Chapter 7: Systematic Search and its Relationship to Firm Founding
7. Systematic search and its relationship to ﬁrm founding Key ideas In this chapter, I discuss how systematic search and exploitation are both informational problems and what this fortunate similarity means for entrepreneurs trying to launch new ventures. Exploitation by entrepreneurs is a relatively unexplored ﬁeld, partly because researchers have separated the discovery process from the exploitation process. Thus, it is really not surprising to ﬁnd that systematic search not only improves discovery eﬀectiveness but also appears to enhance the proﬁtability of exploitation. I argue that if an entrepreneur knows enough to identify a discovery, he or she already has an advantage in knowing how to exploit it successfully. I test this argument in a representative sample of US entrepreneurs and ﬁnd that systematic search leads to more proﬁtable exploitation than otherwise. This, of course, though not unexpected, is a remarkable ﬁnding. In addition, among others, I control for two mediating variable: (1) an adaptive decision-making style and (2) social capital. I ﬁnd that each of these serves a catalyst for promoting the founding of ﬁrms. Systematic search also appears to reduce environmental uncertainty, which has additional important implications for aspiring entrepreneurs. Finally, this research suggests possible lines of future inquiry. INTRODUCTION Finding the discoveries used by entrepreneurs represents an important milestone in the process of founding a ﬁrm. We know that there are two explanations or modes suggested for how entrepreneurs make discoveries. As discussed in Chapter 2, one explanation is based on surprise and relies...
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