable in entrepreneurship. This is arguably where non-obvious, yet teach- and learnable insights can be expected. In old parlance, the distinction speaks to the questions “What opportunities tend to go undetected?” and “Can entrepreneurs correctly identify the reasons for their own success?” Both are central to entrepreneurship scholarship. Therefore, further conceptual development and empirical research on how external enablers and their mechanisms relate to venture creation outcomes is highly desirable. The Shaping Role. Between triggering and outcomes, external enablers are also shaping the venture creation process in several ways. The shaping role emphasizes events, progress and changes in process, which the “Discovery Theory” stream has come to neglect (cf. Dimov, 2007). Variations of “Creation Theory” pay attention to dynamism but tend to somewhat neglect the role of objective, external factors (Alvarez & Barney, 2007; Alvarez et al., 2013; Ardichvili et al., 2003; Cornelissen & Clarke, 2010; Dimov, 2007; Furr et al., 2012; Wood & McKinley, 2010). Our framework facilitates adding systematic attention to external enablers in “Creation Theory” driven research. Shaping is a three-pronged role. First, external enablers can shape the product or main market offering of the emerging venture. Sometimes the very point of a new technology start-up is to capitalize on functionality provided by a particular new technology. Ramoglou & Tsang (2016) mention the non-technological example of “Je Suis Charlie” t-shirts sold after the Charlie Hebdo terrorist attack. However, most new ventures are arguably not triggered by or totally dependent on a single external enabler but may still benefit from one or more enablers later in the journey. Sometimes dramatic events like the bursting of the dot.com bubble, the onset of the Global Financial Crisis, the outbreak of war or dramatic change in political leadership may also result in reconsideration of the design of the market offering or market for which it is positioned. In some cases such apparent setbacks may trigger a reorientation onto what turns out to be a more successful route, justifying the “enabler” label. Second, external enablers can shape the venture itself, how it is resourced; how boundaries are set and how exchange is organized. New technologies (cf. Amit & Zott, 2001; Nambisan, 2016) and regulatory change are perhaps the most obvious candidates for exercising this role. This said, political and socio-cultural changes may also tilt or nudge on-going start-up, e.g., towards a more (or less) social mission than originally envisioned. In fact, the whole complex of business incubators and accelerators, lean start-up ideology and business model innovation mantras can be regarded a domain-specific socio-cultural trend which affects the organization of many new ventures. Third, external enablers can catalytically facilitate the venture creation process without leaving tangible traces in the venture or the market offering that eventuates. For example, 3Dprinting and crowdfunding platforms can have profound enabling influence on early stages of the venture creation process without making much difference to what the venture offers the market
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or how it is organized once it has been established. Seemingly negative shocks like natural disasters, war, terrorism and political upheaval can lead to process delay, which on occasion fortuitously leads to better timing of the introduction of a given product by an otherwise unchanged venture. In most cases, however, the shaping of the process would interact with shaping of the venture and its market offering. Attention to the shaping role(s) of external enablers opens up an avenue for combining an emphasis on objective, external factors with a dynamic process perspective on new venture creation. On the agent side attention to shaping (and outcomes) naturally gears attention to process-specific learning—and contributions of human capital through other stakeholders—in addition to the prior knowledge emphasized in triggering-focused research. DISCUSSION Even a rather casual, layman analysis of recent developments of the global economy highlights a plethora of phenomena suggesting that external enablers including technology, regulation and social change are important for entrepreneurial action and success. Yet, lacking the appropriate conceptualizations for incorporating external enablers into the analysis of venture creation processes, past research has left considerable gaps in our understanding of important phenomena and in the theoretical toolbox available for the conception and design or empirical research projects. In this paper we developed a framework to help fill this gap. Starting with the characteristics of external enablers, we outlined how variance in scope and onset of external enablers affect their strategic use and the market potential of the ventures that do use them. Further, we suggested a set of mechanisms by which external enablers facilitate venture creation processes. Some of these—like compression and conservation—predominantly work on the supply side, while others—like demand substitution and enclosing—make it easier for the venture to generate sufficient income streams. We noted that different types of enablers can offer similar mechanisms while enablers of the same type can offer different mechanisms, underscoring the theoretical potential of conceptualizing seemingly different types of external change as “external enablers”. Equipped with an effective vocabulary for the mechanisms of external enablers, practitioners, too, can more readily identify what a given enabler can offer a given venture or which of several enablers can best provide a particular, sought for mechanism. Successful activation of mechanisms will affect venture outcomes. Again, this makes the conceptualizations both theoretically and practically valuable. In terms of roles, external enablers can differentially affect the triggering (initiation) and the outcomes of venture creation processes. Given its promise of unveiling non-obvious, yet teach- and learnable insights, this distinction should have high priority in a future research agenda. In-between triggering and outcomes, external enablers contribute to shaping the market offerings of the venture, the structure and operations of the venture itself, and (catalytically) the process of its creation. Situating the effects of mechanism in the process through attention to the shaping dimension can add the agency and dynamism that has been lacking in Discovery Theory-driven research. To extant, more process-oriented conceptualizations (“Creation Theory”), attention to shaping through enabling mechanisms by process stage can add systematic inclusion of objective factors where they have previously been relatively neglected. Again, the theoretical notions in our framework seem helpful in overcoming relative shortcomings or blind spots in past research.
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Our framework is neither complete nor free of shortcomings. However, to the best of our knowledge there previously existed no unified framework adapted for the specific purpose of venture-level theorizing about external enablers in entrepreneurial processes. We hope that colleagues will find our framework useful in their research. REFERENCES ARE AVAILABLE FROM THE AUTHORS TABLE 1 Mechanisms of External Enablers in Venture Creation Processes Label
Definition
Example
Compression
Reduction of the amount of time required to perform an activity
Conservation
Reduction of the amount of resources required to perform an activity
(Resource) Expansion
Increase of the amount of a resource that is accessible
(Resource) Substitution
Replacement of one resource with another
Combination
Coupling with external resources or artifacts to provide functionality
3D-printing considerably shortening development times Changes to the natural environment reducing need for cooling, heating, irrigation Crowdfunding platforms making external finance and effective market research available to more start-ups Changing social mores and progress in medical science triggering shift to using autistic software developers Leveraging technology platforms; natural disaster triggering inflow of external resources New technology making possibly entirely new functionality Bipartisan agreement creating expectation of long term stability
Generation Uncertainty reduction Legitimation (Demand) Expansion
(Demand) Substitution
Enclosing
Allowing the creation of new artifacts (devices, functionality, business models) Reductions of the perceived uncertainty of any business decision of buyers or sellers Increase in the legality or psychological/socio-cultural acceptability of the venture or its offerings Increase in demand at given price and functionality Increase in demand due to making focal venture’s market offerings [perceived as] more needed/attractive (positive substitution) or due to making competitive offerings perceived as less needed or attractive (negative substitution) Increase in a venture’s ability to capture the loyalty of buyers and the value it creates
Formal legalization; socio-cultural or demographic trends changing values in favor of a product category Macroeconomic income growth; population growth Terrorist attack, natural disaster or demographic shift fueling demand for associated products; sociocultural trends and/or legislation banning or disadvantaging competitors’ market offerings IP legislation; technology facilitating customer “lock-in”
