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This study explores the effect of the complexity of competitive repertoires of entrepreneurial ventures on their growth in employees accounting for the role of time. We first strive to identify the existence of alternative patterns in the complexity of competitive repertoires of entrepreneurial ventures during their early years of operations, considering the inter-temporal change of the complexity of their repertoires. We then seek to determine trade-offs between those alternative patterns in terms of their effects on short-term growth rates versus long-term growth trends of entrepreneurial ventures. We build on the Awareness-Motivation-Capability framework to justify our predictions and draw on a sample of entrepreneurial ventures that operate in various service industries to test them. Our findings have important implications for research on competitive dynamics and entrepreneurship.
The Paradox of Startup Acquisitions: Eliminating Competition and Creating New Competitors
Prior research shows that incumbent firms frequently acquire high-tech startups in order to eliminate nascent competition, raising policy concerns around the anti-competitive effects of startup acquisitions. In this study, I document that high-tech startup acquisitions paradoxically lead to the creation of new competition. Leveraging employee-employer matched data from the US Census, I find that acquisitions significantly increase the target startup’s rate of employee entrepreneurship, leading to the spawning of new competitors. Surprisingly, this effect holds even for acquisitions that are later withdrawn. To explain these results, I posit that the decision to sell the company often creates resentment among workers against “selling out” to a bigger rival. Overall, this study demonstrates that acquiring a high-tech startup can unintentionally generate new competition by spurring employee entrepreneurship.
Orchestrating Optimal Distinctiveness in Cultural Entrepreneurship: Entrepreneurial Narratives and Resources in the Airbnb Marketplace
University of Manchester Eric Yanfei Zhao,
Entrepreneurs face an important tension because they simultaneously need to differentiate their offering to stand out (“being different”) while conforming to institutionalized conventions to gain legitimacy (“being similar”). How entrepreneurial ventures gain “optimal distinctiveness” – i.e., successfully balance the opposing pressure for differentiation and legitimation – has recently attracted much attention. Drawing on cultural entrepreneurship research, we theorize about how entrepreneurial narratives and resources jointly shape the optimal distinctiveness of entrepreneurial offerings. Analysis of 76,306 Airbnb accommodation listings shows that the distinctiveness of Airbnb listings’ narratives has an inverted U-shaped effect on bookings. We show that this relationship is substantially contingent on the resources available to Airbnb hosts. Horizontally differentiating resources steepen the optimal distinctiveness curve, while vertically differentiating resources flatten the curve.
A Process Theory of Entrepreneur-investor Rivalry
Texas Tech University Jeffery McMullen,
Indiana University Olivia Aronson,
University of Richmond Oleg Petrenko,
University of Arkansas
Entrepreneurship theory overlooks the paradox of contested parity, where arrangements designed to preserve harmony may instead contribute to rivalry between entrepreneurs and investors. Specifically, when these actors share control of ventures due to mutual resource dependencies, they coexist in a tenuous equilibrium that even minor conflicts can disrupt, sparking battles for complete control. We address this paradox by adopting a competitive dynamics lens to examine an exemplary instance of rivalry between the founder and initial major investor of a renowned whiskey micro-distillery. Our core contribution is an empirically grounded theory of entrepreneur-investor rivalry that elaborates the process and outcome of such battles. EIR theory enriches entrepreneurship theory on relations between these actors, and, in doing so, enriches competitive dynamics theory on the nature of rivalry.