Emergence, Newness and Growth
Edited by Candida G. Brush, Lars Kolvereid, L. Øystein Widding and Roger Sørheim
Chapter 8: Decision-making Disagreements and Performance in Venture Capital Backed Firms
* Truls Erikson and Bradley A. George INTRODUCTION The creation and growth of new ventures is often cited as a key component of wealth creation (Birch, 1987; Kirchhoff, 1991; Robinson and McDougall, 2001). Because of their economic and social value, improved understanding of the determinants of new venture performance has become increasingly important (Chrisman et al., 1998). Early models proposed that new venture performance was a function of characteristics of the entrepreneur, the organization’s strategy and the industry structure (Sandberg and Hofer, 1987). While this model has received empirical support in previous studies, Chrisman and colleagues noted that these models should be expanded to include business strategy, resources and organizational structure, processes and systems (Chrisman et al., 1998). While there are a number of organizational processes that may be theoretically linked to new venture performance, a critical process which has received limited treatment in the entrepreneurship research is the decision-making process (Forbes, 2000). New ventures have a number of important differences that need to be considered when examining the relationship between decision processes and performance. Traditional models of the rational actor have been challenged by theorists from the Carnegie school (for example, Simon, 1957; March and Simon, 1958; Cyert and March, 1963), who noted that decision makers have cognitive limitations that inhibit their ability to be perfectly rational. Decision makers often draw upon past experience to form heuristics and decision routines which aid in future decision making. New ventures, by their very nature, lack this experience (Gartner et al., 1992). They...
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