Bad Vision, No Growth - An Empirical Study of the Relationship between Founders’ Growth Motivation, Vision Statements and Venture Growth at Internet Start-ups

Master Thesis - Daniel Zaleski


Master's Thesis, 2011

81 Pages, Grade: 2,5


Excerpt

TABLE OF CONTENTS

ABSTRACT

INDEX OF FIGURES

INDEX OF TABLES

INTRODUCTION

PART 1: THEORY AND HYPOTHESES
1.1 Growth
1.1.1 Entrepreneurship and growth
1.1.2 The definition of firm growth
1.1.3 Conceptualization of growth at firms and the unit of analysis
1.1.4 The use of historical growth and current founder ’ s motivation
1.1.5 Measures of growth
1.1.6 Growth models
1.1.7 Growth patterns
1.1.8 Determinants of growth
1.2 Motivation
1.2.1 Motivation theories
1.2.2 Content theories of motivation
1.2.3 Process theories of motivation
1.2.4 Theory of reasoned action
1.2.5 Theory of planned behavior
1.2.6 Motivation as main determinant of entrepreneurship process and growth
1.3 Vision
1.3.1 Vision definition
1.3.2 The implementation of a vision statement strategy, mediators and moderators
1.3.3 Vision attributes
1.3.4 VisionPlex ®’ s Seven Key Dimensions as extension of traditional vision attributes
1.3.5 Vision content
1.3.6 Building effective vision statements
1.3.7 Vision communication

PART 2: METHODOLOGY
2.1 Research model
2.2 Questionnaire and measurement instruments
2.3 Questionnaire design and means to reduce non-response error
2.4 Translation and Pilot study
2.5 Population and Respondents
2.6 Calculating firm growth
2.7 Calculating growth aspiration, vision attributes, vision content, and vision attribute gap
2.8 Internal consistency of Constructs

PART 3: RESULTS
3.1 Descriptive statistics and correlations
3.2 Multiple Linear Regression Analysis
3.3 Hierarchical multiple linear regression model building

PART 4: DISCUSSION AND CONCLUSION

PART 5: LIMITATIONS AND RECOMMENDATIONS FOR FUTURE RESEARCH

REFERENCES

APPENDIX
Questionnaire
Vision statements with key words
Evaluation of Vision Statements

ABSTRACT

This study seeks to identify the relationship between founder motivation, vision statements, and venture growth at small internet firms. Based on a review of small firm growth, motivation, and vision theory, five hypotheses are developed. To empirically test these hypotheses, data was collected with a self-administrated online survey from 75 founders of small internet firms and 56 unique vision statements.

The main findings from hierarchical multiple regression analysis reveal that Venture growth, measured by employment, is positively related to founder Growth aspiration and Vision attributes. Merely having a vision statement or including growth-related content is not associated with higher growth. However, the quality of a vision statement, as measured by several effectiveness attributes is positively related to venture growth. The perception of vision statements is very firm-specific, and perception gaps caused by founder and objective key-word evaluation are not significantly related to venture growth. The challenge for future research lies in developing more over-arching conceptualizations for the phenomenon of firm growth, but also in capturing the frequency and extent to which vision communication takes place at small firms.

INDEX OF FIGURES

Figure 1: Research Model and Hypotheses

Figure 2: Average Vision Attribute ratings: Founder and Key-Word Rating

Figure 3: Average Vision Attributes Gap Scores of the Seven Vision Attributes

Figure 4: Histograms and Scatterplots of Venture growth and ln_venture_growth

INDEX OF TABLES

Table 1: Dimensions and Determinants of Growth

Table 2: Shared Attributes of Vision Statements (Baum, 1994)..

Table 3: Comparison: Traditional Vision Attributes and VisionPlex® 7 Key Dimensions

Table 4: Response Rate and Sample Size

Table 5: Factor Analysis of Constructs with Changes in Cronbach’s Alphas

Table 6: Descriptive Statistics

Table 7: Correlation Matrix of explanatory Variables

Table 8a: Model building: Full model, Motivation model, and Vision model

Table 8b: Parsimony Model: Highest adjusted R2 and lowest number of variables

INTRODUCTION

“Firm growth is a complex phenomenon which is hard to predict and assess” (Davidsson et al., 2008). Although the field of small firm growth is not understudied and the number of publications is increasing, knowledge about the determinants of firm growth is still limited (Davidsson et al., 2008). Heterogeneity among the empirical studies, different conceptualizations of growth and the use of a very large number of low-level explanatory variables are reasons why no strong explanatory factors emerge (Davidsson, 1991).

The psychological construct of motivation plays an important role in the firm growth literature (Delmar & Wiklund, 2008). According to Shane, Locke, and Collins (2003), “We believe that the development of entrepreneurship theory requires considerations of the motivations of people making entrepreneurial decisions.” Studies examining the link between growth motivation and venture growth support this view by finding positive relationships between the two variables (Baum et al., 1998; Baum, Locke, & Smith, 2001; Davidsson et al, 2008; Delmar & Wiklund, Miner, Smith, & Bracker, 1989; 2008; Wiklund, 1998). According to Davidsson (1991), the main high-level explanatory variables of firm growth are ability, need and opportunity. However, what actually leads to founding a firm and subsequent growth is the perception of these determinants - or reality-as-perceived. Moreover, according to Davidsson (1991), a distinction needs to be made between the firm’s foundation and the management activities which lead to firm growth which he coins continued entrepreneurship.

As the number of employees increases, leadership gains importance as charismatic or transformational leadership is positively associated with followers’ performance, attitudes, and perceptions (Baum, Locke & Kirkpatrick, 1998). Entrepreneurship and business strategy literatures stress the importance of vision and the effects on firm performance theoretically and empirically (Bird, 1992; Wesley & Mintzberg, 1989; Baum & Locke, 2004). Attributes of vision statements and their growth-related content are positively and significantly related to venture growth, but are dependent on effective vision communications between the leader and the follower (Baum, et al, 1998).

What is the relationship between founder motivation, vision statements, and venture growth?

This is the main question which the present study focuses on in the broad context of entrepreneurship literature to shed more light on motivation and vision as determinants of venture growth. The aim of this study is to identify characteristics of firms and their founders to estimate the likelihood that a firm with certain vision statement characteristics is more likely to exhibit growth than those without those characteristics. Based on a review of previous theories, this study develops a research model with the constructs founder motivation and vision statements as determinants of venture growth. There is only a limited number of firm growth studies that have collected actual leader/entrepreneur vision statements such as Baum, Locke & Kirkpatrick (1998). Moreover, the sample of internet startups and the measure of a vision attribute gap can be considered as a unique contribution of this present study.

To empirically test the research model, a self-administered online questionnaire was developed to collect data due to the lack of existing data. Items on venture growth and founder motivation have been developed previously by Davidsson, Delmar, and Wiklund and remain unchanged in the study due to their high internal consistency. Measurement items concerning the vision attributes and vision content have been generously provided by Visiontelligence, a vision statement consulting firm founded by Shelley Kirkpatrick. 782 founders of internet firms were invited to participate in the self-administrated online questionnaire of which 12.5% completed the questionnaire. After data screening, the sample consists of 75 respondents and a total of 57 unique vision statements; 18 respondents (24%) did not provide a vision statement. The results of hypothesis testing provide statistical inferences about the relationship between founder motivation, vision statements and venture growth.

This study is structured in five parts. Part 1 reviews theories on firm growth, founder motivation as a main determinant of firm growth, and vision statements. Based on the theory review, five hypotheses are developed. Part 2 provides a detailed explanation of the methodology, including the research model, measurement of items, data collection, data transformation, and statistical tests. Part 3 presents descriptive statistics, correlations, and the results of the hierarchical regression analysis arriving at a final model with the highest explained variation and the lowest number of explanatory variables. In part 4, the statistical results are interpreted and discussed with respect of the five hypotheses and conclusions are drawn. Finally, part 5 points out and elaborates on the limitations of the study and provides recommendations and possible directions for future research.

PART 1: THEORY AND HYPOTHESES

1.1 Growth

1.1.1 Entrepreneurship and growth

Although the concept of entrepreneurship attracts researchers from different disciplines, professionals commonly associate ‘growth’ with entrepreneurship most frequently among seven other major themes (Gartner, 1990). Also, comparisons of methodological reviews by Delmar, Davidsson, and Wiklund (Davidsson et al., 2006) have shown that the variables growth and entrepreneurship are most commonly researched in the leading academic journals in the field of entrepreneurship such as Journal of Business Venturing and Entrepreneurship Theory and Growth. However, conceptually, there are two opposing views which challenge the direct link between entrepreneurship and growth. The first view coined by Gartner (1990) implies entrepreneurship as creation of new organizations and conceptually does not validate growth as a part of the view per se. Rather, Gartner defines entrepreneurship as the mere creation of an organization, without aspects of innovation or other unconventional ways to exploit opportunities and create economic activity. The other view by Low and Macmillan (1988) regards entrepreneurship as the new creation of economic activity. At the heart of this view, Low and Macmillan include aspects of Schumpeter’s innovation and other commonly quoted aspects of entrepreneurship. Their view imposes that the creation of new economic activity is fundamental to entrepreneurship and does not require new or established organizations. Rather, resource-independent ways of creating economic are incorporated in their view. By comparing the two views, it needs to be noticed that both are based on behavior- and process-based grounds instead of initial personality- and trait-based definitions of entrepreneurship. In terms of ease to research the entrepreneurship phenomena, Low’s and Macmillan’s notion of economic activity is rather vague and more difficult to define in empirical studies (Davidsson et al, 2008). In the remainder of the present study, a combination of the two views entrepreneurship as creation of new organizations and entrepreneurship as creation of new economic activities is applied. The reasoning behind this decision is rather practical because organizations need to be identified for the study instead of other difficult-to-measure economic activities. It is assumed that creating an organization is a prerequisite of creating new economic activity and therefore both views will be inherent in the sample.

1.1.2 The definition of firm growth

Growth at a firm is the “increase in the level, amount or type of work and outputs in the firm” (Coulter, 2001) which involves expanding, enlarging or extending what the firm does. In the case of small firms a distinction has to be made between growth, expansion and gazelles. Growth implies a significant increase in sales or the number of employees after the start-up whereas expansion is rather related to a more controlled increase in market share after the first growth phase (Bjerke, 2007). According to Birch (1979), gazelles are companies which experience a disproportionately large growth of jobs or sales. They are considered exceptions because of their rare occurrences and exceptional conditions which made them grow extreme rapidly. Examples of those exceptionally fast-growing firms can be found in the Deloitte Technology Fast 50 ratings. For example, the winners of the German Technology Fast 50 awards were the three German firms: My-Hammer AG, AOE media GmbH, and zetVision AG with a 5-year growth rate of 4,786.9%; 2,672.63%; and 1,518.63%, respectively (Deloitte, 2010). In the present study, gazelles and expanding firms are omitted from the data set to reduce heterogeneity and increase the usefulness of the results. Thus the term growth will be used to refer to a firm’s initial growth stage with an increasing number of employees.

1.1.3 Conceptualization of growth at firms and the unit of analysis

To analyze firm growth and to identify the proper unit of analysis, the concept of firms needs to be reviewed. Seth and Thomas (1994) reviewed different theories of the firm to conceptualize the firm. The results of the review are four different conceptualizations which propose images of theoretical firms. According to neo-classical theory, the firm is seen as a ‘production function.’ In new industrial organization theory, the firm is viewed as a ‘strategic player’. In agency theory, the firm is seen as a ‘nexus of contracts’, and in transaction cost theory, the firm is conceptualized as a ‘governance structure’. Although the conceptualizations are appropriately defined for the particular theories, they remain theoretical and static and do not provide a well-defined unit of analysis to study firm growth over time (Davidsson et al., 2008). According to Delmar, Wiklund and Davidsson, (2008) firms can be conceptualized based on their underlying assumptions and the nature of the study, namely, factor-based or process-based studies. The evolving conceptualizations of the firm are ‘resource-based’, motivation-based’, strategic adaption-based, and configuration- based. Further, each conceptualization has its own unit of measurement which is the activity, the governance structure, the individual, and the governance structure, respectively. Given the nature of the research study at hand, the underlying type is a motivation-based study with factors of the construct of motivation which need to be considered. Therefore, the unit of analysis is the individual, namely, the founder (entrepreneur) who has decided to create a firm and who is managing it until the present day. In particular, the research strives to identify motives which resolve in growth Identifying motivational characteristics and future expectations towards growth is more generalizable than specific actions which might lead to different outcomes at every firm. Also, the ease of use in empirical research (in particular the sampling) is considered less difficult for individuals than for activities. Therefore, the motivation-based conceptualization of the firm and the individual as the unit of analysis seem to be most appropriate for this study and its research design.

1.1.4 The use of historical growth and current founder ’ s motivation

According to Delmar (1997), firm growth is considered to be a process that should be studied over time. The majority of firm growth studies use historical data with growth as a dependent variable in causal analyses. These studies are limited in their explanatory power because they only include explanatory variables which do not change over time such as gender, and ethnicity. Most of the empirical studies use historical, secondary data for testing simple theoretical propositions. Case studies contain more explanatory variables because the development of the firm is observed in real time; however their generalizability is lower than for empirical studies. To be able to increase the number and richness of explanatory variables, but at the same time obtaining generalizable results, survey-based studies are used most frequently to research growth and to test more complex theoretical propositions. The present study uses the survey method to obtain empirical result on growth and individual characteristics (e.g., motivation of the founder). Historical growth of the years after the founding is the dependent variable; however, the researcher is faced with the problem that the explanatory variables of founder motivation is measured today and was not measured during the development of the firm. The risk of using current motivation to explain past growth is that motivation must not remain stable while the firm develops. Also, Davidsson (1989) points out that there is a dynamic relationship between motivation and growth in which strong initial growth has a reinforcing effect on motivation and vice versa. Therefore, the results which are based on historical growth in this cross-sectional study need to be evaluated with care.

1.1.5 Measures of growth

There are various measures of growth such as share value, profit, employment, turnover, return on investment, image, number of customers, new products and services, and added value. However, many of these measures are industry specific and might lead to misleading results because of their idiosyncratic nature. Barkham et al. (1996), claim that a consensus has been reached among academics that sales growth is the best growth measure. The main argument for choosing sales growth as the measure for firm growth (over employee growth and asset growth) is the fact that sales are generated first if the demand for products and services increases. Following sales growth, additional resources such as assets or employees can be acquired by the firm. Further, the change in sales growth can be observed precisely in a real-time manner which is not applicable for (long-term) assets or employees because they have to be liquidated or laid off, respectively. Although Mc Dougall and D’souza (1992) claim that sales growth is supposed to be easily obtainable, this claim cannot be supported by Welter (2001) because of the sensitivity of this information. While identifying suitable firms for this study, it became apparent that it is common practice for firms to not disclose information about their sales growth. In addition, the survey method limits questions to those that are not related to sales growth because it is frequently associated with a high non- response rate or false indications (Davidsson et al., 2008).

Using profit as a measure of growth can be misleading because there is a manipulation threat caused by the firms. If profit is used as a measure of growth, researchers need to be aware of varying accounting standards or practices which could result in inaccurate and incomparable growth estimates. Thus, profit measures of companies which adhere to different accounting standards need to be adjusted. However, due to fundamentally dissimilar accounting standards a sufficiently accurate estimate cannot be achieved (Merchant & Van der Stede, 2007). National accounting standards are used to create transparency among financial reports, however, no two firms are identical, which results in variability in firms’ financial reports and thus an inability to compare financial information. Publicly listed companies, for instance, which are obliged to report financial statements to their shareholders, have the incentive to adjust costs measures to smooth out profit measures in the firm’s annual reports (Merchant & Van der Stede, 2007). Another aspect which has an impact on a firm’s profit estimates are different taxation laws and therefore individual taxation strategies which are specific to every firm (Merchant & Van der Stede, 2007). In addition, publicly listed companies are averse to exposing sensitive information in form of detailed cost and profit measures because those can endanger the firm’s competitive advantage. The magnitude of the manipulation effect is less at private firms, which do not require financial reporting to outside stakeholders. However, at the same time, those private firms do not have any incentive or obligation to state correct information about their internal operations. For those reasons, using profit as an estimate of growth is considered too unreliable and hence will not be used in this study.

A frequently used measure of growth in entrepreneurship studies is employment growth. The choice of suitable growth indicators is dependent on the unit of analysis and for a growth- oriented entrepreneur using employee growth as an indicator for growth seems to be most suitable for this study. However, the use of employment may also be misleading if assumptions about employees as a means and growth orientation in different stages are ignored. First, employees as a mean refers to the fact that entrepreneurs are not interested in hiring many employees per se. Rather, the number of employees is seen more as a means than a goal of the entrepreneur. In other words, “Employment growth is almost never a goal in itself” (Davidsson, 1989; Wiklund, 1998). In fact, many entrepreneurial firms attempt to remain small because of the decreasing marginal benefits associated with hiring more employees, such as loss of control, dependence on others, shared responsibility, diluted ownership, and increased agency costs. Secondly, growth orientation in different stages implies the initial need for employees for necessary survival which should not be associated with the term growth. An example of a firm with growth orientation in different stages is a retail store with seasonal demand which employs and deploys high numbers of employees without real growth. To circumvent these issues of employee growth, the present study includes only firm founders from the internet-related industry to reduce potential noise in the number of employees. Further, it is assumed that the initial start-up phase of young firms reflects the development of a firm more accurately because the distinction between young firms and established firms is vague in this particular industry. Therefore, the age of firms in the sample ranges from one year to ten years. To conclude, although different measures such as sales growth would be a more accurate in terms of reflecting changes in a real-time manner, the present study uses employee growth mainly because it appears to be most suitable for this survey-based empirical study.

1.1.6 Growth models

There are at least three types of growth models that describe the course of growth at a single business firm. There is a distinction between stage-models of growth, stage-less models of growth, and hybrid models with continuous entrepreneurial efforts and management efforts. Stage-less growth models are considered the least complex type of growth models because of their limited descriptive power. However, in the strategic management literature, but also on a daily management basis, they are used as a tool to focus on certain aspects of the firm’s operations and to develop specific strategic tactics and plans. Working with stage-less models narrows the time-horizon and scope of strategic planning and identifies drivers and obstacles which are related to the firm’s growth. Stage-models are frequently displayed as diagrams with growth variables such as profit, sales or employment on the y-axis and five different stages on the x-axis indicating the relative amount of growth at a certain stage (Smallbone and Wyer, 2000; Bridge et al., 2003). The five different stages cover the life-time of a firm starting with new venture development, start - up activities, venture growth, business stabilization, and innovation or decline (Kuratko, D.F. and Hodgetts, 2004). In the stage- model literature, different terms are used for labeling the growth-stages; however, they are interchangeable since the intent behind the relative amount of growth is identical. All stages are important and require different actions to be taken and strategies to be implemented to interact with the firm’s environment and to continue to grow (Bjerke, 2007). Although the stages provide an overview about possible normative actions to be taken at a certain growth- phase, the stage-model of growth is only a theoretical tool to display and describe growth instead of explaining it. Compared to the stage-less models, the stage-models are less specific, but have a broader scope on the firm’s growth. Hybrid models with continuous entrepreneurial efforts and management efforts combine the two aforementioned growth models and relate narrow and specific management tactics to the growth stages of a firm in a causal manner. Those models imply continuous entrepreneurial initiation efforts followed by managerial efforts which are meant to execute entrepreneurial plans. The hybrid models with the interaction between those two kinds of efforts which causes the total growth of the firm have a high descriptive character and are therefore frequently used for strategic planning. This study focuses on the initial stages of growth namely, new venture development, start - up activities, and venture growth. Since the explanatory power of the aforementioned growth models is rather limited, they are mainly used to describe the development stage of the firm. According to the sample selection, only those firms are selected which are representative for the population of firms in these stages of growth.

1.1.7 Growth patterns

Although growth models are helpful, theoretical tools to describe relative growth throughout a firm’s lifespan, the resulting growth patterns vary in terms of timing, speed, and magnitude which differ at every firm (Bjerke, 2007). Although growth pattern are firm-specific, there are six growth patterns which capture the characteristics of firm growth namely, the fledging that did not fly, Icarus, forever small and happy, the roller-coaster, the harvester, and the entrepreneurially/managerially growing firm (Bjerke, 2007). The fledging that did not fly describes a pattern in which both entrepreneurial and managerial efforts fail to succeed and growth is not achieved within the short life span of the firm. Reasons for this pattern can be traced back to ineffective entrepreneur and management actions which lead to an early ending of the firm. The Icarus-pattern characterizes a constant and fast-growing firm which achieves a high peak within a short period of time, but a steep decline thereafter. The growth and decline phases are extreme and display very successful entrepreneurial and managerial actions followed by a sudden and sharp collapse in firm growth. Forever small and happy is the pattern that characterized the majority of small companies. These firms frequently operate in a niche market and do not have the ambition to grow beyond a certain size. On an operational level, the main goal is to maintain the current size of the firm and to survive in the long-run without getting involved in risky growth activities. The roller-coaster describes a pattern with sharp and continuous growth and decline phases while the peaks of growth are at a moderate level. It resembles a volatile and unstable firm with a probably high employee turnover and seasonality characteristics. The harvester-pattern partly resembles the Icarus-pattern, however, at the peak of growth, the firm executes an exit strategy which prevents the upcoming steep decline in growth. Successful, initial entrepreneurial efforts dominate the operations of the firm and also cause the withdrawal from the market by a sale or merger of the firm which leads to a complete abandonment of ownership. The entrepreneurially/managerially growing firm- pattern describes a well-balanced combination of entrepreneurial and managerial efforts which leads to constant firm growth with the least volatility. Managers succeed in executing effective entrepreneurial efforts in a continuous manner which causes a medium-high, but constant growth in the long-run. The main focus of the present study focuses on two kinds of growth patterns, namely Forever small and happy and The entrepreneurially/managerially growing firm- pattern. By taking a closer look at the two patterns, it can be observed that the speed, magnitude, and the timing of the patterns is identical at the initial stage. In both types of companies, entrepreneurial and managerial efforts are effective which leads to moderate or high, but stable growth. However, at a certain point in time, the forever small and happy-firm deviates from the path of the entrepreneurially/managerially growing firm-firm and stops growing. It is assumed that the occurrence of these growth patterns is randomly distributed among all small firms and the goal of the study is to find generalizable characteristics in terms of founder motivation and the use of vision statements so that positive or negative relationships are associated with different growth patterns.

1.1.8 Determinants of growth

“Firm growth is a complex phenomenon which is hard to predict and assess” (Davidsson et al., 2008). Small firm performance and growth is not an understudied area and the number of publications per year is increasing (Wiklund, 2008). The field of growth and performance literature is fragmented, and it is difficult to identify dominant variables that are represented in more than just a small fraction of all studies (Wiklund, 2008). One reason for the difficulty in identifying determinants of growth is the heterogeneity across studies found in performance measures or sampling design. Although single variables are successfully conceptualized and operationalized, their explanatory power remains limited if the variables are used in a low- level form instead of an over-arching conceptualization (Davidsson, 1991). A simple conceptualization of the most frequently studied determinants of growth is the use of three dimensions of growth according to DeWit and Zhou (2009). Those dimensions are: individual determinants, organizational determinants, and environmental determinants. Table 1 presents these three dimensions together with their determinants and also the main scholars who have studied them.

Table 1: Dimensions and Determinants of Growth

illustration not visible in this excerpt

Although these determinants have been examined in disciplines such as business, psychology, and entrepreneurship studies, knowledge about firm growth is still limited because of the variables’ low level of abstraction (Davidsson, Delmar & Wiklund, 2007).

1.2 Motivation

1.2.1 Motivation theories

While the psychological concept of motivation dates back a century, it has only been applied to business and management since the 1950s (Clegg, 2008). Along with different perspectives of organizational theory, ranging from Taylor’s scientific management to the knowledge- based firm management, motivation theory has developed with the aim to increase the well- being of employees and to make them behave in the organization’s best interest. Motivation theories can be grouped into content and process theories which focus on individuals’ psychological content and the process involved in behavior caused by motivations, respectively.

1.2.2 Content theories of motivation

One fundamental perspective is McGregor’s Theory X and Theory Y which implies that the way individuals are motivated is strongly influenced by their beliefs about human nature (Clegg, 2008). The two theories are extreme opposites of each other and create a spectrum in which individuals can be placed in. Theory X orientation assumes that human beings avoid effort and have a need for direction, structure, and rewards for their work. The consequence of applying this view is to make use of motivational tools such as bonus schemes, reward systems, but also punishments. Theory Y implies that individuals seek fulfillment and meaning through work, desire autonomy, and are driven towards self-actualization. This view leads to motivational tools such as empowerment, opportunities for learning, responsibility, and self-leadership. Although McGregor’s theories provide guidance to motivate individuals given their human nature, it ignores the complexity of the causal relationship between attitudes and behavior. To illustrate, a team supervisor might work long hours on an innovative process to simplify her work so that she can avoid working in the future. Building on McGregor’s theory, Herzberg (1959) introduces a two-dimensional paradigm of factors which affects people’s attitudes about work. He introduces the term hygiene factors which refer to firm policies, supervision, interpersonal relations, working conditions, and salary. According to Herzberg (1959), the absence of hygiene factors can cause job dissatisfaction; however, the presence does not motivate or create satisfaction per se. Further, Herzberg identifies five motivators (satisfiers) which are associated with long-term job satisfaction while hygiene factors (dissatisfiers) can only cause short-term changes in attitudes. Although Herzberg’s theory is an extension of McGregor’s theories, it also fails to provide an explanation about how behavior is affected by motivation. Another well-established theory of motivation is Maslow’s hierarchy of needs. According to Maslow’s theory, individuals are motivated to climb up five different levels of needs by meeting one level of needs after another. The levels range from mere physiological needs over safety, social ties, esteem to self-actualization which is the highest need to be achieved. Despite its wide acceptance and popularity, Maslow’s contribution to motivation research is rather limited because the hierarchy of needs fails to describe how and why individuals meet the needs of the five different levels. Like Maslow’s hierarchy of needs, the aforementioned theories of motivation belong to the category of content theories which refer to those “contents” within individuals which drive or push them. Although content theories contribute to our understanding of motivation, they fail to sufficiently explain why people are motivated to behave in a certain way (Clegg, 2008). To obtain a more suitable ground for theory development and to link founders’ motivation to firm growth more accurately, process theories of motivation need to be considered.

1.2.3 Process theories of motivation

Process theories consider the processes involved in motivation and have a higher explanatory power than content theories. Due to this distinctive characteristic, they are more helpful to understand behavior caused by motivation, especially for business research. The theories are based on the premise that motivation affects behavior; however in the course of time, their structure has developed from attitude-behavior relations to the theory of reasoned action and further to the theory of planned behavior, which are well-supported by empirical evidence (Ajzen, 1991).

1.2.4 Theory of reasoned action

The central factor of the theory of reasoned action (TRA) by Fishbein and Ajzen (1997) is the individual’s intention to perform a certain behavior. It is derived from traditional attitude- behavior research which only provides weak correlations between measures of attitude and performance caused by volitional behaviors (Hale et al., 2003). TRA consists of three general constructs which are behavioral intentions (BI), attitude (A), and subjective norms (SN). THA proposes that “…a person’s behavioral intention depends on the person’s attitude about the behavior and subjective norms (BI=A+SN)” (Ajzen & Fishbein, 1977). It implies that if an individual intends to do a behavior then it is very likely that the individual will do it. Additionally, an individual’s intentions are guided and therefore dependent on the individual’s attitude towards the behavior and the subjective norms. BI is a measure of an individual’s relative strength of intention to perform a behavior. “Attitudes consist of beliefs about the consequences of performing the behavior multiplied by his or her valuation of these consequences. SN is seen as a combination of perceived expectations from relevant individuals or groups along with intentions to comply with these expectations” (Ajzen & Fishein, 1997). In other words, it is the individual’s perception of what people who are important to him or her think about performing the behavior in question. In addition, the constructs A and SN are not weighted equally in the equation for predicting behavior. The different weighting accounts for the differences among individuals’ perception of SN which can be low if individuals do not pay a lot of attention to others’ opinions and high if they really care about what others think about the behavior at question. TRA received significant and justifiable attention in the motivation literature and provides great utility for predicting consumer intentions and behavior, however, the limitation of TRA is its incompleteness referring to the actual ability of individuals to perform the behavior. In other words, an individual who has great intention of performing the behavior can be constrained by a lacking ability to perform it. However, this weakness of TRA is revised in Ajzen’s subsequent theory of planned behavior (Ajzen, 1991).

1.2.5 Theory of planned behavior

The theory of planned behavior (TPB) is an extension of TRA which incorporates “perceived behavioral control” and also its impact on the attitude towards the behavior, subjective norms, intensions, and behavior. TPB is more applicable to growth research because it accounts for founders’ ability to perform the behavior. The addition of volitional control reflects the ability to perform the behavior and reflects the internal resource constraints and external constraints in the operating and business environment of the growing firm. Thus, “…unless the managers of the firm have the ability to develop suitable strategies and can spot growth opportunities, the firm will not grow irrespectively of the motivation to expand the business” (Delmar & Wiklund 2008). Further, TPB accounts for self-assessment which is reflected by the notion of perceived behavior control. Depending on an individual’s subjective self-perception, a gap between a perceived control and volitional control can evolve which has the size of the difference between perceived ability and actual ability.

1.2.6 Motivation as main determinant of entrepreneurship process and growth

According to Davidsson (1991), firm growth is considered as continued entrepreneurhip or continued entrepreneurial process. The present study adopts Shane and Venkataraman’s (2000) definition of entrepreneurship as a process by which “opportunities to create future goods and services are discovered, evaluated, and exploited.” It has to be noted, that being a founder is not a prerequisite of being an entrepreneur. Rather, entrepreneurship is more seen as a creative process that every (business) person is able to engage in by rearranging existing resources in a novel way. According to Shane et al. (2003), entrepreneurship involves human agency and the pursue of opportunities. Further, the likelihood of pursuing opportunities is dependent on the willingness of the entrepreneurs. Consequently, Shane et al. (2003), argue “…the variation among people in their willingness and ability to act has important effects on the entrepreneurial process.” Opponents of this view criticize the omission of external factors such as access to resources, political factors, or market forces. However, holding those factors constant, willingness plays a critical role in growth studies (Shane et al., 2003). Also, weaknesses in controlling for motivation-related effects in previous studies about motivation and entrepreneurship process question the reliability of the limited effect of motivation on entrepreneurial process.

According to Gartner (1990), previous studies fail to control for the variance in opportunities which entrepreneurs are willing to pursue and consequently conclude that willingness has a limited impact on the entrepreneurship processes. The basic economic principle of opportunity costs states that “[Opportunity cost] is the cost that is given up for the next best alternative” (Ross, et al., 2005). However, both, the value of “the next best alternative”, but also the value of the opportunity differ among individuals. Also, the two values can be based on qualitative and non-monetary valuation and therefore hard to estimate. Hence, if there is no control for the value of opportunities, two entrepreneurs with the same level of willingness will not necessarily act in the same manner because they expect different payoffs from those opportunities. A possibility to account for those differences in opportunities is to choose firms from one industry in which the values of opportunities are similar each other; however, although the values may be more comparable within one industry, differences remain. Further, seeing entrepreneurship as a profession rather than a process poses assumptions which do not fit into the nature of entrepreneurship. For example, entrepreneurial actions are episodic and do not last for a long time such as raising venture capital. Depending on the specific steps of the entrepreneurial process, motivation may vary to a great extent and may lead to false conclusions concerning the relationship between motivation and growth.

Weak conceptualizations of determinants of growth and the use of low-level explanatory variables are found in the literature, but also approaches to build more over-arching models of growth. An approach by Wiklund (1998) to create variables on a higher level of abstraction resulted in the overarching labels: strategy, resources, motivation, and environment. The introduction of these theoretical perspectives makes it possible to assess and interpret the single variables in a more meaningful way. Wiklund emphasizes the difference between a theory and a theoretical perspective. “A theoretical perspective is broader, less restrictive and on a higher level of abstraction than a theory” (Wiklund, 2008). Moreover, the focus is rather on general concepts and how they influence each other. Another approach by Davidsson (1991) to shed more light on the main determinants of firm growth focuses on behavior, which he coined continued entrepreneurship. The main contribution of Davidsson’s study is the development of a conceptual model at a higher rate of abstraction which does not assume away too many potential contingencies. Attempting to reduce the complexity of the large numbers of low-level explanatory variables, Davidsson assumes that these variables can be regarded as aspects of the three major determinants: ability, need, and opportunity. In this framework, growth is considered as a theoretical concept which does not take place without the protagonist, the entrepreneur, who experiences growth motivation by his/her perceived ability, perceived need, and perceived opportunity. Consequently, growth motivation is considered to be the main determinant of growth because without a sufficient level of ability, need, and opportunity perceived by the entrepreneur, no growth (continued entrepreneurship) occurs. However, actual growth is not determined by growth motivation of the founder because the three determinants— ability, need, and opportunity—act as boundaries of growth. Therefore, actual growth can only reach the upmost level of this particular boundary, and this happens if the entrepreneur is highly motivated, but growth motivation does not cause actual growth beyond the growth which is actually feasible. Another 10-year longitudinal study by Wiklund, Davidsson, and Delmar (2003) examines the relationship between overall attitudes toward growth on the one hand and expected consequences of growth on the other hand. Unlike other growth studies, the researchers explore reasons for diminished growth motivation and attempt to find explanations for the fact that the majority of entrepreneurs do not want to grow their firms beyond a certain size. The expectancy-value approach finds that a possible deterioration of employee well-being within the firm is the strongest mediator of growth motivation. Within the study, this non-economical concern is more relevant than the concerns about personal income, workload, control, and independence. Besides these findings, another contribution of the study is the methodological design with a diverse approach to venture growth studies that shows that founder’s motivation determines growth, however from a different angle. It can be argued that previous research designs fail to capture the significance of motivation as a determinant of growth because they obey the complexity of the construct growth motivation and also the downsides of firm growth which lead to stagnation.Delmar and Wiklund (2008) examine the relationship between founder motivation and firm growth and argue that growth motivation is a predictor of venture growth. At the same time, they also conclude that the relationship between the two concepts is even more complex than previous studies suggest. The novel feature of their study is the consideration of feedback loops from past behavior and behavioral outcomes (Delmar & Wiklund, 2008). Alongside the theory of reasoned action, Delmar and Wiklund find that both motivation and future behavior are dependent on past behavior and outcomes. Their main contribution is the conclusion that misinterpretations of the causal effects of motivation on outcomes can be acknowledged in future studies. In their study, the stability of future motives and motivation was affected by past behavior and past experiences, which implies that founders who experienced growth at time 1 have more stable motives which affect future behavior and future performance at time 2. Contrary to that, founders who experience low or no growth at time 1 have less stable motives at time 2 and consequently, the level of motivation is smaller at time 2. To conclude, the exclusion of feedback loops but also the other limitations in previous growth studies have lead to a different picture of the relationship between motivation and growth. Concluding from the discussion below, hypothesis 1 states:

[...]

Excerpt out of 81 pages

Details

Title
Bad Vision, No Growth - An Empirical Study of the Relationship between Founders’ Growth Motivation, Vision Statements and Venture Growth at Internet Start-ups
Subtitle
Master Thesis - Daniel Zaleski
College
Maastricht University
Course
International Business Entrepreneurship
Grade
2,5
Author
Year
2011
Pages
81
Catalog Number
V183875
ISBN (eBook)
9783656086161
ISBN (Book)
9783656086420
File size
1032 KB
Language
English
Notes
Note 7.5 entspricht einer 2,5 lt. dt. Notensystem Bad Vision, No Growth: An Empirical Study of the Relationship between Founders’ Growth Motivation, Vision Statements and Venture Growth at Internet Start-ups Visit http://www.danielzaleski.de and get in touch with me if you have any questions or comments.
Keywords
Venture Growth, Entrepreneurship, Motivation, Vision statement, startups, Daniel Zaleski, Growth Motivation, www.danielzaleski.de
Quote paper
Daniel Zaleski (Author), 2011, Bad Vision, No Growth - An Empirical Study of the Relationship between Founders’ Growth Motivation, Vision Statements and Venture Growth at Internet Start-ups, Munich, GRIN Verlag, https://www.grin.com/document/183875

Comments

  • No comments yet.
Read the ebook
Title: Bad Vision, No Growth - An Empirical Study of the Relationship between Founders’ Growth Motivation, Vision Statements and Venture Growth at Internet Start-ups



Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free