The Life Cycle of New Ventures

The Life Cycle of New Ventures

Emergence, Newness and Growth

Edited by Candida G. Brush, Lars Kolvereid, L. Øystein Widding and Roger Sørheim

The contributors to this book provide a cross-national comparison of venture emergence, newness and growth. Their chapters examine the influences of cultural, social and economic factors on venture development, compare the approaches of entrepreneurs who move from idea to emerging organization, and investigate acquisition and development of resources in growth and performance.

Chapter 13: Advice to New Business Founders and Subsequent Venture Performance

Lars Kolvereid, Espen J. Isaksen and Hannes Ottósson

Subjects: business and management, entrepreneurship, international business

Extract

Lars Kolvereid, Espen J. Isaksen and Hannes Ottósson INTRODUCTION This chapter investigates the association between the number of advisers providing valuable advice to founders during the new business start-up process and subsequent new business performance in terms of invested capital, sales turnover and employment. The chapter also examines if there are diminishing returns to scale between the advice obtained and subsequent business performance. A number of studies have investigated the influence of advice on entrepreneurial or business performance, but research on diminishing returns to scale with regard to advice remains scarce. The idea of diminishing return implies that an excessive number of sources of advice may be counterproductive (Watson, 2007). The aim is to specifically address this issue. Further, one of the goals of our investigation is to expand this field of research, attempting to identify an optimal number of sources of advice. In this chapter hypotheses are derived from the emerging theory of outsider assistance (Chrisman, 1999). The application of a sample of representative new businesses in a different context than previous studies implies a rigid test of theory and an examination of the extent to which previous findings can be generalized to other settings. This chapter contributes to the entrepreneurship literature by using longitudinal research design and a robust measure for valuable advice. Within the entrepreneurship field general recommendations for research design have been common. Recommendations include applying approaches that acknowledge the complexity of the business start-up process by using multi-level studies (Low and Macmillan, 1988; Bouchikhi,...

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