Preface

Entrepreneurship plays an important role in the development of economies and is a vital source of change in all aspects of society. Throughout history, successful entrepreneurs have created great businesses and contributed to economic and social development, created jobs, increased productivity, and contributed to a higher quality of life. This book attempts to address a number of contemporary entrepreneurship issues critical for understanding entrepreneurship and business creation.

While this book empowers academics interested in entrepreneurial research, it is not only for them. Any student who reads this book will learn about the entrepreneurial process, the role of entrepreneurship in the economy, and its contemporary issues. This book also encourages would-be entrepreneurs to start and grow their new ventures.

The book consists of 12 chapters systematically organized into 4 sections: "Entrepreneurial Strategy", "Entrepreneurial Education and Opportunities", "Entrepreneurial Finance" and "Entrepreneurial Dynamics, and Innovation". What follows is a brief synopsis of what each chapter entails.

Chapter 1 explains how strategic alliances act as a platform to implement collaborative entrepreneurship while exposing a range of challenges. The objective of the chapter is to explore how to deal with the potential coordination issues that can make an alliance vulnerable and its returns diminished through a preliminary integrative approach to the interface between collaborative entrepreneurship and strategic alliances. The chapter contributes to a better understanding of how firms can enact collaborative entrepreneurship productively to gain greater benefit from the alliance configuration for collaborative advantage.

Business harvesting strategies are examined in Chapter 2. Entity harvesting is as equally important as setting up a new entrepreneurial venture and this chapter explores this issue. During the harvesting process, the entrepreneur recovers value through the sale of an entrepreneurial entity or its assets. Having spent several years building and adding value to the business, the entrepreneur must design an entity harvesting strategy that would provide maximum returns on the investment of time, effort, and money. Several reasons may compel the entrepreneur to harvest the business and this chapter provides some of these reasons based on extant literature and primary data collected from small and medium-sized entity (SME) owners in Sub-Saharan Africa. Further, the chapter outlines various entity harvesting strategies preferred by SME owners in Sub-Saharan Africa and circumstances in which they deem appropriate to apply such.

The entrepreneurial marketing behavior of start-up and scale-up companies and their dominant dimensions are the focus of Chapter 3. The results of the study suggest that there is no difference in entrepreneurial marketing behavior between start-up companies and scale-up companies. Value creation networking is shown to be the most dominant dimension for start-up companies in terms of its impact on

**II**

**Section 3**

of Entrepreneurship?

*and Veronica Marozzo*

of the Italian Case

**Section 4**

and Chile

*by Knut Ingar Westeren*

*by Emanuele Rossi and Simone Boccaletti*

Entrepreneurship at Any Age *by William (Marty) Martin*

Entrepreneurial Finance **129**

**Chapter 8 131**

**Chapter 9 143**

Entrepreneurial Dynamics and Innovation **159**

**Chapter 10 161**

**Chapter 11 173**

**Chapter 12 193**

Innovation Processes in Aquaculture: Comparing Companies in Norway

Entrepreneurship in Urban Jungles through High-Tech Vertical Farming

*by Suaad Jassem and Mohammad Rezaur Razzak*

Financial Fragility and Corporate Bond Funding of SMEs: An Analysis

Does Financial Institution Proximity Affect the Development

*by Francesco Fasano, Maurizio La Rocca, Tiziana La Rocca* 

entrepreneurial marketing behavior. As for scale-up companies, the most dominant dimension is the closeness to market dimension in its impact on entrepreneurial marketing behavior.

Chapter 4 is a comprehensive review of existing approaches for impact measurement and management implemented by socially oriented ventures (both not-for-profit organizations and for-profit businesses) focusing on methodological, governance, and operational barriers and enabling factors of the practices. The chapter drafts a framework that helps any venture to structure a process and methodology to measure its blended performance. The research not only contributes to the scant literature on impact entrepreneurship, but impact ventures might offer a compelling laboratory to disentangle the obstacles posed by the combined achievement of financial and social objectives and how organizations might address these challenges.

Chapter 5 examines the role of prior knowledge in the process of recognizing entrepreneurial opportunities. Recognizing opportunities has often been raised as a crucial aspect of the entrepreneurial process. The ability to identify, analyze, and develop entrepreneurial opportunities is what differentiates entrepreneurs from non-entrepreneurs. The chapter highlights the relevance of understanding the variables that have an influence on the process of recognizing opportunities.

Entrepreneurial behavior oriented to the pursuit of international opportunities is introduced in Chapter 6. The chapter aims to depict antecedents, mechanisms, and outcomes of such entrepreneurial behavior. The chapter makes four contributions. First, it outlines antecedents at three levels (individual, firm, environmental) as driving aspects that lead to the international opportunity-related behavior. Second, it reveals the mechanism by which different actors discover, enact, evaluate, and exploit international opportunities. Third, it describes the outcomes of this opportunity process. Fourth, it suggests establishing a conceptual basis on the topic.

In recent times scholars of the Islamic economy have introduced a new term, 'Halal entrepreneurship' or 'Halalpreneurship' to define and differentiate entrepreneurs in the Halal industry from the conventional entrepreneurs. Its concept and business opportunities are explained in Chapter 7. The chapter aims to achieve two main objectives. Firstly, to provide a comprehensive overview of Halalpreneurship by identifying its salient features that differentiate them from entrepreneurs. Secondly, to explore the business opportunities in different sectors of the global halal industry for the Halalpreneurs to tap.

Chapter 8 joins the stream of research investigating the relationship between local financial development, economic growth, and entrepreneurship. Relevant contributions highlighted that the probability of an individual to start a new business is higher when he/she moves from the least financially developed region to the most financially developed one. The chapter aims to further deepen the role of local financial development on entrepreneurship and on research spin-offs.

The financial policy of corporate bond issuers in the new Italian junior bond market specifically dedicated to unlisted firms and SME's is analyzed in Chapter 9. The aim of the chapter is to assess the extent to which SME's financial choices regarding nonequity external funding can become a key factor in facing real and financial shocks like those triggered by the current Covid-19 pandemic.

**V**

Chapter 10 provides a selective review of the literature and a narrative analysis that illuminates insight to inform academics and practitioners regarding the intersection of age and entrepreneurship. These insights are first built upon a conceptual foundation grounded in a developmental perspective and then organized into opportunities and challenges facing entrepreneurs at various ages along the developmental continuum.

Innovation processes in aquaculture are presented in Chapter 11. The chapter provides a theoretical background and an empirical analysis by comparing companies in Chile and Norway, and is focused on how innovations take place in different stages of the production process and how these are built into the

Chapter 12 examines contemporary entrepreneurial opportunities, such as vertical indoor farming driven by advanced technologies. In order to mitigate the possibilities of food shortages in densely populated cities, initiatives need to be undertaken to foster the growth of large-scale entrepreneurship by individuals that

can venture into this field on a smaller scale and with less capital outlay.

This book tries to facilitate a fundamental rethinking of entrepreneurial activity and how it is manifested. It addresses a critical shortcoming in much of the research, education, and economic development work that deals with entrepreneurship. Instead of the general theories of entrepreneurship, the book lays a foundation for developing theories of different kinds of entrepreneurial ventures. As the reader navigates these pages, he or she should hopefully broaden their entrepreneurial landscape and identify critical factors that drive contemporary entrepreneurship.

This book is the result of respected international authors collaborating from 10 countries. I gratefully acknowledge and thank all the authors for their valuable

**Mladen Turuk**

University of Zagreb, Zagreb, Croatia

Faculty of Economics and Business,

production and managerial system.

contributions.

Chapter 10 provides a selective review of the literature and a narrative analysis that illuminates insight to inform academics and practitioners regarding the intersection of age and entrepreneurship. These insights are first built upon a conceptual foundation grounded in a developmental perspective and then organized into opportunities and challenges facing entrepreneurs at various ages along the developmental continuum.

Innovation processes in aquaculture are presented in Chapter 11. The chapter provides a theoretical background and an empirical analysis by comparing companies in Chile and Norway, and is focused on how innovations take place in different stages of the production process and how these are built into the production and managerial system.

Chapter 12 examines contemporary entrepreneurial opportunities, such as vertical indoor farming driven by advanced technologies. In order to mitigate the possibilities of food shortages in densely populated cities, initiatives need to be undertaken to foster the growth of large-scale entrepreneurship by individuals that can venture into this field on a smaller scale and with less capital outlay.

This book tries to facilitate a fundamental rethinking of entrepreneurial activity and how it is manifested. It addresses a critical shortcoming in much of the research, education, and economic development work that deals with entrepreneurship. Instead of the general theories of entrepreneurship, the book lays a foundation for developing theories of different kinds of entrepreneurial ventures. As the reader navigates these pages, he or she should hopefully broaden their entrepreneurial landscape and identify critical factors that drive contemporary entrepreneurship.

This book is the result of respected international authors collaborating from 10 countries. I gratefully acknowledge and thank all the authors for their valuable contributions.

> **Mladen Turuk** Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia

**IV**

topic.

for the Halalpreneurs to tap.

entrepreneurial marketing behavior. As for scale-up companies, the most dominant dimension is the closeness to market dimension in its impact on entrepreneurial

Chapter 4 is a comprehensive review of existing approaches for impact measurement and management implemented by socially oriented ventures (both not-for-profit organizations and for-profit businesses) focusing on methodological, governance, and operational barriers and enabling factors of the practices. The chapter drafts a framework that helps any venture to structure a process and methodology to measure its blended performance. The research not only contributes to the scant literature on impact entrepreneurship, but impact ventures might offer a compelling laboratory to disentangle the obstacles posed by the combined achievement of financial and social

objectives and how organizations might address these challenges.

Chapter 5 examines the role of prior knowledge in the process of recognizing entrepreneurial opportunities. Recognizing opportunities has often been raised as a crucial aspect of the entrepreneurial process. The ability to identify, analyze, and develop entrepreneurial opportunities is what differentiates entrepreneurs from non-entrepreneurs. The chapter highlights the relevance of understanding the

variables that have an influence on the process of recognizing opportunities.

Entrepreneurial behavior oriented to the pursuit of international opportunities is introduced in Chapter 6. The chapter aims to depict antecedents, mechanisms, and outcomes of such entrepreneurial behavior. The chapter makes four contributions. First, it outlines antecedents at three levels (individual, firm, environmental) as driving aspects that lead to the international opportunity-related behavior. Second, it reveals the mechanism by which different actors discover, enact, evaluate, and exploit international opportunities. Third, it describes the outcomes of this opportunity process. Fourth, it suggests establishing a conceptual basis on the

In recent times scholars of the Islamic economy have introduced a new term, 'Halal entrepreneurship' or 'Halalpreneurship' to define and differentiate entrepreneurs in the Halal industry from the conventional entrepreneurs. Its concept and business opportunities are explained in Chapter 7. The chapter aims to achieve two main objectives. Firstly, to provide a comprehensive overview of Halalpreneurship by identifying its salient features that differentiate them from entrepreneurs. Secondly, to explore the business opportunities in different sectors of the global halal industry

Chapter 8 joins the stream of research investigating the relationship between local financial development, economic growth, and entrepreneurship. Relevant contributions highlighted that the probability of an individual to start a new business is higher when he/she moves from the least financially developed region to the most financially developed one. The chapter aims to further deepen the role of local financial development on entrepreneurship and on research spin-offs.

The financial policy of corporate bond issuers in the new Italian junior bond market specifically dedicated to unlisted firms and SME's is analyzed in Chapter 9. The aim of the chapter is to assess the extent to which SME's financial choices regarding nonequity external funding can become a key factor in facing real and financial shocks

like those triggered by the current Covid-19 pandemic.

marketing behavior.

**1**

Section 1

Entrepreneurial Strategy

Section 1

## Entrepreneurial Strategy

**3**

**1. Introduction**

strategic alliances [3, 4].

**Chapter 1**

*Ribin Seo*

**Abstract**

Collaborative Entrepreneurship

Strategic alliances act as a platform to implement collaborative entrepreneurship

while exposing a range of challenges. By capitalizing on entrepreneurial opportunities for continuous innovation, alliance partners can promote the productive utilization of resource-pooling systems and facilitate innovation processes for value co-creation. Simultaneously, the heterogeneity of partners in terms of different motivations and interests interferes with the advancement of collaborative entrepreneurship for resource exchange and orchestration. The objective of this paper is thus to explore how to deal with the potential coordination issues that can make an alliance vulnerable and its returns diminished through a preliminary integrative approach to the interface between collaborative entrepreneurship and strategic alliances. From this approach, three elements that can contribute to leverage values of collaborative entrepreneurship for continuous innovation are identified: social capital, entrepreneurial orientation, and interorganizational learning. Based on the discussion about the functions of each element in the context of alliance partners' dynamic interactions, a model of analysis on collaborative entrepreneurship for continuous innovation is proposed. Hence, this chapter contributes to a better understanding of how firms can enact collaborative entrepreneurship productively to gain greater benefit from the alliance configuration for collaborative advantage.

**Keywords:** collaborative entrepreneurship, strategic alliances, continuous

innovation, social capital, entrepreneurial orientation, interorganizational learning

In the current complex and turbulent business environment, continuous innovation has been viewed as an important strategy for gaining sustainable competitive advantage and the capacity to consistently carry on innovative initiatives as a necessary condition for the long-term growth of firms [1]. The continuing need for strategic response to changes in environments forces a firm to innovate constantly, but continuous innovation is one of the most challenging tasks for firms [2]. Accordingly, research interest in how ventures could be innovative on a continuously efficient basis has emerged, and scholars provide a rational explanation that one of the answers is linked with the firms' capability to configure and manage

for Continuous Innovation: A

Strategic Alliance Perspective

#### **Chapter 1**

## Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective

*Ribin Seo*

#### **Abstract**

Strategic alliances act as a platform to implement collaborative entrepreneurship while exposing a range of challenges. By capitalizing on entrepreneurial opportunities for continuous innovation, alliance partners can promote the productive utilization of resource-pooling systems and facilitate innovation processes for value co-creation. Simultaneously, the heterogeneity of partners in terms of different motivations and interests interferes with the advancement of collaborative entrepreneurship for resource exchange and orchestration. The objective of this paper is thus to explore how to deal with the potential coordination issues that can make an alliance vulnerable and its returns diminished through a preliminary integrative approach to the interface between collaborative entrepreneurship and strategic alliances. From this approach, three elements that can contribute to leverage values of collaborative entrepreneurship for continuous innovation are identified: social capital, entrepreneurial orientation, and interorganizational learning. Based on the discussion about the functions of each element in the context of alliance partners' dynamic interactions, a model of analysis on collaborative entrepreneurship for continuous innovation is proposed. Hence, this chapter contributes to a better understanding of how firms can enact collaborative entrepreneurship productively to gain greater benefit from the alliance configuration for collaborative advantage.

**Keywords:** collaborative entrepreneurship, strategic alliances, continuous innovation, social capital, entrepreneurial orientation, interorganizational learning

#### **1. Introduction**

In the current complex and turbulent business environment, continuous innovation has been viewed as an important strategy for gaining sustainable competitive advantage and the capacity to consistently carry on innovative initiatives as a necessary condition for the long-term growth of firms [1]. The continuing need for strategic response to changes in environments forces a firm to innovate constantly, but continuous innovation is one of the most challenging tasks for firms [2]. Accordingly, research interest in how ventures could be innovative on a continuously efficient basis has emerged, and scholars provide a rational explanation that one of the answers is linked with the firms' capability to configure and manage strategic alliances [3, 4].

As a collective process where two or more parties work with each other to achieve mutual and private benefits, strategic alliances enable firms to be entrepreneurial in capitalizing on new opportunities through continuous innovation [2]. Alliance firms find it easy to identify and explore opportunities with partners who possess complementary resources and capacities, thus having an advantage over those who are not able to do so [5]. As noted by Antoncic [6], firms can enact entrepreneurial behavior to be innovative, proactive, and risk-taking with a capacity for constant innovation when configuring collaborative partnerships across organizational boundaries. As such, strategic alliances are gaining the attention of research on entrepreneurship, as represented by the concept of collaborative entrepreneurship.

Collaborative entrepreneurship addresses a firm's managerial process to collaborate outside the organization for collaborative advantage [1]. Research on entrepreneurship emphasizes the potential role of firms' collaborations with external parties in an entrepreneurial process from opportunity discovery to value creation [4, 7–9]. In this process, collaborative entrepreneurship involves a group of firms with a common strategy to facilitate innovation processes through the construction of collaborative partnerships [10]. The alliance configuration can be motivated by a firm's entrepreneurial intention to leverage resource complementarity and economies of scales, gain low costs of new market entry, build new capabilities by learning, manage risks by sharing, and, ultimately, create economic value [7]. By capitalizing on entrepreneurial opportunities to co-develop innovations in continuous ways, firms enacting collaborative entrepreneurship can promote the productive utilization of the resource-pooling system for value co-creation.

While interfirm collaboration performs as a strategic platform for collaborative advantage, it also exposes a range of challenges [11]. The heterogeneity of partners with different motivations and interests interferes with the advancement of common grounds for resource exchange and orchestration. Potential coordination issues, including opportunism to manipulate alliances, conflicts between sharing and protecting knowledge, and high transaction and monitoring costs, can make a partnership vulnerable and its returns diminished [12, 13]. As such, failing to manage these challenges discourages the productive dissemination, assimilation, and incorporation of network-available assets that are complementary to continuous innovations.

The performance-creating mechanisms underlying collaborative entrepreneurship remain a "black box" in the literature and are an interesting research topic [4]. The knowledge gap is not as much about whether ventures benefit from enacting collaborative entrepreneurship in their partnerships but rather about how and why its potential performance implications occur. Specifying potential elements to enhance a process of collaborative entrepreneurship will contribute to developing existing theories of strategic alliance as well as practical approaches that need to be fine-grained for better collaborative advantage. To fill this caveat, this book chapter examines the elements that would form and affect that collaborative entrepreneurial process by integrating theoretical models and philosophical principles.

Considering that the success of collaboration depends heavily on a firm's entrepreneurial ability to manage the relationship with its counterpart(s) possessing complementary knowledge-based resources needed for continuous innovation [14], we draw upon the theories of social capital, entrepreneurial orientation, and interorganizational learning. The basic assumptions for this theoretical perspective are that (a) social capital at the alliance level may serve as a strategic asset that sparks partners' decisions to get more entrepreneurially involved in the value-co-creation process [15], (b) entrepreneurial orientation may address the strategic intention of alliance firms to transform network-available resources into a source of collaborative

**5**

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

advantage [7, 9], and (c) interorganizational learning may elucidate a systematic

The main contribution of this book chapter is to establish an interface among the research constructs in the process of collaborative entrepreneurship which becomes an important research area in the strategic management literature. Examining the potential contributions of each of the proposed elements to continuous innovation will improve an understanding of how firms can leverage the value of collaborative entrepreneurship in sustaining competitive advantage. Therefore, the remainder of this paper is organized as follows: Section 2 explores some characteristics of collaborative entrepreneurship and strategic alliances. Section 3 offers the concept and dimensions of each element that affects collaborative entrepreneurship. The paper concludes by proposing a conceptual model for future analysis, which explains how the alliance configuration can be a form of productive collaborative entrepreneurship for continu-

Entrepreneurship addresses the managerial process by which individuals—either on their own or inside organizations—pursue new business opportunities without regard to resources they currently control [17]. According to Stevenson and Jarillo [17], a key feature of entrepreneurship is a focus on achieving exceptional growth, which is a goal that motivates firms to take risks and become innovative and proactive. To achieve growth, entrepreneurial firms—in Miller's [18] explication, those being innovative, proactive, and risk-taking simultaneously—aggressively pursue opportunities in their environment. Teng [19] evinces that entrepreneurship is about the relentless pursuit of entrepreneurial opportunities that indicates the situations in which new market offerings, resources, and operational methods can be introduced in novel ways. The ongoing pursuit of opportunities is not only a fundamental objective of entrepreneurship, but also an approach in entrepreneurship [19]. As such, entrepreneurship can be identified by a firm's activities to recognize

In the process of entrepreneurship, a strategic alliance is perceived as a valuable fertilizer for entrepreneurial firms to better explore and exploit new opportunities [20]. Firms with high entrepreneurial orientation tend to constantly scan their environment to identify new opportunities to improve their competitive positions [21]. As part of their environment-scanning and opportunity-pursuing activities, entrepreneurial firms look for external sources in greater depth, which advances innovation development for performance [7, 9]. Being more open to new ideas and resilient from risks, they are willing to use new approaches to transfer internal innovation to external parties in profitable ways and overcome some barriers in integrating complementary knowledge bases among alliances [8]. Kreiser [8] attests that within interfirm partnerships, non-entrepreneurial firms may not be sufficiently motivated to make necessary investments and commit resources to make

This notion leads to a rational question: Is the creation of a strategic alliance as a body of organizations with different functions an entrepreneurial behavior to pursue an opportunity? While personal independence or self-fulfillment is one of the most important reasons why people would prefer to be self-employed,

combination of the partners' collective learning initiatives [16, 17].

**2. Collaborative entrepreneurship and strategic alliances**

and realize new opportunities for economic value creation.

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

**2.1 Collaborative entrepreneurship**

partnerships configure and succeed.

*2.1.1 Entrepreneurship for alliance configuration*

ous innovation.

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

advantage [7, 9], and (c) interorganizational learning may elucidate a systematic combination of the partners' collective learning initiatives [16, 17].

The main contribution of this book chapter is to establish an interface among the research constructs in the process of collaborative entrepreneurship which becomes an important research area in the strategic management literature. Examining the potential contributions of each of the proposed elements to continuous innovation will improve an understanding of how firms can leverage the value of collaborative entrepreneurship in sustaining competitive advantage. Therefore, the remainder of this paper is organized as follows: Section 2 explores some characteristics of collaborative entrepreneurship and strategic alliances. Section 3 offers the concept and dimensions of each element that affects collaborative entrepreneurship. The paper concludes by proposing a conceptual model for future analysis, which explains how the alliance configuration can be a form of productive collaborative entrepreneurship for continuous innovation.

#### **2. Collaborative entrepreneurship and strategic alliances**

#### **2.1 Collaborative entrepreneurship**

*Entrepreneurship - Contemporary Issues*

laborative entrepreneurship.

the resource-pooling system for value co-creation.

As a collective process where two or more parties work with each other to achieve mutual and private benefits, strategic alliances enable firms to be entrepreneurial in capitalizing on new opportunities through continuous innovation [2]. Alliance firms find it easy to identify and explore opportunities with partners who possess complementary resources and capacities, thus having an advantage over those who are not able to do so [5]. As noted by Antoncic [6], firms can enact entrepreneurial behavior to be innovative, proactive, and risk-taking with a capacity for constant innovation when configuring collaborative partnerships across organizational boundaries. As such, strategic alliances are gaining the attention of research on entrepreneurship, as represented by the concept of col-

Collaborative entrepreneurship addresses a firm's managerial process to collaborate outside the organization for collaborative advantage [1]. Research on entrepreneurship emphasizes the potential role of firms' collaborations with external parties in an entrepreneurial process from opportunity discovery to value creation [4, 7–9]. In this process, collaborative entrepreneurship involves a group of firms with a common strategy to facilitate innovation processes through the construction of collaborative partnerships [10]. The alliance configuration can be motivated by a firm's entrepreneurial intention to leverage resource complementarity and economies of scales, gain low costs of new market entry, build new capabilities by learning, manage risks by sharing, and, ultimately, create economic value [7]. By capitalizing on entrepreneurial opportunities to co-develop innovations in continuous ways, firms enacting collaborative entrepreneurship can promote the productive utilization of

While interfirm collaboration performs as a strategic platform for collaborative advantage, it also exposes a range of challenges [11]. The heterogeneity of partners with different motivations and interests interferes with the advancement of common grounds for resource exchange and orchestration. Potential coordination issues, including opportunism to manipulate alliances, conflicts between sharing and protecting knowledge, and high transaction and monitoring costs, can make a partnership vulnerable and its returns diminished [12, 13]. As such, failing to manage these challenges discourages the productive dissemination, assimilation, and incorporation of network-available assets that are complementary to continuous

The performance-creating mechanisms underlying collaborative entrepreneurship remain a "black box" in the literature and are an interesting research topic [4]. The knowledge gap is not as much about whether ventures benefit from enacting collaborative entrepreneurship in their partnerships but rather about how and why its potential performance implications occur. Specifying potential elements to enhance a process of collaborative entrepreneurship will contribute to developing existing theories of strategic alliance as well as practical approaches that need to be fine-grained for better collaborative advantage. To fill this caveat, this book chapter examines the elements that would form and affect that collaborative entrepreneurial

Considering that the success of collaboration depends heavily on a firm's entrepreneurial ability to manage the relationship with its counterpart(s) possessing complementary knowledge-based resources needed for continuous innovation [14], we draw upon the theories of social capital, entrepreneurial orientation, and interorganizational learning. The basic assumptions for this theoretical perspective are that (a) social capital at the alliance level may serve as a strategic asset that sparks partners' decisions to get more entrepreneurially involved in the value-co-creation process [15], (b) entrepreneurial orientation may address the strategic intention of alliance firms to transform network-available resources into a source of collaborative

process by integrating theoretical models and philosophical principles.

**4**

innovations.

#### *2.1.1 Entrepreneurship for alliance configuration*

Entrepreneurship addresses the managerial process by which individuals—either on their own or inside organizations—pursue new business opportunities without regard to resources they currently control [17]. According to Stevenson and Jarillo [17], a key feature of entrepreneurship is a focus on achieving exceptional growth, which is a goal that motivates firms to take risks and become innovative and proactive. To achieve growth, entrepreneurial firms—in Miller's [18] explication, those being innovative, proactive, and risk-taking simultaneously—aggressively pursue opportunities in their environment. Teng [19] evinces that entrepreneurship is about the relentless pursuit of entrepreneurial opportunities that indicates the situations in which new market offerings, resources, and operational methods can be introduced in novel ways. The ongoing pursuit of opportunities is not only a fundamental objective of entrepreneurship, but also an approach in entrepreneurship [19]. As such, entrepreneurship can be identified by a firm's activities to recognize and realize new opportunities for economic value creation.

In the process of entrepreneurship, a strategic alliance is perceived as a valuable fertilizer for entrepreneurial firms to better explore and exploit new opportunities [20]. Firms with high entrepreneurial orientation tend to constantly scan their environment to identify new opportunities to improve their competitive positions [21]. As part of their environment-scanning and opportunity-pursuing activities, entrepreneurial firms look for external sources in greater depth, which advances innovation development for performance [7, 9]. Being more open to new ideas and resilient from risks, they are willing to use new approaches to transfer internal innovation to external parties in profitable ways and overcome some barriers in integrating complementary knowledge bases among alliances [8]. Kreiser [8] attests that within interfirm partnerships, non-entrepreneurial firms may not be sufficiently motivated to make necessary investments and commit resources to make partnerships configure and succeed.

This notion leads to a rational question: Is the creation of a strategic alliance as a body of organizations with different functions an entrepreneurial behavior to pursue an opportunity? While personal independence or self-fulfillment is one of the most important reasons why people would prefer to be self-employed, their entrepreneurship does not occur without interactions with environments [19, 22]. Under certain conditions, the firm's collaboration with external parties can be more efficient to leverage potential returns than pursuing the opportunity alone [4]. Ribeiro-Soriano and Urbano [1] explain that entrepreneurship is a collective phenomenon that is as much the outcome of a joint effort as an individual endeavor. Covin et al. [22] observe that to interact with environments, entrepreneurs tend to seek alternative ways to pursue the opportunity by configuring collaborative networks or consortia rather than exploiting an opportunity alone.

#### *2.1.2 Collaborative entrepreneurship by alliances*

The establishment of strategic alliances is regarded as a way of putting entrepreneurial activities to promote the productive utilization of its resource- pooling system into practice. Behind alliances, there is the objective of attaining or sharing valuable resources when these cannot be obtained through market exchanges or fusions or acquisitions. Montoro-Sánchez et al. [23] show that entrepreneurial firms use strategic alliances as a way of filling gaps in their resources. For firms to exploit new opportunities, they need to obtain resources beyond those they already possess and control, and for that reason, they are often subject to greater risk. Teng [19] explains that strategic alliances emerge when firms in vulnerable strategic positions need new resources, or, when strong, very well-positioned firms capitalize on their resources to create entrepreneurial opportunities for cooperation. Collaborative entrepreneurship involves developing a firm's strategy which allows continuous innovation in its entrepreneurial process to exploit new opportunities for value co-creation [2, 4, 6].

These selective reviews lead to a rational explanation that the alliance configuration is particularly involved with the phenomenon of collaborative entrepreneurship which produces new market offerings by utilizing and combining knowledge-based resources that each partner possesses. Alliances allow integration of fundamental strategic resources and other businesses so that increasingly entrepreneurial firms manage to reach their objectives [24]. This resource-pooling system for value cocreation is one of the contributive elements to collaborative entrepreneurship [14]. Gupta and Govindarajan [25] state that collaborative entrepreneurship is predicated on the creation of economic value arising out of jointly created original ideas that emerge from sharing knowledge-based resources. Accordingly, the entrepreneurial motives of alliance configuration include leveraging resource complementarity and economies of scales, gaining low costs of new market entry, learning capabilities, and managing risks by sharing [7].

The rationale for explaining the concept of collaborative entrepreneurship is that entrepreneurial firms show a strong tendency to proactively seek and form potential partnerships that are complementary to the productive exploitation of new opportunities [8]. According to Franco and Haase [4], collaborative entrepreneurship is adopted by various firms to remain competitive, allowing growth. Thus, the firm's objectives must include increased flexibility, innovation, collaborator initiative, and risk acceptance. Ribeiro-Soriano and Urbano [1] identify collaborative entrepreneurship by a firm's ability to collaborate outside the organization, arguing that collaboration enables a firm to entrepreneurially explore and exploit new opportunities for collaborative advantages. During the co-creation of new resources and competences for continuous innovation, enacting the entrepreneurial behavior of individual alliance partners is needed for productive entrepreneurship in collaboration. Strategic alliances can thus provide a fertile ground that enables

**7**

benefits of collaborations.

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

alliance partners' entrepreneurial interactions, which are contextualized by an institutionalized system of their social exchange, toward continuous innovation.

Strategic alliances refer to "a process in which autonomous actors interact through formal and informal negotiation, jointly creating rules and structures governing their relationships and ways to act or decide on the issues that brought them together" [26], p. 23. It occurs when a group of autonomous stakeholders in a domain engages in an interactive process to act or decide on issues related to that domain, using shared rules, norms, and structures [9]. Teng [19] explains that strategic alliances are interfirm cooperative arrangements that allow firms to temporarily seek resources from others. To ascertain a unit of analysis, we define strategic alliances as interdependent partnerships adopted by two or more organizations to commit resources conjointly under common objectives. In line with Franco and Hasse [4], we consider all formats of alliances, including contractual agreements and temporal partnerships, both with and without shared risks and rewards,

To address the phenomenon of alliance configuration in practice, research has adopted multidisciplinary theoretical perspectives to study the alliances' managerial implications. First, network-based research analyzes the interactional structure of social contexts where partners' collaborative process takes place [8, 9]. This line of research addresses how to efficiently form and maintain the collaborative networks of alliance partners. Second, strategic-based research addresses sources of collaborative advantage achieved through alliances [4, 7]. This stream highlights the importance of the orchestration between alliance environment and internal resources/capabilities. Last, knowledgebased research regards alliances as a path for knowledge sharing and learning among partners [11, 16]. This line emphasizes the expansion and creation of knowledge bases in

Along with the development of such theoretical perspectives, a large body of research focuses on investigating factors that affect the effectiveness of alliance configuration. Thomson and Perry [26] argue that the success of alliances is a matter of the choice of appropriate partners, the accumulation of relational capital, and the management of partnerships. According to Meier et al. [13], the performance mechanism of interfirm alliances relies heavily on trust, mutual commitments, and dedicated support of key actors, which help reduce transaction costs. The collaborative behavior of each actor can be influenced by the organizational and individual experience of alliances [4]. Particularly, organizational culture connected with personal attitudes toward the external environment can determine the quality and quantity of alliance activity. Research also reports some barriers that impede the development of effective alliances. For instance, Lisowska [27] points out some barriers for successful alliances, such as the lack of funding for collaborative projects, knowledge about cooperation, propensity for cooperation, innovativeness, willingness to change, qualified employees, and the inability to visualize the goals and

The notion that firms can receive clear benefits (bright side) from strategic alliances is not novel, but scholars only pay attention to the potential disadvantage (dark side) of the partnership. The discussion of the bright and dark sides of strategic alliances in this section highlights that firms often find it challenging to achieve collaborative advantage from engagement in partnerships for continuous innovation. Thus, how to create and capture the value of strategic alliances remains

minority equity positions, and shared equity ownerships.

alliances, which occur through learning mechanisms.

an important practical matter for alliance firms.

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

**2.2 Strategic alliances**

alliance partners' entrepreneurial interactions, which are contextualized by an institutionalized system of their social exchange, toward continuous innovation.

#### **2.2 Strategic alliances**

*Entrepreneurship - Contemporary Issues*

*2.1.2 Collaborative entrepreneurship by alliances*

opportunity alone.

co-creation [2, 4, 6].

and managing risks by sharing [7].

their entrepreneurship does not occur without interactions with environments [19, 22]. Under certain conditions, the firm's collaboration with external parties can be more efficient to leverage potential returns than pursuing the opportunity alone [4]. Ribeiro-Soriano and Urbano [1] explain that entrepreneurship is a collective phenomenon that is as much the outcome of a joint effort as an individual endeavor. Covin et al. [22] observe that to interact with environments, entrepreneurs tend to seek alternative ways to pursue the opportunity by configuring collaborative networks or consortia rather than exploiting an

The establishment of strategic alliances is regarded as a way of putting entrepreneurial activities to promote the productive utilization of its resource- pooling system into practice. Behind alliances, there is the objective of attaining or sharing valuable resources when these cannot be obtained through market exchanges or fusions or acquisitions. Montoro-Sánchez et al. [23] show that entrepreneurial firms use strategic alliances as a way of filling gaps in their resources. For firms to exploit new opportunities, they need to obtain resources beyond those they already possess and control, and for that reason, they are often subject to greater risk. Teng [19] explains that strategic alliances emerge when firms in vulnerable strategic positions need new resources, or, when strong, very well-positioned firms capitalize on their resources to create entrepreneurial opportunities for cooperation. Collaborative entrepreneurship involves developing a firm's strategy which allows continuous innovation in its entrepreneurial process to exploit new opportunities for value

These selective reviews lead to a rational explanation that the alliance configuration is particularly involved with the phenomenon of collaborative entrepreneurship which produces new market offerings by utilizing and combining knowledge-based resources that each partner possesses. Alliances allow integration of fundamental strategic resources and other businesses so that increasingly entrepreneurial firms manage to reach their objectives [24]. This resource-pooling system for value cocreation is one of the contributive elements to collaborative entrepreneurship [14]. Gupta and Govindarajan [25] state that collaborative entrepreneurship is predicated on the creation of economic value arising out of jointly created original ideas that emerge from sharing knowledge-based resources. Accordingly, the entrepreneurial motives of alliance configuration include leveraging resource complementarity and economies of scales, gaining low costs of new market entry, learning capabilities,

The rationale for explaining the concept of collaborative entrepreneurship is that entrepreneurial firms show a strong tendency to proactively seek and form potential partnerships that are complementary to the productive exploitation of new opportunities [8]. According to Franco and Haase [4], collaborative entrepreneurship is adopted by various firms to remain competitive, allowing growth. Thus, the firm's objectives must include increased flexibility, innovation, collaborator initiative, and risk acceptance. Ribeiro-Soriano and Urbano [1] identify collaborative entrepreneurship by a firm's ability to collaborate outside the organization, arguing that collaboration enables a firm to entrepreneurially explore and exploit new opportunities for collaborative advantages. During the co-creation of new resources and competences for continuous innovation, enacting the entrepreneurial behavior of individual alliance partners is needed for productive entrepreneurship in collaboration. Strategic alliances can thus provide a fertile ground that enables

**6**

Strategic alliances refer to "a process in which autonomous actors interact through formal and informal negotiation, jointly creating rules and structures governing their relationships and ways to act or decide on the issues that brought them together" [26], p. 23. It occurs when a group of autonomous stakeholders in a domain engages in an interactive process to act or decide on issues related to that domain, using shared rules, norms, and structures [9]. Teng [19] explains that strategic alliances are interfirm cooperative arrangements that allow firms to temporarily seek resources from others. To ascertain a unit of analysis, we define strategic alliances as interdependent partnerships adopted by two or more organizations to commit resources conjointly under common objectives. In line with Franco and Hasse [4], we consider all formats of alliances, including contractual agreements and temporal partnerships, both with and without shared risks and rewards, minority equity positions, and shared equity ownerships.

To address the phenomenon of alliance configuration in practice, research has adopted multidisciplinary theoretical perspectives to study the alliances' managerial implications. First, network-based research analyzes the interactional structure of social contexts where partners' collaborative process takes place [8, 9]. This line of research addresses how to efficiently form and maintain the collaborative networks of alliance partners. Second, strategic-based research addresses sources of collaborative advantage achieved through alliances [4, 7]. This stream highlights the importance of the orchestration between alliance environment and internal resources/capabilities. Last, knowledgebased research regards alliances as a path for knowledge sharing and learning among partners [11, 16]. This line emphasizes the expansion and creation of knowledge bases in alliances, which occur through learning mechanisms.

Along with the development of such theoretical perspectives, a large body of research focuses on investigating factors that affect the effectiveness of alliance configuration. Thomson and Perry [26] argue that the success of alliances is a matter of the choice of appropriate partners, the accumulation of relational capital, and the management of partnerships. According to Meier et al. [13], the performance mechanism of interfirm alliances relies heavily on trust, mutual commitments, and dedicated support of key actors, which help reduce transaction costs. The collaborative behavior of each actor can be influenced by the organizational and individual experience of alliances [4]. Particularly, organizational culture connected with personal attitudes toward the external environment can determine the quality and quantity of alliance activity. Research also reports some barriers that impede the development of effective alliances. For instance, Lisowska [27] points out some barriers for successful alliances, such as the lack of funding for collaborative projects, knowledge about cooperation, propensity for cooperation, innovativeness, willingness to change, qualified employees, and the inability to visualize the goals and benefits of collaborations.

The notion that firms can receive clear benefits (bright side) from strategic alliances is not novel, but scholars only pay attention to the potential disadvantage (dark side) of the partnership. The discussion of the bright and dark sides of strategic alliances in this section highlights that firms often find it challenging to achieve collaborative advantage from engagement in partnerships for continuous innovation. Thus, how to create and capture the value of strategic alliances remains an important practical matter for alliance firms.

#### *2.2.1 The bright side of strategic alliances*

The alliance configuration helps to expand a firm's knowledge base and accelerate its innovation process by exchanging and mobilizing complementary knowledge-based resources across partners [8]. As a result, pooling knowledge in the partnership allows small firms to overcome the liability of smallness by increasing rents from the interaction activities [26]. By sharing costs and risks of continuous innovation with external parties, alliance firms can capitalize on new opportunities for value creation in more efficient ways than doing alone [28]. These benefits of strategic alliances can be summarized as follows.


Research emphasizing the bright side of strategic alliances offers a rationale behind the benefits that firms can gain from their alliance participation. Given this basis, the mainstream of research advocates positive contributions of the firms' engagement in strategic alliances with external parties to their competitive advantage and innovation [1]. However, the next section about some barriers to successful alliances indicates that achieving the collaborative advantage is challenging due to potential issues in the network of relationships among alliance partners.

**9**

**Figure 1.**

*Collaborative entrepreneurial process of strategic alliances.*

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

The heterogeneity of collaborating partners with different motivations and interests interferes with the advancement of common grounds for resource exchange and orchestration. Multiparty-involved collaboration creates significant barriers to success, including higher coordination costs, communication barriers, a lack of shared understanding, and disagreements over invention and innovation strategy [29]. Along this vein, scholars explain several factors that make collaborative partnerships vulnerable. For instance, working together for a joint project with different stakeholders adds difficulty to controlling the innovation process [7, 12]. The more partners involved in the joint project, the more complex the exchange of knowledge and information [29]. In addition, the coordination of partners' collaborative behaviors for resource exchange becomes a source of the increase in transaction costs [31]. The following are the potential disadvantages of strategic alliances, which may lead to diminishing

• *Opportunistic behavior*. While maximizing the effectiveness of resource

increase the transaction costs in resource exchange [28].

knowledge-based resources with their counterparts [33].

exchange in an alliance requires behavioral transparency [32], opportunism to manipulate the partnership for one's interests and not for mutual benefits can

• *The tension between sharing and protection*. The potential leakage of knowledge in a partnership dilutes one's source of competitive advantage [12]. For this reason, although the success of strategic alliances is based on the mutual effort to fertilize resource exchange, partners are reluctant to share specific

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

*2.2.2 The dark side of strategic alliances*

returns of collective actions.

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

#### *2.2.2 The dark side of strategic alliances*

*Entrepreneurship - Contemporary Issues*

*2.2.1 The bright side of strategic alliances*

strategic alliances can be summarized as follows.

The alliance configuration helps to expand a firm's knowledge base and accelerate its innovation process by exchanging and mobilizing complementary knowledge-based resources across partners [8]. As a result, pooling knowledge in the partnership allows small firms to overcome the liability of smallness by increasing rents from the interaction activities [26]. By sharing costs and risks of continuous innovation with external parties, alliance firms can capitalize on new opportunities for value creation in more efficient ways than doing alone [28]. These benefits of

• *Resource sharing*. Some alliances are designed for sharing knowledge-based resources for better innovation performance. By building a common resource pool that each partner possesses, their resource base can be more expanded

• *Competence sharing*. Strategic alliances frequently need the engagement of specialized labor who has tacit knowledge needed for the achievement of common goals [29]. Recruiting such experts is challenging for a firm that suffers from resource constraints. Collaborative partnerships enable the acquisition

• *Cost/Risk sharing*. An innovative initiative is typically costly, requiring huge resource commitments [12]. It also involves risks of failure, derived from the uncertainty about its outcomes. Sharing the costs and risks with partners

• *Reward sharing*. Depending on the nature of partnerships, alliance partners have joint ownership of collective outputs developed jointly [26]. In this case, they share a percentage of alliance partners receive a percentage of profits

• *Idea co-creation*. Engagement in strategic alliances is a source of creativity and innovation. Intellectual interactions of alliance partners with heterogeneous resources often result in the cross-fertilization of original ideas that are effec-

• *Decreased time-to-market*. The resource-pooling system in an alliance helps a firm produce innovative outcome faster than they could alone [30]. This allows the firm to introduce product/service (s) to a market and stay ahead of the competition.

• *Access to new markets*. Some alliances become a pathway to enter new markets or access new customers. Alliance configuration often provides an entrepreneurial opportunity to experiment and commercialize product/service(s) in new

Research emphasizing the bright side of strategic alliances offers a rationale behind the benefits that firms can gain from their alliance participation. Given this basis, the mainstream of research advocates positive contributions of the firms' engagement in strategic alliances with external parties to their competitive advantage and innovation [1]. However, the next section about some barriers to successful alliances indicates that achieving the collaborative advantage is challenging due to

potential issues in the network of relationships among alliance partners.

generated through the commercialization of collective outputs [5].

than by investing in internal resource development [26].

and assimilation of unique competences of its counterparts.

contributes to the managerial stability of alliance firms [28].

tive in solving current business issues [24].

**8**

markets [12].

The heterogeneity of collaborating partners with different motivations and interests interferes with the advancement of common grounds for resource exchange and orchestration. Multiparty-involved collaboration creates significant barriers to success, including higher coordination costs, communication barriers, a lack of shared understanding, and disagreements over invention and innovation strategy [29]. Along this vein, scholars explain several factors that make collaborative partnerships vulnerable. For instance, working together for a joint project with different stakeholders adds difficulty to controlling the innovation process [7, 12]. The more partners involved in the joint project, the more complex the exchange of knowledge and information [29]. In addition, the coordination of partners' collaborative behaviors for resource exchange becomes a source of the increase in transaction costs [31]. The following are the potential disadvantages of strategic alliances, which may lead to diminishing returns of collective actions.


#### **Figure 1.**

*Collaborative entrepreneurial process of strategic alliances.*

• *Lack of mutual trust*. Distrust among alliance partners prevents gaining potential benefits from collaborative entrepreneurship [13]. If partners fail to build trustful relationships in an alliance, they experience communication breakdown, vague role/responsibility set-up, and due diligence based on faulty assumptions in the partnership as well as higher transaction costs than expected [31].

We call these unfavorable conditions to collaborative entrepreneurship the "chasm" of strategic alliances. The chasm built by failing to reduce the negative impact of these disadvantages hinders alliance partners from taking advantage of their partnership. Under this circumstance, alliance partners tend to depreciate their interdependency and safeguard themselves to protect knowledge, resulting in alliance inefficiency. **Figure 1** illustrates the collaborative entrepreneurship process of strategic alliances, discussed above.

#### **3. Collaborative entrepreneurship for continuous innovation**

In today's globally competitive business environment, firms are forced to productively implement continuous innovation and thus seek an opportunity for collaboration entrepreneurship for collaborative advantage. The configuration of strategic alliances with various potential benefits is one of the effective strategies for firms to address the challenging demands of overcoming the insufficient internal resources and the restricted competence base [34]. For alliance firms at a crossroads between the bright and dark sides of alliances, however, how to create and capture the value of collaborative partnerships while resolving the dark side remains an important matter for the firms' continuous innovation. For the "how" question, we suggest several intrafirm-level and interfirm-level factors that can determine the level of collaborative entrepreneurship in strategic alliances. As this requires adopting the theoretical lenses addressing specific constructs at the multilevel of alliances, we draw upon the longstanding theories of social capital (SC), entrepreneurial orientation (EO), and interorganizational learning (IOL). In the following sections, we explain the definition, dimensions, and roles of each construct in the context of collaborative entrepreneurship and strategic alliances.

#### **3.1 Linking social capital to collaborative entrepreneurship**

As delineated earlier, interfirm partnerships for value co-creation are sensitive to partners' relational characteristics contextualizing the common platform in which they interoperate [35]. As such, the relational characteristics of strategic alliances become a critical unit of analysis in explaining learning-related outcomes associated with collaborative advantage [36].

Accordingly, extant research emphasizes the relational traits featuring the contexts where collaborative entrepreneurship is used, evincing that trustfulness among partners is crucial for learning effectiveness [13]. While the benefits of trust-based relationships are acknowledged, trustfulness is only one of the various relational traits characterizing social exchanges in the consortia; others include network ties/configuration/stability and shared goals/value that can contextualize the collective learning mechanism [37]. The extent of collective entrepreneurship is determined by the partners' interactive and conjoint routines based on these relational traits [38]. However, considering one-dimensional traits in isolation provides a narrow perspective on the multifaceted mechanism; a single approach to

**11**

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

contexts underlying alliance partners' interactions for resource exchange.

individual actions as a unique entity to achieve common goals.

new resources through experimentation [15].

thus limiting the partners' performance potential.

incorporate the traits can provide a better viewpoint of the institutionalized social

One of the dominant arguments in the literature is that high-quality SC can create network-level conditions favorable for collaborative interactions across heterogeneous organizations [41]. The degree of SC embedded in a network affects participants' decisions on whether to engage actively in collective action with counterparts (structural capital), interact faithfully in responding to a shared understanding of counterparts' interests (relational capital), and work within collaborative institutions inside the network to achieve common goals (cognitive capital) [15, 42]. Pinheiro et al. [41] explain that the accumulation of SC in an alliance can serve as an assimilated fertilizer that spurs partners to productively exchange and generate knowledge assets by producing collaborative orchestrations. This notion allows a postulation that the system of conjoint research activities based on high SC can create an institutionalized social platform that enables alliance partners to exploit innovation opportunities for value co-creation; this is because the network-based asset helps them transform firm-specific resources into collaborative advantages [37, 40]. The structural capital of networks between organizational units enhances their network-related ability to recognize finegrained opportunities for the refinement of existing resources and the creation of

SC also determines the socio-institutional background that enables partners to expand a spectrum of resource pools for joint problem-solving and risk-sharing [41]. Partnerships embedding higher relational and cognitive capitals can also provide partners with perceived safety to actively interact with each other with a strong mutual belief toward shared goals [43]. Under such circumstances, alliance partners will enrich the information being shared because the development of normative reciprocity and trust within networks changes the nature of information exchanged. Such an exchange based on the high-quality SC is geared toward collec-

We thus propose that SC embedded in strategic alliances, represented by structural, relational, and cognitive capitals, can be a source of collaborative advantage that incentivizes alliance partners to commit to common goals toward continuous innovation. This proposition is theoretically supported by the resource-based view, suggesting that possessing firm-specific resources allows firms to outperform competitors by doing things differently. When strategic alliances entail higher SC that makes the partnerships distinct from others, the partner will conceive it as an interfirm-specific resource to be exploited for performance improvement. Contrarily, alliances with lower SC will suffer from coordination issues that disrupt the productive dissemination and incorporation of network-available resources,

tive performance as alliance partners commit to joint problem-solving.

The SC theory takes advantage of its comprehensive description of the different traits characterizing the idiosyncratic nature of collaborative entrepreneurship at the alliance level. Referring to "the sum of actual and potential resources embedded within, available through, and derived from the networks of relationships possessed by individuals or social units" [39], p. 243, SC encompasses three dimensions: structural, relational, and cognitive capitals [37–40]. According to Inkpen and Tsang [37], structural capital refers to the strength and stability of consortium members and facilitates knowledge flow across organizational boundaries; relational capital, represented by trust and reciprocity, contributes to repressing the risk of relational issues and conflicts; and cognitive capital, defined as shared vision and value, conveys a sense of identity and homogeneity among members and coordinates

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

#### *Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

incorporate the traits can provide a better viewpoint of the institutionalized social contexts underlying alliance partners' interactions for resource exchange.

The SC theory takes advantage of its comprehensive description of the different traits characterizing the idiosyncratic nature of collaborative entrepreneurship at the alliance level. Referring to "the sum of actual and potential resources embedded within, available through, and derived from the networks of relationships possessed by individuals or social units" [39], p. 243, SC encompasses three dimensions: structural, relational, and cognitive capitals [37–40]. According to Inkpen and Tsang [37], structural capital refers to the strength and stability of consortium members and facilitates knowledge flow across organizational boundaries; relational capital, represented by trust and reciprocity, contributes to repressing the risk of relational issues and conflicts; and cognitive capital, defined as shared vision and value, conveys a sense of identity and homogeneity among members and coordinates individual actions as a unique entity to achieve common goals.

One of the dominant arguments in the literature is that high-quality SC can create network-level conditions favorable for collaborative interactions across heterogeneous organizations [41]. The degree of SC embedded in a network affects participants' decisions on whether to engage actively in collective action with counterparts (structural capital), interact faithfully in responding to a shared understanding of counterparts' interests (relational capital), and work within collaborative institutions inside the network to achieve common goals (cognitive capital) [15, 42]. Pinheiro et al. [41] explain that the accumulation of SC in an alliance can serve as an assimilated fertilizer that spurs partners to productively exchange and generate knowledge assets by producing collaborative orchestrations.

This notion allows a postulation that the system of conjoint research activities based on high SC can create an institutionalized social platform that enables alliance partners to exploit innovation opportunities for value co-creation; this is because the network-based asset helps them transform firm-specific resources into collaborative advantages [37, 40]. The structural capital of networks between organizational units enhances their network-related ability to recognize finegrained opportunities for the refinement of existing resources and the creation of new resources through experimentation [15].

SC also determines the socio-institutional background that enables partners to expand a spectrum of resource pools for joint problem-solving and risk-sharing [41]. Partnerships embedding higher relational and cognitive capitals can also provide partners with perceived safety to actively interact with each other with a strong mutual belief toward shared goals [43]. Under such circumstances, alliance partners will enrich the information being shared because the development of normative reciprocity and trust within networks changes the nature of information exchanged. Such an exchange based on the high-quality SC is geared toward collective performance as alliance partners commit to joint problem-solving.

We thus propose that SC embedded in strategic alliances, represented by structural, relational, and cognitive capitals, can be a source of collaborative advantage that incentivizes alliance partners to commit to common goals toward continuous innovation. This proposition is theoretically supported by the resource-based view, suggesting that possessing firm-specific resources allows firms to outperform competitors by doing things differently. When strategic alliances entail higher SC that makes the partnerships distinct from others, the partner will conceive it as an interfirm-specific resource to be exploited for performance improvement. Contrarily, alliances with lower SC will suffer from coordination issues that disrupt the productive dissemination and incorporation of network-available resources, thus limiting the partners' performance potential.

*Entrepreneurship - Contemporary Issues*

of strategic alliances, discussed above.

expected [31].

• *Lack of mutual trust*. Distrust among alliance partners prevents gaining potential benefits from collaborative entrepreneurship [13]. If partners fail to build trustful relationships in an alliance, they experience communication breakdown, vague role/responsibility set-up, and due diligence based on faulty assumptions in the partnership as well as higher transaction costs than

We call these unfavorable conditions to collaborative entrepreneurship the "chasm" of strategic alliances. The chasm built by failing to reduce the negative impact of these disadvantages hinders alliance partners from taking advantage of their partnership. Under this circumstance, alliance partners tend to depreciate their interdependency and safeguard themselves to protect knowledge, resulting in alliance inefficiency. **Figure 1** illustrates the collaborative entrepreneurship process

**3. Collaborative entrepreneurship for continuous innovation**

context of collaborative entrepreneurship and strategic alliances.

As delineated earlier, interfirm partnerships for value co-creation are sensitive to partners' relational characteristics contextualizing the common platform in which they interoperate [35]. As such, the relational characteristics of strategic alliances become a critical unit of analysis in explaining learning-related outcomes associated

Accordingly, extant research emphasizes the relational traits featuring the contexts where collaborative entrepreneurship is used, evincing that trustfulness among partners is crucial for learning effectiveness [13]. While the benefits of trust-based relationships are acknowledged, trustfulness is only one of the various relational traits characterizing social exchanges in the consortia; others include network ties/configuration/stability and shared goals/value that can contextualize the collective learning mechanism [37]. The extent of collective entrepreneurship is determined by the partners' interactive and conjoint routines based on these relational traits [38]. However, considering one-dimensional traits in isolation provides a narrow perspective on the multifaceted mechanism; a single approach to

**3.1 Linking social capital to collaborative entrepreneurship**

with collaborative advantage [36].

In today's globally competitive business environment, firms are forced to productively implement continuous innovation and thus seek an opportunity for collaboration entrepreneurship for collaborative advantage. The configuration of strategic alliances with various potential benefits is one of the effective strategies for firms to address the challenging demands of overcoming the insufficient internal resources and the restricted competence base [34]. For alliance firms at a crossroads between the bright and dark sides of alliances, however, how to create and capture the value of collaborative partnerships while resolving the dark side remains an important matter for the firms' continuous innovation. For the "how" question, we suggest several intrafirm-level and interfirm-level factors that can determine the level of collaborative entrepreneurship in strategic alliances. As this requires adopting the theoretical lenses addressing specific constructs at the multilevel of alliances, we draw upon the longstanding theories of social capital (SC), entrepreneurial orientation (EO), and interorganizational learning (IOL). In the following sections, we explain the definition, dimensions, and roles of each construct in the

**10**

#### **3.2 Linking entrepreneurial orientation to collaborative entrepreneurship**

EO, by far the most popular construct in entrepreneurship literature, is defined as a firm's strategic posture to simultaneously exhibit innovativeness, proactiveness, and risk-taking [44] and represents the firm's priority in identifying and exploiting entrepreneurial opportunities [45]. Its first dimension, innovativeness, is the tendency to support new ideas and experiments to introduce new products and processes. Proactiveness is the propensity to seize market opportunities and develop a first-initiative preference ahead of competitors. Risk-taking is the willingness to accept high risk by venturing into the unknown with strong commitments. As a combination of these dimensions, EO has been theorized to contribute to firm growth and facilitate innovation [21, 45].

The literature accepts that EO plays a significant role in affecting a firm's strategic behaviors and managerial beliefs, emphasizing the proactive deployment of diverse innovation types with uncertainty. Within this wave, research explicating mechanisms underlying the EO's performance implication urges more studies to explore the relationships in diverse contexts, which are contingent upon contextual conditions that firms encounter [22, 44]. In the contexts of strategic alliances, higher EO can promote firms' participation in alliances to translate dynamic and complex resource-exchanging interactions among partners into higher competitive positions in markets.

The resource-based view posits that not all resources translate into competitive advantage; the novel, competitive resources make a real difference for innovation to occur in alliances [5]. This will not be a major concern for alliance firms with high EO, as they focus on breaking through old routines and procedures to make a difference [8]. EO embedded in an organization can address the managerial process of alliance firms to capture the nucleus of heterogeneous resources and convert competitive resources for collaborative advantage [9]. Li et al. [9] document that the higher the EO of alliance firms, the more they commit to their dynamic interactions for resource mobilization and utilization with counterparts for the success of the alliance.

The dimensions of EO, including innovativeness, proactiveness, and risk-taking, can help alliance firms generate greater competitiveness. Specifically, partners must face challenges in combining knowledge-based assets, which are rooted deeply in individual organizations. Innovative alliance firms can be motivated to address such challenges in novel ways with continuous experiments for problem-solving [45]. Second, strong proactiveness may help alliance firms create a first-mover advantage through an early collaborative response to market needs and trends, thereby enhancing the market appeal of collective outputs [46]. Finally, the success of alliances requires all partners to commit to alliance-relevant activities for competitive development with high uncertainty. Risk-taking alliance firms are willing to deal with the risks involved in interorganizational activities by making a strong commitment to and a valuable investment in their alliance projects [7].

The extent to which alliances produce competitive collective outputs is a critical determinant of alliance performance. Entrepreneurial firms' engagement in strategic alliances can contribute to the joint development of collective outputs that will promote their competitive position in industries. Li et al. [9] explain that EO remains an enabler for alliance firms to identify productive routines to manage dynamic resource-integrating activities and develop superior resource-managing capability through entrepreneurial processes. Shu et al. [47] find the positive impact of EO on knowledge spillover in alliances, suggesting that it helps discriminate valuable resources contributing to the achievement of common goals. Thus, EO can motivate alliance firms to contribute inputs to the partnerships for the cogeneration of

**13**

in original technical value.

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

competitive outputs [8]. In contrast, firms with low EO may be unable to exploit the output-cogenerating opportunities due to high concerns about protecting their valuable resources from the appropriation for their interests [19]. Thus, we can postulate that the EO of alliance firms potentially determines the extent to which they gain the

Few studies elaborate on the SC–EO interface, arguing that firms take advantage of the value of SC which drives them to engage entrepreneurially in external networks. For instance, Wu et al. [43] found that the SC/EO degrees simultaneously determine a firm's intention and ability to seek and utilize external complementary resources. Stam et al. [20] stress that both SC and EO affect new ventures' performance, contingent on their network positions. According to Gedajlovic et al. [48], as SC can be logically both an antecedent and a consequence of entrepreneurship, the relationship between SC and EO needs to be situated within a temporal context, here, strategic alliances. Thereupon, high-quality SC among alliance partners will promote their dynamic entrepreneurial collaboration to (1) solve technical problems and commercial issues in innovative ways, (2) proactively identify and embed market needs in their joint projects, and (3) tolerate risks of their resource commitment to the project.

**3.3 Linking interorganizational learning to collaborative entrepreneurship**

Despite no unified IOL dimensionality, scholars have conceived IOL's two distinctive forms, which are exploitation and exploration, since March's [49] seminal research [35, 50, 51]. Exploitation involves the utilization and refinement of existing knowledge to strengthen the excellence of present operations, whereas exploration is the search for new knowledge, the use of unfamiliar knowledge, and the creation of products with unknown demand. IOL supports alliance partners' common refinement and utilization of existing knowledge available in their network—exploitation—and their joint discovery and generation of new knowledge

that can be a future source of collaborative advantage—exploration [51].

Along this vein, Westerlund and Rajala [50] argue that distinguishing exploration in seeking effectiveness of new knowledge development from exploitation in seeking efficiency of existing knowledge bases captures better the IOL process because the two learning forms produce different results. In this vein, exploitative learning and exploratory learning can be drawn as IOL practices. According to March [49], p. 71, exploratory learning entails "search, variation, risk-taking, experimentation, play, flexibility, discovery," whereas exploitative learning involves "refinement, choice, production, efficiency, selection, implementation, execution." Holmqvist [35] asserts that exploitative learning refers to refining and deepening existing knowledge to improve current technical value, whereas exploratory learning refers to the pursuit of new knowledge that leads to more variations

Research recognizes the value of collective learning to achieve common goals, ensuring that expanding a knowledge base by learning at the consortium level is essential for collaborative advantage [30, 35]. A primary purpose of the alliance configuration is the advancement of a co-innovation process to develop novel,

in an existing knowledge base for competitive advantage [49].

As an avenue for sustaining innovativeness and competitiveness, IOL becomes one of the key mechanisms to refine existing knowledge and generate new knowledge, expressing the purpose of partnership formations [16]. IOL refers to the network-based learning process that involves knowledge exploitation and exploration between or among different organizations in the presence of high interdependency [32]. Its outcomes should either be enhanced capabilities for adapting environmental changes or strategic decisions for radical and/or incremental changes

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

mutual benefits of strategic alliances.

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

competitive outputs [8]. In contrast, firms with low EO may be unable to exploit the output-cogenerating opportunities due to high concerns about protecting their valuable resources from the appropriation for their interests [19]. Thus, we can postulate that the EO of alliance firms potentially determines the extent to which they gain the mutual benefits of strategic alliances.

Few studies elaborate on the SC–EO interface, arguing that firms take advantage of the value of SC which drives them to engage entrepreneurially in external networks. For instance, Wu et al. [43] found that the SC/EO degrees simultaneously determine a firm's intention and ability to seek and utilize external complementary resources. Stam et al. [20] stress that both SC and EO affect new ventures' performance, contingent on their network positions. According to Gedajlovic et al. [48], as SC can be logically both an antecedent and a consequence of entrepreneurship, the relationship between SC and EO needs to be situated within a temporal context, here, strategic alliances. Thereupon, high-quality SC among alliance partners will promote their dynamic entrepreneurial collaboration to (1) solve technical problems and commercial issues in innovative ways, (2) proactively identify and embed market needs in their joint projects, and (3) tolerate risks of their resource commitment to the project.

#### **3.3 Linking interorganizational learning to collaborative entrepreneurship**

As an avenue for sustaining innovativeness and competitiveness, IOL becomes one of the key mechanisms to refine existing knowledge and generate new knowledge, expressing the purpose of partnership formations [16]. IOL refers to the network-based learning process that involves knowledge exploitation and exploration between or among different organizations in the presence of high interdependency [32]. Its outcomes should either be enhanced capabilities for adapting environmental changes or strategic decisions for radical and/or incremental changes in an existing knowledge base for competitive advantage [49].

Despite no unified IOL dimensionality, scholars have conceived IOL's two distinctive forms, which are exploitation and exploration, since March's [49] seminal research [35, 50, 51]. Exploitation involves the utilization and refinement of existing knowledge to strengthen the excellence of present operations, whereas exploration is the search for new knowledge, the use of unfamiliar knowledge, and the creation of products with unknown demand. IOL supports alliance partners' common refinement and utilization of existing knowledge available in their network—exploitation—and their joint discovery and generation of new knowledge that can be a future source of collaborative advantage—exploration [51].

Along this vein, Westerlund and Rajala [50] argue that distinguishing exploration in seeking effectiveness of new knowledge development from exploitation in seeking efficiency of existing knowledge bases captures better the IOL process because the two learning forms produce different results. In this vein, exploitative learning and exploratory learning can be drawn as IOL practices. According to March [49], p. 71, exploratory learning entails "search, variation, risk-taking, experimentation, play, flexibility, discovery," whereas exploitative learning involves "refinement, choice, production, efficiency, selection, implementation, execution." Holmqvist [35] asserts that exploitative learning refers to refining and deepening existing knowledge to improve current technical value, whereas exploratory learning refers to the pursuit of new knowledge that leads to more variations in original technical value.

Research recognizes the value of collective learning to achieve common goals, ensuring that expanding a knowledge base by learning at the consortium level is essential for collaborative advantage [30, 35]. A primary purpose of the alliance configuration is the advancement of a co-innovation process to develop novel,

*Entrepreneurship - Contemporary Issues*

innovation [21, 45].

positions in markets.

alliance.

**3.2 Linking entrepreneurial orientation to collaborative entrepreneurship**

EO, by far the most popular construct in entrepreneurship literature, is defined as a firm's strategic posture to simultaneously exhibit innovativeness, proactiveness, and risk-taking [44] and represents the firm's priority in identifying and exploiting entrepreneurial opportunities [45]. Its first dimension, innovativeness, is the tendency to support new ideas and experiments to introduce new products and processes. Proactiveness is the propensity to seize market opportunities and develop a first-initiative preference ahead of competitors. Risk-taking is the willingness to accept high risk by venturing into the unknown with strong commitments. As a combination of these dimensions, EO has been theorized to contribute to firm growth and facilitate

The literature accepts that EO plays a significant role in affecting a firm's strategic behaviors and managerial beliefs, emphasizing the proactive deployment of diverse innovation types with uncertainty. Within this wave, research explicating mechanisms underlying the EO's performance implication urges more studies to explore the relationships in diverse contexts, which are contingent upon contextual conditions that firms encounter [22, 44]. In the contexts of strategic alliances, higher EO can promote firms' participation in alliances to translate dynamic and complex resource-exchanging interactions among partners into higher competitive

The resource-based view posits that not all resources translate into competitive advantage; the novel, competitive resources make a real difference for innovation to occur in alliances [5]. This will not be a major concern for alliance firms with high EO, as they focus on breaking through old routines and procedures to make a difference [8]. EO embedded in an organization can address the managerial process of alliance firms to capture the nucleus of heterogeneous resources and convert competitive resources for collaborative advantage [9]. Li et al. [9] document that the higher the EO of alliance firms, the more they commit to their dynamic interactions for resource mobilization and utilization with counterparts for the success of the

The dimensions of EO, including innovativeness, proactiveness, and risk-taking, can help alliance firms generate greater competitiveness. Specifically, partners must face challenges in combining knowledge-based assets, which are rooted deeply in individual organizations. Innovative alliance firms can be motivated to address such challenges in novel ways with continuous experiments for problem-solving [45]. Second, strong proactiveness may help alliance firms create a first-mover advantage through an early collaborative response to market needs and trends, thereby enhancing the market appeal of collective outputs [46]. Finally, the success of alliances requires all partners to commit to alliance-relevant activities for competitive development with high uncertainty. Risk-taking alliance firms are willing to deal with the risks involved in interorganizational activities by making a strong commit-

The extent to which alliances produce competitive collective outputs is a critical determinant of alliance performance. Entrepreneurial firms' engagement in strategic alliances can contribute to the joint development of collective outputs that will promote their competitive position in industries. Li et al. [9] explain that EO remains an enabler for alliance firms to identify productive routines to manage dynamic resource-integrating activities and develop superior resource-managing capability through entrepreneurial processes. Shu et al. [47] find the positive impact of EO on knowledge spillover in alliances, suggesting that it helps discriminate valuable resources contributing to the achievement of common goals. Thus, EO can motivate alliance firms to contribute inputs to the partnerships for the cogeneration of

ment to and a valuable investment in their alliance projects [7].

**12**

competitive outputs by exchanging and combining the complementary knowledgebased assets of each partner [7, 13]. Using a common learning platform improves the process, supporting alliance partners' conjoint routines to refine and using current knowledge bases to improve technical value (exploitative learning) and to create new knowledge that leads to more variations in original technical value (exploratory learning) [50].

The potential contribution of explorative and exploratory learning at the alliance level to continuous innovation deserves further scrutiny in the context of strategic alliances. The enjoyment of collaborative advantage requires partners to transform their existing knowledge with high asset specificity into exchangeable and understandable forms of resources. For this, they should access, assimilate, and apply existing and complementary knowledge, introducing fine-grained opportunities to fill the mutual knowledge gaps and initiate the best innovation practices. This process is based on exploitative learning, which improves the accessibility, veracity, and availability of heterogeneous knowledge and expands an existing knowledge base in the network [52]. For a consortium to remain effective for innovation, collaborators need to move the focus of their learning from exploitation to exploration to co-create new knowledge. This exploratory learning process supports the multiplication of knowledge throughout the network and the ongoing innovations of market offerings. Consequently, the original knowledge base becomes a source of collaborative advantage that motivates partners to engage actively in the alliances and provide resource commitments for better collective outputs [33, 52].

We thus propose that IOL, represented by exploitative and exploratory learning, enables alliance firms to benefit from their alliances in terms of better advantage in innovation. For exploitative learning, existing knowledge and its further utilization will conduce to the development of a common knowledge base within an alliance. This base not only provides partners with chances to improve their operational routines by adapting others' best practices or know-how, but also allows companies to promote fine-tuned capabilities for continuous innovation. Refining and using the network-available existing knowledge by exploitative learning cannot be solely responsible for alliance results. To transform a collaborative partnership into a source of collaborative advantage, exploratory learning is necessary to codevelop new technical knowledge that helps partner firms to be capable of competing against others and cope with the changing environment. The new knowledge will be better reconciled with the alliance firms' innovation strategies than the counterparts' knowledge gained by exploitative learning.

#### **4. Concluding remarks**

In today's highly uncertain and rapidly changing environment, strategic alliances can provide a common ground that enables alliance firms' exploitation in seeking the efficiency of existing resource bases and their exploration in seeking the effectiveness of new resources and competencies. Despite the increasing research interest in strategic alliances, value-co-creating mechanisms underlying the alliance partners' dynamic interactions were a missing link. Given the basis that collaborative entrepreneurship involves motivating firms to configure strategic alliances in their entrepreneurial processes to exploit new opportunities for continuous innovation [2, 10], this paper explores the potential roles of SC, EO, and IOL that may contribute to the success of strategic alliances.

First, research posits that the collaborative advantage depends on the social context of partner interactions at the alliance level, focusing on relational traits

**15**

**Figure 2.**

*Proposed model of analysis on collaborative entrepreneurship.*

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

such as trustfulness, mutual commitment, common vision, or shared value [13, 37]. The literature advocates these traits' potential contribution to the enhancement of interactions across organizations, which cannot be a spontaneous phenomenon in the presence of high interdependency and heterogeneity, representing the idiosyncratic nature of strategic alliances [39]. SC can offer the holistic view of the multiple traits that institutionalize the alliance partners' conjoint routines toward common goals by encompassing various traits—such as network ties/stability, trustfulness, and shared value/vision—in three dimensions: structural, relational, and cognitive capitals [40]. SC involves regulating and relieving physical/mental relational issues and leveraging entrepreneurial initiatives of actors in a partnership [36, 48].

Second, we introduce the alliance firms' entrepreneurial orientation (EO) as one of the possible explanations that contextualize the success of continuous innovation through collaborations. Referring to a firm's strategic posture to be innovative, proactive, and risk-taking for value creation [44], EO becomes an important element for firm growth [45], while the EO–performance relationship is contingent on specific contexts which firms encounter [21]. According to Jiang et al. [7], the system of conjoint research activities renders an idiosyncratic context in which partners entrepreneurially substantialize the economic values of network-available assets. In this instance, SC at the network level may serve as a strategic asset that sparks partners' decisions to get more entrepreneurially involved in the value-co-creation process, and their EO may address the strategic intention to transform the network-

Lastly, research deliberates the importance of adopting IOL elucidating a systematic combination of alliance partners' collective learning initiatives [16]. IOL addresses the network-based learning practices that involve mutual exploitation and exploration of knowledge in the presence of high interdependency and heterogeneity [32, 35, 50] which underscore the idiosyncratic nature of collaborative entrepreneurship toward continuous innovation [14, 17]. The literature advocates the IOL's potential contribution to the knowledge mobilization over organizations,

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

embedded asset into a source of collaborative advantage.

#### *Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

such as trustfulness, mutual commitment, common vision, or shared value [13, 37]. The literature advocates these traits' potential contribution to the enhancement of interactions across organizations, which cannot be a spontaneous phenomenon in the presence of high interdependency and heterogeneity, representing the idiosyncratic nature of strategic alliances [39]. SC can offer the holistic view of the multiple traits that institutionalize the alliance partners' conjoint routines toward common goals by encompassing various traits—such as network ties/stability, trustfulness, and shared value/vision—in three dimensions: structural, relational, and cognitive capitals [40]. SC involves regulating and relieving physical/mental relational issues and leveraging entrepreneurial initiatives of actors in a partnership [36, 48].

Second, we introduce the alliance firms' entrepreneurial orientation (EO) as one of the possible explanations that contextualize the success of continuous innovation through collaborations. Referring to a firm's strategic posture to be innovative, proactive, and risk-taking for value creation [44], EO becomes an important element for firm growth [45], while the EO–performance relationship is contingent on specific contexts which firms encounter [21]. According to Jiang et al. [7], the system of conjoint research activities renders an idiosyncratic context in which partners entrepreneurially substantialize the economic values of network-available assets. In this instance, SC at the network level may serve as a strategic asset that sparks partners' decisions to get more entrepreneurially involved in the value-co-creation process, and their EO may address the strategic intention to transform the networkembedded asset into a source of collaborative advantage.

Lastly, research deliberates the importance of adopting IOL elucidating a systematic combination of alliance partners' collective learning initiatives [16]. IOL addresses the network-based learning practices that involve mutual exploitation and exploration of knowledge in the presence of high interdependency and heterogeneity [32, 35, 50] which underscore the idiosyncratic nature of collaborative entrepreneurship toward continuous innovation [14, 17]. The literature advocates the IOL's potential contribution to the knowledge mobilization over organizations,

**Figure 2.** *Proposed model of analysis on collaborative entrepreneurship.*

*Entrepreneurship - Contemporary Issues*

(exploratory learning) [50].

outputs [33, 52].

parts' knowledge gained by exploitative learning.

**4. Concluding remarks**

ute to the success of strategic alliances.

competitive outputs by exchanging and combining the complementary knowledgebased assets of each partner [7, 13]. Using a common learning platform improves the process, supporting alliance partners' conjoint routines to refine and using current knowledge bases to improve technical value (exploitative learning) and to create new knowledge that leads to more variations in original technical value

The potential contribution of explorative and exploratory learning at the alliance level to continuous innovation deserves further scrutiny in the context of strategic alliances. The enjoyment of collaborative advantage requires partners to transform their existing knowledge with high asset specificity into exchangeable and understandable forms of resources. For this, they should access, assimilate, and apply existing and complementary knowledge, introducing fine-grained opportunities to fill the mutual knowledge gaps and initiate the best innovation practices. This process is based on exploitative learning, which improves the accessibility, veracity, and availability of heterogeneous knowledge and expands an existing knowledge base in the network [52]. For a consortium to remain effective for innovation, collaborators need to move the focus of their learning from exploitation to exploration to co-create new knowledge. This exploratory learning process supports the multiplication of knowledge throughout the network and the ongoing innovations of market offerings. Consequently, the original knowledge base becomes a source of collaborative advantage that motivates partners to engage actively in the alliances and provide resource commitments for better collective

We thus propose that IOL, represented by exploitative and exploratory learning, enables alliance firms to benefit from their alliances in terms of better advantage in innovation. For exploitative learning, existing knowledge and its further utilization will conduce to the development of a common knowledge base within an alliance. This base not only provides partners with chances to improve their operational routines by adapting others' best practices or know-how, but also allows companies to promote fine-tuned capabilities for continuous innovation. Refining and using the network-available existing knowledge by exploitative learning cannot be solely responsible for alliance results. To transform a collaborative partnership into a source of collaborative advantage, exploratory learning is necessary to codevelop new technical knowledge that helps partner firms to be capable of competing against others and cope with the changing environment. The new knowledge will be better reconciled with the alliance firms' innovation strategies than the counter-

In today's highly uncertain and rapidly changing environment, strategic alliances can provide a common ground that enables alliance firms' exploitation in seeking the efficiency of existing resource bases and their exploration in seeking the effectiveness of new resources and competencies. Despite the increasing research interest in strategic alliances, value-co-creating mechanisms underlying the alliance partners' dynamic interactions were a missing link. Given the basis that collaborative entrepreneurship involves motivating firms to configure strategic alliances in their entrepreneurial processes to exploit new opportunities for continuous innovation [2, 10], this paper explores the potential roles of SC, EO, and IOL that may contrib-

First, research posits that the collaborative advantage depends on the social context of partner interactions at the alliance level, focusing on relational traits

**14**

which is presumed as a critical success factor of strategic partnerships but cannot be a spontaneous phenomenon of the alliance configuration [11, 50].

By shedding new light on the managerial implications of SC, EO, and IOL in the context of interfirm collaborations, the present paper contributes to advancing the understanding of the interface between collaborative entrepreneurship and strategic alliances. According to the theoretical framework developed, we suggest a model of analysis on collaborative entrepreneurship for the potential effects of SC, EO, and IOL on alliance performance (see **Figure 2**). The prescriptive value of the model lies in supporting entrepreneurs and entrepreneurship scholars to understand strategic decisions leading to successful alliances. Empirical verification, in particular adopting a holistic perspective, is almost absent from the literature. Hence, what remains is the empirical testing of the approach and the investigation of the quantitative impact of defined variables. In terms of guidelines for future research, this topic should be addressed by collecting information for expanding the model presented here.

This paper is subject to several limitations that can be addressed in future research. First, given the linear linkages among the phenomenon for the model conciseness, it is important to acknowledge that each construct has its unique impact on the optimal conditions for continuous innovation. For instance, a firm's over-embeddedness in the networks of strong ties can provide liability, instead of benefit, which inhibits from sensing emerging innovation opportunities and realizing potential growth [53]. Thereby, the potential performance implications of high SC in an alliance could level off or remain negative beyond a certain threshold. Future research can adopt this view in explaining more deeply the performancecreating mechanism of strategic alliances.

For an empirical study to test our model, measuring the levels of SC and IOL in the interorganizational context, which can be affected by partners' motivations and expectations toward an alliance, may differ from that of their counterparts. Single respondent's perception of an alliance may generate more than the usual amount of random error in measuring the research constructs. Future research could avoid this single-respondent bias by collecting dyadic or even polyadic data from all partners in an alliance.

Lastly, potential endogeneity problems stemming from an implicit recursive model in our theoretical framework should be considered. While we introduce a strategic alliance as a platform of collaborative entrepreneurship for continuous innovation, our conceptual framework still prevents the elaboration of causal inferences regarding the chain of effects. Due to the potential for endogeneity, we interpret the model of analysis as correlational relationships rather than causal relationships. Avenues for future research are to pay explicit attention to the dynamics of the interface of SC, EO, and IOL and clarity the directions of their causality with continuous innovation.

**17**

**Author details**

Ribin Seo

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

Pohang University of Science and Technology, Pohang, Republic of Korea

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

\*Address all correspondence to: ribinseo@postech.ac.kr

provided the original work is properly cited.

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

### **Author details**

*Entrepreneurship - Contemporary Issues*

model presented here.

in an alliance.

continuous innovation.

creating mechanism of strategic alliances.

which is presumed as a critical success factor of strategic partnerships but cannot be

By shedding new light on the managerial implications of SC, EO, and IOL in the context of interfirm collaborations, the present paper contributes to advancing the understanding of the interface between collaborative entrepreneurship and strategic alliances. According to the theoretical framework developed, we suggest a model of analysis on collaborative entrepreneurship for the potential effects of SC, EO, and IOL on alliance performance (see **Figure 2**). The prescriptive value of the model lies in supporting entrepreneurs and entrepreneurship scholars to understand strategic decisions leading to successful alliances. Empirical verification, in particular adopting a holistic perspective, is almost absent from the literature. Hence, what remains is the empirical testing of the approach and the investigation of the quantitative impact of defined variables. In terms of guidelines for future research, this topic should be addressed by collecting information for expanding the

This paper is subject to several limitations that can be addressed in future research. First, given the linear linkages among the phenomenon for the model conciseness, it is important to acknowledge that each construct has its unique impact on the optimal conditions for continuous innovation. For instance, a firm's over-embeddedness in the networks of strong ties can provide liability, instead of benefit, which inhibits from sensing emerging innovation opportunities and realizing potential growth [53]. Thereby, the potential performance implications of high SC in an alliance could level off or remain negative beyond a certain threshold. Future research can adopt this view in explaining more deeply the performance-

For an empirical study to test our model, measuring the levels of SC and IOL in the interorganizational context, which can be affected by partners' motivations and expectations toward an alliance, may differ from that of their counterparts. Single respondent's perception of an alliance may generate more than the usual amount of random error in measuring the research constructs. Future research could avoid this single-respondent bias by collecting dyadic or even polyadic data from all partners

Lastly, potential endogeneity problems stemming from an implicit recursive model in our theoretical framework should be considered. While we introduce a strategic alliance as a platform of collaborative entrepreneurship for continuous innovation, our conceptual framework still prevents the elaboration of causal inferences regarding the chain of effects. Due to the potential for endogeneity, we interpret the model of analysis as correlational relationships rather than causal relationships. Avenues for future research are to pay explicit attention to the dynamics of the interface of SC, EO, and IOL and clarity the directions of their causality with

a spontaneous phenomenon of the alliance configuration [11, 50].

**16**

Ribin Seo Pohang University of Science and Technology, Pohang, Republic of Korea

\*Address all correspondence to: ribinseo@postech.ac.kr

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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[14] Rocha H, Miles R. A model of collaborative entrepreneurship for a more humanistic management. Journal of Business Ethics. 2009;88:445-462. DOI: 10.1007/s10551-009-0127-8

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capital: How it fosters knowledge transfer, innovation performance, and growth. Organization Studies. 2011;32:157-185. DOI: 10.1177/0170840610394301

[16] Rajala A. Examining the effects of interorganizational learning on performance: A meta-analysis. Journal of Business & Industrial Marketing. 2018;33:574-584. DOI: 10.1108/ jbim-08-2017-0205

[17] Stevenson HH, Jarillo JC. A paradigm of entrepreneurship: Entrepreneurial management. In: Cuervo Á, Ribeiro D, Roig S, editors. Entrepreneurship: Concepts, Theory and Perspective. Berlin: Springer Berlin Heidelberg; 2007. p. 155-170. DOI: 10.1007/978-3-540-48543-8\_7

[18] Miller D. The correlates of entrepreneurship in three types of firms. Management Science. 1983;29:770-791. DOI: 10.1287/mnsc.29.7.770

[19] Teng BS. Corporate entrepreneurship activities through strategic alliances: A resourcebased approach toward competitive advantage. Journal of Management Studies. 2007;44:119-142. DOI: 10.1111/j.1467-6486.2006.00645.x

[20] Stam W, Arzlanian S, Elfring T. Social capital of entrepreneurs and small firm performance: A meta-analysis of contextual and methodological moderators. Journal of Business Venturing. 2014;29:152-173. DOI: 10.1016/j.jbusvent.2013.01.002

[21] Lumpkin GT, Dess GG. Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review. 1996;21:135-172. DOI: 10.5465/ amr.1996.9602161568

[22] Covin JG, Green KM, Slevin DP. Strategic process effects on the entrepreneurial orientation–sales

growth rate relationship. Entrepreneurship Theory and Practice. 2006;30:57-81. DOI: 10.1111/j.1540-6520.2006.00110.x

[23] Montoro-Sánchez A, Ortiz-de-Urbina-Criado A, Romero-Martínez AM. The decision to use alliances as corporate entrepreneurship: The role of resources and skills. Group Decision Negotiation. 2009;18:431-448. DOI: 10.1007/s10726-008-9135-9

[24] Alvarez SA, Ireland RD, Reuer JJ. Editorial: Entrepreneurship and strategic alliances. Journal of Business Venturing. 2006;21:401-404. DOI: 10.1016/j.jbusvent.2005.03.001

[25] Gupta AK, Govindarajan V. Knowledge flows within multinational corporations. Strategic Management Journal. 2000;21:481-510. DOI: 10.1002/(SICI)1097- 0266(200004)21:4<473::AID-SMJ84>3.0.CO;2-I

[26] Thomson AM, Perry JL. Collaboration processes: Inside the black box. Public Administration Review. 2006;66:20-32. DOI: 10.1111/j.1540-6210.2006.00663.x.

[27] Lisowska R. The potential of business environment institutions and the support for the development of small and medium-sized enterprises. Entrepreneurial Business and Economics Review. 2016;4:85-101. DOI: 10.15678/EBER.2016.040307.

[28] Czarnitzki D, Ebersberger B, Fier A. The relationship between R&D collaboration, subsidies and R&D performance: Empirical evidence from Finland and Germany. Journal of Applied Economics. 2007;22:1347-1366. DOI: 10.1002/jae.992

[29] Pippel G. The impact of R&D collaboration networks on the performance of firms: a meta-analysis of the evidence. International Journal of

**18**

*Entrepreneurship - Contemporary Issues*

[1] Ribeiro-Soriano D, Urbano D. Overview of collaborative entrepreneurship: an integrated approach between business decisions and negotiation. Group Decision and Negotiation. 2009;18:419-430. DOI:

**References**

The impact of network range and network closure. Entrepreneurship Theory and Practice. 2011;35:1025-1050. DOI: 10.1111/j.1540-6520.2011.00449.x

[9] Li L, Jiang F, Pei Y, Jiang N. Entrepreneurial orientation and strategic alliance success: The contingency role of relational

2017;72:46-56. DOI: 10.1016/j.

[10] Miles R, Miles G, Snow C.

jbusres.2016.11.011

jkm-06-2019-0265

factors. Journal of Business Research.

Collaborative Entrepreneurship: How Communities of Networked Firms Use Continuous Innovation to Create Economic Wealth. Stanford: Stanford University Press; 2005. 144 p. DOI: 10.1177/0170840606066420

[11] Seo R. Interorganizational learning for R&D consortium performance: A social capital perspective. Journal of Knowledge Management.

2020;24:395-414. DOI: doi.org/10.1108/

[12] Bogers M. The open innovation paradox: Knowledge sharing and protection in R&D collaborations. European Journal of Innovation Management. 2011;14:93-117. DOI: 10.1108/14601061111104715

[13] Meier M, Lütkewitte M,

Mellewigt T, Decker C. How managers can build trust in strategic alliances: A meta-analysis on the central trustbuilding mechanisms. Journal of Business Economics. 2016;86: 229-257. DOI: 10.1007/s11573-015-0777-1

[14] Rocha H, Miles R. A model of collaborative entrepreneurship for a more humanistic management. Journal of Business Ethics. 2009;88:445-462. DOI: 10.1007/s10551-009-0127-8

[15] Maurer I, Bartsch V, Ebers M. The value of intra-organizational social

10.1007/s10726-008-9134-x

[2] Miles R, Miles G, Snow C. Collaborative entrepreneurship: a business model for continuous innovation. Organizational Dynamics.

2006;35:1-11. DOI: 10.1016/j.

[3] Anderson BS, Kreiser PM, Kuratko DF, Hornsby JS, Eshima Y. Reconceptualizing entrepreneurial orientation. Strategic Management Journal. 2014;36:1579-1596. DOI:

[4] Franco M, Haase H. Firm resources and entrepreneurial orientation as determinants for collaborative entrepreneurship. Management Decision. 2013;51:680-696. DOI: 10.1108/00251741311309724

[5] Dyer JH, Singh H. The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management. 1998;23:660-679. DOI: 10.5465/

[6] Antoncic B. Intrapreneurship: A comparative structural equation modeling study. Industrial Management & Data Systems. 2007;107:309-325. DOI: 10.1108/02635570710734244

[7] Jiang X, Yang Y, Pei YL, Wang G. Entrepreneurial orientation, strategic alliances, and firm performance: inside the black box. Long Range Planning. 2016;49:103-116. DOI: 10.1016/j.

[8] Kreiser PM. Entrepreneurial

orientation and organizational learning:

orgdyn.2005.12.004

10.1002/smj.2298

amr.1998.1255632

lrp.2014.09.003

Networking and Virtual Organizations. 2013;12:352-373. DOI: 10.1504/ ijnvo.2013.057282

[30] Lin C, Wu YJ, Chang CC, Wang W, Lee CY. The alliance innovation performance of R&D alliances: The absorptive capacity perspective. Technovation. 2012;32:282-292. DOI: 10.1016/j. technovation.2012.01.004

[31] Tripsas M, Schrader S, Sobrero M. Discouraging opportunistic behavior in collaborative R&D: A new role for government. Research Policy. 1995;24:367-389. DOI: 10.1016/0048-7333(93)00771-K

[32] Fredrich V, Bouncken RB, Kraus S. The race is on: Configurations of absorptive capacity, interdependence and slack resources for interorganizational learning in coopetition alliances. Journal of Business Research. 2019;101:862-868. DOI: 10.1016/j.jbusres.2018.11.038

[33] Frishammar J, Ericsson K, Patel PC. The dark side of knowledge transfer: Exploring knowledge leakage in joint R&D projects. Technovation. 2015;41-42:75-88. DOI: 10.1016/j. technovation.2015.01.001

[34] Parida V, Westerberg M, Frishammar J. Inbound open innovation activities in high-tech SMEs: The impact on innovation performance. Journal of Small Business Management. 2012;50:283-309. DOI: 10.1111/j.1540-627X.2012.00354.x

[35] Holmqvist M. A dynamic model of intra-and interorganizational learning. Organization Studies. 2003;24:95-123. DOI: 10.1177/0170840603024001684

[36] Dyer JH, Hatch NW. Relationspecific capabilities and barriers to knowledge transfers: Creating advantage through network relationships. Strategic Management Journal. 2006;27:701-719. DOI: 10.1002/ smj.543

[37] Inkpen AC, Tsang EWK. Social capital, networks, and knowledge transfer. Academy of Management. 2005;30:146-165. DOI: 10.5465/ amr.2005.15281445

[38] Liao J, Welsch H. Roles of social capital in venture creation: Key dimensions and research implications. Journal of Small Business Management. 2005;43:345-362. DOI: 10.1111/j.1540-627X.2005.00141.x

[39] Nahapiet J, Ghoshal S. Social capital, intellectual capital, and the organizational advantage. Academy of Management Review. 1998;23:242-266. DOI: 10.5465/amr.1998.533225

[40] Adler PS, Kwon SW. Social capital: Prospects for a new concept. Academy of Management Review. 2002;27:17-40. DOI: 10.5465/amr.2002.5922314

[41] Pinheiro ML, Serôdio P, Pinho JC, Lucas C. The role of social capital towards resource sharing in collaborative R&D projects: Evidences from the 7th Framework Programme. International Journal of Project Management. 2016;34:1519-1536. DOI: 10.1016/j.ijproman.2016.07.006

[42] Rauch A, Rosenbusch N, Unger J, Frese M. The effectiveness of cohesive and diversified networks: A metaanalysis. Journal of Business Research. 2016;69:554-568. DOI: 10.1016/j. jbusres.2015.05.011

[43] Wu WY, Chang ML, Chen CW. Promoting innovation through the accumulation of intellectual capital, social capital, and entrepreneurial orientation. R&D Management. 2008;38:265-277. DOI: 10.1111/1467-9914.00120-i1

[44] Covin JG, Wales WJ. Crafting high-Impact entrepreneurial

**21**

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective*

jibs.2012.19

[52] Kim YC, Lu JW, Rhee M. Learning from age difference: Interorganizational learning and survival in Japanese foreign subsidiaries. Journal of International Business Studies. 2012;43:719-745. DOI: 10.1057/

[53] Gargiulo M, Benassi M. The dark side of social capital. In: Leenders RTAJ,

Gabbay SM, editors. Corporate Social Capital and Liability. Boston: Springer; 1999, p. 282-322. DOI: 10.1007/978-1-4615-5027-3\_17

*DOI: http://dx.doi.org/10.5772/intechopen.93868*

orientation research: Some suggested guidelines. Entrepreneurship Theory and Practice. 2019;43:3-18. DOI: 10.1177/1042258718773181

[45] Rauch A, Wiklund J, Lumpkin GT, Frese M. Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice. 2009;33:761-787. DOI: 10.1111/j.1540-6520.2009.00308.x

[46] Wiklund J, Shepherd D. Knowledgebased resources, entrepreneurial orientation, and the performance of small and medium-sized businesses. Strategic Management Journal. 2003;24:1307-1314. DOI: 10.1002/

[47] Shu C, Liu C, Gao S, Shanley M. The knowledge spillover theory of entrepreneurship in alliances. Entrepreneurship Theory and Practice.

[48] Gedajlovic E. Honig B, Moore CB, Payne GT, Wright M. Social capital and entrepreneurship: A schema and research agenda. Entrepreneurship Theory and Practice. 2013;37:455-478.

exploitation in organizational learning. Organization Science. 1991;2:71-87.

[50] Westerlund M, Rajala R. Learning and innovation in inter-organizational

2014;38:913-940. DOI: 10.1111/

[49] March JG. Exploration and

network collaboration. Journal of Business & Industrial

Marketing. 2010;25:435-442. DOI: 10.1108/08858621011066026

[51] Wang CH, Hsu LC. Building

10.1016/j.techfore.2013.04.008

exploration and exploitation in the hightech industry: The role of relationship learning. Technological Forecasting and Social Change. 2014;81:331-340. DOI:

DOI: 10.1287/orsc.2.1.71

smj.360

etap.12024

*Collaborative Entrepreneurship for Continuous Innovation: A Strategic Alliance Perspective DOI: http://dx.doi.org/10.5772/intechopen.93868*

orientation research: Some suggested guidelines. Entrepreneurship Theory and Practice. 2019;43:3-18. DOI: 10.1177/1042258718773181

*Entrepreneurship - Contemporary Issues*

2013;12:352-373. DOI: 10.1504/

[30] Lin C, Wu YJ, Chang CC, Wang W, Lee CY. The alliance innovation performance of R&D alliances: The absorptive capacity perspective. Technovation. 2012;32:282-292. DOI: 10.1016/j. technovation.2012.01.004

ijnvo.2013.057282

Networking and Virtual Organizations.

Journal. 2006;27:701-719. DOI: 10.1002/

[37] Inkpen AC, Tsang EWK. Social capital, networks, and knowledge transfer. Academy of Management. 2005;30:146-165. DOI: 10.5465/

[38] Liao J, Welsch H. Roles of social capital in venture creation: Key dimensions and research

implications. Journal of Small Business Management. 2005;43:345-362. DOI: 10.1111/j.1540-627X.2005.00141.x

[39] Nahapiet J, Ghoshal S. Social capital, intellectual capital, and the organizational advantage. Academy of Management Review. 1998;23:242-266.

DOI: 10.5465/amr.1998.533225

DOI: 10.5465/amr.2002.5922314

10.1016/j.ijproman.2016.07.006

jbusres.2015.05.011

[42] Rauch A, Rosenbusch N, Unger J, Frese M. The effectiveness of cohesive and diversified networks: A metaanalysis. Journal of Business Research. 2016;69:554-568. DOI: 10.1016/j.

[43] Wu WY, Chang ML, Chen CW. Promoting innovation through the accumulation of intellectual capital, social capital, and

entrepreneurial orientation. R&D Management. 2008;38:265-277. DOI:

[44] Covin JG, Wales WJ. Crafting high-Impact entrepreneurial

10.1111/1467-9914.00120-i1

Pinho JC, Lucas C. The role of social capital towards resource sharing in collaborative R&D projects: Evidences from the 7th Framework Programme. International Journal of Project Management. 2016;34:1519-1536. DOI:

[41] Pinheiro ML, Serôdio P,

[40] Adler PS, Kwon SW. Social capital: Prospects for a new concept. Academy of Management Review. 2002;27:17-40.

smj.543

amr.2005.15281445

[31] Tripsas M, Schrader S, Sobrero M. Discouraging opportunistic behavior

Kraus S. The race is on: Configurations

interdependence and slack resources for interorganizational learning in coopetition alliances. Journal of Business Research. 2019;101:862-868. DOI: 10.1016/j.jbusres.2018.11.038

[33] Frishammar J, Ericsson K, Patel PC. The dark side of knowledge transfer: Exploring knowledge leakage in joint R&D projects. Technovation. 2015;41-42:75-88. DOI: 10.1016/j. technovation.2015.01.001

Frishammar J. Inbound open innovation

[34] Parida V, Westerberg M,

Journal of Small Business

activities in high-tech SMEs: The impact on innovation performance.

Management. 2012;50:283-309. DOI: 10.1111/j.1540-627X.2012.00354.x

[35] Holmqvist M. A dynamic model of intra-and interorganizational learning. Organization Studies. 2003;24:95-123. DOI: 10.1177/0170840603024001684

[36] Dyer JH, Hatch NW. Relationspecific capabilities and barriers to knowledge transfers: Creating advantage through network

relationships. Strategic Management

in collaborative R&D: A new role for government. Research Policy. 1995;24:367-389. DOI: 10.1016/0048-7333(93)00771-K

[32] Fredrich V, Bouncken RB,

of absorptive capacity,

**20**

[45] Rauch A, Wiklund J, Lumpkin GT, Frese M. Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice. 2009;33:761-787. DOI: 10.1111/j.1540-6520.2009.00308.x

[46] Wiklund J, Shepherd D. Knowledgebased resources, entrepreneurial orientation, and the performance of small and medium-sized businesses. Strategic Management Journal. 2003;24:1307-1314. DOI: 10.1002/ smj.360

[47] Shu C, Liu C, Gao S, Shanley M. The knowledge spillover theory of entrepreneurship in alliances. Entrepreneurship Theory and Practice. 2014;38:913-940. DOI: 10.1111/ etap.12024

[48] Gedajlovic E. Honig B, Moore CB, Payne GT, Wright M. Social capital and entrepreneurship: A schema and research agenda. Entrepreneurship Theory and Practice. 2013;37:455-478.

[49] March JG. Exploration and exploitation in organizational learning. Organization Science. 1991;2:71-87. DOI: 10.1287/orsc.2.1.71

[50] Westerlund M, Rajala R. Learning and innovation in inter-organizational network collaboration. Journal of Business & Industrial Marketing. 2010;25:435-442. DOI: 10.1108/08858621011066026

[51] Wang CH, Hsu LC. Building exploration and exploitation in the hightech industry: The role of relationship learning. Technological Forecasting and Social Change. 2014;81:331-340. DOI: 10.1016/j.techfore.2013.04.008

[52] Kim YC, Lu JW, Rhee M. Learning from age difference: Interorganizational learning and survival in Japanese foreign subsidiaries. Journal of International Business Studies. 2012;43:719-745. DOI: 10.1057/ jibs.2012.19

[53] Gargiulo M, Benassi M. The dark side of social capital. In: Leenders RTAJ, Gabbay SM, editors. Corporate Social Capital and Liability. Boston: Springer; 1999, p. 282-322. DOI: 10.1007/978-1-4615-5027-3\_17

**23**

**Chapter 2**

**Abstract**

apply such.

**1. Introduction**

from the entrepreneurship career.

*Herring Shava*

Entrepreneurs

Business Harvesting Strategies for

Entrepreneurship plays a pivotal role in our societies, such as employment creation. This is a key to addressing income inequalities leading to poverty reduction and economic growth. As a result of this critical role, the campaign is on establishing more entrepreneurial entities, and there is very little concern regarding harvesting an entrepreneurial entity. Entity harvesting is equally important as setting up a new entrepreneurial venture and this chapter explores this issue. During the harvesting process, the entrepreneur recovers value through the sale of an entrepreneurial entity or its assets. Having spent several years building and adding value to the business, the entrepreneur must design an entity harvesting strategy that would provide maximum returns on the investment of time, effort and money. Several reasons may compel the entrepreneur to harvest the business and this chapter provides some of these reasons based on extant literature and primary data collected from small- and medium-sized entity (SME) owners in Sub-Saharan Africa. Further, the chapter outlines various entity harvesting strategies preferred by SME owners in Sub-Saharan Africa and circumstances at which they deem appropriate to

**Keywords:** harvesting, entrepreneur, buyouts, mergers, outright sale

The start-up process of a new entrepreneurial venture and until such time the entrepreneur decides to exit the business is a contentious issue. On the one hand, the entrepreneur is found working on a business plan intending to start an entrepreneurial venture. On the other hand, the entrepreneur is also found crafting a longterm business harvesting strategy. As contradicting as this may sound, this gives the entrepreneur a clear entrepreneurship roadmap which in many circumstances will be adjusted as the business owner responds to macro- and micro-environmental changes. Having a harvesting strategy upfront is critical for guiding the entity owner towards achieving the business mission. A business harvesting strategy could be characterised as the path to the finishing point at which the entrepreneur is expected to celebrate the sacrifices made, that is, effort, time and money. It is at that finishing point where the entrepreneur recovers the value-added into the business by selling either the firm in its entirety or partly in the form of assets. When this is done, the entrepreneur can start a new entrepreneurial venture or retire completely

The significant contribution of entrepreneurship in our societies cannot be underestimated, especially on employment creation [1]. This is a key to addressing

#### **Chapter 2**

## Business Harvesting Strategies for Entrepreneurs

*Herring Shava*

#### **Abstract**

Entrepreneurship plays a pivotal role in our societies, such as employment creation. This is a key to addressing income inequalities leading to poverty reduction and economic growth. As a result of this critical role, the campaign is on establishing more entrepreneurial entities, and there is very little concern regarding harvesting an entrepreneurial entity. Entity harvesting is equally important as setting up a new entrepreneurial venture and this chapter explores this issue. During the harvesting process, the entrepreneur recovers value through the sale of an entrepreneurial entity or its assets. Having spent several years building and adding value to the business, the entrepreneur must design an entity harvesting strategy that would provide maximum returns on the investment of time, effort and money. Several reasons may compel the entrepreneur to harvest the business and this chapter provides some of these reasons based on extant literature and primary data collected from small- and medium-sized entity (SME) owners in Sub-Saharan Africa. Further, the chapter outlines various entity harvesting strategies preferred by SME owners in Sub-Saharan Africa and circumstances at which they deem appropriate to apply such.

**Keywords:** harvesting, entrepreneur, buyouts, mergers, outright sale

#### **1. Introduction**

The start-up process of a new entrepreneurial venture and until such time the entrepreneur decides to exit the business is a contentious issue. On the one hand, the entrepreneur is found working on a business plan intending to start an entrepreneurial venture. On the other hand, the entrepreneur is also found crafting a longterm business harvesting strategy. As contradicting as this may sound, this gives the entrepreneur a clear entrepreneurship roadmap which in many circumstances will be adjusted as the business owner responds to macro- and micro-environmental changes. Having a harvesting strategy upfront is critical for guiding the entity owner towards achieving the business mission. A business harvesting strategy could be characterised as the path to the finishing point at which the entrepreneur is expected to celebrate the sacrifices made, that is, effort, time and money. It is at that finishing point where the entrepreneur recovers the value-added into the business by selling either the firm in its entirety or partly in the form of assets. When this is done, the entrepreneur can start a new entrepreneurial venture or retire completely from the entrepreneurship career.

The significant contribution of entrepreneurship in our societies cannot be underestimated, especially on employment creation [1]. This is a key to addressing income inequalities leading to poverty reduction and economic growth [2]. As a result of this critical role, the campaign is mainly on establishing more entrepreneurial entities, and there is very little concern about harvesting an entrepreneurial entity [3]. There is very little empirical evidence on this subject from an African perspective [4]. However, it is important to note that entity harvesting is equally important as setting up a new entrepreneurial venture [5]. Resultantly, this chapter contributes to this gap in the literature by exploring this subject matter relying on primary data from SMEs in Sub-Saharan countries (Botswana, Eswatini, South Africa and Zimbabwe). The goal of this chapter is to explore the preferred entity harvesting options of SME owners in Sub-Saharan Africa and to determine why they prefer such options.

The next section will define business harvesting, followed by reasons for harvesting and a discussion on harvesting strategies available to entrepreneurs. The methodology used to gather primary data is explained, and a discussion of the findings is made. The chapter further outlines the implications of investigating small- and medium-sized entities (SME) harvesting practices, areas for further research.

#### **2. Business harvesting**

After entity start-up, the entrepreneur invests time, effort and money with the intent of growing the business. The entrepreneur invests time, effort and money to make money from the firm in the future. Through such entrepreneurial efforts, the entity accumulates value and ends up attracting competition. In such instances, the business could be vulnerable to hostile takeovers, and harvesting the business provides the entrepreneur with maximum returns on the investment made. By definition, business harvesting is a systematic practice by which the entrepreneur recovers value gained by the entity through the selling of individual assets or the entire firm as a whole. Various reasons compel the entrepreneur to harvest the entity and the section to follow outlines some of them.

#### **2.1 Reasons for harvesting**

Factors beyond the control of the owner or entity management could influence the mentioned entity players to consider harvesting [6]. Macro-environmental factors such as the global pandemic similar to Covid-19 have seen most entrepreneurs harvesting their entities as most entities could not operate under the global lockdown, which has extended for at least 3 months in some countries. Owing to the global lockdown, supply chain networks have been severely affected. Firms that rely on imported raw materials have suffered the most as movement of non-essential goods are currently suspended globally. Some factors leading to business harvest include the untimely death of the entrepreneur, serious ill health, or poor mental health. Unrest in the labour market or loss of key expertise may force the entrepreneur to harvest the business. Generally, harvesting reasons are unique to each entrepreneurial entity [5].

Micro-environmental factors speak to reasons for harvesting the entity which the entrepreneur has significant control over. The first example relates to the goal of the entrepreneur [7]. Some entrepreneurs start an entity and work hard to grow the firm so that it becomes very attractive to competition and later sell the entity for a substantial profit. The second example for wanting to harvest the entity could be that the entrepreneur falls in the category of serial entrepreneurs [8]. These are individuals who start entrepreneurial entities but after running the entity for a

**25**

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

given period, they develop other lucrative business ideas and sell the existing firm

Succession is another micro-environmental reason for harvesting the existing entity and it is common in family business [7]. Under succession, the family business owner steps down and pass entity ownership to the next family member. When the family business is carefully run, through succession, the firm will pass from generation to generation and this may continue over many decades. Further, the entrepreneur may start a new entity hoping that this would afford him free space and more time to himself but only to find out later that business demands are far much greater than envisaged. Traditionally, the entrepreneur still has to balance both home and business demands. Unfortunately, the inability to find a middle point between these competing issues may drive the entrepreneur to the point of harvesting the business. However, not all entrepreneurs fail to balance home and business demands. Some entrepreneurs are good at what they do such that the entrepreneurial entity they have built can outlive their physical and mental strength. When this happens, entrepreneurs often choose retirement as they no longer have the physical and mental strength to keep up with both business and home demands. Resultantly, they recover the value added in the business in the form of cash which

Choosing between available business harvesting options may not be that easy for the entrepreneur. Each harvesting option has its advantages and disadvantages. Therefore, the entrepreneur must diligently make the difficult decision to pick the one that would yield maximum returns in line with sacrifices made in building the entity. The next section looks at harvesting strategies that an entrepreneur can exercise.

Several harvesting options exist and these range from buyouts, mergers, outright sale, employee share ownership scheme and an initial public offering. The paragraphs to follow elaborate on the mentioned harvesting strategies.

Buyouts or an outright sale of entity results in the establishment of a new independent entity owned and controlled by managers and sometimes by a private

• Leveraged buyout (LBO). LBO happens when a large portion of a publicly quoted entity is sold to a private equity firm. During the sale process, the

• Management buyout (MBO). In an MBO scenario, the current management of the entity raises funds to buy out the entity owner. In instances where the firm decides to divest in a subsidiary, the current management takes control of a significant amount of equity. As much as the management remains in control of the larger share of the voting equity, to ensure continued smooth flow of operations, that is, firm relations with customers, creditors and suppliers, the previous owner may retain ownership of an equity stake in the firm. This practice is common in family-owned businesses where a small number of managers

MBO can be extended to other managers or employees and at that point, it then becomes a management employee buyout (MEBO). In many instances,

to raise the needed capital for the new entrepreneurial venture.

in this case could be equated to a retirement package.

equity entity. Buyouts are generally in five types:

take control of a portion of equity.

private equity firm gains a larger number of shares.

**2.2 Business harvesting options**

*2.2.1 Buyouts*

#### *Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

*Entrepreneurship - Contemporary Issues*

they prefer such options.

**2. Business harvesting**

**2.1 Reasons for harvesting**

entrepreneurial entity [5].

entity and the section to follow outlines some of them.

research.

income inequalities leading to poverty reduction and economic growth [2]. As a result of this critical role, the campaign is mainly on establishing more entrepreneurial entities, and there is very little concern about harvesting an entrepreneurial entity [3]. There is very little empirical evidence on this subject from an African perspective [4]. However, it is important to note that entity harvesting is equally important as setting up a new entrepreneurial venture [5]. Resultantly, this chapter contributes to this gap in the literature by exploring this subject matter relying on primary data from SMEs in Sub-Saharan countries (Botswana, Eswatini, South Africa and Zimbabwe). The goal of this chapter is to explore the preferred entity harvesting options of SME owners in Sub-Saharan Africa and to determine why

The next section will define business harvesting, followed by reasons for harvesting and a discussion on harvesting strategies available to entrepreneurs. The methodology used to gather primary data is explained, and a discussion of the findings is made. The chapter further outlines the implications of investigating small- and medium-sized entities (SME) harvesting practices, areas for further

After entity start-up, the entrepreneur invests time, effort and money with the intent of growing the business. The entrepreneur invests time, effort and money to make money from the firm in the future. Through such entrepreneurial efforts, the entity accumulates value and ends up attracting competition. In such instances, the business could be vulnerable to hostile takeovers, and harvesting the business provides the entrepreneur with maximum returns on the investment made. By definition, business harvesting is a systematic practice by which the entrepreneur recovers value gained by the entity through the selling of individual assets or the entire firm as a whole. Various reasons compel the entrepreneur to harvest the

Factors beyond the control of the owner or entity management could influence the mentioned entity players to consider harvesting [6]. Macro-environmental factors such as the global pandemic similar to Covid-19 have seen most entrepreneurs harvesting their entities as most entities could not operate under the global lockdown, which has extended for at least 3 months in some countries. Owing to the global lockdown, supply chain networks have been severely affected. Firms that rely on imported raw materials have suffered the most as movement of non-essential goods are currently suspended globally. Some factors leading to business harvest include the untimely death of the entrepreneur, serious ill health, or poor mental health. Unrest in the labour market or loss of key expertise may force the entrepreneur to harvest the business. Generally, harvesting reasons are unique to each

Micro-environmental factors speak to reasons for harvesting the entity which the entrepreneur has significant control over. The first example relates to the goal of the entrepreneur [7]. Some entrepreneurs start an entity and work hard to grow the firm so that it becomes very attractive to competition and later sell the entity for a substantial profit. The second example for wanting to harvest the entity could be that the entrepreneur falls in the category of serial entrepreneurs [8]. These are individuals who start entrepreneurial entities but after running the entity for a

**24**

given period, they develop other lucrative business ideas and sell the existing firm to raise the needed capital for the new entrepreneurial venture.

Succession is another micro-environmental reason for harvesting the existing entity and it is common in family business [7]. Under succession, the family business owner steps down and pass entity ownership to the next family member. When the family business is carefully run, through succession, the firm will pass from generation to generation and this may continue over many decades. Further, the entrepreneur may start a new entity hoping that this would afford him free space and more time to himself but only to find out later that business demands are far much greater than envisaged. Traditionally, the entrepreneur still has to balance both home and business demands. Unfortunately, the inability to find a middle point between these competing issues may drive the entrepreneur to the point of harvesting the business. However, not all entrepreneurs fail to balance home and business demands. Some entrepreneurs are good at what they do such that the entrepreneurial entity they have built can outlive their physical and mental strength. When this happens, entrepreneurs often choose retirement as they no longer have the physical and mental strength to keep up with both business and home demands. Resultantly, they recover the value added in the business in the form of cash which in this case could be equated to a retirement package.

Choosing between available business harvesting options may not be that easy for the entrepreneur. Each harvesting option has its advantages and disadvantages. Therefore, the entrepreneur must diligently make the difficult decision to pick the one that would yield maximum returns in line with sacrifices made in building the entity. The next section looks at harvesting strategies that an entrepreneur can exercise.

#### **2.2 Business harvesting options**

Several harvesting options exist and these range from buyouts, mergers, outright sale, employee share ownership scheme and an initial public offering. The paragraphs to follow elaborate on the mentioned harvesting strategies.

#### *2.2.1 Buyouts*

Buyouts or an outright sale of entity results in the establishment of a new independent entity owned and controlled by managers and sometimes by a private equity entity. Buyouts are generally in five types:


MBO can be extended to other managers or employees and at that point, it then becomes a management employee buyout (MEBO). In many instances, employees are factored in the equation because of the key expertise they possess. This is common where branches of the entity are geographically dispersed, and it becomes an issue of common sense to involve the branch manager in the MEBO to facilitate easy management control. From a business perspective, the success of the branch becomes of interest to the manager owing to stake ownership. MBO or MEBO is advantageous to the owner as it offers a quick exit. The big disadvantage is that the management may not possess similar entrepreneurial traits to those of the departing owner, leading to the downfall of the newly established business.

• A management buy-in (MBI). External managers are granted the opportunity to buy equity in the firm. Often the challenge here is that the newcomers have no extensive knowledge of the existing business particularly regarding how it operates. In rare cases, newcomers may be from the same sector as the existing business and therefore come with valuable insights concerning technology, knowledge on the competition, and how to grow the business leading to its success.

A more advantageous scenario is a hybrid buy-in/management buyout (BIMBO), and this is where a portion if inside managers and a portion of outsiders both acquire a stake in the firm. This is advantageous in the sense that existing managers have profound knowledge on the operations of the firm, meaning there will be little disruptions. More importantly, the incoming managers bring valuable operational insights towards growing the existing business which may have been missing all along.


#### *2.2.2 Business mergers*

Merging a business is a process where the smaller entity is absorbed, often by a larger entity mostly to provide an extra muscle on the weaknesses of the small entity and to maximise on its strengths. The outcome of a merger is a large and very competitive entity. The entrepreneur who intends to harvest the entity through merging with another firm focuses more on the price, structure and terms of the proposed deal. Where mergers occur, special attention is also given to issues about organisational culture, the coming together of different personnel into a single

**27**

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

management process.

the deal fails to materialise.

*2.2.5 Initial public offering (IPO)*

*2.2.4 Employee share ownership scheme (ESOS)*

*2.2.3 Outright sale*

entity, and the coming together of different products under one firm. Other issues that need to be addressed are the fears of employees regarding downsizing or retrenchment that may be necessary to ensure the viability and success of the new entity. More important, operational and marketing issues need further attention considering that products and services may have become so diverse as a result of the merger. Management has to decide as to which products and services they will discontinue or continue offering based on each product/service's cash inflow strength. Research and development initiatives and manufacturing methods are some of the issues that will require special attention. More importantly, the entity has to decide with regards to supply chain partners they would want to continue to be in business with. When supply chain partners have been decided, that also influences the distribution channels they will adopt to ensure a hustle-free logistics

The entrepreneur who opts for an outright sale of his firm as the harvesting option sells the entire business to any person who is willing to pay for the asking price. The buyer could be a supplier interested in forward integration, or the customer who is interested in backward integration. Sometimes the buyer is completely a neutral player from another sector whose intentions are to spread and diversify the risk. Often, entrepreneurs shy away from selling the business to the competitor as this entails disclosing or providing access to trade secrets, which could backfire if

Various governments, particularly in developing countries, have been advocating for employee share ownership schemes as a means of maximising productivity and also as a means of fighting the inequality gaps as far as wealth distribution is concerned. In Africa, it is no secret that the majority of the wealth is controlled by a minority who are predominantly white. From the Africans' point of view, this is gross injustice as they feel they are not benefiting from what is rightfully theirs (riches of Africa). To address this challenge, most African countries have crafted and legalised the employee share ownership scheme [9]. By definition, the employee share ownership scheme is a legalised route by which the employer can transfer some or all of the shares to employees who in turn assume ownership of the shares received [10]. By the end of the deal, employees develop a vested interest in the entity's well-being and become motivated to participate strongly in the growth of the entity to realise as much wealth as they can. Through the ESOS, the entrepreneur harvesting the entity receives cash at different intervals on his way out. The advantage is that the management continues to run the entity at the same time benefiting from the scheme. The disadvantage is that this could also result in the loss of the entrepreneurial drive in the entity. Often, the ESOS is best suited for large corporations given the complica-

tions surrounding the structuring and mapping of the finances involved.

The entrepreneur who chooses initial public offering as a harvesting option enlist the entity on a public stock exchange and have its shares publicly traded [11]. As attractive as this is, the downside is that the entrepreneur now must account to several shareholders on issues related to entity growth and many other key issues shareholders may be interested in [12]. In other words, this could add more

#### *Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

entity, and the coming together of different products under one firm. Other issues that need to be addressed are the fears of employees regarding downsizing or retrenchment that may be necessary to ensure the viability and success of the new entity. More important, operational and marketing issues need further attention considering that products and services may have become so diverse as a result of the merger. Management has to decide as to which products and services they will discontinue or continue offering based on each product/service's cash inflow strength. Research and development initiatives and manufacturing methods are some of the issues that will require special attention. More importantly, the entity has to decide with regards to supply chain partners they would want to continue to be in business with. When supply chain partners have been decided, that also influences the distribution channels they will adopt to ensure a hustle-free logistics management process.

#### *2.2.3 Outright sale*

*Entrepreneurship - Contemporary Issues*

employees are factored in the equation because of the key expertise they possess. This is common where branches of the entity are geographically dispersed, and it becomes an issue of common sense to involve the branch manager in the MEBO to facilitate easy management control. From a business perspective, the success of the branch becomes of interest to the manager owing to stake ownership. MBO or MEBO is advantageous to the owner as it offers a quick exit. The big disadvantage is that the management may not possess similar entrepreneurial traits to those of the departing owner, leading

• A management buy-in (MBI). External managers are granted the opportunity to buy equity in the firm. Often the challenge here is that the newcomers have no extensive knowledge of the existing business particularly regarding how it operates. In rare cases, newcomers may be from the same sector as the existing business and therefore come with valuable insights concerning technology, knowledge

on the competition, and how to grow the business leading to its success.

A more advantageous scenario is a hybrid buy-in/management buyout (BIMBO), and this is where a portion if inside managers and a portion of outsiders both acquire a stake in the firm. This is advantageous in the sense that existing managers have profound knowledge on the operations of the firm, meaning there will be little disruptions. More importantly, the incoming managers bring valuable operational insights towards growing the existing

• Investor-led buyout (ILBO). The entire entity or part thereof is purchased by a privately owned equity firm. Depending on the circumstances or the state of the acquired firm, new management can be brought to run the affairs of the newly acquired entity. This is normally done to safeguard the investments made, especially when the acquired firm is in a precarious position. Conversely, when the newly acquired firm's affairs are in order, existing management is likely to be retained, or a mix of new management and existing management may be the one responsible for the acquired firm. Unfortunately, in an ILBO, existing managers occupying specific office positions in the firm

• Leveraged build-up (LBU). When the goal of a private equity firm is to generate profits from a buyout or buy-in investment, they practice leveraged build-up. This is where the newly acquired entity, as a result of buyout or buy-in, is used as an investment platform, where a series of acquisitions are continuously added to it, forming a large corporate group. This move brings with it the ability to lure skilled and experienced managers, who can exponentially grow the entity

Merging a business is a process where the smaller entity is absorbed, often by a larger entity mostly to provide an extra muscle on the weaknesses of the small entity and to maximise on its strengths. The outcome of a merger is a large and very competitive entity. The entrepreneur who intends to harvest the entity through merging with another firm focuses more on the price, structure and terms of the proposed deal. Where mergers occur, special attention is also given to issues about organisational culture, the coming together of different personnel into a single

to the downfall of the newly established business.

business which may have been missing all along.

are normally not given the option to purchase stocks.

through further acquisitions.

*2.2.2 Business mergers*

**26**

The entrepreneur who opts for an outright sale of his firm as the harvesting option sells the entire business to any person who is willing to pay for the asking price. The buyer could be a supplier interested in forward integration, or the customer who is interested in backward integration. Sometimes the buyer is completely a neutral player from another sector whose intentions are to spread and diversify the risk. Often, entrepreneurs shy away from selling the business to the competitor as this entails disclosing or providing access to trade secrets, which could backfire if the deal fails to materialise.

#### *2.2.4 Employee share ownership scheme (ESOS)*

Various governments, particularly in developing countries, have been advocating for employee share ownership schemes as a means of maximising productivity and also as a means of fighting the inequality gaps as far as wealth distribution is concerned. In Africa, it is no secret that the majority of the wealth is controlled by a minority who are predominantly white. From the Africans' point of view, this is gross injustice as they feel they are not benefiting from what is rightfully theirs (riches of Africa). To address this challenge, most African countries have crafted and legalised the employee share ownership scheme [9]. By definition, the employee share ownership scheme is a legalised route by which the employer can transfer some or all of the shares to employees who in turn assume ownership of the shares received [10]. By the end of the deal, employees develop a vested interest in the entity's well-being and become motivated to participate strongly in the growth of the entity to realise as much wealth as they can. Through the ESOS, the entrepreneur harvesting the entity receives cash at different intervals on his way out. The advantage is that the management continues to run the entity at the same time benefiting from the scheme. The disadvantage is that this could also result in the loss of the entrepreneurial drive in the entity. Often, the ESOS is best suited for large corporations given the complications surrounding the structuring and mapping of the finances involved.

#### *2.2.5 Initial public offering (IPO)*

The entrepreneur who chooses initial public offering as a harvesting option enlist the entity on a public stock exchange and have its shares publicly traded [11]. As attractive as this is, the downside is that the entrepreneur now must account to several shareholders on issues related to entity growth and many other key issues shareholders may be interested in [12]. In other words, this could add more

administrative issues to the entrepreneur that he/she may have not anticipated before choosing this harvesting option.

#### **3. Methodology**

This research is exploratory and predominantly quantitative. However, openended questions were incorporated to solicit further insights concerning the subject in question. A self-administered questionnaire was designed from extant literature on the subject of entity harvesting. Qualitative data gathered from open-ended questions provided rich insights as to the SME owner's preferred method of harvesting and motivations to harvest the business. A sample of 612 SMEs was approached in Botswana, Eswatini, South Africa and Zimbabwe (Sub-Saharan Africa). Opportunistic convenience sampling was carried out. In the absence of a trusted sampling frame, field workers approached SME owners who were willing to participate in this research. Field workers explained the goal of the research and participants' rights with regards to research that is the right to terminate participation without questions asked, right not to answer questions that infringe on their privacy, anonymity and truthful presentation of their views. Having explained at length issues related to the rights of the participants, their consent was sought and obtained. Descriptive statistics were performed to make the meaning of quantitative data. Similarly, qualitative data obtained were grouped into themes and each theme was observed and monitored in terms of recurrence. Thus, the frequency distribution of each theme was established to determine how popular that theme was among SME owners.

#### **4. Findings**

The results presented in this section provide a detailed background of the business owner and the SME. These cover issues related to the age of the business, location of the business, industry or sector in which the business is operating, the ownership structure of the business, the business development stage and sales revenue growth. Further, this section presents findings concerning harvesting practices preferred by small businesses in Sub-Saharan Africa.

#### **4.1 Demographic distribution of SMEs**

Data on the year of business establishment for the SMEs were gathered. The findings revealed that 40% of SMEs were between 5 and 10 years old whilst the other 40% were between 10 and 20 years old and 20% of the SMEs were established more than 20 years ago. Therefore, all the SMEs were in business for a considerable amount of time. This implies that the SME owners in question are fairly experienced business players. The findings with regards to the location of the SMEs reveal that that 20% of the SMEs were based in Gaberone, Botswana, 25% of the SMEs were based in Harare, Zimbabwe, 40% were based in Johannesburg, South Africa, and 15% of the SMEs were located in Mbabane, Eswatini. Data with regards to sector distribution of the SMEs revealed that 40% were in manufacturing, while mining, tourism, transport and logistics and retail sector were each represented by 15%, respectively. Data further revealed that 60% of the SMEs were registered as private companies, while partnerships and sole traders were both represented by 20%, respectively. The chapter further reveals that all SME owners who participated in this research are multiple business owners with 60% having total control

**29**

**Table 1.**

*SMEs sales revenue growth by country.*

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

revenue in the past 12 months.

**4.2 SMEs preferred harvesting options**

preferred SMEs entity harvesting options.

and a further 20% being owners of two operational SMEs.

and ownership of three operational SMEs, while 20% owned four operational SMEs

SMEs were given a list of entity harvesting options and were asked to rank in order of preference to identify the harvesting option they would consider when the time of harvest has come. Findings are summarised in **Table 2**. They reveal that the majority of SMEs in Sub-Saharan Africa preferred the outright sale harvesting option, M = 4.6, SD = 0.89, followed by the management buy-in harvesting option, M = 4.4, SD = 0.89, mergers, M = 3.8, SD = 1.3, investor-led buyout, M = 3.6, SD = 1.67 and leveraged build-ups with M = 3.4, SD = 1.51 concluded the top five

SME owners who identified outright sale as their preferred entity harvesting method cited unavailability of an heir to take over the business, desire to pursue other interest, business reaching its peak performance level, retirement reasons,

**Country Sales revenue movement in the past 12 months %** Botswana Satisfactory movement 44

Eswatini Satisfactory movement 42

South Africa Satisfactory movement 40

Zimbabwe Satisfactory movement 12

Non-satisfactory movement 36 A decline in sales revenue 20

Non-satisfactory movement 28 A decline in sales revenue 30

Non-satisfactory movement 40 A decline in sales revenue 20

Non-satisfactory movement 54 A decline in sales revenue 34

*4.2.1 Justification for choosing the outright sale entity harvesting option*

SME owners were further asked to identify the stage at which they thought their businesses occupied in the business life cycle (the SME at which they were found during fieldwork, that is, ignoring other SMEs they owned). The findings reveal that SMEs were at varying stages of the business life cycle with 20% being at the growth stage, while 40% were at the maturity stage and a further 40% already at their decline stage. A country analysis showing sales revenue growth in the past 12 months shows that SMEs in Botswana realised a more satisfactory movement (44%) followed by SMEs in Eswatini (42%) and SMEs in South Africa represented by 40%. Only 12% of SMEs in Zimbabwe registered satisfactory movement in sales revenue. This could be a reflector of the ongoing economic crisis that has affected the Zimbabwean economy for over a decade. As shown in **Table 1**, Zimbabwean SMEs further leads on the declining sales revenue option as 34% of SMEs registered a decline in sales revenue and 54% registering non-satisfactory movement in sales

#### *Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

*Entrepreneurship - Contemporary Issues*

**3. Methodology**

was among SME owners.

**4. Findings**

before choosing this harvesting option.

administrative issues to the entrepreneur that he/she may have not anticipated

This research is exploratory and predominantly quantitative. However, openended questions were incorporated to solicit further insights concerning the subject in question. A self-administered questionnaire was designed from extant literature on the subject of entity harvesting. Qualitative data gathered from open-ended questions provided rich insights as to the SME owner's preferred method of harvesting and motivations to harvest the business. A sample of 612 SMEs was approached in Botswana, Eswatini, South Africa and Zimbabwe (Sub-Saharan Africa). Opportunistic convenience sampling was carried out. In the absence of a trusted sampling frame, field workers approached SME owners who were willing to participate in this research. Field workers explained the goal of the research and participants' rights with regards to research that is the right to terminate participation without questions asked, right not to answer questions that infringe on their privacy, anonymity and truthful presentation of their views. Having explained at length issues related to the rights of the participants, their consent was sought and obtained. Descriptive statistics were performed to make the meaning of quantitative data. Similarly, qualitative data obtained were grouped into themes and each theme was observed and monitored in terms of recurrence. Thus, the frequency distribution of each theme was established to determine how popular that theme

The results presented in this section provide a detailed background of the business owner and the SME. These cover issues related to the age of the business, location of the business, industry or sector in which the business is operating, the ownership structure of the business, the business development stage and sales revenue growth. Further, this section presents findings concerning harvesting

Data on the year of business establishment for the SMEs were gathered. The findings revealed that 40% of SMEs were between 5 and 10 years old whilst the other 40% were between 10 and 20 years old and 20% of the SMEs were established more than 20 years ago. Therefore, all the SMEs were in business for a considerable amount of time. This implies that the SME owners in question are fairly experienced business players. The findings with regards to the location of the SMEs reveal that that 20% of the SMEs were based in Gaberone, Botswana, 25% of the SMEs were based in Harare, Zimbabwe, 40% were based in Johannesburg, South Africa, and 15% of the SMEs were located in Mbabane, Eswatini. Data with regards to sector distribution of the SMEs revealed that 40% were in manufacturing, while mining, tourism, transport and logistics and retail sector were each represented by 15%, respectively. Data further revealed that 60% of the SMEs were registered as private companies, while partnerships and sole traders were both represented by 20%, respectively. The chapter further reveals that all SME owners who participated in this research are multiple business owners with 60% having total control

practices preferred by small businesses in Sub-Saharan Africa.

**4.1 Demographic distribution of SMEs**

**28**

and ownership of three operational SMEs, while 20% owned four operational SMEs and a further 20% being owners of two operational SMEs.

SME owners were further asked to identify the stage at which they thought their businesses occupied in the business life cycle (the SME at which they were found during fieldwork, that is, ignoring other SMEs they owned). The findings reveal that SMEs were at varying stages of the business life cycle with 20% being at the growth stage, while 40% were at the maturity stage and a further 40% already at their decline stage. A country analysis showing sales revenue growth in the past 12 months shows that SMEs in Botswana realised a more satisfactory movement (44%) followed by SMEs in Eswatini (42%) and SMEs in South Africa represented by 40%. Only 12% of SMEs in Zimbabwe registered satisfactory movement in sales revenue. This could be a reflector of the ongoing economic crisis that has affected the Zimbabwean economy for over a decade. As shown in **Table 1**, Zimbabwean SMEs further leads on the declining sales revenue option as 34% of SMEs registered a decline in sales revenue and 54% registering non-satisfactory movement in sales revenue in the past 12 months.

#### **4.2 SMEs preferred harvesting options**

SMEs were given a list of entity harvesting options and were asked to rank in order of preference to identify the harvesting option they would consider when the time of harvest has come. Findings are summarised in **Table 2**. They reveal that the majority of SMEs in Sub-Saharan Africa preferred the outright sale harvesting option, M = 4.6, SD = 0.89, followed by the management buy-in harvesting option, M = 4.4, SD = 0.89, mergers, M = 3.8, SD = 1.3, investor-led buyout, M = 3.6, SD = 1.67 and leveraged build-ups with M = 3.4, SD = 1.51 concluded the top five preferred SMEs entity harvesting options.

#### *4.2.1 Justification for choosing the outright sale entity harvesting option*

SME owners who identified outright sale as their preferred entity harvesting method cited unavailability of an heir to take over the business, desire to pursue other interest, business reaching its peak performance level, retirement reasons,


#### **Table 1.**

*SMEs sales revenue growth by country.*


#### **Table 2.**

*SMEs preferred entity harvesting options in Sub-Saharan Africa.*


#### **Table 3.**

*Reasons behind choosing the outright sale harvesting option.*

uncertain business environment and unavailability of a working turnaround business strategy as factors that would drive them to consider an outright sale of the entity. **Table 3** provides descriptive statistics summarising the observed frequencies of the mentioned reasons.

The paragraphs to follow further expand on the findings outlined in **Table 3**.


**31**

savings.

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

business markets.

uncompromised.

**4.3 Business merger**

below the market value of the entity.

Conversely, not all SMEs were of the view that they would harvest the entity through outright sale when it is poorly performing. The findings also revealed that most entrepreneurs preferred harvesting their ventures on discovering new and exciting opportunities, which they viewed as more profitable than the existing one. In support, some respondents also argued that where an entrepreneur comes up with a more lucrative business plan that has been well evaluated, the less lucrative venture must be harvested to mobilise funds to finance the lucrative business opportunity. Some SME owners were also quick to emphasise that the culture among SME owners was such that as long as the

venture is still viable, there is no reason for harvesting the entity.

• Retirement plan. A few SME owners pointed out they would consider the outright sale as their harvesting strategy and completely retire from the entrepreneurial life. The outright sale harvesting option would provide them with enough funds to sustain them when they are no longer actively involved in

• Uncertain business environment. A significant number of SMEs particularly those found in the mining sector pointed out that for them, their businesses are largely affected by ever-changing government policies around mineral ownership and the processes involved in the selling of the minerals. The SMEs in the mining sector felt that they are the least protected by regulations. Mining operations are severely threatened by artisanal miners who continuously invade mining shafts and plants. In all this chaos, SME owners blame governments for doing very little to protect SMEs in the mining sector and their employees. When the rule of law is compromised as is the case in the mining sector, an outright sale was the preferred harvesting strategy. This enables the entrepreneur to invest capital in countries where the rule of law is known to be

• Failure of the business turnaround strategy. Unlike some other SMEs who would harvest once symptoms and signs of failure start being noticed, some prefer to try and resuscitate the firm. However, when these efforts fail, they then choose to practice the outright sale harvesting option. The disadvantage of this strategy is that the business may have hit rock bottom a long time ago without the owner noticing. As such, when the new buyer comes, he or she has more bargaining power and the entrepreneur may receive proceeds that are far

The findings reveal that entity merger was the third preferred harvesting option, M = 3.8, SD = 1.30. A study conducted in India by Mantravadi and Reddy [13] found out that firm profitability levels behaved differently depending on the sector after the merger, with some having their profitability levels increasing yet others experienced a decline. Generally, mergers are known to result in improved profitability for firms that were experiencing a sharp decline in profits. It was therefore very much anticipated for SME owners in Sub-Saharan Africa to at least consider business merger as a harvesting method given its tremendous benefits which include, improved revenues and profitability, faster growth in scale and quicker access to markets, acquisition of new technology, elimination of competition and increased market share [4]. Also, through mergers, firms enjoy tax shields and investment

*Entrepreneurship - Contemporary Issues*

of the mentioned reasons.

*Reasons behind choosing the outright sale harvesting option.*

*SMEs preferred entity harvesting options in Sub-Saharan Africa.*

**Table 3.**

**Table 2.**

uncertain business environment and unavailability of a working turnaround business strategy as factors that would drive them to consider an outright sale of the entity. **Table 3** provides descriptive statistics summarising the observed frequencies

**Justification Frequency (%)** Absence of an heir 33 Desire to pursue other interests 22 Business performance reached peak level 18 Retirement plan 12 Uncertain business environment 9 Failure of a business turnaround strategy 6

**Harvesting option Mean score Standard deviation** Outright sale 4.6 0.89 Management buy-in (MBI) 4.4 0.89 Mergers 3.8 1.30 Investor led buyout (ILBO) 3.6 1.67 Leveraged build-ups 3.4 1.51 Management buyout (MBO) 3.0 1.41 Employ share ownership scheme (ESOS) 2.8 1.30

The paragraphs to follow further expand on the findings outlined in **Table 3**.

• Business performance is at peak. Other SME owners pointed out that they would consider an outright sale harvesting option when the entrepreneurial entity has reached its all high-performance mark. This move is advantageous considering that this is the point where the business will be very attractive to competition and other individuals or organisation interested in a takeover. Given this situation, the entrepreneur has more bargaining power and is more likely to receive a significant amount better than the firm's asking price.

• Desire to pursue other interests. The desire to pursue other interests in this

research was found to be triggered by the failure of the current enterprise to bring forth the anticipated results. Although some SME owners are genuinely interested in pursuing other business avenues, SME owners pointed out that they would rather cash in on the business especially once signs and symptoms of decline are noticed. They argued that rarely does it pay to continue investing time, effort and money once the business has started showing negative signs of performance.

• Absence of an heir. In the absence of an immediate family member to take over the business, SME owners pointed out that it is rather wise for them to cash in on their businesses and enjoy the fruits thereof than to leave the business to a distant relative who never contributed towards the well-being of the entity.

**30**

Conversely, not all SMEs were of the view that they would harvest the entity through outright sale when it is poorly performing. The findings also revealed that most entrepreneurs preferred harvesting their ventures on discovering new and exciting opportunities, which they viewed as more profitable than the existing one. In support, some respondents also argued that where an entrepreneur comes up with a more lucrative business plan that has been well evaluated, the less lucrative venture must be harvested to mobilise funds to finance the lucrative business opportunity. Some SME owners were also quick to emphasise that the culture among SME owners was such that as long as the venture is still viable, there is no reason for harvesting the entity.


#### **4.3 Business merger**

The findings reveal that entity merger was the third preferred harvesting option, M = 3.8, SD = 1.30. A study conducted in India by Mantravadi and Reddy [13] found out that firm profitability levels behaved differently depending on the sector after the merger, with some having their profitability levels increasing yet others experienced a decline. Generally, mergers are known to result in improved profitability for firms that were experiencing a sharp decline in profits. It was therefore very much anticipated for SME owners in Sub-Saharan Africa to at least consider business merger as a harvesting method given its tremendous benefits which include, improved revenues and profitability, faster growth in scale and quicker access to markets, acquisition of new technology, elimination of competition and increased market share [4]. Also, through mergers, firms enjoy tax shields and investment savings.

In this research, SME owners who opted merging with other firms as a harvesting technique cited lack of operating and growth capital as the major reason.

• Lack of operating and growth capital. SME owners pointed out that if the firm is experiencing liquidity challenges, merging with a financially stable firm is the only route to preserving the legacy of the founder and keep initial business ideas, products, or services for a reasonable time in the market. Some of the SME owners pointed out that they had undertaken this harvesting practice before. For the previous mergers to occur, SME owners pointed out that the underlying reason that led to those mergers was liquidity problems. However, family and friends played an influential role in choosing the harvesting option. Other SME owners pointed out that they consider a business merger as it is a welcome opportunity to come out of financial distress without having to approach banks for funding.

#### **4.4 Buyout**

The research sought the respondents' views on different types of buyouts they would consider as their harvesting options. The findings imply that buyout options are widely used by SMEs. Buyouts involve a transition from one set of owners to another where the previous owners lose control over the firm and the new ones pay a premium for shares that gives them a controlling interest in the firm. The results on the different types of buyouts as entity harvesting options preferred by SMEs owners show that management buy-in is the second most preferred entity harvesting option, M = 4.4, SD = 0.89.

The findings reveal that SME owners are willing to surrender their businesses to external management for considerable value than their internal ones. Investor-led buyout (ILBO) was identified as the fourth preferred entity harvesting option, M = 3.6, SD = 1.67. SME owners argued that if the business is taken over by some investor institutions and is rejuvenated, their peers judge them better than if the same happens with former employees. Leveraged build-ups (LBUs) were identified by SME owners as the fifth preferred entity harvesting option, M = 3.4, SD = 1.51, whereas management buyout (MBO) was the sixth preferred entity harvesting option, M = 3, SD = 1.41.

#### *4.4.1 SME justification for preferring various buyout options*

SME owners identified the unavailability of a successor, de-risking and entity owner poor health as major drivers for preferring various buyout entity harvesting options.


**33**

options.

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

entity harvesting but partial harvest.

owner's perspective, it provides this opportunity.

**4.5 Employee share ownership scheme (ESOS)**

ties maintained for a foreseeable future.

and salvage the value they may have added to the firm.

**5. Discussion of the findings**

to fund business growth initiatives, in the process guaranteeing business continuity. In other words, a portion of SME owners is not interested in total

• Poor health. Some SME owners opted for the ILBO harvesting option citing deteriorating health conditions. In this case, the owner sells a division of a firm instead of the entire firm. Health failure means that the SME owner is no longer able to participate in business affairs daily. In certain instances, the entrepreneur remains hopeful that he or she would recover and be actively involved in the affairs of the entity and possibly buy out the investor. For the hopeful entrepreneur, it is better to have somebody taking care of the firm until the entrepreneur's recovery point, and by design, the ILBO from the SME

The research findings reveal that the ESOS is the least preferred entity harvesting options among SME owners, M = 2.8, SD = 1.30. SME owners who preferred this option pointed out that because they would have succeeded in building a strong performance-oriented culture, it was more strategically important for them to involve entity employees in the entity's succession plans. From the SME owner's perspective, having employees who are best performers to own a stake in the firm and participate in running the affairs of the entity would make it easier to pass on the performance-oriented culture to all incoming employees. This is critical in ensuring that the firm's competitive advantage is sustained and the firm's profitability abili-

The findings presented in this chapter indicate that both macro- and microenvironmental factors play a significant role concerning the SME owner's preferred entity harvesting strategy. The majority of SME owners in Sub-Saharan Africa pointed out that they prefer an outright sale as an entity harvesting strategy. The results show that this decision is largely influenced by the absence of an heir (macro-environmental factor). SME owners have little control over this aspect and as much as business skills can be learned, people's interest differs upon realising and accepting this reality, SME owners are left with the option of disposing of the entity

The results further reveal that among buyout options, the ILBO is more popular with SME owners as it was more preferred compared to all other buyout options. The findings further reveal that SME owners are worried about the volatility, uncertainty, chaos and unpredictability of the business environment. From the findings, the majority of SMEs are either declining or static and very few are making significant profits as most economies are in a recession. The present circumstances do not help SME owners in Zimbabwe who have consistently braved the economic downturn for over a decade and with the global economy in recession owing to the Covid-19 pandemic, this situation will drastically affect preferred entity harvesting options, possibly from an outright sale to mergers including some of the buyout

Despite the global recession that is very likely to have a bearing on preferred entity harvesting options, SME owners are somewhat hopeful that their businesses can have a second life. This is why apart from an outright sale, they believe that

*Entrepreneurship - Contemporary Issues*

approach banks for funding.

ing option, M = 4.4, SD = 0.89.

option, M = 3, SD = 1.41.

options.

options.

*4.4.1 SME justification for preferring various buyout options*

**4.4 Buyout**

In this research, SME owners who opted merging with other firms as a harvesting

• Lack of operating and growth capital. SME owners pointed out that if the firm is experiencing liquidity challenges, merging with a financially stable firm is the only route to preserving the legacy of the founder and keep initial business ideas, products, or services for a reasonable time in the market. Some of the SME owners pointed out that they had undertaken this harvesting practice before. For the previous mergers to occur, SME owners pointed out that the underlying reason that led to those mergers was liquidity problems. However, family and friends played an influential role in choosing the harvesting option. Other SME owners pointed out that they consider a business merger as it is a welcome opportunity to come out of financial distress without having to

The research sought the respondents' views on different types of buyouts they would consider as their harvesting options. The findings imply that buyout options are widely used by SMEs. Buyouts involve a transition from one set of owners to another where the previous owners lose control over the firm and the new ones pay a premium for shares that gives them a controlling interest in the firm. The results on the different types of buyouts as entity harvesting options preferred by SMEs owners show that management buy-in is the second most preferred entity harvest-

The findings reveal that SME owners are willing to surrender their businesses to external management for considerable value than their internal ones. Investor-led buyout (ILBO) was identified as the fourth preferred entity harvesting option, M = 3.6, SD = 1.67. SME owners argued that if the business is taken over by some investor institutions and is rejuvenated, their peers judge them better than if the same happens with former employees. Leveraged build-ups (LBUs) were identified by SME owners as the fifth preferred entity harvesting option, M = 3.4, SD = 1.51, whereas management buyout (MBO) was the sixth preferred entity harvesting

SME owners identified the unavailability of a successor, de-risking and entity owner poor health as major drivers for preferring various buyout entity harvesting

• No suitable family member to take over the firm. Similar to the outright sale harvesting option, the MBI, ILBO, LBU and MBO entity harvesting options were identified as harvesting options by SME owners citing unavailability of a suitable family member to drive the firm forward when they quit. SME owners experienced displeasure in the idea that a distant relative would inherit the estate in case their close relatives are not business focused. Hence, SME owners preferred to settle for either the MBI, ILBO, LBU or MBO entity harvesting

• De-risking. Some SME owners singled out the LBO entity harvesting option. They cited de-risking as their motivation for preferring this strategy. SMEs owners pointed out that the ILBO by design brings in the much-needed capital

technique cited lack of operating and growth capital as the major reason.

**32**

to fund business growth initiatives, in the process guaranteeing business continuity. In other words, a portion of SME owners is not interested in total entity harvesting but partial harvest.

• Poor health. Some SME owners opted for the ILBO harvesting option citing deteriorating health conditions. In this case, the owner sells a division of a firm instead of the entire firm. Health failure means that the SME owner is no longer able to participate in business affairs daily. In certain instances, the entrepreneur remains hopeful that he or she would recover and be actively involved in the affairs of the entity and possibly buy out the investor. For the hopeful entrepreneur, it is better to have somebody taking care of the firm until the entrepreneur's recovery point, and by design, the ILBO from the SME owner's perspective, it provides this opportunity.

#### **4.5 Employee share ownership scheme (ESOS)**

The research findings reveal that the ESOS is the least preferred entity harvesting options among SME owners, M = 2.8, SD = 1.30. SME owners who preferred this option pointed out that because they would have succeeded in building a strong performance-oriented culture, it was more strategically important for them to involve entity employees in the entity's succession plans. From the SME owner's perspective, having employees who are best performers to own a stake in the firm and participate in running the affairs of the entity would make it easier to pass on the performance-oriented culture to all incoming employees. This is critical in ensuring that the firm's competitive advantage is sustained and the firm's profitability abilities maintained for a foreseeable future.

#### **5. Discussion of the findings**

The findings presented in this chapter indicate that both macro- and microenvironmental factors play a significant role concerning the SME owner's preferred entity harvesting strategy. The majority of SME owners in Sub-Saharan Africa pointed out that they prefer an outright sale as an entity harvesting strategy. The results show that this decision is largely influenced by the absence of an heir (macro-environmental factor). SME owners have little control over this aspect and as much as business skills can be learned, people's interest differs upon realising and accepting this reality, SME owners are left with the option of disposing of the entity and salvage the value they may have added to the firm.

The results further reveal that among buyout options, the ILBO is more popular with SME owners as it was more preferred compared to all other buyout options. The findings further reveal that SME owners are worried about the volatility, uncertainty, chaos and unpredictability of the business environment. From the findings, the majority of SMEs are either declining or static and very few are making significant profits as most economies are in a recession. The present circumstances do not help SME owners in Zimbabwe who have consistently braved the economic downturn for over a decade and with the global economy in recession owing to the Covid-19 pandemic, this situation will drastically affect preferred entity harvesting options, possibly from an outright sale to mergers including some of the buyout options.

Despite the global recession that is very likely to have a bearing on preferred entity harvesting options, SME owners are somewhat hopeful that their businesses can have a second life. This is why apart from an outright sale, they believe that

through MBI and mergers, their entities or entity offerings are still relevant to the market. What also can be learned from the findings is that such decisions are not being made only in light of the bad economic situation but it appears they were made right from the start as part of the business plan and continue to be adjusted as the economic situation changes.

However, from findings, it has been observed that SMEs owners appear not ready to give current employees and management a chance to own shares and to run the business as a harvesting option. In contrast to extant literature which pointed out that the ESOS is meant to spread the wealth between entity employees and entity owners, the findings reveal that entity owners are utilising this strategy to secure entity profitability for a longer period by extending share ownership to best-performing employees who in turn will have the obligation to pass on the performance-oriented culture to newly recruited employees.

#### **6. Implications for studying entity harvesting strategies**

#### **6.1 Theoretical implications**

The chapter explained SME owner preferred entity harvesting strategies making use of primary data collected from four Southern African countries and to the author's best knowledge, by the time of writing, this research is the first to adopt such a strategy. More importantly, this chapter calls for more research to be done in this area and advance the debate on SME owner business exit strategies as they are critical in guiding the owner in achieving the entity's mission. Also, the findings presented in this chapter contribute significantly to the gap in extant literature in the Sub-Saharan Africa region and beyond.

#### **6.2 Practical implications**

The findings presented in this chapter point to the notion that the preferred SME owner entity harvesting strategies are largely reactionary. This means that SME owners respond to macro- and micro-environmental factors and by so doing they are more of spectators rather than influencers of the business environment. The only way SMEs can succeed in practicing their original entity harvesting plan without being reactionary is to work diligently and make sure that micro-environmental factors are aligned to their needs. As a result, business consultants, policymakers and business support institutions can help SMEs in training their employees to be the best performers and ensure that all employees with funds can participate in ESOS. Currently, the practice is that only best performing employees benefit from this initiative defeating the original purpose which it was designed for. Other training activities can be held to help SMEs with risk management skills which would help when the de-risking time comes. SME owner-preferred entity harvesting options are influenced by the unavailability of an heir to take over the reins of the entity. This affects mostly family-owned SMEs. It should be acknowledged that succession is not a short-term endeavour but a long-term issue. Therefore, the search and training for a potential successor should start early to ensure the continuity of the firm. The critical aspect of the succession plan is raising awareness among the current SME owner/managers to kick start the search and preparation for succession early. This will enable them to identify the needed support tools, measures and the relevant infrastructure to enhance the success chances of the incoming an heir. When this is done on time, the thinking is that succession plans would have less effect on the SME owner's preferred entity harvesting strategy.

**35**

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

The research is exploratory and descriptive. Although this is a stepping stone in trying to answer complex questions around SME owner-preferred entity harvesting strategies, considering that this was a cross-country analysis, issues related to culture and economic outlook were not controlled to determine if they had a major bearing on entity harvesting strategies reported. The reader should, therefore,

Future research should focus on similar harvesting strategies to establish causal relationships and also identifying boundaries in which the SME owner's choice of entity harvesting strategy is directly or indirectly influenced by country characteristics, age of the business and economic outlook. Given that this was an exploratory research, the author further advocates for more studies making use of both simple and complex multivariate statistical analysis to establish definite relationships on

The chapter outlined SME owner-preferred entity harvesting strategies and determined why the given option is preferred. Relying on cross-country data, the chapter concludes that the majority of SME owners prefer the outright sale option when harvesting their entities. This option is mainly influenced by the absence of an heir to take over the reins of the business implying that most SMEs are familyowned businesses. The chapter also concludes that SMEs do prefer other entity harvesting strategies such as mergers and buyout which includes among them ILBO, MBI, LBU and MBO as well as employee share ownership schemes. Mergers and buyout options are largely influenced by deteriorating economic conditions among other factors. The chapter further concludes that SMEs also prefer ESOS as a harvesting strategy but solely to secure the entity's competitive advantage and profitability for as long as they can. This is evident in their willingness to sell entity stake to best performing employees who in turn have the duty to pass on the performance-oriented culture to recruits. However, among all other harvesting strategies that SMEs do prefer, the IPO was not one of them. The reason could be that SMEs

are still battling with issues related to entity control and autonomy.

exercise caution in the interpretation and application of the findings.

**7. Limitations of the study**

**8. Future research**

this phenomenon.

**9. Conclusion**

### **7. Limitations of the study**

*Entrepreneurship - Contemporary Issues*

the economic situation changes.

**6.1 Theoretical implications**

**6.2 Practical implications**

the Sub-Saharan Africa region and beyond.

through MBI and mergers, their entities or entity offerings are still relevant to the market. What also can be learned from the findings is that such decisions are not being made only in light of the bad economic situation but it appears they were made right from the start as part of the business plan and continue to be adjusted as

However, from findings, it has been observed that SMEs owners appear not ready to give current employees and management a chance to own shares and to run the business as a harvesting option. In contrast to extant literature which pointed out that the ESOS is meant to spread the wealth between entity employees and entity owners, the findings reveal that entity owners are utilising this strategy to secure entity profitability for a longer period by extending share ownership to best-performing employees who in turn will have the obligation to pass on the

The chapter explained SME owner preferred entity harvesting strategies making use of primary data collected from four Southern African countries and to the author's best knowledge, by the time of writing, this research is the first to adopt such a strategy. More importantly, this chapter calls for more research to be done in this area and advance the debate on SME owner business exit strategies as they are critical in guiding the owner in achieving the entity's mission. Also, the findings presented in this chapter contribute significantly to the gap in extant literature in

The findings presented in this chapter point to the notion that the preferred SME owner entity harvesting strategies are largely reactionary. This means that SME owners respond to macro- and micro-environmental factors and by so doing they are more of spectators rather than influencers of the business environment. The only way SMEs can succeed in practicing their original entity harvesting plan without being reactionary is to work diligently and make sure that micro-environmental factors are aligned to their needs. As a result, business consultants, policymakers and business support institutions can help SMEs in training their employees to be the best performers and ensure that all employees with funds can participate in ESOS. Currently, the practice is that only best performing employees benefit from this initiative defeating the original purpose which it was designed for. Other training activities can be held to help SMEs with risk management skills which would help when the de-risking time comes. SME owner-preferred entity harvesting options are influenced by the unavailability of an heir to take over the reins of the entity. This affects mostly family-owned SMEs. It should be acknowledged that succession is not a short-term endeavour but a long-term issue. Therefore, the search and training for a potential successor should start early to ensure the continuity of the firm. The critical aspect of the succession plan is raising awareness among the current SME owner/managers to kick start the search and preparation for succession early. This will enable them to identify the needed support tools, measures and the relevant infrastructure to enhance the success chances of the incoming an heir. When this is done on time, the thinking is that succession plans would have less effect on the SME owner's preferred entity harvesting strategy.

performance-oriented culture to newly recruited employees.

**6. Implications for studying entity harvesting strategies**

**34**

The research is exploratory and descriptive. Although this is a stepping stone in trying to answer complex questions around SME owner-preferred entity harvesting strategies, considering that this was a cross-country analysis, issues related to culture and economic outlook were not controlled to determine if they had a major bearing on entity harvesting strategies reported. The reader should, therefore, exercise caution in the interpretation and application of the findings.

#### **8. Future research**

Future research should focus on similar harvesting strategies to establish causal relationships and also identifying boundaries in which the SME owner's choice of entity harvesting strategy is directly or indirectly influenced by country characteristics, age of the business and economic outlook. Given that this was an exploratory research, the author further advocates for more studies making use of both simple and complex multivariate statistical analysis to establish definite relationships on this phenomenon.

### **9. Conclusion**

The chapter outlined SME owner-preferred entity harvesting strategies and determined why the given option is preferred. Relying on cross-country data, the chapter concludes that the majority of SME owners prefer the outright sale option when harvesting their entities. This option is mainly influenced by the absence of an heir to take over the reins of the business implying that most SMEs are familyowned businesses. The chapter also concludes that SMEs do prefer other entity harvesting strategies such as mergers and buyout which includes among them ILBO, MBI, LBU and MBO as well as employee share ownership schemes. Mergers and buyout options are largely influenced by deteriorating economic conditions among other factors. The chapter further concludes that SMEs also prefer ESOS as a harvesting strategy but solely to secure the entity's competitive advantage and profitability for as long as they can. This is evident in their willingness to sell entity stake to best performing employees who in turn have the duty to pass on the performance-oriented culture to recruits. However, among all other harvesting strategies that SMEs do prefer, the IPO was not one of them. The reason could be that SMEs are still battling with issues related to entity control and autonomy.

*Entrepreneurship - Contemporary Issues*

### **Author details**

Herring Shava Department of Business Management, Faculty of Management and Commerce, University of Fort Hare, Alice, South Africa

\*Address all correspondence to: herringshava@gmail.com

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**37**

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

> [9] Chaniwa M, Nyawenze C, Mandumbu R, Mutsiveri G,

[10] Elouadi S. The promotion of partnership value through employee share ownership and customer share ownership. In: Corporate Governance Models and Applications in Developing Economies. Hershey PA, USA: IGI

[11] Honjo Y. Public or perish? From founding to initial public offering. Review of Managerial Science.

[12] Souitaris V, Zerbinati S, Peng B, Shepherd D. Should I stay or should I go? Founder power and exit via initial public offering. Academy of Management Journal. 2020;**63**(1):64-95

[13] Mantravadi DP, Reddy AV. Postmerger performance of acquiring firms from different industries in India. International Research Journal of Finance and Economics.

Global; 2020. pp. 192-204

2020;**20**:1-38

2008;**22**:192-204

Gadzirayi CT, Munyati VT, et al. Ending poverty through affordable credit to small-scale cotton farmers: The case of the cotton company of Zimbabwe. In: Scaling up SDGs Implementation 2020. Cham: Springer; 2020. pp. 115-127

[1] Meyer N, Hamilton L. Female entrepreneurs' business training and its effect on various entrepreneurial factors: Evidence from a developing country. International Journal of Economics and Finance Studies.

[2] Ahmed T, Chandran VG, Klobas JE, Liñán F, Kokkalis P. Entrepreneurship education programmes: How learning, inspiration and resources affect

intentions for new venture creation in a developing economy. The International Journal of Management Education.

[3] Maziriri ET, Chivandi A. Modelling key predictors that stimulate the entrepreneurial performance of small and medium-sized enterprises (SMEs) and poverty reduction:

Perspectives from SME managers in an emerging economy. Acta Commercii.

[4] van Rooyen D, Van Zyl JH. The role of the business environment in harvesting strategies. The Southern African Journal of Entrepreneurship and Small Business Management.

[5] DeTienne DR. Entrepreneurial exit as a critical component of the entrepreneurial process: Theoretical development. Journal of Business Venturing. 2010;**25**(2):203-215

[6] Nieman G, Nieuwenhuizen C. Entrepreneurship, a South African Perspective. 2nd ed. Pretoria: Van

[7] Houck TE. The great escape. Accounting Today. October 2008. p. 32

[8] Flanagan C. Help small business customers develop an exit strategy. North Western Financial Review.

Schaik Publishers; 2019

January 2009;**7**:5

**References**

2020;**12**(1):135-151

2020;**18**(1):100327

2020;**20**(1):1-5

2010;**3**(1):16-31

*Business Harvesting Strategies for Entrepreneurs DOI: http://dx.doi.org/10.5772/intechopen.93442*

### **References**

*Entrepreneurship - Contemporary Issues*

**36**

**Author details**

University of Fort Hare, Alice, South Africa

provided the original work is properly cited.

\*Address all correspondence to: herringshava@gmail.com

Department of Business Management, Faculty of Management and Commerce,

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

Herring Shava

[1] Meyer N, Hamilton L. Female entrepreneurs' business training and its effect on various entrepreneurial factors: Evidence from a developing country. International Journal of Economics and Finance Studies. 2020;**12**(1):135-151

[2] Ahmed T, Chandran VG, Klobas JE, Liñán F, Kokkalis P. Entrepreneurship education programmes: How learning, inspiration and resources affect intentions for new venture creation in a developing economy. The International Journal of Management Education. 2020;**18**(1):100327

[3] Maziriri ET, Chivandi A. Modelling key predictors that stimulate the entrepreneurial performance of small and medium-sized enterprises (SMEs) and poverty reduction: Perspectives from SME managers in an emerging economy. Acta Commercii. 2020;**20**(1):1-5

[4] van Rooyen D, Van Zyl JH. The role of the business environment in harvesting strategies. The Southern African Journal of Entrepreneurship and Small Business Management. 2010;**3**(1):16-31

[5] DeTienne DR. Entrepreneurial exit as a critical component of the entrepreneurial process: Theoretical development. Journal of Business Venturing. 2010;**25**(2):203-215

[6] Nieman G, Nieuwenhuizen C. Entrepreneurship, a South African Perspective. 2nd ed. Pretoria: Van Schaik Publishers; 2019

[7] Houck TE. The great escape. Accounting Today. October 2008. p. 32

[8] Flanagan C. Help small business customers develop an exit strategy. North Western Financial Review. January 2009;**7**:5

[9] Chaniwa M, Nyawenze C, Mandumbu R, Mutsiveri G, Gadzirayi CT, Munyati VT, et al. Ending poverty through affordable credit to small-scale cotton farmers: The case of the cotton company of Zimbabwe. In: Scaling up SDGs Implementation 2020. Cham: Springer; 2020. pp. 115-127

[10] Elouadi S. The promotion of partnership value through employee share ownership and customer share ownership. In: Corporate Governance Models and Applications in Developing Economies. Hershey PA, USA: IGI Global; 2020. pp. 192-204

[11] Honjo Y. Public or perish? From founding to initial public offering. Review of Managerial Science. 2020;**20**:1-38

[12] Souitaris V, Zerbinati S, Peng B, Shepherd D. Should I stay or should I go? Founder power and exit via initial public offering. Academy of Management Journal. 2020;**63**(1):64-95

[13] Mantravadi DP, Reddy AV. Postmerger performance of acquiring firms from different industries in India. International Research Journal of Finance and Economics. 2008;**22**:192-204

**39**

closeness to the market

**1. Introduction**

**Chapter 3**

**Abstract**

Domination of Value Creation

to the Market Dimensions on

Behavior: An Analysis from the

Perspective of Start-Up Companies

The aim of this study is to bridge the gap in literature by studying how far do growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market dimensions in start-up companies and scale-up companies have impact on entrepreneurial marketing (EM) behavior. Therefore, the goals in this study are: analyzing whether there is any difference in EM behavior for start-up company and scale-up company? The questionnaires were distributed to 406 business owners in Indonesia, spread throughout eight provinces. Start-up companies are companies that have been operating for less than 6 years, and scale-up companies are companies that have been operating for more than 6 years. Snowball sampling was used to select the chosen respondents, using the entire firms in Indonesia, be it services or manufacturing. The result of the study suggests that there is no difference in entrepreneurial marketing behavior between start-up companies and scale-up companies. Value creation networking is shown to be the most dominant dimension for startup companies in terms of its impact on entrepreneurial marketing behavior, as for scale-up company, the most dominant dimension is closeness to market dimension

**Keywords:** entrepreneurial marketing, growth orientation, opportunity orientation,

During the development stage, which is around year 1980, there were discussions about the pros and cons of EM [1]. The surfacing of EM was sparked from the critique towards customer centric model in marketing, which caused the lack

total customer focus, value creation networking, informal market analysis,

Networking and Closeness

Entrepreneurial Marketing

and Scale-Up Companies

*Christina Whidya Utami and Hendro Susanto*

in its impact on entrepreneurial marketing behavior.

#### **Chapter 3**

Domination of Value Creation Networking and Closeness to the Market Dimensions on Entrepreneurial Marketing Behavior: An Analysis from the Perspective of Start-Up Companies and Scale-Up Companies

*Christina Whidya Utami and Hendro Susanto*

#### **Abstract**

The aim of this study is to bridge the gap in literature by studying how far do growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market dimensions in start-up companies and scale-up companies have impact on entrepreneurial marketing (EM) behavior. Therefore, the goals in this study are: analyzing whether there is any difference in EM behavior for start-up company and scale-up company? The questionnaires were distributed to 406 business owners in Indonesia, spread throughout eight provinces. Start-up companies are companies that have been operating for less than 6 years, and scale-up companies are companies that have been operating for more than 6 years. Snowball sampling was used to select the chosen respondents, using the entire firms in Indonesia, be it services or manufacturing. The result of the study suggests that there is no difference in entrepreneurial marketing behavior between start-up companies and scale-up companies. Value creation networking is shown to be the most dominant dimension for startup companies in terms of its impact on entrepreneurial marketing behavior, as for scale-up company, the most dominant dimension is closeness to market dimension in its impact on entrepreneurial marketing behavior.

**Keywords:** entrepreneurial marketing, growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, closeness to the market

#### **1. Introduction**

During the development stage, which is around year 1980, there were discussions about the pros and cons of EM [1]. The surfacing of EM was sparked from the critique towards customer centric model in marketing, which caused the lack of innovation and therefore resulted in process and replication of relatively similar products and services, and not very innovative results [2]. For years, EM research was focused on companies; moreover, researchers and practitioners tried to identify the success factors of a company, but were not fully focused on EM problem [3]. In addition, EM domain at the time has not become a developed field of study with established ideas.

Discussion about Entrepreneurial Marketing (EM) surfaced as a marketing practice that can help companies operating in fast changing environments. EM originates from an intercept between marketing and entrepreneurship, and integrates marketing and entrepreneurship through the common concepts that the two fields possess [4]. EM approach can proactively take advantage of innovation and help manage risk as long as marketing process is intended to "create, communicate, and give added value to customers" [5].

Several previous studies identified several characteristics of EM behavior, such as decision making [6], resources decision making and decision based on intuition and experience [7], focus on opportunity recognition, flexible approach on market and exploiting smaller niche market [8]. From initial discussions conducted, there was a phenomenon where EM behavior is proven to be different between companies that have been operating longer (scale-up companies) and start-ups. This conclusion is based on several initial researches that show that startup companies were more successful in implementing entrepreneurial marketing, and scale-up company would also be more successful in implementing entrepreneurial marketing. Despite that, there was still no study that explicitly studied the implementation of EM on scale-up companies compared to start-up companies. Majority of EM studies depended on case study, and as a result, although it gave an overview of the companies' experience in detail, but it could not be generalized to various samples. Several studies conducted previously also tend to be unable to decide on the dimension that is most dominant that would contribute to the entrepreneurial marketing behavior if the researcher decided to research companies with certain characteristics.

Based on the reasons above, researcher will attempt to analyze the difference in entrepreneurial marketing behavior of start-up companies compared to scale-up companies. The unit of this study is companies located in Indonesia, and operating in eight provinces. Start-up company is defined as a company that has been conducting business operation for less than 6 years, whereas scale-up company is a company that has been operating for more than 6 years. Snowball sampling was used to select the respondents with the entirety of firms in Indonesia, be it services or manufacturing, as the population. Furthermore, this study is aimed to bridge the gap in literature by analyzing how far the difference is in the implementation of entrepreneurial marketing behavior between start-up company and scale-up company.

#### **2. Literature review**

In the study on EM definition [9], expanded it to a wider version by combining the definition of entrepreneurship and the definition of marketing of American Marketing Association (page 27): EM is an organizational function and a series of processes to create innovation, communicate, and give value to customer and to manage relationship with customer in a way that benefits the organization and its stakeholders, and this can be indicated by innovation, risk taking, proactive, that can be done without the currently existing resources. However in the initial

**41**

*Domination of Value Creation Networking and Closeness to the Market Dimensions…*

article focuses on the dimension that underlies both definitions.

conception, EM was often seen as reactive, not advanced and limited to individual's wants [4, 9, 10]. EM practice is describes as "an entrepreneur's unplanned action, not linear and visionary." Conceptualized EM as "proactive identification and exploitation of opportunities to obtain and maintain customers that is beneficial through innovative approach on risk management, increasing resources, and value creation," a more recent definition proposed in the literature [9, 10]. Researcher realized the two definitions are in accordance with the core concept of EM, and this

Several studies have explored various combinations of EM dimensions. Though fragmented, several researchers collectively formed EM paradigm [11, 12]. Several further studies were conducted by focusing on the understanding of the reciprocal relationship between the main constructs (for example, encouraged opportunity, proactive, focus on innovation, customer intensity, risk management, resource development and value creation) of Entrepreneurial Marketing. EM scale recently developed and tested it for convergent, discriminant and nominative validity. The latest development shows that EM is a multidimensional

Therefore, based on the results of various studies, it can be suggested that EM dimensions are as follows: growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness

EM is often linked with growth. Entrepreneur marketers often have long term goal in their marketing activity and aim to generate sales growth through long term relationship. Marketer's ambition to grow the company will eventually determine the company's business model, competitive strategy and resource management. To grow, marketers adopt several ways to grow their business, including increasing repeated business and creating a community of customers who are dedicated and loyal to the product. Several researchers suggested that on EM characteristic dimen-

EM puts emphasis on pursuing opportunities, regardless of consideration to the

existing resources. Marketers respond to the opportunities that arise by improvising and allocating their resources [13]. Even though opportunities can arise randomly, but EM is known to be proactive and to always look for new opportunities. Entrepreneurial marketers are able to see and have the willingness to be a pioneer in serving unfulfilled needs and capturing arising opportunities before their competitors. Therefore, innovation and creativity are important processes that help EM to change opportunity to reality. Companies that adopt EM often focus on creating new product category and directing their customer to respond to the result of company's innovation continuously [14]. Innovation is to be understood not only limited to the product or service, but also including the process or

EM make their customers their main priority and treat customers as active participants in their marketing decision making process. Marketers integrated their customers to their operation and accept regularly recommendations from customers. Customers' preference directly plays an important role in determining product approach, price, distribution, and communication of a company. In order to follow the change, EM behavior prioritizes customers' preference, using very focused, flexible approach that can be adjusted to the market [4, 13]. They are willing to make new promises to customers, modify their product design and change price to

Value creation through networking is an important concept in EM. EM collects market information and gain access to potential customer through their network.

give the most satisfactory product or service for the customers.

to the market whereby each EM dimension will be explained briefly below.

sion is encouraging growth in the identified target market.

*DOI: http://dx.doi.org/10.5772/intechopen.93628*

construct [9].

marketing strategy.

#### *Domination of Value Creation Networking and Closeness to the Market Dimensions… DOI: http://dx.doi.org/10.5772/intechopen.93628*

conception, EM was often seen as reactive, not advanced and limited to individual's wants [4, 9, 10]. EM practice is describes as "an entrepreneur's unplanned action, not linear and visionary." Conceptualized EM as "proactive identification and exploitation of opportunities to obtain and maintain customers that is beneficial through innovative approach on risk management, increasing resources, and value creation," a more recent definition proposed in the literature [9, 10]. Researcher realized the two definitions are in accordance with the core concept of EM, and this article focuses on the dimension that underlies both definitions.

Several studies have explored various combinations of EM dimensions. Though fragmented, several researchers collectively formed EM paradigm [11, 12]. Several further studies were conducted by focusing on the understanding of the reciprocal relationship between the main constructs (for example, encouraged opportunity, proactive, focus on innovation, customer intensity, risk management, resource development and value creation) of Entrepreneurial Marketing. EM scale recently developed and tested it for convergent, discriminant and nominative validity. The latest development shows that EM is a multidimensional construct [9].

Therefore, based on the results of various studies, it can be suggested that EM dimensions are as follows: growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market whereby each EM dimension will be explained briefly below.

EM is often linked with growth. Entrepreneur marketers often have long term goal in their marketing activity and aim to generate sales growth through long term relationship. Marketer's ambition to grow the company will eventually determine the company's business model, competitive strategy and resource management. To grow, marketers adopt several ways to grow their business, including increasing repeated business and creating a community of customers who are dedicated and loyal to the product. Several researchers suggested that on EM characteristic dimension is encouraging growth in the identified target market.

EM puts emphasis on pursuing opportunities, regardless of consideration to the existing resources. Marketers respond to the opportunities that arise by improvising and allocating their resources [13]. Even though opportunities can arise randomly, but EM is known to be proactive and to always look for new opportunities. Entrepreneurial marketers are able to see and have the willingness to be a pioneer in serving unfulfilled needs and capturing arising opportunities before their competitors. Therefore, innovation and creativity are important processes that help EM to change opportunity to reality. Companies that adopt EM often focus on creating new product category and directing their customer to respond to the result of company's innovation continuously [14]. Innovation is to be understood not only limited to the product or service, but also including the process or marketing strategy.

EM make their customers their main priority and treat customers as active participants in their marketing decision making process. Marketers integrated their customers to their operation and accept regularly recommendations from customers. Customers' preference directly plays an important role in determining product approach, price, distribution, and communication of a company. In order to follow the change, EM behavior prioritizes customers' preference, using very focused, flexible approach that can be adjusted to the market [4, 13]. They are willing to make new promises to customers, modify their product design and change price to give the most satisfactory product or service for the customers.

Value creation through networking is an important concept in EM. EM collects market information and gain access to potential customer through their network.

*Entrepreneurship - Contemporary Issues*

and give added value to customers" [5].

established ideas.

characteristics.

company.

**2. Literature review**

of innovation and therefore resulted in process and replication of relatively similar products and services, and not very innovative results [2]. For years, EM research was focused on companies; moreover, researchers and practitioners tried to identify the success factors of a company, but were not fully focused on EM problem [3]. In addition, EM domain at the time has not become a developed field of study with

Discussion about Entrepreneurial Marketing (EM) surfaced as a marketing practice that can help companies operating in fast changing environments. EM originates from an intercept between marketing and entrepreneurship, and integrates marketing and entrepreneurship through the common concepts that the two fields possess [4]. EM approach can proactively take advantage of innovation and help manage risk as long as marketing process is intended to "create, communicate,

Several previous studies identified several characteristics of EM behavior, such as decision making [6], resources decision making and decision based on intuition and experience [7], focus on opportunity recognition, flexible approach on market and exploiting smaller niche market [8]. From initial discussions conducted, there was a phenomenon where EM behavior is proven to be different between companies that have been operating longer (scale-up companies) and start-ups. This conclusion is based on several initial researches that show that startup companies were more successful in implementing entrepreneurial marketing, and scale-up company would also be more successful in implementing entrepreneurial marketing. Despite that, there was still no study that explicitly studied the implementation of EM on scale-up companies compared to start-up companies. Majority of EM studies depended on case study, and as a result, although it gave an overview of the companies' experience in detail, but it could not be generalized to various samples. Several studies conducted previously also tend to be unable to decide on the dimension that is most dominant that would contribute to the entrepreneurial marketing behavior if the researcher decided to research companies with certain

Based on the reasons above, researcher will attempt to analyze the difference in entrepreneurial marketing behavior of start-up companies compared to scale-up companies. The unit of this study is companies located in Indonesia, and operating in eight provinces. Start-up company is defined as a company that has been conducting business operation for less than 6 years, whereas scale-up company is a company that has been operating for more than 6 years. Snowball sampling was used to select the respondents with the entirety of firms in Indonesia, be it services or manufacturing, as the population. Furthermore, this study is aimed to bridge the gap in literature by analyzing how far the difference is in the implementation of entrepreneurial marketing behavior between start-up company and scale-up

In the study on EM definition [9], expanded it to a wider version by combining the definition of entrepreneurship and the definition of marketing of American Marketing Association (page 27): EM is an organizational function and a series of processes to create innovation, communicate, and give value to customer and to manage relationship with customer in a way that benefits the organization and its stakeholders, and this can be indicated by innovation, risk taking, proactive, that can be done without the currently existing resources. However in the initial

**40**

The information from network is also what's helping marketer to give product with the best quality to the customers, and to create a competitive advantage compared to the competitors [15]. Resources from network can help companies to manage their risks and allocate their resources more efficiently. This is especially applicable to small companies with marketing activities that are usually limited by their lack of resources. Note that entrepreneurial marketer's network is not limited to suppliers and customers, but also including competitors.

Entrepreneurial marketers often follow their intuition when making marketing decision and consider intuitive assessment as a very important part in assessing market potential [16]. Marketing decision under EM does not always depend on formal planning process. Company's marketing strategy can also appear and adjusted during implementation. Marketers have the tendency to not conduct formal market research since they believe that they gain intuitive understanding that is rich about the market through their constant contact with the customers. By taking into consideration customers' perception during the interaction, marketer can gain valuable market information and identify appropriate market opportunity.

EM often have decision-making process that is tightly related to the customer. They make decisions based on customer's feedback or information that they gain during the direct interaction or face-to-face conversation with the customer. Through relationship with suppliers and trade partners, marketers can gather information about the market and customer's change in preference. This information enables them to more effectively implement marketing strategy and communication. Several EM rely on experience when making decision about new product and service because they believe that experience helps make competent marketing decision.

Previous entrepreneurial studies consider 6 years or less as the conventional operational definition of start-up companies [17, 18]. This research also explored the validity of the results using different cut off, whereby the company has been operating for 6 or 7 years, but it did not make any difference. This further ensures that the cut off for start-up companies operating for 6 years has a strong judgment (**Figure 1**).

The relationship between EM and company's characteristic needs to be explored, two hypotheses about the relationship between the practice of EM in company and characteristic was beginning to be developed. Considering entrepreneurial behavior is often found in small companies, start-up companies and scale-up companies, this research studies the relationship between the practice of EM and company's characteristic, which is the operating age of the company. In the context of EM practices being related to company's age, several researchers admitted that company's age has significant impact towards the strategy and performance of the company [19]. Previous studies stated that entrepreneurial process usually happens at the beginning stages of company development [20]. Several studies have also provided evidence that shows that start-up companies have several characteristics that enables it to be more entrepreneurial than scale-up companies. Start-up companies are not limited by certain structures and routines that prevents them from thinking creatively. As a result, they can use their resources more innovatively and make more innovation. Several studies also found that start-up companies have slight advantage compared to scale-up companies in exploring new technology [21], and that start-up companies tend to have more innovation activities compared to scale-up companies. The lack of routine also enables start-up company to react more readily to rising market opportunity in unknown region better than scale-up companies. In a study, start-up company can make use of their knowledge from the international market and expand their business through the launch of new product or service, whereby scale-up companies are unable to do that [22]. For companies at

**43**

*Domination of Value Creation Networking and Closeness to the Market Dimensions…*

the beginning of the life stages (start-up), they do have a very well-defined knowledge management process. Start-up companies are more informal in their planning and marketing analysis [23] and often improvise to make or implement a solution [24]. Improvisation enables them to be more customer oriented by adjusting their product/service rapidly based on customer's preference and by using innovative marketing strategy that might not be thought up of by scale-up companies. Start-up companies emphasize more on network creation and relationship through using more of information from their network compared to scale-up companies. Network

and alliances help companies to plant themselves in their market and gather important market information through direct interaction with their customers. Researchers believe that network not only helps start-up companies identify new market opportunities, but also helps them to survive [25]. This might be the reason why start-up companies are able to grow in small market and in environments that do not require wide production asset [26]. Based on the discussion from the studies,

**H1.** Start-up companies have higher entrepreneurial marketing behavior than

This research used quantitative approach, since it examined the significance of EM dimension in determining the dominant dimension among start-up companies and scale-up companies. In quantitative approach, the study uses rationalization process of a phenomenon that occurred and measured the variable (indicator variable) that is being studied, and would subsequently try to make a generalized conclusion. The population of the study is companies in eight provinces in Indonesia. Snowball sampling was used to select the chosen respondents. Questionnaires were distributed to national sample from 406 business owners in Indonesia, spread throughout eight provinces. Start-up companies are companies that have been operating for less than 6 years, whereas scale-up companies are companies that have been operating for more than 6 years. The analysis technique to test the hypotheses proposed is by the use of multiple regression analysis and t-test difference test.

**H2.** Value creation networking will be the dominant dimension in start-up

*DOI: http://dx.doi.org/10.5772/intechopen.93628*

therefore the hypotheses are as follows:

companies and scale-up companies.

**3. Research methodology**

scale-up companies.

**Figure 1.**

*Conceptual model. Source: Christina [1].*

*Domination of Value Creation Networking and Closeness to the Market Dimensions… DOI: http://dx.doi.org/10.5772/intechopen.93628*

#### **Figure 1.**

*Entrepreneurship - Contemporary Issues*

and customers, but also including competitors.

market information and identify appropriate market opportunity.

they believe that experience helps make competent marketing decision.

The information from network is also what's helping marketer to give product with the best quality to the customers, and to create a competitive advantage compared to the competitors [15]. Resources from network can help companies to manage their risks and allocate their resources more efficiently. This is especially applicable to small companies with marketing activities that are usually limited by their lack of resources. Note that entrepreneurial marketer's network is not limited to suppliers

Entrepreneurial marketers often follow their intuition when making marketing decision and consider intuitive assessment as a very important part in assessing market potential [16]. Marketing decision under EM does not always depend on formal planning process. Company's marketing strategy can also appear and adjusted during implementation. Marketers have the tendency to not conduct formal market research since they believe that they gain intuitive understanding that is rich about the market through their constant contact with the customers. By taking into consideration customers' perception during the interaction, marketer can gain valuable

EM often have decision-making process that is tightly related to the customer. They make decisions based on customer's feedback or information that they gain during the direct interaction or face-to-face conversation with the customer. Through relationship with suppliers and trade partners, marketers can gather information about the market and customer's change in preference. This information enables them to more effectively implement marketing strategy and communication. Several EM rely on experience when making decision about new product and service because

Previous entrepreneurial studies consider 6 years or less as the conventional operational definition of start-up companies [17, 18]. This research also explored the validity of the results using different cut off, whereby the company has been operating for 6 or 7 years, but it did not make any difference. This further ensures that the cut off for start-up companies operating for 6 years has a strong judgment

The relationship between EM and company's characteristic needs to be explored,

two hypotheses about the relationship between the practice of EM in company and characteristic was beginning to be developed. Considering entrepreneurial behavior is often found in small companies, start-up companies and scale-up companies, this research studies the relationship between the practice of EM and company's characteristic, which is the operating age of the company. In the context of EM practices being related to company's age, several researchers admitted that company's age has significant impact towards the strategy and performance of the company [19]. Previous studies stated that entrepreneurial process usually happens at the beginning stages of company development [20]. Several studies have also provided evidence that shows that start-up companies have several characteristics that enables it to be more entrepreneurial than scale-up companies. Start-up companies are not limited by certain structures and routines that prevents them from thinking creatively. As a result, they can use their resources more innovatively and make more innovation. Several studies also found that start-up companies have slight advantage compared to scale-up companies in exploring new technology [21], and that start-up companies tend to have more innovation activities compared to scale-up companies. The lack of routine also enables start-up company to react more readily to rising market opportunity in unknown region better than scale-up companies. In a study, start-up company can make use of their knowledge from the international market and expand their business through the launch of new product or service, whereby scale-up companies are unable to do that [22]. For companies at

**42**

(**Figure 1**).

*Conceptual model. Source: Christina [1].*

the beginning of the life stages (start-up), they do have a very well-defined knowledge management process. Start-up companies are more informal in their planning and marketing analysis [23] and often improvise to make or implement a solution [24]. Improvisation enables them to be more customer oriented by adjusting their product/service rapidly based on customer's preference and by using innovative marketing strategy that might not be thought up of by scale-up companies. Start-up companies emphasize more on network creation and relationship through using more of information from their network compared to scale-up companies. Network and alliances help companies to plant themselves in their market and gather important market information through direct interaction with their customers. Researchers believe that network not only helps start-up companies identify new market opportunities, but also helps them to survive [25]. This might be the reason why start-up companies are able to grow in small market and in environments that do not require wide production asset [26]. Based on the discussion from the studies, therefore the hypotheses are as follows:

**H1.** Start-up companies have higher entrepreneurial marketing behavior than scale-up companies.

**H2.** Value creation networking will be the dominant dimension in start-up companies and scale-up companies.

#### **3. Research methodology**

This research used quantitative approach, since it examined the significance of EM dimension in determining the dominant dimension among start-up companies and scale-up companies. In quantitative approach, the study uses rationalization process of a phenomenon that occurred and measured the variable (indicator variable) that is being studied, and would subsequently try to make a generalized conclusion. The population of the study is companies in eight provinces in Indonesia. Snowball sampling was used to select the chosen respondents. Questionnaires were distributed to national sample from 406 business owners in Indonesia, spread throughout eight provinces. Start-up companies are companies that have been operating for less than 6 years, whereas scale-up companies are companies that have been operating for more than 6 years. The analysis technique to test the hypotheses proposed is by the use of multiple regression analysis and t-test difference test.

#### **4. Variable identification**

The dependent variable in this study is EM behavior, measured using 6 questions. Five points Likert scale is used as follows: agree, slightly agree, disagree, slightly disagree, and strongly disagree. The independent variables are categorized according to the EM dimensions, which are growth orientation, closeness to the market, value creation networking and informal market analysis, each measured through three questions, as for opportunity orientation and total customer focus are each measured through four questions (**Figure 2**).

From the sample of 406 companies there are 185 (45.56%) start-up companies and 221 (54.43%) scale-up companies that were the respondents. In terms of the company asset, there are 23% companies with asset between 200 and 500 million, 37% companies with assets more than 500 million to 10 billion, and 40% companies with assets more than 10 billion. The sample characteristics are based on the type of industries as follows: 3% service, 10% manufacturing, 3% real estate, 7% retail, 3% health tools industry, 3% biotechnology, 3% sugar refination, 3% property, 3% food and beverage, 3% retail houseware, 3% coffee processing, 3% trading company, 3% hospitality, 7% freight forwarding and logistic, 3% fishery, 7% batik industry, 3% paint company, 3% agency, 7% furniture, 10% digital industry, and 7% branding and graphic design.

All 406 companies have launched new product or service in their business with details as follows: 58% of the companies have launched new product or service in its business within ≤2 years, 26% of the companies have launched a new product or service within 2.5 ≤ 5 years, 13% of the companies have launched a new product or service within 5.5 ≤ 10 years and 2% of the companies have launched a new product or service within ≤10.5 tahun. Therefore, more than half of the sample has launched new product or service in less than 2 years. A total of 96% of the sample agreed and strongly agreed to appreciate process related to innovation and only 4% slightly disagreed or disagreed with innovation process.

In addition, below is the observation of respondents' answers for each of the questionnaires questions that can be seen in **Table 1** as follows:

Almost all responses from respondents for all questions have the mean of above 4, only the mean for the answers to opportunity orientation dimension question, which is "Our marketing effort leads the customer, and not to respond" and the three questions for all dimensions of informal analysis dimension that have answers mean between 3 and 3.5, which are "Introducing new product or service usually only involves limited research and formal market analysis," "Our marketing decisions are based more on informal customer feedback rather than formal market research," "It is important to rely on intuition when making marketing decision."

**45**

**Table 1.**

*Source: data processing, 2020.*

*Mean and standard deviation of respondents' answers.*

*Domination of Value Creation Networking and Closeness to the Market Dimensions…*

O3 Adding innovative product or service is very important to our

T1 Majority of our marketing decisions is based on what we learnt

T2 Our customers require us to act flexibly and according to their

T4 We adjust ourselves quickly to fulfill our customers'

V2 We use our friends and main industry partners extensively to

V3 Majority of our marketing decisions is based on information

I1 Introducing new product or service usually only involves

I2 Our marketing decisions are based more on informal customer

I3 It is important to rely on intuition when making marketing

C1 Customer demands are usually the reason why we introduce

C2 We usually introduce new product and service based on the

C3 We highly rely on experience when making marketing

EM1 Growth orientation is an important factor in building business

EM2 Opportunity orientation is an important factor in building

EM3 Total customer focus is an important factor in building

EM4 **Value Creation Through Networking** is an important factor

EM5 **Informal Market Analysis** is an important factor in building

EM6 **Closeness To The Market** is an important factor in building

success

from daily contact with the customers

specific needs

everchanging expectations

help us in developing and marketing our products and services

exchange with people in our personal and professional network

limited research and formal market analysis

feedback rather than formal market research

decision

new product and/ or service

recommendation from our suppliers

decision

success

business success

business success

in building business success

business success

business success

**Code Question Mean Std. deviation** G1 Long term growth is more important than immediate gain 4.5 0.7593 G2 Our main purpose is to grow the business 4.633 0.5405 G3 We aggressively try to expand our customer base 4.1601 0.9514 O1 We keep searching for new business opportunities 4.4113 0.73419 O2 Our marketing effort leads the customer, and not to respond 3.4704 1.33809

O4 Creativity stimulates good marketing decision 4.5739 0.65032

T3 Everyone in this company make customers their main priority 4.5123 0.71912

V1 We learn from our competitors 4.4039 0.81612

4.5 0.73954

4.2833 0.80189

4.0739 0.97851

4.4532 0.67515

4.2931 0.86084

4.1897 0.81103

3.1059 1.41635

3.4631 1.16634

3.2217 1.25122

4.9012 0.90122

4.9831 0.98316

4.7436 0.74367

4.5148 0.63131

4.4852 0.60739

4.5 0.63148

4.5 0.67678

4.3374 0.67909

4.4113 0.71372

*DOI: http://dx.doi.org/10.5772/intechopen.93628*

**Figure 2.** *Research model. Source: Christina [1].*


#### *Domination of Value Creation Networking and Closeness to the Market Dimensions… DOI: http://dx.doi.org/10.5772/intechopen.93628*

*Source: data processing, 2020.*

#### **Table 1.**

*Mean and standard deviation of respondents' answers.*

*Entrepreneurship - Contemporary Issues*

each measured through four questions (**Figure 2**).

disagreed or disagreed with innovation process.

questionnaires questions that can be seen in **Table 1** as follows:

The dependent variable in this study is EM behavior, measured using 6 questions. Five points Likert scale is used as follows: agree, slightly agree, disagree, slightly disagree, and strongly disagree. The independent variables are categorized according to the EM dimensions, which are growth orientation, closeness to the market, value creation networking and informal market analysis, each measured through three questions, as for opportunity orientation and total customer focus are

From the sample of 406 companies there are 185 (45.56%) start-up companies and 221 (54.43%) scale-up companies that were the respondents. In terms of the company asset, there are 23% companies with asset between 200 and 500 million, 37% companies with assets more than 500 million to 10 billion, and 40% companies with assets more than 10 billion. The sample characteristics are based on the type of industries as follows: 3% service, 10% manufacturing, 3% real estate, 7% retail, 3% health tools industry, 3% biotechnology, 3% sugar refination, 3% property, 3% food and beverage, 3% retail houseware, 3% coffee processing, 3% trading company, 3% hospitality, 7% freight forwarding and logistic, 3% fishery, 7% batik industry, 3% paint company, 3% agency, 7% furniture, 10% digital industry, and 7% branding and graphic design. All 406 companies have launched new product or service in their business with details as follows: 58% of the companies have launched new product or service in its business within ≤2 years, 26% of the companies have launched a new product or service within 2.5 ≤ 5 years, 13% of the companies have launched a new product or service within 5.5 ≤ 10 years and 2% of the companies have launched a new product or service within ≤10.5 tahun. Therefore, more than half of the sample has launched new product or service in less than 2 years. A total of 96% of the sample agreed and strongly agreed to appreciate process related to innovation and only 4% slightly

In addition, below is the observation of respondents' answers for each of the

Almost all responses from respondents for all questions have the mean of above 4, only the mean for the answers to opportunity orientation dimension question, which is "Our marketing effort leads the customer, and not to respond" and the three questions for all dimensions of informal analysis dimension that have answers mean between 3 and 3.5, which are "Introducing new product or service usually only involves limited research and formal market analysis," "Our marketing decisions are based more on informal customer feedback rather than formal market research," "It is important to rely on intuition when making marketing decision."

**4. Variable identification**

**44**

**Figure 2.**

*Research model. Source: Christina [1].*

#### **5. Analysis and discussion**

#### **5.1 Validity and reliability test**

Validity test using Pearson correlations shows that the value of calculated r is > table r, based on the significance test 0.01 (two-tailed), which means that the items above are valid. As for the reliability test, it was conducted using Cronbach's alpha that shows value of 0.876, higher than 0.6 which means that it is reliable, that the instrument used in the study to obtain information used can be relied on as a tool to collect data and can reveal actual information in the field.

#### **5.2 Hypothesis testing**

t-Test differences test is used to prove that there is a difference in the entrepreneurial marketing behavior between start-up and scale-up companies, based on **Tables 2** and **3** as follows.

**Table 2** shows that there are 185 (45.56%) start-up companies and 221 (54.43%) scale-up companies as respondents, with mean of 4.45 for start-up companies and mean of 4.45 for scale-up companies. The standard deviations for the two are 0.51 and 0.47 respectively, which indicates that the respondents' responses tend to be homogeneous.

**Table 3** shows EM differences test analysis for companies managed by founders and companies managed by professionals by using Levene's test in independent t-test. Sig value (two-tailed) or p value. In the test below the p value is 0.96, whereby it is >0.05**.** Since it is >0.05, then there is no statistically meaningful or significant difference between entrepreneurial marketing behavior of start-up companies and scale-up companies on the 0.05 probability level.

As for **Tables 4**–**6**, multiple regression tests were conducted to analyze whether the six dimensions have significant impact on entrepreneurial marketing behavior of start-up companies compared to scale-up companies.

According to **Table 4**, R value is 0.767 and R square value is 0.588 for start-up companies, and as for scale-up companies, the R is 0.606 and the R square is 0.444, which suggests that the percentage contribution of the independent variables (which are: growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market) on EM behavior is 58.8% for start-up companies and 37.0% for scale-up companies.

According to **Table 5**, it shows that the significance is 0.000 be it for start-up companies and also for scale-up companies, which means that there is a significant impact of growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market simultaneously on EM behavior of start-up companies and also for scale-up companies.

According to **Table 6**, it can be analyzed that the six dimensions have significant impact on entrepreneurial marketing behavior. For start-up companies, there are only two dimensions that are significant, which are opportunity orientation and value creation networking. As for scale-up companies, all dimensions are


**47**

*Domination of Value Creation Networking and Closeness to the Market Dimensions…*

**Upper**

0.09891

**Levene's test for equality of variance**

**F**

Entre

Equal variance

2.763

0.097

0.05

404

0.96

0.00245

0.04907

−0.09402

assume of

Equal variance

0.05

379.758

0.961

0.00245

0.0494

−0.09468

0.09957

assume of

**Table 3.** *T-test difference testing.*

mark2

**Sig**

**t**

**df**

**Sig. (2-tailed)**

**Mean difference**

**Std. error** 

**95% confidence interval of the difference**

**difference**

**Lower**

*DOI: http://dx.doi.org/10.5772/intechopen.93628*

**Table 2.** *Group statistic.* *Domination of Value Creation Networking and Closeness to the Market Dimensions… DOI: http://dx.doi.org/10.5772/intechopen.93628*


**Table 3.**

*T-test difference testing.*

*Entrepreneurship - Contemporary Issues*

**5. Analysis and discussion**

**5.1 Validity and reliability test**

**5.2 Hypothesis testing**

**Tables 2** and **3** as follows.

homogeneous.

Validity test using Pearson correlations shows that the value of calculated r is > table r, based on the significance test 0.01 (two-tailed), which means that the items above are valid. As for the reliability test, it was conducted using Cronbach's alpha that shows value of 0.876, higher than 0.6 which means that it is reliable, that the instrument used in the study to obtain information used can be relied on as a tool to

t-Test differences test is used to prove that there is a difference in the entrepreneurial marketing behavior between start-up and scale-up companies, based on

**Table 2** shows that there are 185 (45.56%) start-up companies and 221 (54.43%) scale-up companies as respondents, with mean of 4.45 for start-up companies and mean of 4.45 for scale-up companies. The standard deviations for the two are 0.51 and 0.47 respectively, which indicates that the respondents' responses tend to be

**Table 3** shows EM differences test analysis for companies managed by founders and companies managed by professionals by using Levene's test in independent t-test. Sig value (two-tailed) or p value. In the test below the p value is 0.96, whereby it is >0.05**.** Since it is >0.05, then there is no statistically meaningful or significant difference between entrepreneurial marketing behavior of start-up

As for **Tables 4**–**6**, multiple regression tests were conducted to analyze whether the six dimensions have significant impact on entrepreneurial marketing behavior

According to **Table 4**, R value is 0.767 and R square value is 0.588 for start-up companies, and as for scale-up companies, the R is 0.606 and the R square is 0.444, which suggests that the percentage contribution of the independent variables (which are: growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market) on EM behavior is 58.8% for start-up companies and 37.0% for scale-up companies. According to **Table 5**, it shows that the significance is 0.000 be it for start-up companies and also for scale-up companies, which means that there is a significant impact of growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market simultaneously on EM behavior of start-up companies and also for scale-up companies. According to **Table 6**, it can be analyzed that the six dimensions have significant

impact on entrepreneurial marketing behavior. For start-up companies, there are only two dimensions that are significant, which are opportunity orientation and value creation networking. As for scale-up companies, all dimensions are

Antremark2 Start-up 185 4.4595 0.51224 0.03766

**Start\_Scale Mean Std. deviation Std. error mean**

Scale-up 221 4.457 0.47518 0.03196

collect data and can reveal actual information in the field.

companies and scale-up companies on the 0.05 probability level.

of start-up companies compared to scale-up companies.

**46**

**Table 2.** *Group statistic.*


#### **Table 4.**

*Model summary.*


#### **Table 5.**

*ANOVA.*


#### **Table 6.**

*Coefficient.*

significant, which are growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market. They are deemed significant because the significance value is smaller than 0.05. Value creation networking variable is the most dominant dimension for startup companies, with beta value of 0.46, and as for scale-up companies, the most dominant dimension is closeness to the market, with beta value of 0.345.

**49**

*Domination of Value Creation Networking and Closeness to the Market Dimensions…*

The result of the study shows that there is no difference in entrepreneurial marketing behavior between start-up companies and scale-up companies. For both start-up and scale-up companies, value creation networking seems to be the most dominant dimension. For start-up companies, they use difference approach in pursuing their market opportunity. Start-up companies pursue opportunity by relying on speed, flexibility, and ability to satisfy market niche, whereas scale-up companies pursue opportunity by relying on financial resources and human resources [27]. Start-up companies have opportunistic, flexible and innovative marketing decision making process with clear target. Company can improvise and make sudden changes in their decision making pattern when involved with their market. As a result, they have the ability to react rapidly to environmental changes and tend to capture new opportunities at a faster rate than scale-up companies [6, 28]. Start-up companies have less decision makers that dominate compared to scale-up companies. As a result, decision and strategy in start-up companies will be directly impacted by the personal intention of the decision maker [29].

Finally, start-up companies have a more flat organizational structure compared to scale-up companies, and it makes them closer with the customers. Members of the company at all levels in start-up companies have potential to be involved in interactions at individual level and direct face to face interaction with the customers [6]. Also, it is relatively easy for start-up companies to access market information through direct means [30]. As a result, start-up companies have the tendency to invest in creating personal relationship with their main customers to build strong

In detail, this research found that start-up companies are more oriented to value creation to build networking in marketing. As for scale-up companies, closeness to the market dimension is shown to be the dimension with the most dominant impact

Various studies suggested that the EM behavior is common in start-up companies, and this suggests the assumption that scale-up company type is not suited for Entrepreneurial Marketing. However, this study has systematically found that there is not difference between the entrepreneurial marketing behavior of start-up and scale-up companies. However, it was found that for start-up companies, value creation networking is the most dominant dimension, and as for scale-up companies,

In the context of EM practices, the findings of this study, which are the characteristics of start-up and scale-up companies, are the right determining factor for EM practices. Therefore, this study gives important theoretical contribution, whereby EM behavior cannot be conceptualized only through the activities of start-up companies and scale-up companies, but should also use other steps that will represent the entrepreneurial level of a company better, such as analyzing the entrepreneurial

This study offers several implications for future studies. Whereby, the result of this

study illustrates that start-up companies do not have well defined market or established customer base, therefore they rely less on market demand/market information compared to scale-up companies when introducing new products. These findings suggest that future studies need to analyze how far EM can help in reducing effect of responsibility for newness within the company and to identify the best EM practices that should be adopted by the company so that they can survive in the long run.

closeness to the market dimension is the most dominant dimension.

*DOI: http://dx.doi.org/10.5772/intechopen.93628*

customer contact compared to scale-up companies.

on entrepreneurial behavior.

**7. Conclusion**

organization aspect.

**6. Discussion**

*Domination of Value Creation Networking and Closeness to the Market Dimensions… DOI: http://dx.doi.org/10.5772/intechopen.93628*

#### **6. Discussion**

*Entrepreneurship - Contemporary Issues*

**Table 4.** *Model summary.*

> Young (start-up)

**Table 5.** *ANOVA.*

**Type of companies Unstandardized** 

**coefficients**

**Type of companies Sum of squares df Mean** 

**Young Old**

**Std. error**

**Model R R square Adjusted R square Std. error of the estimate**

Young (<6 years) 0.767 0.588 0.579 0.33896 Old (>6 years) 0.608 0.370 0.352 0.38244

Residual 12.029 178 0.068

Old (scale-up) Regression 18.376 6 3.063 20.940 0.000 Residual 31.299 214 0.146

Total 48.279 184

Total 49.675 220

**B Beta**

**Young Old**

(Constant) 0.983 0.164 6.01 0

GrowthOrient1 0.165 0.051 0.194 3.227 0.001

OpportunityOrient2 0.053 0.055 0.061 0.976 0.33

TotasCustFocus3 0.065 0.044 0.087 1.463 0.145

ValueCreationNetwork4 0.46 0.055 0.568 8.352 0.0

InformalMarketAnalysis5 −0.006 0.025 −0.012 −0.24 0.811

ClosnessToTheMarket6 0.076 0.102 0.117 0.743 0.459

**Standardized coefficients**

**square**

Regression 36.250 6 6.042 89.404 0.000

**Young Old**

1.713 0.311 5.516 0

0.119 0.058 0.142 2.063 0.04

–0.106 0.055 –0.141 –1.933 0.055

0.254 0.059 0.268 4.334 0.00

0.178 0.049 0.25 3.669 0

−0.18 0.031 −0.412 −5.888 0

0.345 0.063 0.384 5.472 0

**t Sig.**

**F Sig.**

**Young Old**

**Young Old**

**48**

**Table 6.** *Coefficient.*

significant, which are growth orientation, opportunity orientation, total customer focus, value creation networking, informal market analysis, and closeness to the market. They are deemed significant because the significance value is smaller than 0.05. Value creation networking variable is the most dominant dimension for startup companies, with beta value of 0.46, and as for scale-up companies, the most dominant dimension is closeness to the market, with beta value of 0.345.

The result of the study shows that there is no difference in entrepreneurial marketing behavior between start-up companies and scale-up companies. For both start-up and scale-up companies, value creation networking seems to be the most dominant dimension. For start-up companies, they use difference approach in pursuing their market opportunity. Start-up companies pursue opportunity by relying on speed, flexibility, and ability to satisfy market niche, whereas scale-up companies pursue opportunity by relying on financial resources and human resources [27]. Start-up companies have opportunistic, flexible and innovative marketing decision making process with clear target. Company can improvise and make sudden changes in their decision making pattern when involved with their market. As a result, they have the ability to react rapidly to environmental changes and tend to capture new opportunities at a faster rate than scale-up companies [6, 28]. Start-up companies have less decision makers that dominate compared to scale-up companies. As a result, decision and strategy in start-up companies will be directly impacted by the personal intention of the decision maker [29].

Finally, start-up companies have a more flat organizational structure compared to scale-up companies, and it makes them closer with the customers. Members of the company at all levels in start-up companies have potential to be involved in interactions at individual level and direct face to face interaction with the customers [6]. Also, it is relatively easy for start-up companies to access market information through direct means [30]. As a result, start-up companies have the tendency to invest in creating personal relationship with their main customers to build strong customer contact compared to scale-up companies.

In detail, this research found that start-up companies are more oriented to value creation to build networking in marketing. As for scale-up companies, closeness to the market dimension is shown to be the dimension with the most dominant impact on entrepreneurial behavior.

#### **7. Conclusion**

Various studies suggested that the EM behavior is common in start-up companies, and this suggests the assumption that scale-up company type is not suited for Entrepreneurial Marketing. However, this study has systematically found that there is not difference between the entrepreneurial marketing behavior of start-up and scale-up companies. However, it was found that for start-up companies, value creation networking is the most dominant dimension, and as for scale-up companies, closeness to the market dimension is the most dominant dimension.

In the context of EM practices, the findings of this study, which are the characteristics of start-up and scale-up companies, are the right determining factor for EM practices. Therefore, this study gives important theoretical contribution, whereby EM behavior cannot be conceptualized only through the activities of start-up companies and scale-up companies, but should also use other steps that will represent the entrepreneurial level of a company better, such as analyzing the entrepreneurial organization aspect.

This study offers several implications for future studies. Whereby, the result of this study illustrates that start-up companies do not have well defined market or established customer base, therefore they rely less on market demand/market information compared to scale-up companies when introducing new products. These findings suggest that future studies need to analyze how far EM can help in reducing effect of responsibility for newness within the company and to identify the best EM practices that should be adopted by the company so that they can survive in the long run.

### **Acknowledgement**

The research was financially funded by the Ministry of Research, Technology, and Higher Education Directorate General of Research and Development (Kementerian Riset, Teknologi, dan Pendidikan Tinggi Direktorat Jenderal Penguatan Riset dan Pengembangan).

### **Author details**

Christina Whidya Utami\* and Hendro Susanto Ciputra University, Surabaya, Indonesia

\*Address all correspondence to: whidyautami@ciputra.ac.id

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**51**

*Domination of Value Creation Networking and Closeness to the Market Dimensions…*

[8] Stasch S. Guerilla marketing in new venture marketing strategies. In: Hills GE, Siu W, Malewicki D, editors. Research at the Marketing/ Entrepreneurship Interface. Chicago, IL: University of Illinois at Chicago; 1999.

[9] Kraus MW, Cote S, Keltner D. Social class, contextualism, and empathic accuracy. Psychological Science. 2010;**21**(11):1716-1723. DOI:

10.1177/2F0956797610387613

[11] Collinson E, Shaw E. Entrepreneurial marketing – A historical perspective on development and practice. Management Decision. 2001;**3**(4):761-766. DOI: 10.1108/

EUM0000000006221

[13] Becherer RC, Haynes PJ, Fletcher LP. Paths to profitability in owner-operated firms: The role of entrepreneurial marketing. Journal of Business and Entrepreneurship.

[14] Hacioglu G, Eren SS, Eren MS, Celikkan H. The effect of entrepreneurial marketing on firms' innovative performance in Turkish SMEs. Social and Behavioral Sciences. 2012;**58**:871-878. DOI: 10.1016/j.

[15] Gilmore A, Carson D, Grant K. SME marketing in practice. Marketing Intelligence & Planning. 2001;**9**(1):6-11. DOI: 10.1108/02634500110363583

2006;**43**(1/2):17-31

sbspro.2012.09.1065

[12] Jones R, Rowley J. Entrepreneurial marketing in small businesses: A conceptual exploration. International Small Business Journal. 2011;**29**(1):25- 36. DOI: 10.1177/2F0266242610369743

[10] Hills GE, Hultman C. Entrepreneurial marketing: Conceptual and empirical research opportunities. Entrepreneurship Research. 2013;**3**(4): 437-448. DOI: 10.1515/erj-2013-0064

pp. 57-67

*DOI: http://dx.doi.org/10.5772/intechopen.93628*

[1] Christina WU, Susanto H. Perilaku entrepreneurial marketing (Sebuah Tinjauan dari Skala Perusahaan). Business and Finance Journal. 2019;**4**(2):93-104. DOI: 10.33086/bfj. v4i2.1365. ISSN: 2527-4872 dan E-ISSN:

[2] Sheth JN, Newman BI, Gross BL. Why we buy what we buy: A theory of consumption values. Journal of Business Research. 1991;**22**(2):159-170. DOI: 10.1016/0148-2963(91)90050-8

[3] Scott M, Rosa P. Has firm analysis reached its limits? Time for a rethink. International Small Business Journal: Researching Entrepreneurship. 1996;**30**(8):81-89. DOI: 10.1177/02F0266242696144006

[4] Morris M, Schindehutte M,

[5] Miles MP, Darroch J. Large firms, entrepreneurial marketing processes, and the cycle of competitive advantage. European Journal of Marketing. 2006;**40**(5/6):485-501. DOI: 10.1108/03090560610657804

[6] Carson D, McCartan-Quinn D. Non-practice of theoretically based marketing in small business: Issues arising and their implications. Journal of Marketing Theory and Practice. 1995;**3**(4):24-32.

DOI: 10.1080/10696679.1995.11501702

[7] Thomas LC, Painbéni S, Barton H. Entrepreneurial marketing within the French wine industry. International Journal of Entrepreneurial Behavior & Research. 2013;**19**(2):238-260. DOI: 10.1108/13552551311310392

LaForge R. Entrepreneurial marketing: A construct for integrating emerging entrepreneurship and marketing perspectives. Journal of Marketing Theory and Practice. 2002;**10**(4):1-19. DOI: 10.1080/10696679.2002.11501922

2477-393X c

**References**

*Domination of Value Creation Networking and Closeness to the Market Dimensions… DOI: http://dx.doi.org/10.5772/intechopen.93628*

#### **References**

*Entrepreneurship - Contemporary Issues*

Penguatan Riset dan Pengembangan).

The research was financially funded by the Ministry of Research, Technology,

and Higher Education Directorate General of Research and Development (Kementerian Riset, Teknologi, dan Pendidikan Tinggi Direktorat Jenderal

**Acknowledgement**

**50**

**Author details**

Christina Whidya Utami\* and Hendro Susanto Ciputra University, Surabaya, Indonesia

provided the original work is properly cited.

\*Address all correspondence to: whidyautami@ciputra.ac.id

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

[1] Christina WU, Susanto H. Perilaku entrepreneurial marketing (Sebuah Tinjauan dari Skala Perusahaan). Business and Finance Journal. 2019;**4**(2):93-104. DOI: 10.33086/bfj. v4i2.1365. ISSN: 2527-4872 dan E-ISSN: 2477-393X c

[2] Sheth JN, Newman BI, Gross BL. Why we buy what we buy: A theory of consumption values. Journal of Business Research. 1991;**22**(2):159-170. DOI: 10.1016/0148-2963(91)90050-8

[3] Scott M, Rosa P. Has firm analysis reached its limits? Time for a rethink. International Small Business Journal: Researching Entrepreneurship. 1996;**30**(8):81-89. DOI: 10.1177/02F0266242696144006

[4] Morris M, Schindehutte M, LaForge R. Entrepreneurial marketing: A construct for integrating emerging entrepreneurship and marketing perspectives. Journal of Marketing Theory and Practice. 2002;**10**(4):1-19. DOI: 10.1080/10696679.2002.11501922

[5] Miles MP, Darroch J. Large firms, entrepreneurial marketing processes, and the cycle of competitive advantage. European Journal of Marketing. 2006;**40**(5/6):485-501. DOI: 10.1108/03090560610657804

[6] Carson D, McCartan-Quinn D. Non-practice of theoretically based marketing in small business: Issues arising and their implications. Journal of Marketing Theory and Practice. 1995;**3**(4):24-32. DOI: 10.1080/10696679.1995.11501702

[7] Thomas LC, Painbéni S, Barton H. Entrepreneurial marketing within the French wine industry. International Journal of Entrepreneurial Behavior & Research. 2013;**19**(2):238-260. DOI: 10.1108/13552551311310392

[8] Stasch S. Guerilla marketing in new venture marketing strategies. In: Hills GE, Siu W, Malewicki D, editors. Research at the Marketing/ Entrepreneurship Interface. Chicago, IL: University of Illinois at Chicago; 1999. pp. 57-67

[9] Kraus MW, Cote S, Keltner D. Social class, contextualism, and empathic accuracy. Psychological Science. 2010;**21**(11):1716-1723. DOI: 10.1177/2F0956797610387613

[10] Hills GE, Hultman C. Entrepreneurial marketing: Conceptual and empirical research opportunities. Entrepreneurship Research. 2013;**3**(4): 437-448. DOI: 10.1515/erj-2013-0064

[11] Collinson E, Shaw E. Entrepreneurial marketing – A historical perspective on development and practice. Management Decision. 2001;**3**(4):761-766. DOI: 10.1108/ EUM0000000006221

[12] Jones R, Rowley J. Entrepreneurial marketing in small businesses: A conceptual exploration. International Small Business Journal. 2011;**29**(1):25- 36. DOI: 10.1177/2F0266242610369743

[13] Becherer RC, Haynes PJ, Fletcher LP. Paths to profitability in owner-operated firms: The role of entrepreneurial marketing. Journal of Business and Entrepreneurship. 2006;**43**(1/2):17-31

[14] Hacioglu G, Eren SS, Eren MS, Celikkan H. The effect of entrepreneurial marketing on firms' innovative performance in Turkish SMEs. Social and Behavioral Sciences. 2012;**58**:871-878. DOI: 10.1016/j. sbspro.2012.09.1065

[15] Gilmore A, Carson D, Grant K. SME marketing in practice. Marketing Intelligence & Planning. 2001;**9**(1):6-11. DOI: 10.1108/02634500110363583

[16] Li Y-H, Huang J-W, Tsai M-T. Entrepreneurial orientation and firm performance: The role of knowledge creation process. Industrial Marketing Management. 2009;**38**(4):440-449. DOI: 10.1016/j.indmarman.2008.02.004

[17] Brush CG, Vanderwerf P. A comparison of methods and sources for obtaining estimates of new venture performance. Journal of Business Venturing. 1992;**14**(3):157-170. DOI: 10.1016/0883-9026(92)90010-O

[18] Robinson K, McDougall P. Entry barriers and new venture performance: A comparison of universal and contingency approaches. Strategic Management Journal. 2001;**22**(6/7):659- 685. DOI: 10.1002/smj.186

[19] Stinchcombe AL. Social structure and organizations. In: March JG, editor. Handbook of Organizations. Chicago, IL: Rand McNally; 1965. pp. 142-193

[20] Cunningham J, Lischeron J. Defining entrepreneurship. Journal of Small Business Management. 1991;**29**(1):45-61

[21] Nooteboom B, Haverbeke WV, Duysters G, Gilsing V, Van den Oord A. Optimal cognitive distance and absorptive capacity. Research Policy. 2007;**36**(7):1016-1034. DOI: 10.2139/ ssrn.903745

[22] Naldi L, Davidsson P. Entrepreneurial growth: The role of international knowledge acquisition as moderated by firm age. Journal of Business Venturing. 2013;**29**(5):687-703. DOI: 10.1016/j.jbusvent.2013.08.003

[23] Covin JG, Slevin DP. New venture strategic posture, structure, and performance: An industry life cycle analysis. Journal of Business Venturing. 1990;**5**(2):123-135. DOI: 10.1016/0883-9026(90)90004-D

[24] Zahra SA, Sapienza HJ, Davidsson P. Entrepreneurship and dynamic capabilities: A review, model and research agenda. Journal of Management Studies. 2006;**43**(4):917-955. DOI: 10.1111/j.1467-6486.2006.00616.x

**Chapter 4**

**Abstract**

ventures, social reporting

maximize shareholders welfare, not value [1].

**1. Introduction**

**53**

Measuring a Blended Performance:

Managerial Insights from the Field

The commitment to generating a blended value is increasingly spreading in the business sector. At the forefront of this movement, impact ventures are organizations born to produce value for the society, i.e. social impact, while engaging in commercial activities to sustain their operations. On the other end, we have observed an increased emphasis on more responsible, sustainable practices that traditional for-profit businesses have been called to establish. Accounting for and reporting on social impact has become increasingly of interest to a range of institutions and sectors, with the result that many competing methodologies, approaches, guidelines and standards have been introduced. The chapter performs a comprehensive review of existing approaches for impact measurement and management implemented by socially-oriented ventures (both not for profit organizations and for-profit businesses) focusing on both methodological, governance and operational barriers and enabling factors of the practices. Then, it drafts a framework which helps any ventures to structure a process and methodology to measure its blended performance. The research not only contributes to the scant literature on impact entrepreneurship but impact ventures might offer a compelling laboratory to disentangle the obstacles posed by the combined achievement of financial and social

of Impact Entrepreneurship

*Irene Bengo, Veronica Chiodo and Valentina Tosi*

objectives and how organizations might address these challenges.

**Keywords:** social impact, performance measurement, blended value, social

The commitment to generating a blended value, which produces positive effects on society alongside economic returns, is spreading in the business sector. Corporations are increasingly asked to produce not only economic but also social value. Recently, Hart and Zingales have promoted this idea, stating that, companies should

Therefore, on one end, the organization delivering social services has progressively acquired the know-how, tools, and models which usually characterize the business world, leading to the establishment of new enterprises defined as *social ventures* [2]. Social ventures (SVs) are hybrid organizations where their primary aim is to provide solutions to the most wicked problems – such as aging, climate change, refugee's crisis – leveraging on forms of entrepreneurship to sustain their operations

[25] Watson J. Modeling the relationship between networking and firm performance. Journal of Business Venturing. 2007;**22**(6):852-874. DOI: 10.1016/j.jbusvent.2006.08.001

[26] Katila R, Shane S. When does lack of resources make new firms innovative? Academy of Management Journal. 2005;**48**(5):814-829. DOI: 10.5465/ amj.2005.18803924

[27] Dean TJ, Brown RL, Bamford CE. Differences in large and small firm responses to environmental context: Strategic implications from a comparative analysis of business formations. Strategic Management Journal. 1998;**19**(8):709- 728. DOI: 10.1002/(SICI)1097- 0266(199808)19:8%3C709::AID-SMJ966%3E3.0.CO;2-9

[28] Chen MJ, Hambrick DC. Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior. Academy of Management Journal. 1995;**38**(2):453- 482. DOI: 10.5465/256688

[29] Brush CG, Chaganti R. Businesses without glamour? An analysis of resources on performance by size and age in small service and retail firms. Journal of Business Venturing. 1998;**7(2)**:233-257. DOI: 10.1016/ S0883-9026(97)00103-1

[30] Hisrich R. The need for marketing in entrepreneurship. Journal of Business & Industrial Marketing. 1992;**7**(3):53-57. DOI: 10.1108/08858629210035427

#### **Chapter 4**

*Entrepreneurship - Contemporary Issues*

[16] Li Y-H, Huang J-W, Tsai M-T. Entrepreneurial orientation and firm performance: The role of knowledge creation process. Industrial Marketing Management. 2009;**38**(4):440-449. DOI: 10.1016/j.indmarman.2008.02.004 and dynamic capabilities: A review, model and research agenda. Journal of Management Studies. 2006;**43**(4):917-955. DOI: 10.1111/j.1467-6486.2006.00616.x

between networking and firm performance. Journal of Business Venturing. 2007;**22**(6):852-874. DOI: 10.1016/j.jbusvent.2006.08.001

amj.2005.18803924

[25] Watson J. Modeling the relationship

[26] Katila R, Shane S. When does lack of resources make new firms innovative? Academy of Management Journal. 2005;**48**(5):814-829. DOI: 10.5465/

[27] Dean TJ, Brown RL, Bamford CE.

Management Journal. 1998;**19**(8):709-

[28] Chen MJ, Hambrick DC. Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior. Academy of Management Journal. 1995;**38**(2):453-

[29] Brush CG, Chaganti R. Businesses without glamour? An analysis of resources on performance by size and age in small service and retail firms. Journal of Business Venturing. 1998;**7(2)**:233-257. DOI: 10.1016/

[30] Hisrich R. The need for marketing in entrepreneurship. Journal of Business & Industrial Marketing. 1992;**7**(3):53-57. DOI: 10.1108/08858629210035427

Differences in large and small firm responses to environmental context: Strategic implications from a comparative analysis of business formations. Strategic

728. DOI: 10.1002/(SICI)1097- 0266(199808)19:8%3C709::AID-

SMJ966%3E3.0.CO;2-9

482. DOI: 10.5465/256688

S0883-9026(97)00103-1

[17] Brush CG, Vanderwerf P. A comparison of methods and sources for obtaining estimates of new venture performance. Journal of Business Venturing. 1992;**14**(3):157-170. DOI: 10.1016/0883-9026(92)90010-O

[18] Robinson K, McDougall P. Entry barriers and new venture performance:

[19] Stinchcombe AL. Social structure and organizations. In: March JG, editor. Handbook of Organizations. Chicago, IL: Rand McNally; 1965. pp. 142-193

[20] Cunningham J, Lischeron J. Defining entrepreneurship. Journal of Small Business Management.

[21] Nooteboom B, Haverbeke WV, Duysters G, Gilsing V, Van den Oord A.

Optimal cognitive distance and absorptive capacity. Research Policy. 2007;**36**(7):1016-1034. DOI: 10.2139/

[22] Naldi L, Davidsson P. Entrepreneurial growth: The role of international knowledge acquisition as moderated by firm age. Journal of Business Venturing. 2013;**29**(5):687-703. DOI: 10.1016/j.jbusvent.2013.08.003

[23] Covin JG, Slevin DP. New venture strategic posture, structure, and performance: An industry life cycle analysis. Journal of Business Venturing. 1990;**5**(2):123-135.

[24] Zahra SA, Sapienza HJ, Davidsson P. Entrepreneurship

DOI: 10.1016/0883-9026(90)90004-D

1991;**29**(1):45-61

ssrn.903745

A comparison of universal and contingency approaches. Strategic Management Journal. 2001;**22**(6/7):659-

685. DOI: 10.1002/smj.186

**52**

## Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship

*Irene Bengo, Veronica Chiodo and Valentina Tosi*

#### **Abstract**

The commitment to generating a blended value is increasingly spreading in the business sector. At the forefront of this movement, impact ventures are organizations born to produce value for the society, i.e. social impact, while engaging in commercial activities to sustain their operations. On the other end, we have observed an increased emphasis on more responsible, sustainable practices that traditional for-profit businesses have been called to establish. Accounting for and reporting on social impact has become increasingly of interest to a range of institutions and sectors, with the result that many competing methodologies, approaches, guidelines and standards have been introduced. The chapter performs a comprehensive review of existing approaches for impact measurement and management implemented by socially-oriented ventures (both not for profit organizations and for-profit businesses) focusing on both methodological, governance and operational barriers and enabling factors of the practices. Then, it drafts a framework which helps any ventures to structure a process and methodology to measure its blended performance. The research not only contributes to the scant literature on impact entrepreneurship but impact ventures might offer a compelling laboratory to disentangle the obstacles posed by the combined achievement of financial and social objectives and how organizations might address these challenges.

**Keywords:** social impact, performance measurement, blended value, social ventures, social reporting

#### **1. Introduction**

The commitment to generating a blended value, which produces positive effects on society alongside economic returns, is spreading in the business sector. Corporations are increasingly asked to produce not only economic but also social value. Recently, Hart and Zingales have promoted this idea, stating that, companies should maximize shareholders welfare, not value [1].

Therefore, on one end, the organization delivering social services has progressively acquired the know-how, tools, and models which usually characterize the business world, leading to the establishment of new enterprises defined as *social ventures* [2]. Social ventures (SVs) are hybrid organizations where their primary aim is to provide solutions to the most wicked problems – such as aging, climate change, refugee's crisis – leveraging on forms of entrepreneurship to sustain their operations [3]. On the other end, we have observed an increased emphasis on more responsible, sustainable and inclusive practices that traditional for-profit businesses have been called to establish or observe. Companies have started to consider the integration of social and environmental concerns no more as initiatives needed to be compliant with mandatory regulations but as a strategic part of the core business and they are moving from a responsive to a proactive approach [4]. Corporate Social Responsibility (CSR) has shifted from being a side-unit of the company to strategic leverage for the creation of economic value [5].

articulated view of the state of this domain and highlight the evolving trends to

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

The goal of fulfilling a social mission raises the question of how the impact that these organizations have on society should be assessed to understand if and how they are achieving their objectives and contributing to the well-being of society. Moreover, enterprises blended social and business logics have multiple stakeholders

Scholars have also used terminology such as social value [15, 16], social performance [17, 18], social returns [19] to express similar concepts. Different definitions

to account to, raising the quest for transparency and accountability [12, 13]. First, the definition of what social impact means is still controversial and

*"Social Impact Assessment includes the processes of analysing, monitoring and managing the intended and unintended social consequences, both positive and negative, of planned interventions (policies, programs, plans, projects) and any*

*"Impact only if it increases the quantity or quality of the enterprise's social outcomes*

*"The process of transforming patterns of thought, behavior, social relationships, institutions, and social structure to generate beneficial outcomes for individuals, communities, organizations, society, and/or the environment beyond the benefits for*

In this paper, we use a broad conceptualization of social impact to include considerations on the organizations' capacity to deliver social and environmental

Concerning social impact measurement, a comprehensive review of the literature indicates two historical trends: one addressing *social accounting* and *audit*, and the other on *social impact assessment* [23]. Social accounting and audit is defined as "a systematic analysis of the effects of an organization on its communities of interest or stakeholders" [24], p. 309 and has become a commonly used label for what has been named, among others, *corporate social reporting* or *social responsibility accounting* [25]. Essentially, it includes reporting on an organization's social activities, environmental impact, interactions with the employees, the community, customers and other stakeholders and, possibly, their consequences [26]. Social impact assessment "includes the processes of analysing, monitoring and managing the intended and unintended social consequences, both positive and negative, of planned interventions (policies, programs, projects) and any social change processes invoked by those interventions." [27], p. 5. [9], p. 1174 stressed that assessing social impact consists of "providing evidence that an organization is providing a real and tangible benefit to the community or the environment". The field has grown to use a diverse terminology to indicate slightly differing approaches within the same field, including *impact assessment*, *impact measurement*, *outcome measurement*, *performance evaluation*, *performance measurement*, *social accounting*, *social and environmental reporting*, *social impact measurement*, *social performance*, and, *triple bottom line reporting*. These terms typically cover a range

*social change processes invoked by those interventions." [20], p. 5*

*beyond what would otherwise have occurred." [21], p. 1*

*the instigators of such transformations." [22], p. 1252.*

value and of specific methods to measure it.

**55**

support organization approaching this practice to find their way.

differently translated based on the domain it is applied [14].

**2. Literature review**

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

could be found in literature as:

Within this context, social impact assessment has emerged as an endogenous practice to improve accountability and transparency of a large range of organizations, as well as to enhance communication among various actors, both aspects being essential to foster the growth of the whole sector [6]. Moreover, several contextual elements are raising the need to include the practice of measuring social impact in the organizations' operations: the attempt of public administrations to reengineer their procurement schemes according to the outcome-based paradigm; diffusion of evidence-based practices in philanthropy as well as in public policies; the emergence of the so-called social impact finance; and national governments are bringing in guidelines for measuring social impact [7]. Therefore, these elements increase the urgency for organizations to quantify and make explicit the social value generated. Indeed, social impact measurement and reporting can be strategic to improve their performance, access resources, and build organizational legitimacy.

Standards for measuring social value are still underdeveloped to date [8]. In fact, during the years, a large number of approaches, methods, frameworks and tools have been developed as an attempt to meet the diverse information needs of stakeholders in the sector. This ongoing proliferation of models is due to the fact the term social impact describes a very heterogenous array of effects on several users, different scales and type of activities [9].

However, such heterogeneity in approaches has not yet been fully systematized [10] and there is still an open debate on whether and how to find a common standard on social impact measurement. Those supporting the idea of a *golden standard*, used by all the organizations and harmonized among countries, state that it would allow the comparability of results and support the development of this domain. On the other end, the skeptical claim that this standard would lead to an excessive simplification losing the true soul of the social impact they try to measure. This would be detrimental for the sector because it raises the risk of the so-called *purpose washing* [11], namely when a business or financial institution claims to be impact-oriented without having any substantive social or environmental effects but just to leverage the momentum of the phenomenon for marketing purposes. Instead, they posit a transaction-based approach (a custom method and KPIs for each deal) is the most appropriate way to measure the real social changes an organization produces. However, this customized effort very often requires an organization to design a measurement infrastructure and gather specialized data from scratch. Therefore, specialized expertise is needed and this makes impact measurement and management very costly and time consuming especially for small impact ventures already operating in a resource-constraint environment.

Against this lack of a prevalent approach, organizations have many difficulties to surf this huge pool of methods, metrics, framework and processes.

Therefore, the purpose of this paper is to analyze existing practices of social impact measurement, with a specific focus on emerging ones, and discuss their characteristics. To this aim, we performed a broad review of academic and gray literature that focuses on social impact measurement and searched existing databases collecting relevant practices in the field. Based on the analysis of specific dimensions, we formulated a conceptual framework to provide a more clearly

articulated view of the state of this domain and highlight the evolving trends to support organization approaching this practice to find their way.

#### **2. Literature review**

[3]. On the other end, we have observed an increased emphasis on more responsible, sustainable and inclusive practices that traditional for-profit businesses have been called to establish or observe. Companies have started to consider the integration of social and environmental concerns no more as initiatives needed to be compliant with mandatory regulations but as a strategic part of the core business and they are moving from a responsive to a proactive approach [4]. Corporate Social Responsibility (CSR) has shifted from being a side-unit of the company to

Within this context, social impact assessment has emerged as an endogenous practice to improve accountability and transparency of a large range of organizations, as well as to enhance communication among various actors, both aspects being essential to foster the growth of the whole sector [6]. Moreover, several contextual elements are raising the need to include the practice of measuring social impact in the organizations' operations: the attempt of public administrations to reengineer their procurement schemes according to the outcome-based paradigm; diffusion of evidence-based practices in philanthropy as well as in public policies; the emergence of the so-called social impact finance; and national governments are bringing in guidelines for measuring social impact [7]. Therefore, these elements increase the urgency for organizations to quantify and make explicit the social value generated. Indeed, social impact measurement and reporting can be strategic to improve their performance, access resources, and build organizational legitimacy. Standards for measuring social value are still underdeveloped to date [8]. In fact, during the years, a large number of approaches, methods, frameworks and tools have been developed as an attempt to meet the diverse information needs of stakeholders in the sector. This ongoing proliferation of models is due to the fact the term social impact describes a very heterogenous array of effects on several users, dif-

However, such heterogeneity in approaches has not yet been fully systematized

[10] and there is still an open debate on whether and how to find a common standard on social impact measurement. Those supporting the idea of a *golden standard*, used by all the organizations and harmonized among countries, state that it would allow the comparability of results and support the development of this domain. On the other end, the skeptical claim that this standard would lead to an excessive simplification losing the true soul of the social impact they try to measure. This would be detrimental for the sector because it raises the risk of the so-called *purpose washing* [11], namely when a business or financial institution claims to be impact-oriented without having any substantive social or environmental effects but just to leverage the momentum of the phenomenon for marketing purposes. Instead, they posit a transaction-based approach (a custom method and KPIs for each deal) is the most appropriate way to measure the real social changes an organization produces. However, this customized effort very often requires an organization to design a measurement infrastructure and gather specialized data from scratch. Therefore, specialized expertise is needed and this makes impact measurement and management very costly and time consuming especially for small

impact ventures already operating in a resource-constraint environment.

surf this huge pool of methods, metrics, framework and processes.

Against this lack of a prevalent approach, organizations have many difficulties to

Therefore, the purpose of this paper is to analyze existing practices of social impact measurement, with a specific focus on emerging ones, and discuss their characteristics. To this aim, we performed a broad review of academic and gray literature that focuses on social impact measurement and searched existing databases collecting relevant practices in the field. Based on the analysis of specific dimensions, we formulated a conceptual framework to provide a more clearly

strategic leverage for the creation of economic value [5].

*Entrepreneurship - Contemporary Issues*

ferent scales and type of activities [9].

**54**

The goal of fulfilling a social mission raises the question of how the impact that these organizations have on society should be assessed to understand if and how they are achieving their objectives and contributing to the well-being of society. Moreover, enterprises blended social and business logics have multiple stakeholders to account to, raising the quest for transparency and accountability [12, 13].

First, the definition of what social impact means is still controversial and differently translated based on the domain it is applied [14].

Scholars have also used terminology such as social value [15, 16], social performance [17, 18], social returns [19] to express similar concepts. Different definitions could be found in literature as:

*"Social Impact Assessment includes the processes of analysing, monitoring and managing the intended and unintended social consequences, both positive and negative, of planned interventions (policies, programs, plans, projects) and any social change processes invoked by those interventions." [20], p. 5*

*"Impact only if it increases the quantity or quality of the enterprise's social outcomes beyond what would otherwise have occurred." [21], p. 1*

*"The process of transforming patterns of thought, behavior, social relationships, institutions, and social structure to generate beneficial outcomes for individuals, communities, organizations, society, and/or the environment beyond the benefits for the instigators of such transformations." [22], p. 1252.*

In this paper, we use a broad conceptualization of social impact to include considerations on the organizations' capacity to deliver social and environmental value and of specific methods to measure it.

Concerning social impact measurement, a comprehensive review of the literature indicates two historical trends: one addressing *social accounting* and *audit*, and the other on *social impact assessment* [23]. Social accounting and audit is defined as "a systematic analysis of the effects of an organization on its communities of interest or stakeholders" [24], p. 309 and has become a commonly used label for what has been named, among others, *corporate social reporting* or *social responsibility accounting* [25]. Essentially, it includes reporting on an organization's social activities, environmental impact, interactions with the employees, the community, customers and other stakeholders and, possibly, their consequences [26]. Social impact assessment "includes the processes of analysing, monitoring and managing the intended and unintended social consequences, both positive and negative, of planned interventions (policies, programs, projects) and any social change processes invoked by those interventions." [27], p. 5. [9], p. 1174 stressed that assessing social impact consists of "providing evidence that an organization is providing a real and tangible benefit to the community or the environment".

The field has grown to use a diverse terminology to indicate slightly differing approaches within the same field, including *impact assessment*, *impact measurement*, *outcome measurement*, *performance evaluation*, *performance measurement*, *social accounting*, *social and environmental reporting*, *social impact measurement*, *social performance*, and, *triple bottom line reporting*. These terms typically cover a range

of approaches that have their roots in program evaluation and performance measurement in the public and non-profit sectors [28].

Balanced Scorecard [39] was initially developed for corporates and it has been adapted for the non-profit and the social enterprise sectors [40]; the Social Return on Investment (SROI) has been widely used by a large range of actors [41]. The impact investors' community, especially in the United States, has widely adopted the Impact Reporting and Investment Standards (now IRIS+) developed by the Global Impact Investing Network (GIIN) to report on the impact of their investment in the sector. In the business world, a lot of companies have started to assess their social impact through the B Impact Assessment developed by B Lab, to obtain the B Corp certification. Simultaneously, sustainability and Environmental, Social, and Governance (ESG) accounting practices for businesses have been largely shaped by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). These few examples clearly highlight how the various perspectives of organizations in the sector resulted in an increasing number of models being developed but a comprehensive and systematic vie of them has not been yet developed.

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

The chapter performs a review of the existing social impact measurement

The practice of social impact measurement, as already underlined, is still emerging and very dynamic therefore we built our database from scratch merging

To select the models to be included in the analysis, we performed a search through Scopus and Google Scholar to search for the academic papers in the last five years that performed a review of approaches or described one single, well defined, method specific to measure social impact. We also carried out desk research of gray literature to find practitioner reports illustrating specific approaches, guidelines, tools and metrics to assess social and environmental impact. The search used the

The process yielded to 647 academic papers published between 2016 and 2020, and 123 practitioner reports. To further ensure the relevance of our sample, we reviewed the abstracts and excluded documents that did not discuss the measurement of social or environmental impact. From the documents, we identified 116 social impact measurement models. We excluded from the selection of those models that were either found to no longer be used or those that were not consistent with the objectives of our research. The most robust attempts to classify existing social impact measurement models used are [6, 9, 42] from which we identified 63 models (10 of them were no longer in use and were therefore excluded by the analysis). The other relevant a cluster of sources were papers and report belonging to the domain of social impact investing. For example, the [43] 12 modes as the most spread among social impact investors. Lastly, the analysis includes different efforts implemented by the corporate sector to measure ESG performance, sustainability

**Table 7** (in the Appendix) outlines all the identified models and which type of

After selecting the sample, we identified a number of variables through which we classified the models relying on previous studies. The dimensions used in the

organizations generated the social impact measured by the specific model.

models through data collected on secondary sources.

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

**3. Methodology**

**3.1 Data collection**

different sources.

keywords listed in **Table 1**.

and social responsibility.

**3.2 Data analysis**

**57**

More recently, in a seminal article on the Stanford Social Innovation Review, [29], p. 6 stressed the fact that "an impact evaluation should help determine why something works, not merely whether it works."

We use the terms social impact measurement in the manner employed by [30], to encompass the broad range of practices adopted by an organization to measure its progress towards its social goals.

Measuring social impact is crucial for many reasons. Lall [31] distinguishes between two fundamental factors: external, or *measuring to prove*, and internal, or *measuring to improve*.

On one end, the measurement process is thought to be capable to improve an organization's performance, because it allows a deep understanding of how to best allocate resources and efforts to maximize social outcomes. On the other end, the practice of social impact assessment may be seen as the process of providing validated evidence that the organization is generating a real and tangible benefit to the community or the environment [9]. [31, 32] also observe that the purpose and perceptions of impact measurement in impact investing processes actually change from legitimacy to learning in the course of time. Whereas [33] underlined that investor-investee relationships negotiated through the impact measurement process are generating a new set of impact measurement practices, which are relational and non-transactional in nature with an evolving and ongoing learning process for both. Trends in corporate sustainability have further enhanced the emphasis on impact measurement needs.

Therefore, social impact measurement and reporting are considered to be strategic to improve performance of the organization, access resources, and build organizational legitimacy [34].

However, the lack of a well-established framework for social and environmental accountability may prevent organizations, and particularly social ventures, to operate at their best capacity in the economy. In fact, the absence of reliable metrics may limit the investors' willingness to provide funding to the enterprise, due to the fact that they may not be able to make informed decisions on how to channel their funding in the most effective way to generate social value [6]. Moreover, the lack of a consolidated measurement system may be detrimental for the organization's management which may not have adequate information to support effective decision making and maximize social outcomes [32].

In recent years, there has been considerable progress in developing measurement and evaluation methods with numerous approaches being developed at the practitioners' level and a prominent role being played by foundations and impact investors [30]. Indeed, attention to impact has been often driven by funders who want to know whether their financial resources are making a difference on society, and the growing field of responsible, sustainable and impact investing has highly contributed to developments in this area. Other practitioners such as social analysts and managers of social ventures have also repeatedly tried to develop an appropriate framework for measuring and comparing social value creation [35].

Despite, the practice of social impact measurement has evolved quite rapidly in the last decades, scientific research has lagged behind. Therefore, a proper theorization of how to measure and compare the results of social value creation processes is still missing in the academic community [36]. The most sophisticated approaches in impact evaluation are experimental and quasi-experimental research designs, such as randomized control trials (RCTs) or the difference-in-differences technique have been rarely employed (e.g., [37, 38]). On the other hand, some of the most consolidated approaches have been developed by practitioners. For example, the

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

Balanced Scorecard [39] was initially developed for corporates and it has been adapted for the non-profit and the social enterprise sectors [40]; the Social Return on Investment (SROI) has been widely used by a large range of actors [41]. The impact investors' community, especially in the United States, has widely adopted the Impact Reporting and Investment Standards (now IRIS+) developed by the Global Impact Investing Network (GIIN) to report on the impact of their investment in the sector. In the business world, a lot of companies have started to assess their social impact through the B Impact Assessment developed by B Lab, to obtain the B Corp certification. Simultaneously, sustainability and Environmental, Social, and Governance (ESG) accounting practices for businesses have been largely shaped by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). These few examples clearly highlight how the various perspectives of organizations in the sector resulted in an increasing number of models being developed but a comprehensive and systematic vie of them has not been yet developed.

#### **3. Methodology**

of approaches that have their roots in program evaluation and performance mea-

More recently, in a seminal article on the Stanford Social Innovation Review, [29], p. 6 stressed the fact that "an impact evaluation should help determine why

We use the terms social impact measurement in the manner employed by [30], to encompass the broad range of practices adopted by an organization to measure its

Measuring social impact is crucial for many reasons. Lall [31] distinguishes between two fundamental factors: external, or *measuring to prove*, and internal, or

On one end, the measurement process is thought to be capable to improve an organization's performance, because it allows a deep understanding of how to best allocate resources and efforts to maximize social outcomes. On the other end, the practice of social impact assessment may be seen as the process of providing validated evidence that the organization is generating a real and tangible benefit to the community or the environment [9]. [31, 32] also observe that the purpose and perceptions of impact measurement in impact investing processes actually change from legitimacy to learning in the course of time. Whereas [33] underlined that investor-investee relationships negotiated through the impact measurement process are generating a new set of impact measurement practices, which are relational and non-transactional in nature with an evolving and ongoing learning process for both. Trends in corporate sustainability have further enhanced the emphasis on impact

Therefore, social impact measurement and reporting are considered to be stra-

However, the lack of a well-established framework for social and environmental accountability may prevent organizations, and particularly social ventures, to operate at their best capacity in the economy. In fact, the absence of reliable metrics may limit the investors' willingness to provide funding to the enterprise, due to the fact that they may not be able to make informed decisions on how to channel their funding in the most effective way to generate social value [6]. Moreover, the lack of a consolidated measurement system may be detrimental for the organization's management which may not have adequate information to support effective deci-

In recent years, there has been considerable progress in developing measurement and evaluation methods with numerous approaches being developed at the practitioners' level and a prominent role being played by foundations and impact investors [30]. Indeed, attention to impact has been often driven by funders who want to know whether their financial resources are making a difference on society, and the growing field of responsible, sustainable and impact investing has highly contributed to developments in this area. Other practitioners such as social analysts

and managers of social ventures have also repeatedly tried to develop an

appropriate framework for measuring and comparing social value creation [35]. Despite, the practice of social impact measurement has evolved quite rapidly in the last decades, scientific research has lagged behind. Therefore, a proper theorization of how to measure and compare the results of social value creation processes is still missing in the academic community [36]. The most sophisticated approaches in impact evaluation are experimental and quasi-experimental research designs, such as randomized control trials (RCTs) or the difference-in-differences technique have been rarely employed (e.g., [37, 38]). On the other hand, some of the most consolidated approaches have been developed by practitioners. For example, the

tegic to improve performance of the organization, access resources, and build

surement in the public and non-profit sectors [28].

something works, not merely whether it works."

progress towards its social goals.

*Entrepreneurship - Contemporary Issues*

*measuring to improve*.

measurement needs.

**56**

organizational legitimacy [34].

sion making and maximize social outcomes [32].

#### **3.1 Data collection**

The chapter performs a review of the existing social impact measurement models through data collected on secondary sources.

The practice of social impact measurement, as already underlined, is still emerging and very dynamic therefore we built our database from scratch merging different sources.

To select the models to be included in the analysis, we performed a search through Scopus and Google Scholar to search for the academic papers in the last five years that performed a review of approaches or described one single, well defined, method specific to measure social impact. We also carried out desk research of gray literature to find practitioner reports illustrating specific approaches, guidelines, tools and metrics to assess social and environmental impact. The search used the keywords listed in **Table 1**.

The process yielded to 647 academic papers published between 2016 and 2020, and 123 practitioner reports. To further ensure the relevance of our sample, we reviewed the abstracts and excluded documents that did not discuss the measurement of social or environmental impact. From the documents, we identified 116 social impact measurement models. We excluded from the selection of those models that were either found to no longer be used or those that were not consistent with the objectives of our research. The most robust attempts to classify existing social impact measurement models used are [6, 9, 42] from which we identified 63 models (10 of them were no longer in use and were therefore excluded by the analysis). The other relevant a cluster of sources were papers and report belonging to the domain of social impact investing. For example, the [43] 12 modes as the most spread among social impact investors. Lastly, the analysis includes different efforts implemented by the corporate sector to measure ESG performance, sustainability and social responsibility.

**Table 7** (in the Appendix) outlines all the identified models and which type of organizations generated the social impact measured by the specific model.

#### **3.2 Data analysis**

After selecting the sample, we identified a number of variables through which we classified the models relying on previous studies. The dimensions used in the


**Table 1.** *Keywords.*


analysis are listed in **Table 2**. The categories identified for each dimension have been used to conduct a coding analysis of documents, websites and academic articles describing the approaches. Therefore, the approach was then assigned to one or more category of each dimension. Lastly, a frequency analysis was conducted for each variable included, aiming to have a better understanding of the character-

Description

results.

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

effective.

**Target stakeholder of the measurement process** [45]

Assess strengths and weaknesses Focus on assessing the organization's structural and operational

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

Measure approach effectiveness Models which have been explicitly developed to measure the

environmental results. Performance improvement Approaches which, in addition to the purpose of assessing results,

allocating funding.

Performance measurement Approaches that have as primary objective to assess how well the

Portfolio management Support the investment process of capital providers (i.e. funders,

Sectoral Measurement approaches can be developed with a specific sectoral scope or they can be used for evaluating results in multiple sectors. Multi-sectoral

Managers This category identifies the main type of stakeholder which will use the results of the evaluation.

in the case of microfinance at its beginning).

capacity to deliver social impact, without evaluating specific end

effectiveness of a specific programmatic or sectoral approach (e.g.

organization, program or project is achieving its social or

are used to make the organization, program or project more

investors, etc.) when evaluating investment opportunities and

The category "Sector Stakeholders" refers to those cases where there is no specific focus on a single category of stakeholders.

**4. A decision-making framework for social impact measurement**

The analysis conducted identified 126 approaches to impact measurement developed over time by academia and practitioners in the sector. Among these, 10 were found to be no longer in use and were therefore excluded from the sample. A frequency analysis was conducted for each variable discussed in the methodology, aiming to have a better understanding of the characteristics of the approaches under

Most of the identified approaches were Methods, followed by frameworks (20,7%) and dashboards (20,7%) still representing a large part of the sample. Finally, 6 sets of metrics (5,2%) were identified. Concerning the driver of the

istics of the approaches under study.

**Scope** [48]

Funders/investors Sector stakeholders Public administrations

*Dimensions and categories.*

Others

**Table 2.**

**59**

**4.1 Results of the frequency analysis**

study. Findings are shown in **Table 3**.


#### **Table 2.**

**Keywords**

*Entrepreneurship - Contemporary Issues*

**Table 1.** *Keywords.*

**Type** [44]

**Driver** [45]

External; internal

**58**

**Purpose of the measurement** [46, 47]

Social impact measurement Social return evaluation Social impact assessment Social return metrics

Social performance evaluation ESG assessment

Nonfinancial performance assessment ESG rating Nonfinancial performance evaluation ESG measurement Nonfinancial performance metrics ESG evaluation Social return measurement ESG certification Social return assessment ESG label

Description

performance

process.

organization.

Method Provide a specific procedure to perform the measurement, often

Framework Provide a way for organizations to think about, design, plan,

Dashboard Dashboards provide a predefined "set of indicators and metrics to

Set of metrics Databases or catalogs of indicators to be chosen and used

External Approaches developed or used to serve the needs of internal

Internal The latter identifies those approaches, which are used to support a

Accountability Approaches intended to achieve transparency towards stakeholder

through dedicated reporting and disclosure.

through a step-by-step approach. These are able to guide the organization conducting the evaluation all the way to a final result.

implement and embed performance measurement into a project, program or organization as a whole. They do not prescribe a particular method or indicators to use to assess social impact or

cover different performance dimensions, that are considered representative of the results of the organization" [6], p. 13

autonomously by the evaluator, but they do not include any specific consideration on how to implement the measurement

stakeholders and primarily decision-makers within the

transparent reporting process towards external stakeholders.

Social performance metrics ESG standard assessment Nonfinancial performance measurement ESG assessment framework

Social impact evaluation Impact investing measurement Social impact metrics Impact investing assessment Social performance measurement Impact investing evaluation Social performance assessment Impact investing metrics

*Dimensions and categories.*

analysis are listed in **Table 2**. The categories identified for each dimension have been used to conduct a coding analysis of documents, websites and academic articles describing the approaches. Therefore, the approach was then assigned to one or more category of each dimension. Lastly, a frequency analysis was conducted for each variable included, aiming to have a better understanding of the characteristics of the approaches under study.

#### **4. A decision-making framework for social impact measurement**

#### **4.1 Results of the frequency analysis**

The analysis conducted identified 126 approaches to impact measurement developed over time by academia and practitioners in the sector. Among these, 10 were found to be no longer in use and were therefore excluded from the sample. A frequency analysis was conducted for each variable discussed in the methodology, aiming to have a better understanding of the characteristics of the approaches under study. Findings are shown in **Table 3**.

Most of the identified approaches were Methods, followed by frameworks (20,7%) and dashboards (20,7%) still representing a large part of the sample. Finally, 6 sets of metrics (5,2%) were identified. Concerning the driver of the

#### *Entrepreneurship - Contemporary Issues*


category. Most of the models analyzed have a multi-sectoral scope (84,5%), while only 15,5% of the models in the sample have a specific sectoral focus. As far as the target audience is concerned, we found that most models were structured to inform funders and investors (56,9%) or managers (24,1%). A large part of the sample was targeted at general sector stakeholders (20,7%), while one model was aimed at informing other categories of stakeholders such as the organization's staff or

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

After reviewing the distribution of the sample within the categories identified

Referring to activities *Social Ventures* as the main unit of analysis, the organization can mostly rely on specific procedure able to guide the organization conducting the evaluation all the way to a final result. The method might help in the managing performance of the organization, functioning as a decision-making tool. Indeed, the main purpose of the identified approaches is performance measurement, followed by portfolio management in case the organizations, is an investor. It is interesting that very few approaches are seen as an accountability tool or enable them to reach a deep level of analysis to really improve the performance of the organization. Almost all the approaches are multi-sectoral and they mainly target investors and managers of the organization. Interestingly, the same holds once we consider *For-profit Companies*; the only crucial difference is that the prevalent target audience is the man-

The third category we analyzed is Investors. In this case, we see a greater number of dashboards in the Type of approach, supporting the idea that they favor synthetic measures. The main driver of measurement is to serve internal stakeholders and in particular, we see from the prevalent purpose that is Portfolio management that it is used by investment managers to assess the performance of

Lastly, the analysis reveals a low presence of approaches considering the social

Once we read the frequency analysis using the Type of approach as the main lens (**Table 5**), we can notice that Method and Dashboards are mostly used to produce information targeting external stakeholders; while, Frameworks, helping organizations to think about, design, plan, implement and embed performance measurement into a project, program or organization as a whole and Set of metrics are meant for internal stakeholders. Considering the scope, for performance measurement, Frameworks are the most appropriate; both Methods and Dashboards are mostly used for portfolio management. Set of metrics and Dashboards should be

Lastly, we can consider the audience the social impact measurement approaches are supposed to target (**Table 6**). Social impact measurement targeting the managers and other internal stakeholders is mainly used as a decision making instrument to improve the performance; once, the target is the financiers, the analysis confirms that about half of the approaches are used for portfolio managers followed by performance measurement. Few of the approaches are then really used to provide information to other relevant external stakeholders in the forms of social

on the basis of our conceptualization, we suggest that an organization should consider what to measure (the *unit of analysis of the measurement process*) or for whom to measure (the target audience). Therefore, an organization approaches the measurement practice might consider which its main unit of analysis of the measurement and building on this to identify the other features fitting to the process. Therefore, we set these two variables as the main driver of the analysis

and we investigated how they interact with the other categories interact

agers of the organizations and no more investors.

their portfolio to make the allocation of capital more efficient.

customers.

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

(**Tables 4** and **5**).

impact of policy.

**61**

considered reporting and disclosure.

reporting or other types of disclosure.

#### **Table 3.**

*Frequency analysis.*

measurement, most models analyzed have a primarily external focus (56%), while 26,7% have an internal focus. Some models are suited to serve both internal and external interests (17,2%). With respect to the ultimate purpose of the measurement approach, most models were designed to support portfolio management (45,7%), performance measurement efforts (36,2%) or accountability (19%). Some were particularly suited to support performance improvement (10,3%), assess organizational strengths and weaknesses (6%) or measure the effectiveness of a specific programmatic or sectoral approach (4,3%). Clearly, some models were able to respond to multiple purposes and were therefore present in more than one

#### *Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

category. Most of the models analyzed have a multi-sectoral scope (84,5%), while only 15,5% of the models in the sample have a specific sectoral focus. As far as the target audience is concerned, we found that most models were structured to inform funders and investors (56,9%) or managers (24,1%). A large part of the sample was targeted at general sector stakeholders (20,7%), while one model was aimed at informing other categories of stakeholders such as the organization's staff or customers.

After reviewing the distribution of the sample within the categories identified on the basis of our conceptualization, we suggest that an organization should consider what to measure (the *unit of analysis of the measurement process*) or for whom to measure (the target audience). Therefore, an organization approaches the measurement practice might consider which its main unit of analysis of the measurement and building on this to identify the other features fitting to the process. Therefore, we set these two variables as the main driver of the analysis and we investigated how they interact with the other categories interact (**Tables 4** and **5**).

Referring to activities *Social Ventures* as the main unit of analysis, the organization can mostly rely on specific procedure able to guide the organization conducting the evaluation all the way to a final result. The method might help in the managing performance of the organization, functioning as a decision-making tool. Indeed, the main purpose of the identified approaches is performance measurement, followed by portfolio management in case the organizations, is an investor. It is interesting that very few approaches are seen as an accountability tool or enable them to reach a deep level of analysis to really improve the performance of the organization. Almost all the approaches are multi-sectoral and they mainly target investors and managers of the organization. Interestingly, the same holds once we consider *For-profit Companies*; the only crucial difference is that the prevalent target audience is the managers of the organizations and no more investors.

The third category we analyzed is Investors. In this case, we see a greater number of dashboards in the Type of approach, supporting the idea that they favor synthetic measures. The main driver of measurement is to serve internal stakeholders and in particular, we see from the prevalent purpose that is Portfolio management that it is used by investment managers to assess the performance of their portfolio to make the allocation of capital more efficient.

Lastly, the analysis reveals a low presence of approaches considering the social impact of policy.

Once we read the frequency analysis using the Type of approach as the main lens (**Table 5**), we can notice that Method and Dashboards are mostly used to produce information targeting external stakeholders; while, Frameworks, helping organizations to think about, design, plan, implement and embed performance measurement into a project, program or organization as a whole and Set of metrics are meant for internal stakeholders. Considering the scope, for performance measurement, Frameworks are the most appropriate; both Methods and Dashboards are mostly used for portfolio management. Set of metrics and Dashboards should be considered reporting and disclosure.

Lastly, we can consider the audience the social impact measurement approaches are supposed to target (**Table 6**). Social impact measurement targeting the managers and other internal stakeholders is mainly used as a decision making instrument to improve the performance; once, the target is the financiers, the analysis confirms that about half of the approaches are used for portfolio managers followed by performance measurement. Few of the approaches are then really used to provide information to other relevant external stakeholders in the forms of social reporting or other types of disclosure.

measurement, most models analyzed have a primarily external focus (56%), while 26,7% have an internal focus. Some models are suited to serve both internal and external interests (17,2%). With respect to the ultimate purpose of the measurement approach, most models were designed to support portfolio management (45,7%), performance measurement efforts (36,2%) or accountability (19%). Some were particularly suited to support performance improvement (10,3%), assess organizational strengths and weaknesses (6%) or measure the effectiveness of a specific programmatic or sectoral approach (4,3%). Clearly, some models were able to respond to multiple purposes and were therefore present in more than one

**Variable Value Frequency (%)**

Method 62 53.4 Framework 24 20.7 Dashboard 24 20.7 Set of metrics 6 5.2

Internal 31 26.7 Externa 65 56.1 Internal; external 20 17.2

Accountability 22 19 Assess strengths and weaknesses 7 6 Measure approach effectiveness 5 4.3 Performance measurement 42 36.2 Performance improvement 12 10.3 Portfolio management 53 45.7

Sectoral 18 15.5 Multi-sectoral 98 84.5 Thematic 28 24.1 ESG 21 75 Employees 1 3.6 Environment 3 10.7 Sustainability 3 10.7

Managers 28 24.1 Funders and investors 66 56.9 Sector stakeholders 24 20.7 Public administrations 2 1.7 Others 1 0.9

*Type*

*Entrepreneurship - Contemporary Issues*

*Driver*

*Purpose*

*Scope*

*Target audience*

**Table 3.** *Frequency analysis.*

**60**


**Type Method Framework Dashboard Set of metrics Value (%) Value (%) Value (%) Value (%)**

**Target audience**

**Value (%) Value (%) Value (%) Value (%) Value (%)**

5 4.3 2 1.7 2 1.7 — — ——

3 2.6 1 0.9 1 0.9 — — ——

**Public administrations** **Others**

**stakeholders**

Assess strengths and weaknesses 1 0.9 3 2.6 3 2.6 — — Measure approach effectiveness 4 3.4 1 0.9 —— — — Performance measurement 27 23.3 8 6.9 5 4.3 2 1.7 Performance improvement 4 3.4 4 3.4 4 3.4 — — Portfolio management 37 31.9 5 4.3 10 8.6 1 0.9

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

Sectoral 11 9.5 5 4.3 2 1.7 — — Multi-sectoral 51 44 19 16.4 22 19 6 5.2

Managers 12 10.3 10 8.6 6 5.2 — — Financiers 41 35.3 9 7.6 13 11.2 3 2.6 Sector stakeholders 10 8.6 4 3.4 7 6 3 2.6 Public administrations 2 1.7 ———— — — Others — — 1 0.9 —— — —

**Managers Financiers Sector**

External 1 0.9 48 41.4 14 12.1 2 1.7 1 0.9 Internal 22 19 7 6 3 2.6 — — —— External; internal 5 4.3 11 9.5 7 6 — — ——

Accountability 2 1.7 9 7.6 10 8.6 — — 1 0.9

Performance measurement 8 6.9 23 20 10 8.6 2 1.7 — — Performance improvement 9 7.6 1 0.9 2 1.7 — — —— Portfolio management 3 2.6 50 43.1 3 2.6 — — ——

Sectoral 3 2.6 11 9.5 4 3.4 — — —— Multi-sectoral 25 21.6 55 47.4 20 17.2 2 1.7 1 0.9

**Scope**

**Table 5.**

**Driver**

**Purpose**

**Scope**

**Table 6.**

**63**

Assess strengths and weaknesses

Measure approach effectiveness

*Frequency Analysis by the target audience.*

**Target audience**

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

*Frequency Analysis by type.*

#### **Table 4.**

*Frequency Analysis by the unit of analysis.*



*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

#### **Table 5.**

**Unit of analysis of the measurement process**

**Value (%) Value (%) Value (%) Value (%)**

**Investors Public**

**institutions**

**For-profit companies**

**Social ventures**

Method 27 23.3 25 21.6 20 17.2 2 1.7 Framework 14 12.1 10 8.6 4 3.4 — — Dashboard 8 6.9 12 10.3 8 6.9 — — Set of metrics 2 1.7 5 4.3 1 0.9 — —

External 28 24.1 29 25 19 16.4 2 1.7 Internal 17 14.7 10 8.6 6 5.2 — — External; internal 5 4.3 13 11.2 8 6.9 — —

Accountability 9 7.8 11 9.5 4 3.4 — — Assess strengths and weaknesses 3 2.6 2 1.7 2 1.7 — — Measure approach effectiveness 2 1.7 — — 1 0.9 — — Performance measurement 24 20.7 17 14.7 11 9.5 1 0.9 Performance improvement 9 7.8 5 4.3 1 0.9 — — Portfolio management 16 13.8 27 23.3 22 19 1 0.9

Sectoral 6 5.2 3 2.6 12 10.3 1 0.9 Multi-sectoral 44 37.9 49 42.2 21 18.1 1 0.9

Managers 17 14.7 10 8.6 4 3.4 — — Funders/investors 22 19 34 29.3 25 21.6 1 0.9 Sector stakeholders 10 8.6 12 10.3 4 3.4 1 0.9 Public administrations 2 1.7 — — —— — — Others 1 0.9 — — —— — —

External 35 30.2 11 9.5 13 11.2 6 5.2 Internal 13 11.2 11 9.5 7 6 — — External; internal 14 12.1 2 1.7 4 3.4 — —

Accountability 4 3.4 5 4.3 9 7.6 4 3.4

**Type Method Framework Dashboard Set of metrics Value (%) Value (%) Value (%) Value (%)**

**Type**

*Entrepreneurship - Contemporary Issues*

**Driver**

**Purpose**

**Scope**

**Table 4.**

**Driver**

**Purpose**

**62**

**Target audience**

*Frequency Analysis by the unit of analysis.*

*Frequency Analysis by type.*


#### **Table 6.**

*Frequency Analysis by the target audience.*

Leveraging on the frequency analysis, we developed a framework to support impact-oriented organizations to select to the most appropriate model based on their needs and objective.

organization. In this part of the process, stakeholders will understand the needs, the type of impact and the approach of measurement (social, environmental or

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

To achieve this objective, the actors could agree on several founding principles to guide their work as proposed by the *UNPRI Operating Principles for Responsible Investment*, one of the approaches that could be used to develop the impact statement and impact mission. Other principles, for example, are developed by the *EY*

Stakeholder analysis implies the identification of the main actors that can affect or be affected in some way by project activities [49]. This analysis should start with the mapping of internal and external stakeholders. Once the most relevant stakeholders have been identified and classified according to their nature, it would be crucial to investigate, one by one, their specific interests or needs, the main capabilities they can devote to the project and all the possible actions the organization can implement in order to involve them, foster their participation into the project

Finally, it is interested to assign priority to stakeholders in order to classify them according to their level of power to influence the project and the level of interest in the service/product offered by the project. A reference to undertaking this step is

Social impact measurement models that better interpret this phase are the *Social*

The further step of the social impact measurement process is the definition of the Social Value Chain [52]. This tool allows to graphically represent the process of change that a project can generate in relation to a specific social problem. The main objective of this step is to identify the logical framework and the cause and effect

By developing the Social Value Chain it is possible to understand the social value's creation process. Moreover, it is an easily understandable representation of the logic through which the short-term results on beneficiaries lead to the genera-

*Theory of Change* and *Impact Management Project* are two models that well

Once defined the outcomes and impacts that the organization's activity is generating, it is possible to define the indicators (KPIs) to use in order to assess the generated social change. The and international institution such as *IRIS +*, *GRI* and *SASB Standards*, provide a huge repository of indicators that can be consulted, nevertheless, sometimes the impact dimensions do not coincide with those present on the existing repositories and therefore it is necessary to conceive

After the definition of the indicators, there is the data collection phase.

*Return On Investments (SROI)* and the *Social Impact Assessment (SIA)*.

links between the different elements that compose it.

tion of long-term impacts on the community of reference.

integrated).

*Total Value* and the *EPIC methodology*.

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

*4.2.3 Stakeholder analysis*

and satisfy their needs [50].

the *Power and Interest Grid* [51].

*4.2.4 Define the changes*

describe this phase.

ad-hoc indicators.

*4.2.6 Data collection*

**65**

*4.2.5 Define the indicators*

We suggest that the first two steps of the analysis to be considered are the Unit of analysis and the Target Audience. The second step is to select models that are appropriate respect to the purpose of the measurement and the driver of the measurement. Third, the scope and type of approach help refine the process.

#### **4.2 How to implement a social impact measurement**

The analysis of the 116 approached identified also enabled to outline a reference process that an organization approaching the design of its social impact measurement might follow. The process presented in this section emerged from the review of the implementation procedures and tools entailed by the existing methodologies. Indeed, for each of the step, we also provided a reference to one or more methods that the organization can look at.

The process foresees the steps outlined in **Figure 1** and described in the following sections.

#### *4.2.1 Measurement objectives and internal boundaries*

The scope of this first phase is setting the objectives of impact analysis (why and for whom), the level (e.g. portfolio of social investments/individual social enterprise), the available resources, the motivation for measuring social impact, the leader of the process (internal resource or a consultant).

More suitable models for the needs of this phase are *EY Total Value*, *EPIC methodology* and *WBCSD Measuring Impact Framework*.

#### *4.2.2 Impact statement and impact Mission*

In this phase, the organization defines what the impact perspective and the impact ambition are. First of all, it is fundamental to analyze social needs and their relevance linked to the context. This analysis implies the study of the effects and changes that could be generated in the long term by the activities of the

**Figure 1.** *Social impact measurement process.*

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

organization. In this part of the process, stakeholders will understand the needs, the type of impact and the approach of measurement (social, environmental or integrated).

To achieve this objective, the actors could agree on several founding principles to guide their work as proposed by the *UNPRI Operating Principles for Responsible Investment*, one of the approaches that could be used to develop the impact statement and impact mission. Other principles, for example, are developed by the *EY Total Value* and the *EPIC methodology*.

#### *4.2.3 Stakeholder analysis*

Leveraging on the frequency analysis, we developed a framework to support impact-oriented organizations to select to the most appropriate model based on

We suggest that the first two steps of the analysis to be considered are the Unit of analysis and the Target Audience. The second step is to select models that are appropriate respect to the purpose of the measurement and the driver of the mea-

The analysis of the 116 approached identified also enabled to outline a reference process that an organization approaching the design of its social impact measurement might follow. The process presented in this section emerged from the review of the implementation procedures and tools entailed by the existing methodologies. Indeed, for each of the step, we also provided a reference to one or more methods

The scope of this first phase is setting the objectives of impact analysis (why and for whom), the level (e.g. portfolio of social investments/individual social enterprise), the available resources, the motivation for measuring social impact, the

More suitable models for the needs of this phase are *EY Total Value*, *EPIC*

In this phase, the organization defines what the impact perspective and the impact ambition are. First of all, it is fundamental to analyze social needs and their relevance linked to the context. This analysis implies the study of the effects and

changes that could be generated in the long term by the activities of the

The process foresees the steps outlined in **Figure 1** and described in the

surement. Third, the scope and type of approach help refine the process.

**4.2 How to implement a social impact measurement**

*4.2.1 Measurement objectives and internal boundaries*

leader of the process (internal resource or a consultant).

*methodology* and *WBCSD Measuring Impact Framework*.

*4.2.2 Impact statement and impact Mission*

their needs and objective.

*Entrepreneurship - Contemporary Issues*

that the organization can look at.

following sections.

**Figure 1.**

**64**

*Social impact measurement process.*

Stakeholder analysis implies the identification of the main actors that can affect or be affected in some way by project activities [49]. This analysis should start with the mapping of internal and external stakeholders. Once the most relevant stakeholders have been identified and classified according to their nature, it would be crucial to investigate, one by one, their specific interests or needs, the main capabilities they can devote to the project and all the possible actions the organization can implement in order to involve them, foster their participation into the project and satisfy their needs [50].

Finally, it is interested to assign priority to stakeholders in order to classify them according to their level of power to influence the project and the level of interest in the service/product offered by the project. A reference to undertaking this step is the *Power and Interest Grid* [51].

Social impact measurement models that better interpret this phase are the *Social Return On Investments (SROI)* and the *Social Impact Assessment (SIA)*.

#### *4.2.4 Define the changes*

The further step of the social impact measurement process is the definition of the Social Value Chain [52]. This tool allows to graphically represent the process of change that a project can generate in relation to a specific social problem. The main objective of this step is to identify the logical framework and the cause and effect links between the different elements that compose it.

By developing the Social Value Chain it is possible to understand the social value's creation process. Moreover, it is an easily understandable representation of the logic through which the short-term results on beneficiaries lead to the generation of long-term impacts on the community of reference.

*Theory of Change* and *Impact Management Project* are two models that well describe this phase.

#### *4.2.5 Define the indicators*

Once defined the outcomes and impacts that the organization's activity is generating, it is possible to define the indicators (KPIs) to use in order to assess the generated social change. The and international institution such as *IRIS +*, *GRI* and *SASB Standards*, provide a huge repository of indicators that can be consulted, nevertheless, sometimes the impact dimensions do not coincide with those present on the existing repositories and therefore it is necessary to conceive ad-hoc indicators.

#### *4.2.6 Data collection*

After the definition of the indicators, there is the data collection phase.

Once identified which stakeholder to involve, there is the definition of the modality of the collection (interviews, focus group, questionnaire, observation) which is chosen according to the nature of the data to gather, the number of stakeholders to involve, and the available resources, and the mean of the collection (digital platforms, email, pa56per questionnaire, phone call) that should be consistent with the modality of collection selected. The last aspect to define is the timing of the collection, namely when the data collection phase should take place. According to the overall measurement process, data could be collected periodically, or at the beginning and at the end of a project or a pilot, etc.

Moreover, the findings support the idea that so far it has not been possible to establish a *golden standard* in the practice of social impact measurement. Indeed, we found several approaches with different characteristics to meet the heterogeneous needs of many stakeholders. Indeed, there seem to be tradeoffs between the scope of application of standards and the validity of comparison. Thus, it may be difficult for researchers and practitioners to develop direct social impact measurement standards that are universally applicable. Therefore, the chapter provides a contribution to practice by outlining a reference process that an organization can follow to design

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

In addition, our analysis confirmed to a certain extent that recent developments in impact measurement have been largely driven by impact investors. This clearly emerged by the results showing that most models in our sample, and particularly the most recently developed one, are designed to have funders and investors as their

The analysis also reveals some open issues that should need to be addressed to advance the practice of social impact measurement and might represent avenues of

The first challenge that hinders the practice of social impact measurement is the

availability of **suitable data.** It should be crucial to increase the quality of data, where quality refers not only to availability but also to homogeneity, interoperability and standardization. Scholars pinpointed the lack of database that directly observes the provision of social impact across multiple sectors and locations [53]. Second, there has been a global effort in recent years towards **harmonizing** indicators, instruments, and methods for assessing and analyzing results, assisted by international networks for data sharing and learning. Among them, we highlight the development of the Impact Management Project (IMP), spearheaded by Bridges Ventures, which has put together a structured network including the most influential organization in the field, such as the GIIN, B Lab, the Global Steering Group for Impact Investing, Social Value International, the International Finance Corporation, the World Benchmarking Alliance, UNDP, the Sustainability Accounting Standards Board, etc. The IMP is aiming to put forward a comprehensive framework, comparable to those used for financial analyses of traditional investing decisions, to be

Second, a recent trend is the emergence of a new generation of **open-source platforms** that generate opportunities for complex projects that enable real-time data entry and analysis, as well as the data processing, analysis, and visualization facility. Leveraging on latest technologies, artificial intelligence algorithms and big data analytics, combined with large and small data [54], is seen from many [55–57] as one of the possible paths to improve the usability of SIM both in finance and in the social sector. Although the recognized potential, there are still many aspects hampering the ability to leverage the power of data and technology to tackle societal challenges [58] and particularly their application to social impact measurement as well as to program and policy evaluation. According to the literature, these issues concern different aspects i.e. data ownership and accountability ethical issues like risk of doubling down on bias, reproduce inequalities or gender or race discrimination [59]; methodological issues like the importance of realizing safety mechanisms that can complement the algorithmic decision-making process or the trade-off between big data analysis and the work on the field [54]. Many specific elements that should be complemented with a broader and multi-actors effort finalized to the construction of a proper data analysis infrastructure, an essential element to share

widely used to articulate considerations concerning impact.

data and resources as many [60] have been affirming in recent years.

To conclude, the analysis presented in this chapter adds to the debate on whether there is a need of a standard method in social impact measurement by

its own methodology.

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

primary audience.

further research.

**67**

**Acumen Lean Data** approach uses the power of low-cost technology to collect high-quality data at a fraction of the time and cost of other methods.

#### *4.2.7 Impact quantification*

After collecting data, and verify their reliability, it is necessary to analyze them, calculate the quantitative indicators and describe the qualitative ones, according to the defined times and methods.

If it was not already available, the first assessment will provide the baseline or, in other words, the identification of the starting point. Then, it's important to periodically repeat the measurement, evaluating the results by comparing them with the defined targets and historical values.

Therefore, in this stage an attempt is made to go beyond the measurement of the simple output - the immediate result produced in terms of product/service - and to understand how the changes on the beneficiary directly produced by the organization/project activity (outcome) contribute to generating wider effects and over a longer time horizon (impact) and finally to understand, and possibly purify, the "collateral" effects (deadweight, attribution, drop off, displacement, etc.) that are difficult to trace back to the organization's activity. To overcome (or partially overcome) these impact measurement challenges (deeply explained into the fourth chapter), there are some analytical approaches like the counterfactual analysis that can be used in order to more precisely assess social impact.

Models that best suit the needs of this phase are, for examples the *Impact Weighted Accounts* and the *Social Return On Investments (SROI)*.

#### *4.2.8 Communication and reporting*

The final stage of the social impact measurement process is reporting to stakeholders, communicating and using the results, and embedding the measurement process in the organization.

This phase is strongly addressed within the *SDGs Compass approach*.

#### **5. Discussion and conclusions**

This chapter contributes to theory and practice in different ways. It fills the gap in the academic literature of systematizing the existing heterogeneous pool of approaches to conduct social impact measurement. Indeed, we first identify 116 approaches (see the **Table 7** in the Annex) which the most used so far; second, we suggest several dimensions that can be employed to analyze and classify these approaches. Third, we combine these dimensions to create a framework able to support organization eager to design their own social impact measurement infrastructure in selecting the proper instruments, metrics and approach.

#### *Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

Moreover, the findings support the idea that so far it has not been possible to establish a *golden standard* in the practice of social impact measurement. Indeed, we found several approaches with different characteristics to meet the heterogeneous needs of many stakeholders. Indeed, there seem to be tradeoffs between the scope of application of standards and the validity of comparison. Thus, it may be difficult for researchers and practitioners to develop direct social impact measurement standards that are universally applicable. Therefore, the chapter provides a contribution to practice by outlining a reference process that an organization can follow to design its own methodology.

In addition, our analysis confirmed to a certain extent that recent developments in impact measurement have been largely driven by impact investors. This clearly emerged by the results showing that most models in our sample, and particularly the most recently developed one, are designed to have funders and investors as their primary audience.

The analysis also reveals some open issues that should need to be addressed to advance the practice of social impact measurement and might represent avenues of further research.

The first challenge that hinders the practice of social impact measurement is the availability of **suitable data.** It should be crucial to increase the quality of data, where quality refers not only to availability but also to homogeneity, interoperability and standardization. Scholars pinpointed the lack of database that directly observes the provision of social impact across multiple sectors and locations [53]. Second, there has been a global effort in recent years towards **harmonizing** indicators, instruments, and methods for assessing and analyzing results, assisted by international networks for data sharing and learning. Among them, we highlight the development of the Impact Management Project (IMP), spearheaded by Bridges Ventures, which has put together a structured network including the most influential organization in the field, such as the GIIN, B Lab, the Global Steering Group for Impact Investing, Social Value International, the International Finance Corporation, the World Benchmarking Alliance, UNDP, the Sustainability Accounting Standards Board, etc. The IMP is aiming to put forward a comprehensive framework, comparable to those used for financial analyses of traditional investing decisions, to be widely used to articulate considerations concerning impact.

Second, a recent trend is the emergence of a new generation of **open-source platforms** that generate opportunities for complex projects that enable real-time data entry and analysis, as well as the data processing, analysis, and visualization facility. Leveraging on latest technologies, artificial intelligence algorithms and big data analytics, combined with large and small data [54], is seen from many [55–57] as one of the possible paths to improve the usability of SIM both in finance and in the social sector. Although the recognized potential, there are still many aspects hampering the ability to leverage the power of data and technology to tackle societal challenges [58] and particularly their application to social impact measurement as well as to program and policy evaluation. According to the literature, these issues concern different aspects i.e. data ownership and accountability ethical issues like risk of doubling down on bias, reproduce inequalities or gender or race discrimination [59]; methodological issues like the importance of realizing safety mechanisms that can complement the algorithmic decision-making process or the trade-off between big data analysis and the work on the field [54]. Many specific elements that should be complemented with a broader and multi-actors effort finalized to the construction of a proper data analysis infrastructure, an essential element to share data and resources as many [60] have been affirming in recent years.

To conclude, the analysis presented in this chapter adds to the debate on whether there is a need of a standard method in social impact measurement by

Once identified which stakeholder to involve, there is the definition of the modality of the collection (interviews, focus group, questionnaire, observation) which is chosen according to the nature of the data to gather, the number of stakeholders to involve, and the available resources, and the mean of the collection (digital platforms, email, pa56per questionnaire, phone call) that should be consistent with the modality of collection selected. The last aspect to define is the timing

of the collection, namely when the data collection phase should take place.

high-quality data at a fraction of the time and cost of other methods.

or at the beginning and at the end of a project or a pilot, etc.

can be used in order to more precisely assess social impact.

*Weighted Accounts* and the *Social Return On Investments (SROI)*.

*4.2.7 Impact quantification*

the defined times and methods.

*Entrepreneurship - Contemporary Issues*

defined targets and historical values.

*4.2.8 Communication and reporting*

**5. Discussion and conclusions**

process in the organization.

**66**

According to the overall measurement process, data could be collected periodically,

**Acumen Lean Data** approach uses the power of low-cost technology to collect

After collecting data, and verify their reliability, it is necessary to analyze them, calculate the quantitative indicators and describe the qualitative ones, according to

If it was not already available, the first assessment will provide the baseline or, in other words, the identification of the starting point. Then, it's important to periodically repeat the measurement, evaluating the results by comparing them with the

Therefore, in this stage an attempt is made to go beyond the measurement of the simple output - the immediate result produced in terms of product/service - and to understand how the changes on the beneficiary directly produced by the organization/project activity (outcome) contribute to generating wider effects and over a longer time horizon (impact) and finally to understand, and possibly purify, the "collateral" effects (deadweight, attribution, drop off, displacement, etc.) that are difficult to trace back to the organization's activity. To overcome (or partially overcome) these impact measurement challenges (deeply explained into the fourth chapter), there are some analytical approaches like the counterfactual analysis that

Models that best suit the needs of this phase are, for examples the *Impact*

The final stage of the social impact measurement process is reporting to stakeholders, communicating and using the results, and embedding the measurement

This chapter contributes to theory and practice in different ways. It fills the gap

This phase is strongly addressed within the *SDGs Compass approach*.

in the academic literature of systematizing the existing heterogeneous pool of approaches to conduct social impact measurement. Indeed, we first identify 116 approaches (see the **Table 7** in the Annex) which the most used so far; second, we suggest several dimensions that can be employed to analyze and classify these approaches. Third, we combine these dimensions to create a framework able to support organization eager to design their own social impact measurement infrastructure in selecting the proper instruments, metrics and approach.

underlining that the most promising path is not standardization, but harmonization to enable a minimum level of comparability and platforms to enhance the open sharing of data on social aspects.

**# Approach Unit of analysis of the measurement process**

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

28 Family of measures x

33 FMO ESG Toolkits x

36 Global Impact Investing Rating System x 37 GOGLA Impact Metrics x x

40 GRI sustainability reporting framework x

30 Financial Instruments for Social Impact x

31 Financial Products for Specified Use of Proceeds project-related finance (Equator

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

32 Financial Products for Unspecified Use of

42 HIPSO Harmonized Indicators for Private

44 Impact Analysis for Corporate Finance & Investments (Tool prototype)

47 Impact Management Project (IMP) Five

48 Impact Measurement - A practical guide to

55 Inventory of Business Indicators (SDG

56 Investing for Impact: operating principles for

Guide to Investing for impact: Operating Principles for Impact Management

49 Impact multiple of money (IMM) x

51 Impact-Weighted Accounts x

57 Investors in people x

43 Il Metodo VALORIS x

45 Impact Due Diligence Tools x 46 Impact Identification & Assessment for Bank

Sector Operations

Portfolios

Dimensions

data collection

Compass)

**69**

impact management

principles scope)

Funds

29 Finance Initiative Impact Radar x x

34 FTSE ESG Ratings x x 35 Global Alliance for Banking on Values x

38 GRESB Infrastructure Fund Assessment x 39 GRESB Real Estate Assessment x x

41 HIP Rating x x

50 Impact Risk Classification (IRC) x x

53 Inrate ESG Impact Rating Methodology x x 54 Inrate ESG Real Estate Assessment x x

58 IRIS + (and IRIS) x x

52 Inrate ESG Country Ratings x

**Social ventures** **For-profit companies**

x

x

x x

x

xx x

x

x

x

x

**Investors Public**

**institutions**

### **Conflict of interest**

The authors declare no conflict of interest.

### **A. Appendix**


*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*


underlining that the most promising path is not standardization, but harmonization to enable a minimum level of comparability and platforms to enhance the open

**# Approach Unit of analysis of the measurement process**

**Social ventures** **For-profit companies**

x

x

x

**Investors Public**

**institutions**

sharing of data on social aspects.

*Entrepreneurship - Contemporary Issues*

The authors declare no conflict of interest.

1 AA1000AP x

6 Atkisson compass assessment for investors x 7 Barclays Sustainability Impact Framework x

9 Bridges Ventures Impact Radar x

14 Cradle to Cradle certification x

18 Eco-mapping x 19 EFQM x 20 EMAS x

22 EPIC x 23 ESG Disclosure score x 24 ESG Relevance Score x

26 European Impact Investing Luxembourg x 27 Expected return x

25 ESG Risk Rating x x

4 Aeris CDFI Ratings System x

11 CERISE-IDIA x

2 Acumen Lean Data x 3 Acumen scorecard x

8 Best available charitable option x

12 Charity analysis framework x 13 Cost per impact x

15 Dalberg Approach x 16 DTA Fit for purpose x 17 Echoing green midyear and year-end report x

21 ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) SCORES

**68**

10 Business Reporting on the SDGs: An Analysis

5 Anticipated Impact Measurement and

Monitoring (AIMM)

of the Goals and Targets

**Conflict of interest**

**A. Appendix**


**# Approach Unit of analysis of the measurement process**

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

94 Sopact - tool x x

97 Standard Ethics Rating (SER) x

100 The B impact rating system x

98 Star social firm x 99 Success measures data system x

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

101 The big picture x 102 The Committee on Sustainability Assessment

104 The Impact Due Diligence Guide x

106 Third sector performance dashboard x 107 TIMM x 108 Towards Common Metrics and Consistent Reporting of Sustainable Value Creation

Sector Standard Approach for ESG Reporting

112 Volunteering impact assessment toolkit x

116 Y Analytics x

Irene Bengo, Veronica Chiodo\* and Valentina Tosi

\*Address all correspondence to: veronica.chiodo@polimi.it

115 What did we learn from listening to 4800+ customers in Omidyar Network's Education

*List of approaches classified by unit of analysis.*

Politecnico di Milano, Milan, Italy

provided the original work is properly cited.

109 Trucost x

114 WBA's benchmarks x

(COSA) Methodology

110 UK social housing

portfolio?

**Author details**

**Table 7.**

**71**

95 SPI4 x 96 SPI4 - Alinus x

103 The FINCA client assessment tool x

105 The SRI LABEL x x

111 Vital Capital's Impact Diamond x

113 Wallace assessment tool x

Department of Management, Economics and Industrial Engineering (DIG),

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

**Social ventures** **For-profit companies**

x

x

x x

x

**Investors Public**

**institutions**


*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

#### **Table 7.**

**# Approach Unit of analysis of the measurement process**

61 LM3 x x

63 LuxFLAG ESG Label x

67 MicroRate x 68 Movement above the US\$1 a day threshold x 69 MSCI ESG Ratings Methodology x x 70 Omidyar Network Lean data x x x

73 Progress out of poverty index x

82 SOCIAL x

89 Social rating x

90 Social return assessment x

91 Social return on investment x 92 Social Value Maturity Index x 93 Social value metrics x

59 ISS ESG Corporate Rating x 60 ISS SDG Impact rating x

64 Measuring impact framework x

62 Logic model builder x

66 MetODD-SDG x

71 Outcome star x 72 Practical quality assurance system for small organizations (PQASSO) / Trusted Charity

74 Prove it! x 75 Public value scorecard x 76 Quality first x

Sam Corporate Responsibility Assessment

80 SDG Impact Indicators: A Guide for Investors

SASB Materiality Map and Standard Navigator

81 SDG Impact Practice Standard x

83 Social accounting and audit x 84 Social Business Scorecard x 85 Social enterprise balanced scorecard x 86 Social enterprise mark x 87 Social Impact Assessment (SIA) x

88 Social Impact Measurement for Local Economies (SIMPLE)

78 S&P Global Ratings ESG Evaluation

79 SASB Standard

**70**

and Companies

77 RobecoSam 3 steps SDG Framework x

65 Methodology for impact analysis and

*Entrepreneurship - Contemporary Issues*

assessment

**Social ventures**

x

x

x

x

x

x x

**For-profit companies** **Investors Public**

**institutions**

*List of approaches classified by unit of analysis.*

#### **Author details**

Irene Bengo, Veronica Chiodo\* and Valentina Tosi Department of Management, Economics and Industrial Engineering (DIG), Politecnico di Milano, Milan, Italy

\*Address all correspondence to: veronica.chiodo@polimi.it

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

### **References**

[1] Hart, O, Zingales, L. Companies Should Maximize Shareholder Welfare Not Market Value. 2017; ECGI - Finance Working Paper No. 521/2017.

[2] Harris, M. Nonprofits and business toward a subfield of nonprofit studies. Nonprofit and Voluntary Sector Quarterly. 2012;41:892–902. DOI: 10.1177/0899764012443735

[3] Margiono, A, Zolin, R., Chang, A. A typology of social venture business model configurations. International Journal of Entrepreneurial Behavior & Research. 2018;24(3):626–650. DOI: 10.1108/IJEBR-09-2016-0316

[4] Wood, DJ, Logsdon, JM. Social issues in management as a distinct field: Corporate social responsibility and performance. Business & Society. 2019; 58(7):1334–1357. DOI: 10.1177/ 0007650316680041

[5] Arena, M, Azzone, A, Mapelli, F. What drives the evolution of Corporate Social Responsibility strategies? An institutional logics perspective. Journal of Cleaner Production. 2018;171(10): 345–355. DOI: 10.1016/j. jclepro.2017.09.245

[6] Bengo, I, Arena, M, Azzone, G, Calderini, M. Indicators and metrics for social business: a review of current approaches. Journal of Social Entrepreneurship. 2016;7(1):1–24. DOI: 10.1080/19420676.2015.1049286

[7] Bengo, I. Debate: Impact measurement and social public procurement. Public Money & Management. 2018;38(5):391–392. DOI: 10.1080/09540962.2018.1471817

[8] Salazar, J, Husted, BW, Biehl, M. Thoughts on the evaluation of corporate social performance through projects. Journal of Business Ethics. 2012;105(2): 175–186. DOI: 10.1007/s10551- 011-0957-z

[9] Grieco, C, Michelini, L, Iasevoli, G. Measuring value creation in social enterprises: A cluster analysis of social impact assessment models. Nonprofit and voluntary sector quarterly. 2015;44 (6):1173–1193. DOI: 10.1177/ 0899764014555986

2011;35(4):805–830. DOI: 10.1111/

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[24] Richmond, BJ, Mook, L, Quarter, J,. Social Accounting for Nonprofits. Nonprofit Management & Leadership;

[25] Gray, R. Current developments and trends in social and environmental auditing, reporting and attestation: a review and comment. International journal of auditing. 2000;4(3):247–268.

[27] Vanclay F. International principles for social impact assessment. Impact assessment and project appraisal. 2003; 21(1): 5–12. DOI: https://doi.org/ 10.3152/147154603781766491

[28] Hatry, HP. Sorting the relationships among performance measurement, program evaluation, and performance management. New Directions for Evaluation. 2013;137:19–32. DOI: h ttps://doi.org/10.1002/ev.20043

[29] Gugerty. M K, Dean Karlan, D. Ten Reasons Not to Measure Impact—and What to Do Instead Impact evaluations are an important tool for learning about effective solutions to social problems, but they are a good investment only in the right circumstances. Stanford Social

Innovation Review. 2018.

(3): 118–141.

[30] Ebrahim, A, Rangan, VK. What impact? A framework for measuring the scale and scope of social performance. California management review. 2014; 56

[31] Lall, S. Measuring to improve versus measuring to prove: Understanding the

measurement practices in nascent social

adoption of social performance

DOI: 10.1111/1099-1123.00316

[26] Lisi IE. Determinants and performance effects of social performance measurement systems. Journal of Business Ethics. 2018;152(1): 225–51. DOI: 10.1007/s10551-016-3287-3

July 2015; Helsinki.

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

2003; 13(4): 308–324.

[16] Santos, FM. A positive theory of social entrepreneurship. Journal of business ethics. 2012;111(3):335–351. DOI: 10.1007/s10551-012-1413-4

[17] Husted, BW, de Jesus Salazar, J. Taking Friedman seriously: Maximizing profits and social performance. Journal of Management studies. 2006;43(1):75–

entrepreneurship research: A source of explanation, prediction, and delight. Journal of world business. 2006;41(1): 36–44. DOI: 10.1016/j.jwb.2005.09.002

[19] Emerson, J. The blended value proposition: Integrating social and financial returns. California

management review. 2003;45(4):35–51.

[20] Vanclay, F. International principles for social impact assessment. Impact assessment and project appraisal. 2003; 21(1):5–12. DOI: https://doi.org/10.3152/

[21] Brest P, Born K. Unpacking the Impact in Impact Investing. Stanford Social Innovation Review. 2013;11(4):

[22] Stephan U, Patterson M, Kelly C, Mair J. Organizations driving positive social change: A review and an integrative framework of change processes. Journal of Management. 2016;42(5):1250–81. DOI: 10.1177/

[23] Dufour, B. State of the art in impact measurement: methods for work integration social enterprises measuring their social value in a public context. In: 5th EMES International Research Conference on Social Enterprise "Building a scientific field to foster the

j.1540-6520.2010.00372.x

91. DOI: 10.1111/

j.1467-6486.2006.00583.x

[18] Mair, J, Marti, I. Social

DOI: 10.2307/41166187

147154603781766491

0149206316633268

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**73**

[10] Braig, P, Edinger-Schons, LM. From Purpose to Impact - An Investigation of the Application of Impact Measurement and Valuation Methods for Quantifying Environmental and Social Impacts of Businesses. Sustainable Production and Consumption. 2020;23:189–197. DOI: 10.1039/c9pp90009h

[11] Findlay, S, Moran, M. Purposewashing of impact investing funds: motivations, occurrence and prevention. Social Responsibility Journal. 2019;15(7):853–873. DOI: 10.1108/SRJ-11-2017-0260

[12] Bagnoli, L, Megali, C. Measuring performance in social enterprises. Nonprofit and Voluntary Sector Quarterly. 2011;40(1):149–165. DOI: 10.1177/0899764009351111

[13] Arena, M., Azzone, G., Bengo, I. Performance measurement for Social Enterprises. International Journal of Voluntary and Nonprofit Organizations. 2015;26(2):649–672. DOI: 10.1007/ s11266-013-9436-8

[14] Rawhouser, H, Cummings, M, Newbert, SL. Social impact measurement: Current approaches and future directions for social entrepreneurship research. Entrepreneurship Theory and Practice. 2019;43(1):82–115. DOI: 10.1177/ 1042258717727718

[15] Moss, TW, Short, JC, Payne, GT, Lumpkin, GT. Dual identities in social ventures: An exploratory study. Entrepreneurship theory and practice. *Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

2011;35(4):805–830. DOI: 10.1111/ j.1540-6520.2010.00372.x

**References**

[1] Hart, O, Zingales, L. Companies Should Maximize Shareholder Welfare Not Market Value. 2017; ECGI - Finance

*Entrepreneurship - Contemporary Issues*

[9] Grieco, C, Michelini, L, Iasevoli, G. Measuring value creation in social enterprises: A cluster analysis of social impact assessment models. Nonprofit and voluntary sector quarterly. 2015;44

[10] Braig, P, Edinger-Schons, LM. From Purpose to Impact - An Investigation of the Application of Impact Measurement and Valuation Methods for Quantifying Environmental and Social Impacts of Businesses. Sustainable Production and Consumption. 2020;23:189–197. DOI:

[11] Findlay, S, Moran, M. Purposewashing of impact investing funds: motivations, occurrence and prevention. Social Responsibility Journal. 2019;15(7):853–873. DOI: 10.1108/SRJ-11-2017-0260

[12] Bagnoli, L, Megali, C. Measuring performance in social enterprises. Nonprofit and Voluntary Sector Quarterly. 2011;40(1):149–165. DOI:

[13] Arena, M., Azzone, G., Bengo, I. Performance measurement for Social Enterprises. International Journal of Voluntary and Nonprofit Organizations. 2015;26(2):649–672. DOI: 10.1007/

[14] Rawhouser, H, Cummings, M,

measurement: Current approaches and

Entrepreneurship Theory and Practice. 2019;43(1):82–115. DOI: 10.1177/

[15] Moss, TW, Short, JC, Payne, GT, Lumpkin, GT. Dual identities in social ventures: An exploratory study. Entrepreneurship theory and practice.

Newbert, SL. Social impact

future directions for social entrepreneurship research.

10.1177/0899764009351111

s11266-013-9436-8

1042258717727718

(6):1173–1193. DOI: 10.1177/

0899764014555986

10.1039/c9pp90009h

[2] Harris, M. Nonprofits and business toward a subfield of nonprofit studies. Nonprofit and Voluntary Sector Quarterly. 2012;41:892–902. DOI: 10.1177/0899764012443735

[3] Margiono, A, Zolin, R., Chang, A. A typology of social venture business model configurations. International Journal of Entrepreneurial Behavior & Research. 2018;24(3):626–650. DOI: 10.1108/IJEBR-09-2016-0316

[4] Wood, DJ, Logsdon, JM. Social issues in management as a distinct field: Corporate social responsibility and performance. Business & Society. 2019;

58(7):1334–1357. DOI: 10.1177/

[5] Arena, M, Azzone, A, Mapelli, F. What drives the evolution of Corporate Social Responsibility strategies? An institutional logics perspective. Journal of Cleaner Production. 2018;171(10):

[6] Bengo, I, Arena, M, Azzone, G, Calderini, M. Indicators and metrics for social business: a review of current approaches. Journal of Social

Entrepreneurship. 2016;7(1):1–24. DOI: 10.1080/19420676.2015.1049286

Management. 2018;38(5):391–392. DOI: 10.1080/09540962.2018.1471817

[8] Salazar, J, Husted, BW, Biehl, M. Thoughts on the evaluation of corporate social performance through projects. Journal of Business Ethics. 2012;105(2):

175–186. DOI: 10.1007/s10551-

011-0957-z

**72**

0007650316680041

345–355. DOI: 10.1016/j. jclepro.2017.09.245

[7] Bengo, I. Debate: Impact measurement and social public procurement. Public Money &

Working Paper No. 521/2017.

[16] Santos, FM. A positive theory of social entrepreneurship. Journal of business ethics. 2012;111(3):335–351. DOI: 10.1007/s10551-012-1413-4

[17] Husted, BW, de Jesus Salazar, J. Taking Friedman seriously: Maximizing profits and social performance. Journal of Management studies. 2006;43(1):75– 91. DOI: 10.1111/ j.1467-6486.2006.00583.x

[18] Mair, J, Marti, I. Social entrepreneurship research: A source of explanation, prediction, and delight. Journal of world business. 2006;41(1): 36–44. DOI: 10.1016/j.jwb.2005.09.002

[19] Emerson, J. The blended value proposition: Integrating social and financial returns. California management review. 2003;45(4):35–51. DOI: 10.2307/41166187

[20] Vanclay, F. International principles for social impact assessment. Impact assessment and project appraisal. 2003; 21(1):5–12. DOI: https://doi.org/10.3152/ 147154603781766491

[21] Brest P, Born K. Unpacking the Impact in Impact Investing. Stanford Social Innovation Review. 2013;11(4): 22–31.

[22] Stephan U, Patterson M, Kelly C, Mair J. Organizations driving positive social change: A review and an integrative framework of change processes. Journal of Management. 2016;42(5):1250–81. DOI: 10.1177/ 0149206316633268

[23] Dufour, B. State of the art in impact measurement: methods for work integration social enterprises measuring their social value in a public context. In: 5th EMES International Research Conference on Social Enterprise "Building a scientific field to foster the

social enterprise eco-system; 30 June – 3 July 2015; Helsinki.

[24] Richmond, BJ, Mook, L, Quarter, J,. Social Accounting for Nonprofits. Nonprofit Management & Leadership; 2003; 13(4): 308–324.

[25] Gray, R. Current developments and trends in social and environmental auditing, reporting and attestation: a review and comment. International journal of auditing. 2000;4(3):247–268. DOI: 10.1111/1099-1123.00316

[26] Lisi IE. Determinants and performance effects of social performance measurement systems. Journal of Business Ethics. 2018;152(1): 225–51. DOI: 10.1007/s10551-016-3287-3

[27] Vanclay F. International principles for social impact assessment. Impact assessment and project appraisal. 2003; 21(1): 5–12. DOI: https://doi.org/ 10.3152/147154603781766491

[28] Hatry, HP. Sorting the relationships among performance measurement, program evaluation, and performance management. New Directions for Evaluation. 2013;137:19–32. DOI: h ttps://doi.org/10.1002/ev.20043

[29] Gugerty. M K, Dean Karlan, D. Ten Reasons Not to Measure Impact—and What to Do Instead Impact evaluations are an important tool for learning about effective solutions to social problems, but they are a good investment only in the right circumstances. Stanford Social Innovation Review. 2018.

[30] Ebrahim, A, Rangan, VK. What impact? A framework for measuring the scale and scope of social performance. California management review. 2014; 56 (3): 118–141.

[31] Lall, S. Measuring to improve versus measuring to prove: Understanding the adoption of social performance measurement practices in nascent social

enterprises. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations. 2017;28(6):2633–2657. DOI: 10.1007/s11266-017-9898-1

[32] Ormiston J. Blending practice worlds: Impact assessment as a transdisciplinary practice. Business Ethics: A European Review. 2019;28(4): 423–40. DOI: 10.1111/beer.12230

[33] Chen S, Harrison R. Beyond profit vs. purpose: Transactional-relational practices in impact investing. Journal of Business Venturing Insights. 2020; 14: e00182. DOI: 10.1016/j.jbvi.2020. e00182

[34] Nicholls, A. "We do good things, don't we?": 'Blended Value Accounting' in social entrepreneurship. Accounting, organizations and society. 2009; 34(6– 7): 755–769. DOI: 10.1016/j. aos.2009.04.008

[35] Rawhouser H, Cummings M, Newbert SL. Social impact measurement: Current approaches and future directions for social entrepreneurship research. Entrepreneurship Theory and Practice. 2019; 43(1):82–115. DOI: 10.1177/ 1042258717727718

[36] Kroeger, A, Weber, C. Developing a conceptual framework for comparing social value creation. Academy of Management Review. 2014; 39(4): 513– 540. DOI: 10.5465/amr.2012.0344

[37] Duflo, E, Kremer, M. Use of randomization in the evaluation of development effectiveness. Evaluating development effectiveness. 2005; 7: 205–231.

[38] Meyer, BD. Natural and quasiexperiments in economics. Journal of business & economic statistics. 1995; 13 (2): 151–161.

[39] Kaplan, RS, Norton, DP. Using the balanced scorecard as a strategic

management system. Harvard business review. 2007; 74(1): 75–85.

enterprises: A cluster analysis of social impact assessment models. Nonprofit and voluntary sector quarterly. 2015; 44 (6): 1173–1193. DOI: https://doi.org/

*DOI: http://dx.doi.org/10.5772/intechopen.94441*

Challenge for Social Work. American Academy of Social Work and Social

[58] Niño, M, Zicari, R V, Ivanov, T, Hee, K, Mushtaq, N, Rosselli, M., … Underwood, H. Data Projects for " Social Good ": Challenges and Opportunities. 2017; 11(5), 896–906. DOI: doi.org/10.5281/zenodo.1130095

[59] Lepri, B, Nuriam O, Letouze, E F,

Algorithmic Decision-Making Processes. Philosophy & Technology. 2018; 31(4): 611–627. DOI: 10.1007/s13347-017-

[60] Varshney, K R, Mojsilovi'c, A, Mojsilovi´. Open Platforms for Artificial Intelligence for Social Good: Common Patterns as a Pathway to True Impact. In: International Conference on Machine Learning AI for Social Good Workshop; 2019; Long Beach.

Pentland, A P, Vinck, P. Fair, Transparent, and Accountable

Welfare. 2015.

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship*

0279-x

[49] Goodpaster, KE. Business ethics and stakeholder analysis. Business ethics quarterly. 1991; 1:53–73. DOI: 10.2307/

[50] Bryson, JM. What to do when stakeholders matter: stakeholder identification and analysis techniques. Public management review. 2004; 6(1): 21–53. DOI: https://doi.org/10.1080/

[51] Eden C, Ackermann F. Making strategy: The journey of strategic management. London, UK: Sage; 2013.

[52] Funnell, SC, Rogers, PJ. Purposeful program theory: Effective use of theories of change and logic models. John Wiley & Sons; 2011: 31.

[53] Soleimani, A, Schneper, W D, Newburry, W. The impact of stakeholder power on corpor- ate reputation: A cross-country corporate governance perspective. Organization Science. 2014; 25(4): 991–1008. DOI:

[54] York, P, Bamberger, M. Measuring results and impact in the age of big data: The nexus of evaluation, analytics, and digital technology. The Rockefeller

[55] Letouzé, E, Sangokoya, D. How To Use Big Data? Data Pop Alliance. 2017.

[56] OECD. Social Impact Investment 2019: The Impact Imperative for Sustainable Development. Paris: OECD

[57] Coulton, C J, George, R, Putnam-Hornstein, E, De Haan, B. Harnessing Big Data for Social Good : A Grand

10.1287/orsc.2013.0889

Foundation. 2020.

Publishing; 2019.

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DOI: 10.4135/9781446217153

14719030410001675722

10.1177/0899764014555986

3857592

[40] Somers, AB. Shaping the balanced scorecard for use in UK social enterprises. Social Enterprise Journal. 2005;1(1): 43–56. DOI: 10.1108/ 17508610580000706

[41] Arvidson, M, Lyon, F, McKay, S, Moro, D. Valuing the social? The nature and controversies of measuring social return on investment (SROI). Voluntary sector review. 2013; 4(1): 3–18. DOI: 10.1332/204080513X661554

[42] Olsen, S, Galimidi, B. Catalog of Approaches to Impact Measurement - Assessing social impact in private ventures. The Rockfeller Foundation. 2008.

[43] Global Impact Investor network report (GIIN). The State Of Impact Measurement And Management Practice. The Rockfeller Foundation 2020.

[44] Zappalà, G, Lyons, M. Recent approaches to measuring social impact in the Third sector: An overview. Centre for Social Impact Sydney. 2009.

[45] Migliavacca, AM. Social impact measurement practices; A metaanalysis. International Journal Series in Multidisciplinary Research. 2016; 2(3): 1–17.

[46] Clark, C, Rosenzweig, W, Long, D, Olsen, S. Double Bottom Line Project Report: Assessing Social Impact in Double Line Ventures, Methods Catalog. Columbia Business School: Rise-Project. 2004.

[47] Rinaldo, H. Getting Started in Social Impact Measurement: A guide to choosing how to measure social impact. Norwich: The Guild. 2010.

[48] Grieco, C, Michelini, L, Iasevoli, G. Measuring value creation in social

*Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship DOI: http://dx.doi.org/10.5772/intechopen.94441*

enterprises: A cluster analysis of social impact assessment models. Nonprofit and voluntary sector quarterly. 2015; 44 (6): 1173–1193. DOI: https://doi.org/ 10.1177/0899764014555986

enterprises. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations. 2017;28(6):2633–2657. DOI: 10.1007/s11266-017-9898-1

*Entrepreneurship - Contemporary Issues*

management system. Harvard business

[40] Somers, AB. Shaping the balanced

enterprises. Social Enterprise Journal. 2005;1(1): 43–56. DOI: 10.1108/

[41] Arvidson, M, Lyon, F, McKay, S, Moro, D. Valuing the social? The nature and controversies of measuring social return on investment (SROI). Voluntary sector review. 2013; 4(1): 3–18. DOI:

[42] Olsen, S, Galimidi, B. Catalog of Approaches to Impact Measurement - Assessing social impact in private ventures. The Rockfeller Foundation.

[43] Global Impact Investor network report (GIIN). The State Of Impact Measurement And Management

[44] Zappalà, G, Lyons, M. Recent approaches to measuring social impact in the Third sector: An overview. Centre

for Social Impact Sydney. 2009.

[45] Migliavacca, AM. Social impact measurement practices; A metaanalysis. International Journal Series in Multidisciplinary Research. 2016; 2(3):

[46] Clark, C, Rosenzweig, W, Long, D, Olsen, S. Double Bottom Line Project Report: Assessing Social Impact in Double Line Ventures, Methods Catalog. Columbia Business School:

[47] Rinaldo, H. Getting Started in Social Impact Measurement: A guide to choosing how to measure social impact.

[48] Grieco, C, Michelini, L, Iasevoli, G. Measuring value creation in social

Practice. The Rockfeller Foundation 2020.

review. 2007; 74(1): 75–85.

scorecard for use in UK social

10.1332/204080513X661554

2008.

1–17.

Rise-Project. 2004.

Norwich: The Guild. 2010.

17508610580000706

[32] Ormiston J. Blending practice worlds: Impact assessment as a transdisciplinary practice. Business Ethics: A European Review. 2019;28(4): 423–40. DOI: 10.1111/beer.12230

[33] Chen S, Harrison R. Beyond profit vs. purpose: Transactional-relational practices in impact investing. Journal of Business Venturing Insights. 2020; 14: e00182. DOI: 10.1016/j.jbvi.2020.

[34] Nicholls, A. "We do good things, don't we?": 'Blended Value Accounting' in social entrepreneurship. Accounting, organizations and society. 2009; 34(6–

7): 755–769. DOI: 10.1016/j.

future directions for social entrepreneurship research.

[35] Rawhouser H, Cummings M, Newbert SL. Social impact

measurement: Current approaches and

Entrepreneurship Theory and Practice. 2019; 43(1):82–115. DOI: 10.1177/

[36] Kroeger, A, Weber, C. Developing a conceptual framework for comparing social value creation. Academy of Management Review. 2014; 39(4): 513– 540. DOI: 10.5465/amr.2012.0344

[37] Duflo, E, Kremer, M. Use of randomization in the evaluation of development effectiveness. Evaluating development effectiveness. 2005; 7:

[38] Meyer, BD. Natural and quasiexperiments in economics. Journal of business & economic statistics. 1995; 13

[39] Kaplan, RS, Norton, DP. Using the balanced scorecard as a strategic

aos.2009.04.008

1042258717727718

205–231.

(2): 151–161.

**74**

e00182

[49] Goodpaster, KE. Business ethics and stakeholder analysis. Business ethics quarterly. 1991; 1:53–73. DOI: 10.2307/ 3857592

[50] Bryson, JM. What to do when stakeholders matter: stakeholder identification and analysis techniques. Public management review. 2004; 6(1): 21–53. DOI: https://doi.org/10.1080/ 14719030410001675722

[51] Eden C, Ackermann F. Making strategy: The journey of strategic management. London, UK: Sage; 2013. DOI: 10.4135/9781446217153

[52] Funnell, SC, Rogers, PJ. Purposeful program theory: Effective use of theories of change and logic models. John Wiley & Sons; 2011: 31.

[53] Soleimani, A, Schneper, W D, Newburry, W. The impact of stakeholder power on corpor- ate reputation: A cross-country corporate governance perspective. Organization Science. 2014; 25(4): 991–1008. DOI: 10.1287/orsc.2013.0889

[54] York, P, Bamberger, M. Measuring results and impact in the age of big data: The nexus of evaluation, analytics, and digital technology. The Rockefeller Foundation. 2020.

[55] Letouzé, E, Sangokoya, D. How To Use Big Data? Data Pop Alliance. 2017.

[56] OECD. Social Impact Investment 2019: The Impact Imperative for Sustainable Development. Paris: OECD Publishing; 2019.

[57] Coulton, C J, George, R, Putnam-Hornstein, E, De Haan, B. Harnessing Big Data for Social Good : A Grand

Challenge for Social Work. American Academy of Social Work and Social Welfare. 2015.

[58] Niño, M, Zicari, R V, Ivanov, T, Hee, K, Mushtaq, N, Rosselli, M., … Underwood, H. Data Projects for " Social Good ": Challenges and Opportunities. 2017; 11(5), 896–906. DOI: doi.org/10.5281/zenodo.1130095

[59] Lepri, B, Nuriam O, Letouze, E F, Pentland, A P, Vinck, P. Fair, Transparent, and Accountable Algorithmic Decision-Making Processes. Philosophy & Technology. 2018; 31(4): 611–627. DOI: 10.1007/s13347-017- 0279-x

[60] Varshney, K R, Mojsilovi'c, A, Mojsilovi´. Open Platforms for Artificial Intelligence for Social Good: Common Patterns as a Pathway to True Impact. In: International Conference on Machine Learning AI for Social Good Workshop; 2019; Long Beach.

**77**

Section 2

Entrepreneurial Education

and Opportunities

Section 2

## Entrepreneurial Education and Opportunities

**79**

**Chapter 5**

**Abstract**

The Role of Prior Knowledge

in the Process of Recognizing

*Felipe Baeta and Tales Andreassi*

this results in fewer potential businesses.

particular opportunity after it has been identified.

**1. Introduction**

Entrepreneurial Opportunities

Recognizing opportunities has often been raised as a crucial aspect of the entrepreneurial process. It seems that the ability to identify, analyze and develop entrepreneurial opportunities is what differentiates entrepreneurs from those who are not. This assertion highlights the relevance of understanding in greater depth the variables that have an influence on the process of recognizing opportunities. In this context, an entrepreneur's prior knowledge and experience, which can be broken down into three domains, have an impact on the dimensions of recognizing opportunities, such as the scope of the opportunity and the intensity of the process. Deriving from this dynamic, the objective of this study is to understand the role of prior knowledge in the process of recognizing entrepreneurial opportunities. By way of in-depth interviews with ten entrepreneurs, it was concluded that those who have limited professional experience attribute greater relevance in the process to their educational activities. When it comes to recognizing opportunities, however, these same entrepreneurs have a broader scope and approach the process in a more intense way. Entrepreneurs who have a better-defined mental framework, on the other hand, which results from their vast professional experience, tend to channel any opportunities they recognize towards the industry in which they operate and

**Keywords:** entrepreneurial opportunities, processo of recognizing opportunities

The emergence of the recognition of opportunity as a central issue in the entrepreneurial process has been shifting the subject and unit of analysis of the research in this particular area [1]. One of the conclusions that derives from this is the understanding that entrepreneurship is a process of creating value, which is based on solid concepts involving a combination of resources, in order to exploit a

Literature, in particular, has attempted to answer the question of why some people recognize entrepreneurial opportunities, while others do not. In order to answer to this question, studies have presented a series of characteristics and interactions. The characteristics of entrepreneurs are divided between the psychological and the non-psychological, including, for example, their social networks and the quality and depth of the resultant ties; family role models; an ability to recognize patterns; a state of alertness; and the ability to assess information. As for

#### **Chapter 5**

## The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities

*Felipe Baeta and Tales Andreassi*

#### **Abstract**

Recognizing opportunities has often been raised as a crucial aspect of the entrepreneurial process. It seems that the ability to identify, analyze and develop entrepreneurial opportunities is what differentiates entrepreneurs from those who are not. This assertion highlights the relevance of understanding in greater depth the variables that have an influence on the process of recognizing opportunities. In this context, an entrepreneur's prior knowledge and experience, which can be broken down into three domains, have an impact on the dimensions of recognizing opportunities, such as the scope of the opportunity and the intensity of the process. Deriving from this dynamic, the objective of this study is to understand the role of prior knowledge in the process of recognizing entrepreneurial opportunities. By way of in-depth interviews with ten entrepreneurs, it was concluded that those who have limited professional experience attribute greater relevance in the process to their educational activities. When it comes to recognizing opportunities, however, these same entrepreneurs have a broader scope and approach the process in a more intense way. Entrepreneurs who have a better-defined mental framework, on the other hand, which results from their vast professional experience, tend to channel any opportunities they recognize towards the industry in which they operate and this results in fewer potential businesses.

**Keywords:** entrepreneurial opportunities, processo of recognizing opportunities

#### **1. Introduction**

The emergence of the recognition of opportunity as a central issue in the entrepreneurial process has been shifting the subject and unit of analysis of the research in this particular area [1]. One of the conclusions that derives from this is the understanding that entrepreneurship is a process of creating value, which is based on solid concepts involving a combination of resources, in order to exploit a particular opportunity after it has been identified.

Literature, in particular, has attempted to answer the question of why some people recognize entrepreneurial opportunities, while others do not. In order to answer to this question, studies have presented a series of characteristics and interactions. The characteristics of entrepreneurs are divided between the psychological and the non-psychological, including, for example, their social networks and the quality and depth of the resultant ties; family role models; an ability to recognize patterns; a state of alertness; and the ability to assess information. As for interactions, it is worth mentioning the reservation raised by [2], that any response that differentiates people based on their ability to recognize opportunities must also consider entrepreneurial motivation, the opportunity sources and the degree of deliberation of the process of searching for opportunities, which is sometimes active and sometimes emerging.

This said, previous knowledge and past experiences have been configured as one of the fundamental factors on the horizon of non-psychological variables. It is also assumed that accumulated knowledge and experiences, especially previous career experiences, provide the conditions for forming a more assertive judgment of entrepreneurial opportunities. Basically, it is claimed that the accumulation of knowledge and experiences favors the creation of cognitive structures that in some way affect the scope of the opportunities and the intensity of their recognition process [3].

Literature presents three aspects of the origin of prior knowledge: knowledge that comes from activities that are of special interest to the entrepreneur; the professional experiences of the entrepreneur; and the formal education of the entrepreneur [4].

This work sought to understand the role of prior knowledge in the recognition of opportunities, which was broken down into its three dimensions. Specifically these dimensions are identifying how: the activities that fascinate entrepreneurs, their professional background, and their studies influence the scope of the business opportunities and the intensity of the process. It is understood that the scope of the opportunities has to do with the extent and divergence of the entrepreneur's experiences and the potential opportunities that are recognized as existing. The intensity of the process is related to the number of opportunities that emerge during the process.

#### **2. Theoretical reference**

The concept of entrepreneurial opportunities has become central to the conceptual definition of entrepreneurship. This affirmation and the procedural approach applied to studies in the field highlights the need for more in-depth studies into the opportunity recognition process that entrepreneurs adopt when creating any new business.

A central dimension of the approach to entrepreneurship is the process of identifying and economically exploiting new opportunities, either by creating new companies, or within the scope of existing organizations [1]. Using this same line of reasoning, [5] define entrepreneurship as the process of creating value based on combining resources for exploiting an opportunity.

Despite its relevance, the definition of entrepreneurial opportunities in literature is highly fragmented. Another point that arises from the conceptual distortions and that must be considered is the difficulty in determining the boundary between an idea and a real opportunity [6]. We use, however, the definition proposed by [7], in which opportunities for entrepreneurs are moments when there is a possibility of introducing a profitable product, i.e. one that generates more revenue than the costs associated with the process of producing or developing it.

In line with the emergence of research in the area and the increasing indication of the importance of opportunities in this field of study, seeking opportunities and continuously and creatively recognizing them as such has been shown to be important [8]. Recognizing opportunities is often also suggested as both the starting point and, indeed, the main point of the entrepreneurial process.

**81**

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities*

defined business concept as a solution that responds to discoveries.

and *locus* of the recognition of opportunities in literature.

Several authors, such as [9–11], stress that recognizing opportunities is actually the first critical step in the entrepreneurial process. With this same understanding, [12] also suggest that entrepreneurship is mainly driven by the perception and recognition of opportunities. Likewise, the work by [13] had already suggested that recognizing and exploiting opportunities was the central point of studies about

The identification process - the recognition of opportunities - is guided by three central activities: perception or identification, discovery or evaluation, and creation or development [14]. When developing each of them, it is evident that perception induces the act of feeling the demands of the market, or perceiving any underutilization of resources; discovery is related to the fit between the needs of the market and specific resources; while creation is the consolidation of resources in a well-

In view of the objectives of this study, we need to understand the mechanisms

Assuming and observing that entrepreneurship is a process in which opportunities are recognized when they are beginning, even before the undertaking is formalized, [10] undertook an empirical study aimed at identifying the different behaviors of successful entrepreneurs with regard to their recognition of opportunities.

The recognition and exploitation of opportunities from a theoretical perspective and propose a radical change in the direction of the research into entrepreneurship [1]. These authors believe that entrepreneurial behavior is transitory, the result of the ability certain people have of responding to signals from the environment about opportunities, and this is not related to any stable, permanent characteristic that differentiates some people (entrepreneurs) from others (nonentrepreneurs) in all situations. The study of entrepreneurship, therefore, should have as its main focus an analysis of the nature and process of identifying and

Empirical evidence shows that entrepreneurs have special resources and the ability to perceive and reason differently from other people. In general terms, it seems to be due to this point that they are able to identify innovative business

This vision is shared for some researchers who argue that studies should focus on examining the entrepreneurial process in the connection between the individual and the opportunity [7]. The connection in question can be interpreted as being the interaction between the individual, their characteristics and the environment. The dialog between them is the result of the resources that entrepreneurs have at their disposal and the resources provided and existing in the environment, plus other

Whether discovering opportunities, or evaluating and exploiting them, entrepreneurs individually commit both personal and psychological factors and nonpsychological characteristics, namely, their prior knowledge, social networks, the

One of the first explanations of the way in which entrepreneurs recognize business opportunities was proposed by [15], who suggested that opportunities

Prior knowledge and social networks as points that favor the recognition of opportunities: jobs that allow access to the most recent information that is closely linked to the market; the varied experiences of life and work that enable the knowledge base to be expanded; an extensive social network facilitating access to information that is otherwise difficult to obtain; and the active search for opportu-

aspects that have an influence on the entrepreneurial process.

ability to recognize patterns, their alertness, and others.

are the result of the tacit knowledge of each individual.

nities, particularly in places that others ignore [16].

*DOI: http://dx.doi.org/10.5772/intechopen.94161*

entrepreneurship.

exploiting opportunities.

opportunities before others do.

#### *The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities DOI: http://dx.doi.org/10.5772/intechopen.94161*

Several authors, such as [9–11], stress that recognizing opportunities is actually the first critical step in the entrepreneurial process. With this same understanding, [12] also suggest that entrepreneurship is mainly driven by the perception and recognition of opportunities. Likewise, the work by [13] had already suggested that recognizing and exploiting opportunities was the central point of studies about entrepreneurship.

The identification process - the recognition of opportunities - is guided by three central activities: perception or identification, discovery or evaluation, and creation or development [14]. When developing each of them, it is evident that perception induces the act of feeling the demands of the market, or perceiving any underutilization of resources; discovery is related to the fit between the needs of the market and specific resources; while creation is the consolidation of resources in a welldefined business concept as a solution that responds to discoveries.

In view of the objectives of this study, we need to understand the mechanisms and *locus* of the recognition of opportunities in literature.

Assuming and observing that entrepreneurship is a process in which opportunities are recognized when they are beginning, even before the undertaking is formalized, [10] undertook an empirical study aimed at identifying the different behaviors of successful entrepreneurs with regard to their recognition of opportunities.

The recognition and exploitation of opportunities from a theoretical perspective and propose a radical change in the direction of the research into entrepreneurship [1]. These authors believe that entrepreneurial behavior is transitory, the result of the ability certain people have of responding to signals from the environment about opportunities, and this is not related to any stable, permanent characteristic that differentiates some people (entrepreneurs) from others (nonentrepreneurs) in all situations. The study of entrepreneurship, therefore, should have as its main focus an analysis of the nature and process of identifying and exploiting opportunities.

Empirical evidence shows that entrepreneurs have special resources and the ability to perceive and reason differently from other people. In general terms, it seems to be due to this point that they are able to identify innovative business opportunities before others do.

This vision is shared for some researchers who argue that studies should focus on examining the entrepreneurial process in the connection between the individual and the opportunity [7]. The connection in question can be interpreted as being the interaction between the individual, their characteristics and the environment. The dialog between them is the result of the resources that entrepreneurs have at their disposal and the resources provided and existing in the environment, plus other aspects that have an influence on the entrepreneurial process.

Whether discovering opportunities, or evaluating and exploiting them, entrepreneurs individually commit both personal and psychological factors and nonpsychological characteristics, namely, their prior knowledge, social networks, the ability to recognize patterns, their alertness, and others.

One of the first explanations of the way in which entrepreneurs recognize business opportunities was proposed by [15], who suggested that opportunities are the result of the tacit knowledge of each individual.

Prior knowledge and social networks as points that favor the recognition of opportunities: jobs that allow access to the most recent information that is closely linked to the market; the varied experiences of life and work that enable the knowledge base to be expanded; an extensive social network facilitating access to information that is otherwise difficult to obtain; and the active search for opportunities, particularly in places that others ignore [16].

*Entrepreneurship - Contemporary Issues*

active and sometimes emerging.

process [3].

process.

**2. Theoretical reference**

creating any new business.

combining resources for exploiting an opportunity.

associated with the process of producing or developing it.

and, indeed, the main point of the entrepreneurial process.

entrepreneur [4].

interactions, it is worth mentioning the reservation raised by [2], that any response that differentiates people based on their ability to recognize opportunities must also consider entrepreneurial motivation, the opportunity sources and the degree of deliberation of the process of searching for opportunities, which is sometimes

This said, previous knowledge and past experiences have been configured as one of the fundamental factors on the horizon of non-psychological variables. It is also assumed that accumulated knowledge and experiences, especially previous career experiences, provide the conditions for forming a more assertive judgment of entrepreneurial opportunities. Basically, it is claimed that the accumulation of knowledge and experiences favors the creation of cognitive structures that in some way affect the scope of the opportunities and the intensity of their recognition

Literature presents three aspects of the origin of prior knowledge: knowledge that comes from activities that are of special interest to the entrepreneur; the professional experiences of the entrepreneur; and the formal education of the

This work sought to understand the role of prior knowledge in the recognition of opportunities, which was broken down into its three dimensions. Specifically these dimensions are identifying how: the activities that fascinate entrepreneurs, their professional background, and their studies influence the scope of the business opportunities and the intensity of the process. It is understood that the scope of the opportunities has to do with the extent and divergence of the entrepreneur's experiences and the potential opportunities that are recognized as existing. The intensity of the process is related to the number of opportunities that emerge during the

The concept of entrepreneurial opportunities has become central to the conceptual definition of entrepreneurship. This affirmation and the procedural approach applied to studies in the field highlights the need for more in-depth studies into the opportunity recognition process that entrepreneurs adopt when

A central dimension of the approach to entrepreneurship is the process of identifying and economically exploiting new opportunities, either by creating new companies, or within the scope of existing organizations [1]. Using this same line of reasoning, [5] define entrepreneurship as the process of creating value based on

Despite its relevance, the definition of entrepreneurial opportunities in literature is highly fragmented. Another point that arises from the conceptual distortions and that must be considered is the difficulty in determining the boundary between an idea and a real opportunity [6]. We use, however, the definition proposed by [7], in which opportunities for entrepreneurs are moments when there is a possibility of introducing a profitable product, i.e. one that generates more revenue than the costs

In line with the emergence of research in the area and the increasing indication of the importance of opportunities in this field of study, seeking opportunities and continuously and creatively recognizing them as such has been shown to be important [8]. Recognizing opportunities is often also suggested as both the starting point

**80**

Narrowing our analysis to consider just prior knowledge, there is a wealth of evidence indicating that information gathered from life experiences, both in its quality and diversity, can be of great advantage to entrepreneurs in terms of their recognizing potentially lucrative opportunities. As an example, prior knowledge that focuses on the needs of customers and, consequently, on ways of addressing them, greatly reinforces the ability of entrepreneurs to provide innovative solutions and, as a result, favors the emergence of opportunities that are potentially valuable for creating new businesses [7].

It is important to stress that although life experience can be of great advantage to recognize opportunities, no necessarily elder entrepreneurs are more successful in this process than younger entrepreneurs. According to [17], countries whose populations are excessively skewed towards old or young cohorts may experience low levels of entrepreneurial activity. [18] studied start-ups systematically in the United States and found that successful entrepreneurs are middle-aged, not younger or older. The mean age at founding for the 1-in-1000 fastest growing new ventures is 45 years old.

In this particular context, literature provides evidence of three different types of prior knowledge that are identified as coming from an entrepreneur's background. The first type of prior knowledge has to do with fascination and fun [4], and is described as an area that an entrepreneur dominates, or that is of special interest to them. The second type concerns the experiences that arise from work positions they have held. Finally, the third type of prior knowledge has to do with the educational activities undertaken by the entrepreneur. It is worth mentioning that the three perspectives listed above consider that there is a close relationship between access to information and the emergence of the perception of opportunities.

In addition to the role of each of the variables that have an influence on the process of recognizing opportunities, we now need to understand in greater detail the dynamics of this relationship.

The entrepreneur's background, including their prior knowledge, has an impact on the recognition of opportunities based on the dimensions of the process. Here we highlight the consequences of the variables on the scope of the opportunity and the intensity of the process. Scope concerns the peculiarities and sectoral and functional attributes of the undertaking, while intensity is related to the number of opportunities that emerge during the process. **Figure 1** shows the dynamics of this relationship.

As potential inferences of this framework, it is presumed that very high levels of prior knowledge may reduce the need for active research, since a large stock of knowledge contributes to the formation of broad and rich connections of cognitive structures, and this again makes participation in formal search activities a less crucial task [19].

Based on their comparative analysis of experienced and novice entrepreneurs, these same authors identified that these two profiles have distinct cognitive structures, which provide experienced entrepreneurs with a cognitive advantage because of their greater clarity and the depth of their experience.

Based on the results of the literature, it is possible to argue that as entrepreneurs acquire a particular knowledge, they become more skilled at perceiving meanings based on new data and information, and at exploring the links between existing items of information [20].

In the positions entrepreneurs hold within a company, they have potential access to various pieces of information they would not have access to if they were not in the company. This information ranges from unexplored ideas and discontinued projects to proprietary technological knowledge, and can serve as a driver of the process of recognizing an entrepreneurial opportunity.

The entrepreneur also has access to specific information from the sector in which they work, such as customer needs and demands, or changes in consumption

**83**

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities*

habits. Alsos and Kaikkonen [20] also argue that entrepreneurs who have access to a vast network of contacts through a company or the market in which they operate will probably have access to a large number of good but "hidden options," in other

*The dynamics of the relationship between the entrepreneur's background and the dimensions of the process of* 

Based on the simple act of starting a new business, entrepreneurs can observe opportunities that they would be unable to recognize or develop had they not

This dependence, as expressed in the literature and that is related to the entrepreneur's previous activities with the possibilities of recognizing new opportunities,

The questions that guided this research relate to the field of entrepreneurship, its approach being recognizing opportunities. The research problem, therefore, can be summarized in the following question: What is the role of prior knowledge in the

Deriving from the research problem, the general objective is to identify the relevance and dynamics of the influence of prior knowledge and past experiences in the process of recognizing entrepreneurial opportunities. The specific objectives of this study are: to understand how prior knowledge and past experiences influence the recognition of opportunities; to identify the relationships between the three types of prior knowledge and the process of recognizing entrepreneurial opportunities; and to analyze the interactions between each type of prior knowledge and the dimensions of the opportunity recognition process, in particular the scope of opportunities and the intensity of the emergence of potential new businesses and their interactions.

*DOI: http://dx.doi.org/10.5772/intechopen.94161*

words, latent business ideas.

*recognizing opportunities. Source: Prepared by the author.*

**Figure 1.**

started their own venture [21].

**3. Research methodology**

process of recognizing entrepreneurial opportunities?

is the basis of this study.

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities DOI: http://dx.doi.org/10.5772/intechopen.94161*

#### **Figure 1.**

*Entrepreneurship - Contemporary Issues*

for creating new businesses [7].

the dynamics of this relationship.

crucial task [19].

items of information [20].

Narrowing our analysis to consider just prior knowledge, there is a wealth of evidence indicating that information gathered from life experiences, both in its quality and diversity, can be of great advantage to entrepreneurs in terms of their recognizing potentially lucrative opportunities. As an example, prior knowledge that focuses on the needs of customers and, consequently, on ways of addressing them, greatly reinforces the ability of entrepreneurs to provide innovative solutions and, as a result, favors the emergence of opportunities that are potentially valuable

It is important to stress that although life experience can be of great advantage to recognize opportunities, no necessarily elder entrepreneurs are more successful in this process than younger entrepreneurs. According to [17], countries whose populations are excessively skewed towards old or young cohorts may experience low levels of entrepreneurial activity. [18] studied start-ups systematically in the United States and found that successful entrepreneurs are middle-aged, not younger or older. The mean age at founding for the 1-in-1000 fastest growing new ventures is 45 years old. In this particular context, literature provides evidence of three different types of prior knowledge that are identified as coming from an entrepreneur's background. The first type of prior knowledge has to do with fascination and fun [4], and is described as an area that an entrepreneur dominates, or that is of special interest to them. The second type concerns the experiences that arise from work positions they have held. Finally, the third type of prior knowledge has to do with the educational activities undertaken by the entrepreneur. It is worth mentioning that the three perspectives listed above consider that there is a close relationship between access to

information and the emergence of the perception of opportunities.

of their greater clarity and the depth of their experience.

process of recognizing an entrepreneurial opportunity.

In addition to the role of each of the variables that have an influence on the process of recognizing opportunities, we now need to understand in greater detail

The entrepreneur's background, including their prior knowledge, has an impact on the recognition of opportunities based on the dimensions of the process. Here we highlight the consequences of the variables on the scope of the opportunity and the intensity of the process. Scope concerns the peculiarities and sectoral and functional attributes of the undertaking, while intensity is related to the number of opportunities that emerge during the process. **Figure 1** shows the dynamics of this relationship. As potential inferences of this framework, it is presumed that very high levels of prior knowledge may reduce the need for active research, since a large stock of knowledge contributes to the formation of broad and rich connections of cognitive structures, and this again makes participation in formal search activities a less

Based on their comparative analysis of experienced and novice entrepreneurs, these same authors identified that these two profiles have distinct cognitive structures, which provide experienced entrepreneurs with a cognitive advantage because

Based on the results of the literature, it is possible to argue that as entrepreneurs acquire a particular knowledge, they become more skilled at perceiving meanings based on new data and information, and at exploring the links between existing

In the positions entrepreneurs hold within a company, they have potential access to various pieces of information they would not have access to if they were not in the company. This information ranges from unexplored ideas and discontinued projects to proprietary technological knowledge, and can serve as a driver of the

The entrepreneur also has access to specific information from the sector in which they work, such as customer needs and demands, or changes in consumption

**82**

*The dynamics of the relationship between the entrepreneur's background and the dimensions of the process of recognizing opportunities. Source: Prepared by the author.*

habits. Alsos and Kaikkonen [20] also argue that entrepreneurs who have access to a vast network of contacts through a company or the market in which they operate will probably have access to a large number of good but "hidden options," in other words, latent business ideas.

Based on the simple act of starting a new business, entrepreneurs can observe opportunities that they would be unable to recognize or develop had they not started their own venture [21].

This dependence, as expressed in the literature and that is related to the entrepreneur's previous activities with the possibilities of recognizing new opportunities, is the basis of this study.

#### **3. Research methodology**

The questions that guided this research relate to the field of entrepreneurship, its approach being recognizing opportunities. The research problem, therefore, can be summarized in the following question: What is the role of prior knowledge in the process of recognizing entrepreneurial opportunities?

Deriving from the research problem, the general objective is to identify the relevance and dynamics of the influence of prior knowledge and past experiences in the process of recognizing entrepreneurial opportunities. The specific objectives of this study are: to understand how prior knowledge and past experiences influence the recognition of opportunities; to identify the relationships between the three types of prior knowledge and the process of recognizing entrepreneurial opportunities; and to analyze the interactions between each type of prior knowledge and the dimensions of the opportunity recognition process, in particular the scope of opportunities and the intensity of the emergence of potential new businesses and their interactions.

With regard to the nature of the research, it can be classified as exploratory. Exploratory research is usually undertaken when there are few previous studies related to the research question. Rather than testing hypotheses, this type of research looks for patterns, ideas and insights in order to carry out a more rigorous and qualitative investigation in the future.

In order to operationalize this investigation, we chose a research strategy that involved carrying out a basic qualitative study [22]. This is justified because of the nature of the problem, the objectives that guided the research and, in particular, the fact that there are few alternative methodological processes in this field of research. The framework was based on a qualitative phenomenological paradigm [22].

It is also worth noting that qualitative research starts from an extensive interest or a broad question that becomes narrower as the investigation progresses. In this sense, it does not demand that observed events are measured or listed, nor does it base its analysis on statistical tools [23].

A thorough bibliographic review was initially undertaken on those topics that were relevant to this research. The objective of this initiative was to become familiar with the literature and gain an understanding from the perspective of prior knowledge as applied to recognizing opportunities, thus giving rise to insights into potential research problems. Bringing together this theoretical reference point helped us develop the methodological processes behind this research and supported the framework that involves prior knowledge and the dimensions of scope and intensity.

Based on the research object, and from the point of view of the approach to the problem being researched, we chose in-depth interviews as the data collection source of the empirical material of this study. An in-depth interview technique is recommended for understanding a single meaning when various agents are being used [22].

A semi-structured interview script was used for this purpose, which was developed on the basis of the objectives of this research and the literature that was consulted when establishing the theoretical point of reference. The purpose of these interviews was to obtain as much information as possible about the topics being addressed in the research from the oral reports of the respondents. The use of interviews is justified since they are the ideal way to obtain responses to the objectives proposed by this study.

The initial suggestion was to approach ten entrepreneurs. The selection of respondents was not intended to be statistically representative, but to include as much diversity as possible. The age profile of the seven men and three women who were interviewed was quite different and ranged from 23 to 55 years old. It is worth adding that the activity sectors and the professional and academic backgrounds of the entrepreneurs were also diverse.

#### **4. Result and discussions**

The results we obtained corroborate the result proposed by [15], who states that previous experience facilitates recognition of the value of new information and, consequently, favors the process of recognizing entrepreneurial opportunities. In other words, the different dimensions of prior knowledge apparently interfere in a positive way in the process of recognizing entrepreneurial opportunities.

One notable aspect that all entrepreneurs mentioned during the research is that what they are and what they know were, in some way or another, a starting point and served as orientation in their process of recognizing opportunities. This sentence reaffirms the belief expressed in the literature that the entrepreneur's

**85**

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities*

background has an impact, regardless of its extent, in the way they recognize

Family aspects, involving both relationship ties and the intrinsic knowledge that derives from this aspect, were also repeatedly mentioned by the entrepreneurs during the interviews, and certainly they can condition even the relevance of an entrepreneur's experiences and knowledge when it comes to recognizing

It is essential to highlight that the third variant of prior knowledge, which is related to fascination and the hobbies of the entrepreneur, plays a relevant role in the process. It seems, however, that this aspect is much more closely related to the fact that it provides the legitimate motivation for a more in-depth search for knowledge in this field of interest rather than to the direct accumulation of the knowledge necessary for discovering an opportunity. This is what the following

*I always liked flying... I've got an uncle and a cousin who are pilots and I've always been influenced by that. Since I was little, I've built model airplanes. I fly model planes and I've always liked flying a flight simulator. On weekends an outing for me was to go to the airport. It's a big hobby... I studied mechanical engineering because I liked airplanes, and my dream was to work for Embraer. (Entrepreneur A).*

In short, this domain of prior knowledge drives the entrepreneur to outline the boundaries of his potential opportunities, thereby influencing the reach and scope

Another latent result obtained from this study was the fact that younger entrepreneurs tend to attribute greater value to knowledge gained by way of a formal education process. They recounted during the interviews that practically every experience they had had before starting their venture generated some kind of buzz in them or had a positive influence on them. This respondent profile repeatedly presented social ties - especially with those closest to them - as being important in

In a clear correlation, another profile, of the entrepreneur who attributes great relevance to dominating the type of prior knowledge that is aligned with education and academic studies, is comprised of those entrepreneurs who have a narrow professional experience. From a conceptual point of view, discussions focus on the relationship between having little professional experience and the greater importance of knowledge that comes from the education of the entrepreneur, as shown in

*Yes, I think I can find a link between the opportunities I've already recognized and those that appeared... Since I had a more technical education, I see things from their more technical side, and opportunities too... Perhaps my education in mechanical* 

*I used to work as a cashier for Itaú Bank and then my career started to take off sharply. I got several promotions in a short space of time in the bank for something I did not like doing. After all, I had a degree in marketing... because it was short and had little focus on my area, it was not an experience that helped a lot when it came to identifying an opportunity... The opportunities I saw were always linked to my college, to publicity and marketing... I always wanted to do an internship in my area, in the area of creation, and I always asked [myself ] how I could do this little by little without giving up my job... And what if I had an advertising agency* 

*engineering influenced the opportunities (Entrepreneur A).*

*DOI: http://dx.doi.org/10.5772/intechopen.94161*

extract from an interview shows:

of his entrepreneurial opportunities.

the following extracts:

the process of recognizing their opportunities.

*completely on-line? (Entrepreneur E).*

opportunities.

opportunities and even in the opportunity itself.

#### *The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities DOI: http://dx.doi.org/10.5772/intechopen.94161*

background has an impact, regardless of its extent, in the way they recognize opportunities and even in the opportunity itself.

Family aspects, involving both relationship ties and the intrinsic knowledge that derives from this aspect, were also repeatedly mentioned by the entrepreneurs during the interviews, and certainly they can condition even the relevance of an entrepreneur's experiences and knowledge when it comes to recognizing opportunities.

It is essential to highlight that the third variant of prior knowledge, which is related to fascination and the hobbies of the entrepreneur, plays a relevant role in the process. It seems, however, that this aspect is much more closely related to the fact that it provides the legitimate motivation for a more in-depth search for knowledge in this field of interest rather than to the direct accumulation of the knowledge necessary for discovering an opportunity. This is what the following extract from an interview shows:

*I always liked flying... I've got an uncle and a cousin who are pilots and I've always been influenced by that. Since I was little, I've built model airplanes. I fly model planes and I've always liked flying a flight simulator. On weekends an outing for me was to go to the airport. It's a big hobby... I studied mechanical engineering because I liked airplanes, and my dream was to work for Embraer. (Entrepreneur A).*

In short, this domain of prior knowledge drives the entrepreneur to outline the boundaries of his potential opportunities, thereby influencing the reach and scope of his entrepreneurial opportunities.

Another latent result obtained from this study was the fact that younger entrepreneurs tend to attribute greater value to knowledge gained by way of a formal education process. They recounted during the interviews that practically every experience they had had before starting their venture generated some kind of buzz in them or had a positive influence on them. This respondent profile repeatedly presented social ties - especially with those closest to them - as being important in the process of recognizing their opportunities.

In a clear correlation, another profile, of the entrepreneur who attributes great relevance to dominating the type of prior knowledge that is aligned with education and academic studies, is comprised of those entrepreneurs who have a narrow professional experience. From a conceptual point of view, discussions focus on the relationship between having little professional experience and the greater importance of knowledge that comes from the education of the entrepreneur, as shown in the following extracts:

*Yes, I think I can find a link between the opportunities I've already recognized and those that appeared... Since I had a more technical education, I see things from their more technical side, and opportunities too... Perhaps my education in mechanical engineering influenced the opportunities (Entrepreneur A).*

*I used to work as a cashier for Itaú Bank and then my career started to take off sharply. I got several promotions in a short space of time in the bank for something I did not like doing. After all, I had a degree in marketing... because it was short and had little focus on my area, it was not an experience that helped a lot when it came to identifying an opportunity... The opportunities I saw were always linked to my college, to publicity and marketing... I always wanted to do an internship in my area, in the area of creation, and I always asked [myself ] how I could do this little by little without giving up my job... And what if I had an advertising agency completely on-line? (Entrepreneur E).*

*Entrepreneurship - Contemporary Issues*

qualitative investigation in the future.

base its analysis on statistical tools [23].

of scope and intensity.

tives proposed by this study.

the entrepreneurs were also diverse.

**4. Result and discussions**

used [22].

With regard to the nature of the research, it can be classified as exploratory. Exploratory research is usually undertaken when there are few previous studies related to the research question. Rather than testing hypotheses, this type of research looks for patterns, ideas and insights in order to carry out a more rigorous and

In order to operationalize this investigation, we chose a research strategy that involved carrying out a basic qualitative study [22]. This is justified because of the nature of the problem, the objectives that guided the research and, in particular, the fact that there are few alternative methodological processes in this field of research. The framework was based on a qualitative phenomenological paradigm [22].

It is also worth noting that qualitative research starts from an extensive interest or a broad question that becomes narrower as the investigation progresses. In this sense, it does not demand that observed events are measured or listed, nor does it

A thorough bibliographic review was initially undertaken on those topics that were relevant to this research. The objective of this initiative was to become familiar with the literature and gain an understanding from the perspective of prior knowledge as applied to recognizing opportunities, thus giving rise to insights into potential research problems. Bringing together this theoretical reference point helped us develop the methodological processes behind this research and supported the framework that involves prior knowledge and the dimensions

Based on the research object, and from the point of view of the approach to the problem being researched, we chose in-depth interviews as the data collection source of the empirical material of this study. An in-depth interview technique is recommended for understanding a single meaning when various agents are being

A semi-structured interview script was used for this purpose, which was developed on the basis of the objectives of this research and the literature that was consulted when establishing the theoretical point of reference. The purpose of these interviews was to obtain as much information as possible about the topics being addressed in the research from the oral reports of the respondents. The use of interviews is justified since they are the ideal way to obtain responses to the objec-

The initial suggestion was to approach ten entrepreneurs. The selection of respondents was not intended to be statistically representative, but to include as much diversity as possible. The age profile of the seven men and three women who were interviewed was quite different and ranged from 23 to 55 years old. It is worth adding that the activity sectors and the professional and academic backgrounds of

The results we obtained corroborate the result proposed by [15], who states that previous experience facilitates recognition of the value of new information and, consequently, favors the process of recognizing entrepreneurial opportunities. In other words, the different dimensions of prior knowledge apparently interfere in a

positive way in the process of recognizing entrepreneurial opportunities.

One notable aspect that all entrepreneurs mentioned during the research is that what they are and what they know were, in some way or another, a starting point and served as orientation in their process of recognizing opportunities. This sentence reaffirms the belief expressed in the literature that the entrepreneur's

**84**

*I'd not had a lot of professional experience, just an internship... There's no doubt at all that the things I learned in college helped me a lot. They gave me the technical basis for understanding the subject... I was doing my end of course work in the same business area. It was when I was preparing the work that I saw it was a promising business. (Entrepreneur F).*

It is worth noting that these same entrepreneurs, who have a smaller stock of knowledge resulting from their professional experiences, tend to have a broader opportunity recognition process in terms of scope. In other words, there is a greater diversity in the profile of the opportunities that these entrepreneurs recognize, especially with regard to the branches of industry in which an opportunity might occur.

It is believed, therefore, that as private entrepreneurs with a lot of professional experience build their wealth of information based on their educational activities or as a result of their hobbies, they tend to have a smaller focus, but a consequently broader scope of opportunities. This is in line with what [19] proposed. As a result, entrepreneurs with less experience in business, which is the result of the work they did, tend to spend more time on a variety of potential opportunities.

For entrepreneurs with a low cognitive structure as a result of their professional experiences the intensity of the process is greater, with a much higher number of entrepreneurial opportunities springing up. The following extracts from the transcribed interviews corroborate this situation:

*There were various opportunities. I tried several times to do other things. I tried opening a home automation company with the same partner I have today, but it was a market that was just beginning. I'm always having new business ideas... I cannot see any coherence between them; few of them are in the same market. Perhaps my technical background because of engineering conditions me in some way, but generally I cannot especially see any relationship with a market or a sector (Entrepreneur A).*

*I looked on my own at everything from physiotherapy clinics, distance learning financial courses, etc.; I do not even remember any more, there were a lot of markets. There were undoubtedly more than ten in completely different sectors (Entrepreneur B).*

*I could see various business possibilities, from a store selling scarves, which was a franchise, to technology for the textile industry... I looked at a lot of things (Entrepreneur F).*

*Various others [opportunities] appeared in a wide variety of sectors... one that was fairly relevant was in the functional food sector. Because of my family I had contact with some functional products, but the investment was too high for me. That's why I left it for a later stage (Entrepreneur H)*

On the other hand, those entrepreneurs with more robust professional experiences tend to identify and develop opportunities that are much more focused on their previous field of activity, either from the point of view of functional position, or as a branch of industry. In this situation, these entrepreneurs find it more difficult to move away from the ties they have. We draw this conclusion from the interviews, but it is also based on inferences taken from the above literature. (XIX) infer and suggest a more in-depth study into the suspicion that entrepreneurs who are just beginning should look at opportunities in a less focused way. Those who are

**87**

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities*

experienced, however, should channel their analyses towards a smaller thematic area that has opportunities that focus on the experiences and knowledge that come

Finally, another conclusion derived from this profile of entrepreneurs is that, in contrast to the great intensity presented by those who have low cognitive structures as a result of their professional experiences, they usually recognize a smaller number of opportunities and consequently the process is less intense. This is what

*There were not a lot of businesses that I thought about establishing, and they always* 

*In fact, I was in the insurance industry for many years. Even though I spent some time in advertising, my origin and my major interest was in the insurance market... I used to know the market. I had a lot of relationships in it. I knew the problems and I was already imagining an ideal business model... As a result, I looked on this market more kindly, and it was natural for me to decide to set up an insurance broker, with* 

*I worked my whole professional life in the building management (condominium) area. I started in a large company and then I set up my own company... I began to get interested in technology, which is when I imagined that the operation I knew well could be automated by way of a web application environment... That was* 

Due to the increasing relevance of the concept of opportunities as a central point in defining the entrepreneurial process, the ability to identify, evaluate and develop opportunities emerges as a potential item that differentiates entrepreneurs from

It is also believed that the experiences and knowledge accumulated in a wide variety of activities in some way mean that certain people are capable of acting better when faced with a combination of disconnected items of information. In other words, the cognitive structures derived from these past experiences facilitate

In order to explain the relationship between prior knowledge and past experiences when recognizing opportunities, this work adopted a theoretical framework that draws a parallel between three domains of knowledge, namely: i) subjects of special interest to the entrepreneur, professional experiences and formal education activities, and the dimensions of the opportunity recognition process, and specifically for this study, ii) the scope of entrepreneurial opportunities and iii) the

The scope of opportunities has to do with the characteristics of the business, which are related to its line of activity and the functional role of its work. Meanwhile, the intensity of the process is based on the number of opportunities

interviews with entrepreneurs using a semi-structured script.

and developing an entrepreneurial opportunity.

By adopting a qualitative research approach, this study carried out ten in-depth

This allowed us to reach some conclusions. The first concerns endorsing the literature on the relevance of past knowledge in the process of identifying, evaluating

and guide people towards recognizing an entrepreneurial opportunity.

*were in some way related to my work experience [...]. (Entrepreneur D).*

*a focus and the differentials that I thought were ideal (Entrepreneur G).*

*basically the only opportunity I identified (Entrepreneur J).*

*DOI: http://dx.doi.org/10.5772/intechopen.94161*

the extracts from the interviews transcribed below show:

from their past.

**5. Conclusions**

non-entrepreneurs.

intensity of the process.

that appear to the entrepreneur.

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities DOI: http://dx.doi.org/10.5772/intechopen.94161*

experienced, however, should channel their analyses towards a smaller thematic area that has opportunities that focus on the experiences and knowledge that come from their past.

Finally, another conclusion derived from this profile of entrepreneurs is that, in contrast to the great intensity presented by those who have low cognitive structures as a result of their professional experiences, they usually recognize a smaller number of opportunities and consequently the process is less intense. This is what the extracts from the interviews transcribed below show:

*There were not a lot of businesses that I thought about establishing, and they always were in some way related to my work experience [...]. (Entrepreneur D).*

*In fact, I was in the insurance industry for many years. Even though I spent some time in advertising, my origin and my major interest was in the insurance market... I used to know the market. I had a lot of relationships in it. I knew the problems and I was already imagining an ideal business model... As a result, I looked on this market more kindly, and it was natural for me to decide to set up an insurance broker, with a focus and the differentials that I thought were ideal (Entrepreneur G).*

*I worked my whole professional life in the building management (condominium) area. I started in a large company and then I set up my own company... I began to get interested in technology, which is when I imagined that the operation I knew well could be automated by way of a web application environment... That was basically the only opportunity I identified (Entrepreneur J).*

#### **5. Conclusions**

*Entrepreneurship - Contemporary Issues*

*business. (Entrepreneur F).*

might occur.

*I'd not had a lot of professional experience, just an internship... There's no doubt at all that the things I learned in college helped me a lot. They gave me the technical basis for understanding the subject... I was doing my end of course work in the same business area. It was when I was preparing the work that I saw it was a promising* 

It is worth noting that these same entrepreneurs, who have a smaller stock of knowledge resulting from their professional experiences, tend to have a broader opportunity recognition process in terms of scope. In other words, there is a greater diversity in the profile of the opportunities that these entrepreneurs recognize, especially with regard to the branches of industry in which an opportunity

It is believed, therefore, that as private entrepreneurs with a lot of professional experience build their wealth of information based on their educational activities or as a result of their hobbies, they tend to have a smaller focus, but a consequently broader scope of opportunities. This is in line with what [19] proposed. As a result, entrepreneurs with less experience in business, which is the result of the work they

For entrepreneurs with a low cognitive structure as a result of their professional

experiences the intensity of the process is greater, with a much higher number of entrepreneurial opportunities springing up. The following extracts from the

*There were various opportunities. I tried several times to do other things. I tried opening a home automation company with the same partner I have today, but it was a market that was just beginning. I'm always having new business ideas... I cannot see any coherence between them; few of them are in the same market. Perhaps my technical background because of engineering conditions me in some way, but generally I cannot especially see any relationship with a market or a sector* 

*I looked on my own at everything from physiotherapy clinics, distance learning financial courses, etc.; I do not even remember any more, there were a lot of markets. There were undoubtedly more than ten in completely different sectors* 

*I could see various business possibilities, from a store selling scarves, which was a franchise, to technology for the textile industry... I looked at a lot of things* 

*Various others [opportunities] appeared in a wide variety of sectors... one that was fairly relevant was in the functional food sector. Because of my family I had contact with some functional products, but the investment was too high for me. That's why* 

On the other hand, those entrepreneurs with more robust professional experiences tend to identify and develop opportunities that are much more focused on their previous field of activity, either from the point of view of functional position, or as a branch of industry. In this situation, these entrepreneurs find it more difficult to move away from the ties they have. We draw this conclusion from the interviews, but it is also based on inferences taken from the above literature. (XIX) infer and suggest a more in-depth study into the suspicion that entrepreneurs who are just beginning should look at opportunities in a less focused way. Those who are

did, tend to spend more time on a variety of potential opportunities.

transcribed interviews corroborate this situation:

*I left it for a later stage (Entrepreneur H)*

*(Entrepreneur A).*

*(Entrepreneur B).*

*(Entrepreneur F).*

**86**

Due to the increasing relevance of the concept of opportunities as a central point in defining the entrepreneurial process, the ability to identify, evaluate and develop opportunities emerges as a potential item that differentiates entrepreneurs from non-entrepreneurs.

It is also believed that the experiences and knowledge accumulated in a wide variety of activities in some way mean that certain people are capable of acting better when faced with a combination of disconnected items of information. In other words, the cognitive structures derived from these past experiences facilitate and guide people towards recognizing an entrepreneurial opportunity.

In order to explain the relationship between prior knowledge and past experiences when recognizing opportunities, this work adopted a theoretical framework that draws a parallel between three domains of knowledge, namely: i) subjects of special interest to the entrepreneur, professional experiences and formal education activities, and the dimensions of the opportunity recognition process, and specifically for this study, ii) the scope of entrepreneurial opportunities and iii) the intensity of the process.

The scope of opportunities has to do with the characteristics of the business, which are related to its line of activity and the functional role of its work. Meanwhile, the intensity of the process is based on the number of opportunities that appear to the entrepreneur.

By adopting a qualitative research approach, this study carried out ten in-depth interviews with entrepreneurs using a semi-structured script.

This allowed us to reach some conclusions. The first concerns endorsing the literature on the relevance of past knowledge in the process of identifying, evaluating and developing an entrepreneurial opportunity.

Another conclusion was the fact that in the process of recognizing an opportunity those entrepreneurs who had had less time in their professional careers attribute the relevance of their prior knowledge to their educational activities.

Along these same lines, entrepreneurs who have little professional experience present a very wide field of opportunities, making it clear that they have little detailed knowledge of a particular sector or industry. This can be justified by the fact that experiences that originate from formal education are much less restrictive than professional experiences. These same entrepreneurs are endowed with enormous intensity when it comes to the process of recognizing opportunities; in other words, business ideas that become opportunities and potential ventures are constantly emerging.

On the other hand, those entrepreneurs with greater and better constructed work experience, both in an industry and in a functional position, have less scope; in other words, in most cases they direct their past experiences to a connected and very narrow thematic horizon. These entrepreneurs also have a less intense opportunity recognition process, which is directly justified by the fact that the possibilities in terms of thematic fields are narrower.

The limitations of this study are, in particular, the potential correlation that exists between robust professional experiences and the age of the entrepreneur. In other words, the question remains as to how much their deliberation in terms of their little professional experience is based on the limitations of their professional experiences, or on their age, in view of the little time they have had to form a stronger set of experiences.

As a suggestion for future research, there is a need for a detailed study of the interactions, not only between the domains of prior knowledge, but of other variables that try to explain the differences in the ability to recognize an entrepreneurial opportunity.

#### **Author details**

Felipe Baeta and Tales Andreassi\* FGV EAESP, Brazil

\*Address all correspondence to: tandreassi@gmail.com

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**89**

p. 61-75.

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities*

1995.

[10] HILLS, G. E. Opportunity

[11] TIMMONS, J. A. et al.

Babson College, 1987.

of Chicago Press, 1973.

Babson College, 1998.

2000

2001.

2 (1): 65-82.

recognition by successful entrepreneurs: a pilot study. In: ZAHRA S. A. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley: Babson College,

Opportunity recognition: the core of entrepreneurship. In: CHURCHILL, N. C. et al. (Ed.). Frontiers of

entrepreneurship research. Wellesley:

[12] STEVENSON, H. H.; ROBERTS, M. J.; GROUSBECK, H. I. New business

[13] KIRZNER, I. M. Competition and entrepreneurship. Chicago: University

[14] HILLS, G. E.; SHRADER, R. C. Successful entrepreneurs: insights into opportunity recognition. In: ZAHRA S. A. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley:

[15] SHANE, S. Prior knowledge and the discovery of entrepreneurial opportunity. Organization Science,

Entrepreneurship: a process perspective.

[17] LÉVESQUE, M.; MINNITI, M. Age matters: how demographics influence aggregate entrepreneurship. Strategic Entrepreneurship Journal, September

[18] AZOULAY, P.; JONES, B.F.; KIM, J.D.; MIRANDA, J. 2020. "Age and High-Growth Entrepreneurship." American

Economic Review: Insights,

[16] BARON, R.; SHANE, S.

Nelson Education, 2007

ventures and the entrepreneur. Homewood: Irwin, 1985.

*DOI: http://dx.doi.org/10.5772/intechopen.94161*

[1] SHANE, S.; VENKATARAMAN S. The promise of entrepreneurship as a field of research. Academy of Management Review, v. 25, p. 217-226,

[2] FUDURIC, N. The sources of

[3] FAASSEN, W. Recognition and development of the entrepreneurial opportunity by novice entrepreneurs: influenced by their background? Enschede: University of Twente, 2010.

[4] ARDICHVILI, A.; CARDOZO, R.; RAY, S. A theory of entrepreneurial opportunity identification and development. Journal of Business Venturing, v. 18, n. 1, p. 105-123, 2003.

Aalborg University, 2008.

[5] STEVENSON, H. H.;

p. 10-23, 1986.

2000.

Elgar, 2003.

JARILLO-MOSSI, J. C. Preserving entrepreneurship as companies grow. Journal of Business Strategy, v. 7,

[6] SINGH, R. P. Entrepreneurial opportunity recognition through social networks. Londres: Garland Publiching,

[7] SHANE, S. A general theory of entrepreneurship. Cheltenham: Edward

[8] ALVES, R. D. Empreendedorismo e o processo de identificação de oportunidades. Master Thesis –

Pontifícia Universidade Católica do Rio

[9] CHRISTENSEN, P. S.; MADSEN, O. O.; PETERSON, R. Conceptualizing

de Janeiro, Rio de Janeiro, 2005.

entrepreneurial opportunity recognition. In: HILLS, G. E. (Ed.). Marketing and entrepreneurship: research ideas and opportunities. Westport: Quorum Books, 1994.

entrepreneurial opportunities. Aalborg:

2000.

**References**

*The Role of Prior Knowledge in the Process of Recognizing Entrepreneurial Opportunities DOI: http://dx.doi.org/10.5772/intechopen.94161*

#### **References**

*Entrepreneurship - Contemporary Issues*

constantly emerging.

in terms of thematic fields are narrower.

stronger set of experiences.

neurial opportunity.

Another conclusion was the fact that in the process of recognizing an opportunity those entrepreneurs who had had less time in their professional careers attribute

Along these same lines, entrepreneurs who have little professional experience present a very wide field of opportunities, making it clear that they have little detailed knowledge of a particular sector or industry. This can be justified by the fact that experiences that originate from formal education are much less restrictive than professional experiences. These same entrepreneurs are endowed with enormous intensity when it comes to the process of recognizing opportunities; in other words, business ideas that become opportunities and potential ventures are

On the other hand, those entrepreneurs with greater and better constructed work experience, both in an industry and in a functional position, have less scope; in other words, in most cases they direct their past experiences to a connected and very narrow thematic horizon. These entrepreneurs also have a less intense opportunity recognition process, which is directly justified by the fact that the possibilities

The limitations of this study are, in particular, the potential correlation that exists between robust professional experiences and the age of the entrepreneur. In other words, the question remains as to how much their deliberation in terms of their little professional experience is based on the limitations of their professional experiences, or on their age, in view of the little time they have had to form a

As a suggestion for future research, there is a need for a detailed study of the interactions, not only between the domains of prior knowledge, but of other variables that try to explain the differences in the ability to recognize an entrepre-

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

the relevance of their prior knowledge to their educational activities.

**88**

**Author details**

FGV EAESP, Brazil

Felipe Baeta and Tales Andreassi\*

provided the original work is properly cited.

\*Address all correspondence to: tandreassi@gmail.com

[1] SHANE, S.; VENKATARAMAN S. The promise of entrepreneurship as a field of research. Academy of Management Review, v. 25, p. 217-226, 2000.

[2] FUDURIC, N. The sources of entrepreneurial opportunities. Aalborg: Aalborg University, 2008.

[3] FAASSEN, W. Recognition and development of the entrepreneurial opportunity by novice entrepreneurs: influenced by their background? Enschede: University of Twente, 2010.

[4] ARDICHVILI, A.; CARDOZO, R.; RAY, S. A theory of entrepreneurial opportunity identification and development. Journal of Business Venturing, v. 18, n. 1, p. 105-123, 2003.

[5] STEVENSON, H. H.; JARILLO-MOSSI, J. C. Preserving entrepreneurship as companies grow. Journal of Business Strategy, v. 7, p. 10-23, 1986.

[6] SINGH, R. P. Entrepreneurial opportunity recognition through social networks. Londres: Garland Publiching, 2000.

[7] SHANE, S. A general theory of entrepreneurship. Cheltenham: Edward Elgar, 2003.

[8] ALVES, R. D. Empreendedorismo e o processo de identificação de oportunidades. Master Thesis – Pontifícia Universidade Católica do Rio de Janeiro, Rio de Janeiro, 2005.

[9] CHRISTENSEN, P. S.; MADSEN, O. O.; PETERSON, R. Conceptualizing entrepreneurial opportunity recognition. In: HILLS, G. E. (Ed.). Marketing and entrepreneurship: research ideas and opportunities. Westport: Quorum Books, 1994. p. 61-75.

[10] HILLS, G. E. Opportunity recognition by successful entrepreneurs: a pilot study. In: ZAHRA S. A. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley: Babson College, 1995.

[11] TIMMONS, J. A. et al. Opportunity recognition: the core of entrepreneurship. In: CHURCHILL, N. C. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley: Babson College, 1987.

[12] STEVENSON, H. H.; ROBERTS, M. J.; GROUSBECK, H. I. New business ventures and the entrepreneur. Homewood: Irwin, 1985.

[13] KIRZNER, I. M. Competition and entrepreneurship. Chicago: University of Chicago Press, 1973.

[14] HILLS, G. E.; SHRADER, R. C. Successful entrepreneurs: insights into opportunity recognition. In: ZAHRA S. A. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley: Babson College, 1998.

[15] SHANE, S. Prior knowledge and the discovery of entrepreneurial opportunity. Organization Science, 2000

[16] BARON, R.; SHANE, S. Entrepreneurship: a process perspective. Nelson Education, 2007

[17] LÉVESQUE, M.; MINNITI, M. Age matters: how demographics influence aggregate entrepreneurship. Strategic Entrepreneurship Journal, September 2001.

[18] AZOULAY, P.; JONES, B.F.; KIM, J.D.; MIRANDA, J. 2020. "Age and High-Growth Entrepreneurship." American Economic Review: Insights, 2 (1): 65-82.

[19] BARON, R.; ENSLEY, M. Opportunity recognition as the detection of meaningful patterns: evidence from comparisons of novice and experienced entrepreneurs. Management Science, v. 52, p. 1331- 1344, 2006.

[20] ALSOS, G. A.; KAIKKONEN, V. Opportunities and prior knowledge: a study of experienced entrepreneurs. In: ZAHRA S. A. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley: Babson College, 2004. p. 300-314.

[21] RONSTADT, R. The corridor principle. Journal of Business Venturing, v. 3, n. 1, p. 31-40, 1988.

[22] MERRIAM, S. B. Case study research in education: a qualitative approach. San Francisco: Jossey-Bass, 1988.

[23] GODOY, A. S. Introdução à pesquisa qualitativa e suas possibilidades. Revista de Administração de Empresas, v. 35, n. 2, p. 57-63, 1995.

**91**

research.

**1. Introduction**

**Chapter 6**

**Abstract**

*Alexander Tabares*

International Entrepreneurship:

International entrepreneurship (IE) research draws on the notion that internationalization is an entrepreneurial behavior oriented to the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create value and get a competitive advantage. Based on the clear emphasis on opportunity-focused behaviors, IE research has made progress and extended its domain and boundaries to an extent that the mechanisms operating throughout the international opportunity process can be described. The present chapter aims to depict antecedents, mechanisms, and outcomes of this entrepreneurial behavior oriented to the pursuit of international opportunities and it offers directions for future research. As such, the chapter makes four contributions. First, it outlines antecedents at three levels (individual, firm, and environmental) as driving aspects that lead to the international opportunity-related behavior. Second, it reveals the mechanism by which different actors discover, enact, evaluate, and exploit international opportunities. Third, it describes the outcomes of this opportunities process. Fourth, it suggests establishing a conceptual basis around one previously proposed definition incorporating a notion of a social context that would enable IE scholarly community to set the objective criteria around opportunities and go beyond the legal entity of the focal firm and consider multiple actors, resources, processes, history, and context. Finally, the chapter offers some theoretical contributions by proposing directions for future

**Keywords:** international entrepreneurship, international opportunities, opportunity

International entrepreneurship (IE) is an intersectional domain [1, 2] combining

international business and entrepreneurship areas of knowledge. The IE field emerged in the early 1990s when different studies indicated that some small and young new ventures could go into international markets from inception at their early years [3], which was different from the traditional Uppsala perspective which

discovery, opportunity creation, international performance

An Entrepreneurial Behavior

Oriented to the Pursuit of

International Opportunities

#### **Chapter 6**

*Entrepreneurship - Contemporary Issues*

[20] ALSOS, G. A.; KAIKKONEN, V. Opportunities and prior knowledge: a study of experienced entrepreneurs. In: ZAHRA S. A. et al. (Ed.). Frontiers of entrepreneurship research. Wellesley: Babson College, 2004. p. 300-314.

[21] RONSTADT, R. The corridor

[22] MERRIAM, S. B. Case study research in education: a qualitative approach. San Francisco: Jossey-Bass,

v. 3, n. 1, p. 31-40, 1988.

1988.

2, p. 57-63, 1995.

principle. Journal of Business Venturing,

[23] GODOY, A. S. Introdução à pesquisa qualitativa e suas possibilidades. Revista de Administração de Empresas, v. 35, n.

[19] BARON, R.; ENSLEY, M. Opportunity recognition as the detection of meaningful patterns: evidence from comparisons of novice and experienced entrepreneurs. Management Science, v. 52, p. 1331-

1344, 2006.

**90**

## International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit of International Opportunities

*Alexander Tabares*

### **Abstract**

International entrepreneurship (IE) research draws on the notion that internationalization is an entrepreneurial behavior oriented to the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create value and get a competitive advantage. Based on the clear emphasis on opportunity-focused behaviors, IE research has made progress and extended its domain and boundaries to an extent that the mechanisms operating throughout the international opportunity process can be described. The present chapter aims to depict antecedents, mechanisms, and outcomes of this entrepreneurial behavior oriented to the pursuit of international opportunities and it offers directions for future research. As such, the chapter makes four contributions. First, it outlines antecedents at three levels (individual, firm, and environmental) as driving aspects that lead to the international opportunity-related behavior. Second, it reveals the mechanism by which different actors discover, enact, evaluate, and exploit international opportunities. Third, it describes the outcomes of this opportunities process. Fourth, it suggests establishing a conceptual basis around one previously proposed definition incorporating a notion of a social context that would enable IE scholarly community to set the objective criteria around opportunities and go beyond the legal entity of the focal firm and consider multiple actors, resources, processes, history, and context. Finally, the chapter offers some theoretical contributions by proposing directions for future research.

**Keywords:** international entrepreneurship, international opportunities, opportunity discovery, opportunity creation, international performance

#### **1. Introduction**

International entrepreneurship (IE) is an intersectional domain [1, 2] combining international business and entrepreneurship areas of knowledge. The IE field emerged in the early 1990s when different studies indicated that some small and young new ventures could go into international markets from inception at their early years [3], which was different from the traditional Uppsala perspective which

argued that firms, especially multinationals, could become international following a specific-regular, slow, and evolutionary process to become international. Thus, this early and rapid internationalization theoretical framework challenged the validity of the Uppsala model prevailing so far, and it opened avenues for IE research to study and focus on features of early internationalizing firms and their innovative and new internationalization process [4, 5]. Consequently, most IE research concentrated on studying the internationalization of newly founded ventures that are necessarily small and young and it restricted for years the study of bigger companies [2].

Nonetheless, over the last years, IE research has moved on toward studying a variety of internationalization entrepreneurial behaviors [2, 6] of different actors organizations, groups, or individuals [7]; and then, it has considered not only the entrepreneurial behaviors of small and young firms but also the entrepreneurial behaviors of large and established companies [2]. Hence, IE has evolved over the years, and it has incorporated progressively new insights that address the field as a behavioral process of pursuing opportunities across national borders [2, 8–12] to create value and get a competitive advantage [2, 12].

In the evolving IE field, different definitions have determined common conceptual elements suggesting that the IE field implies a dynamic process or behavior of discovering, evaluation, and exploitation of opportunities across national borders to achieve value creation to different stakeholders [2]. First, McDougall and Oviatt [13] defined IE as a combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create value in business organizations. Then, Zahra and George [12] defined IE as the process of creatively discovering and exploiting opportunities that lie outside a firm's domestic markets in the pursuit of competitive advantage. Afterward, Dimitratos and Plakoyiannaki [14] defined IE as an organizational-wide process that is embedded in the organizational culture of the firm and which seeks through the exploitation of opportunities in the international marketplace to generate value. Next, Oviatt and McDougall [7] defined IE as the discovery, enactment, evaluation, and exploitation of opportunities—across national borders—to create future goods and services. Later, Styles and Seymour [11] defined IE as the behavioral processes associated with the creation and exchange of value through the identification and exploitation of opportunities that cross-national borders. Afterward, Zahra et al. [15] defined IE as the discovery, formation, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and environmental. Finally, Tabares, et al. [2] defined IE as the socially constructed behavioral processes associated with the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and environmental.

Based on the clear emphasis on opportunity-focused behaviors, IE research has made progress and extended its domain and boundaries to an extent that the mechanisms operating throughout the international opportunity process can be described [2]. In this sense, the international opportunity process has been described as a dynamic and iterative phenomenon [2] that develops over time and interacts with the outside world [2, 16, 17] in a complex system that embraces numerous dimensions and various levels (individual, firm, and environment) [2, 18, 19]. Over the years, IE research has also depicted antecedents, mechanisms, and outcomes of this entrepreneurial behavior oriented to the pursuit of international opportunities [2, 20].

**93**

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

**2. Antecedents influencing the international opportunities process**

IE research has outlined antecedents at three levels (individual, firm, and environmental) as driving aspects that lead to the discovery, enactment, evaluation,

Three significant variables have been identified in the process of discovering, enacting, evaluating, and exploiting international opportunities [2]. They have been related to cognition, human capital, and social capital features that determine why some individuals, and not others, pursue specific international opportunities and behave differently toward these opportunities [2]. Thus, different studies illustrate the importance of cognitive features and mental models in the discovery, enactment, evaluation, and exploitation of international opportunities [2, 21–23]. Specifically, individuals with high entrepreneurial intention—perceived-desirability and self-efficacy—are psychologically equipped to pursue international opportunities successfully [24–26]. Similarly, individuals with high levels of commitment [16, 27], alertness [28, 29], imagination [22, 30, 31], willingness, and flexibility [16, 27] can sense and exploit opportunities more efficiently. Other cognitive schemas driving to opportunity-related behaviors are also related to higher levels of proactiveness, risk-taking propensity [16, 21, 23], and global mindset [25, 32, 33] that enable individuals to pursue specific international opportunities. Accordingly, the mentioned cognitive schemas serve individuals to make decisions involving international opportunity capture and growth in foreign markets [2]. Such mental schemas serve to acquire and process information to resolve problems and respond

Regarding individuals' human capital, some studies suggest that the constant investment of individuals in training, education, and other types of learning, namely the English language acquisition, are determinant factors in the pursuit of international opportunities [2, 21, 28, 34–36]. Similarly, different studies indicate that prior experiential knowledge of individuals in the form of entrepreneurial experience [37], market experience—the business with clients, market, and competitors [28, 31, 37], internationalization experience—resources, capabilities, strategies [27, 38–41], and cross-cultural experience—institutional rules, norms, and cultural values [31, 42–45] enables individuals to identify a broader range of

opportunity types and hence pursue better international opportunities.

About individuals' social capital, scholarly research observes that this social capital offers sources of learning and provides information that enables individuals to obtain strategic knowledge on providers, clients, and institutions in foreign countries and then pursues international opportunities [2, 16, 46–49]. Furthermore, this social capital enables individuals to gain financial resources and learn where to find them for continued internationalization [40, 50]. Some studies point out that personal ties with international trade intermediaries, export promoting agencies, local and international distributors, and trade exhibitions are fundamental to discover, enact, evaluate, and exploit international opportunities [31, 36, 44, 47, 51, 52]. Similarly, other ties related to family, social, and business contexts benefit individuals to get access to critical resources, including knowledge that assists them in pursuing and exploiting international opportunities [25, 26, 46, 52–55]. Interestingly, casual ties with overseas distributors and customers through word of mouth are also triggers of international opportunities [39, 47, 56–60].

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

**2.1 Individual-level analysis**

and exploitation of international opportunities.

to dynamic and changing market conditions [2].

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

#### **2. Antecedents influencing the international opportunities process**

IE research has outlined antecedents at three levels (individual, firm, and environmental) as driving aspects that lead to the discovery, enactment, evaluation, and exploitation of international opportunities.

#### **2.1 Individual-level analysis**

*Entrepreneurship - Contemporary Issues*

bigger companies [2].

create value and get a competitive advantage [2, 12].

argued that firms, especially multinationals, could become international following a specific-regular, slow, and evolutionary process to become international. Thus, this early and rapid internationalization theoretical framework challenged the validity of the Uppsala model prevailing so far, and it opened avenues for IE research to study and focus on features of early internationalizing firms and their innovative and new internationalization process [4, 5]. Consequently, most IE research concentrated on studying the internationalization of newly founded ventures that are necessarily small and young and it restricted for years the study of

Nonetheless, over the last years, IE research has moved on toward studying a variety of internationalization entrepreneurial behaviors [2, 6] of different actors organizations, groups, or individuals [7]; and then, it has considered not only the entrepreneurial behaviors of small and young firms but also the entrepreneurial behaviors of large and established companies [2]. Hence, IE has evolved over the years, and it has incorporated progressively new insights that address the field as a behavioral process of pursuing opportunities across national borders [2, 8–12] to

In the evolving IE field, different definitions have determined common conceptual elements suggesting that the IE field implies a dynamic process or behavior of discovering, evaluation, and exploitation of opportunities across national borders to achieve value creation to different stakeholders [2]. First, McDougall and Oviatt [13] defined IE as a combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create value in business organizations. Then, Zahra and George [12] defined IE as the process of creatively discovering and exploiting opportunities that lie outside a firm's domestic markets in the pursuit of competitive advantage. Afterward, Dimitratos and Plakoyiannaki [14] defined IE as an organizational-wide process that is embedded in the organizational culture of the firm and which seeks through the exploitation of opportunities in the international marketplace to generate value. Next, Oviatt and McDougall [7] defined IE as the discovery, enactment, evaluation, and exploitation of opportunities—across national borders—to create future goods and services. Later, Styles and Seymour [11] defined IE as the behavioral processes associated with the creation and exchange of value through the identification and exploitation of opportunities that cross-national borders. Afterward, Zahra et al. [15] defined IE as the discovery, formation, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and environmental. Finally, Tabares, et al. [2] defined IE as the socially constructed behavioral processes associated with the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and

Based on the clear emphasis on opportunity-focused behaviors, IE research has made progress and extended its domain and boundaries to an extent that the mechanisms operating throughout the international opportunity process can be described [2]. In this sense, the international opportunity process has been described as a dynamic and iterative phenomenon [2] that develops over time and interacts with the outside world [2, 16, 17] in a complex system that embraces numerous dimensions and various levels (individual, firm, and environment) [2, 18, 19]. Over the years, IE research has also depicted antecedents, mechanisms, and outcomes of this entrepreneurial behavior oriented to the pursuit of

**92**

environmental.

international opportunities [2, 20].

Three significant variables have been identified in the process of discovering, enacting, evaluating, and exploiting international opportunities [2]. They have been related to cognition, human capital, and social capital features that determine why some individuals, and not others, pursue specific international opportunities and behave differently toward these opportunities [2]. Thus, different studies illustrate the importance of cognitive features and mental models in the discovery, enactment, evaluation, and exploitation of international opportunities [2, 21–23]. Specifically, individuals with high entrepreneurial intention—perceived-desirability and self-efficacy—are psychologically equipped to pursue international opportunities successfully [24–26]. Similarly, individuals with high levels of commitment [16, 27], alertness [28, 29], imagination [22, 30, 31], willingness, and flexibility [16, 27] can sense and exploit opportunities more efficiently. Other cognitive schemas driving to opportunity-related behaviors are also related to higher levels of proactiveness, risk-taking propensity [16, 21, 23], and global mindset [25, 32, 33] that enable individuals to pursue specific international opportunities. Accordingly, the mentioned cognitive schemas serve individuals to make decisions involving international opportunity capture and growth in foreign markets [2]. Such mental schemas serve to acquire and process information to resolve problems and respond to dynamic and changing market conditions [2].

Regarding individuals' human capital, some studies suggest that the constant investment of individuals in training, education, and other types of learning, namely the English language acquisition, are determinant factors in the pursuit of international opportunities [2, 21, 28, 34–36]. Similarly, different studies indicate that prior experiential knowledge of individuals in the form of entrepreneurial experience [37], market experience—the business with clients, market, and competitors [28, 31, 37], internationalization experience—resources, capabilities, strategies [27, 38–41], and cross-cultural experience—institutional rules, norms, and cultural values [31, 42–45] enables individuals to identify a broader range of opportunity types and hence pursue better international opportunities.

About individuals' social capital, scholarly research observes that this social capital offers sources of learning and provides information that enables individuals to obtain strategic knowledge on providers, clients, and institutions in foreign countries and then pursues international opportunities [2, 16, 46–49]. Furthermore, this social capital enables individuals to gain financial resources and learn where to find them for continued internationalization [40, 50]. Some studies point out that personal ties with international trade intermediaries, export promoting agencies, local and international distributors, and trade exhibitions are fundamental to discover, enact, evaluate, and exploit international opportunities [31, 36, 44, 47, 51, 52]. Similarly, other ties related to family, social, and business contexts benefit individuals to get access to critical resources, including knowledge that assists them in pursuing and exploiting international opportunities [25, 26, 46, 52–55]. Interestingly, casual ties with overseas distributors and customers through word of mouth are also triggers of international opportunities [39, 47, 56–60].

#### **2.2 Firm-level analysis**

The previous individual-level analysis asserted that the person's traits are vital factors to pursue international opportunities [2]. However, these features alone cannot be considered as sufficient to handle the complexities and challenges of discovering, enacting, evaluating, and exploiting international opportunities [2]. Influenced by the individual's unique characteristics, the firm must be able to embed the entrepreneurial vision and orientation of the founders into the company and build up an organizational structure that can facilitate the pursuit of international opportunities and thus achieve a competitive advantage [2]. At this firm-level, four significant variables have been identified in the process of discovering, enacting, evaluating, and exploiting international opportunities. They have been related to the firm's culture, the firm's knowledge-based resources, the firm's networks, and the firm's strategy [2].

Substantial IE research indicates the relevance of the firm's culture as a set of shared values and beliefs (a collective cognition) that help firms' members to understand organizational performance and thus provide norms for their behavior and actions in the organization [14, 61–64]. Such collective cognition (collective knowledge structures or articulated heuristics) serves the firm to pursue international opportunities and respond to external events they face [61, 64]. Thus, the firm's culture becomes a source of sustainable competitive advantage, and, most importantly, it enables the employees to pursue and exploit foreign market opportunities [14, 62, 63, 65–68].

Regarding the firm's knowledge-based resources, some findings suggest that access and control of unique resources, in particular, knowledge, enable the firm to gain competitive advantage by pursuing opportunities in international markets [2, 39, 69–71]. Although these knowledge-based resources are grounded on the individual's human capital capabilities [2], they are integrated into the firm through collective routines and processes by which the firm combines and reconfigures new and existing resources to pursue international opportunities and achieve competitive advantage [2, 24, 61, 71]. Furthermore, the firm leverages its capacity to discover, enact, evaluate, and exploit international opportunities through prior organizational knowledge acquired through experiential knowledge within international networks [72–74], international industry and market-specific knowledge [35, 56, 75, 76], internationalization knowledge [40, 47, 75, 77], technological knowledge [33, 35, 39, 78], and institutional knowledge [31, 40, 42, 44, 79].

About the firm's networks, different studies contend that the firm's alliances and relationships provide better access to international opportunities [40, 41, 44, 47, 48, 72] and abilities to overcome the liabilities of newness and foreignness [40, 80, 81]. Some findings indicate that the firm's networks are sources of learning that offer information on risks, consumers, suppliers, politics, economics, and competitive resources leading to superior knowledge and incremental commitment that, in turn, enable the firm to pursue international opportunities successfully [34, 56, 65, 73]. Interestingly, some findings reveal that bonding—close ties offering trust and security—and bridging networks—open and weak ties offering new information)—enable firms to discover, enact, evaluate, and exploit international opportunities [57, 72, 82–86].

Some IE research underscores that the firm's strategy is also essential because it defines a roadmap to deal with the uncertain events which constitute the dynamic and changing business environment [2]. Some studies remark that the firm's strategy has three dimensions: an entrepreneurial posture-oriented strategy, a decision-making rule-oriented strategy, and organization capabilities

**95**

worldwide [2, 15, 36].

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

reconfiguration-oriented strategy [2]. Through the firm's entrepreneurial orientation (understood as the posture to be risky, proactive, and innovative), the firm is alert and prepared to discover and enact international opportunities [39, 61, 63, 70, 77, 79, 87, 88]. Through the firm's decision-making rules (causal logic or effectual logic), the firm evaluates and exploit international opportunities [39, 44, 59, 89–92]. Through the firm's capabilities reconfiguration, the firm responds to changing environments and then combines, modifies, and deploys efficiently existing and new asset base are likely to pursue and exploit other opportunities across national

At this level, different studies show that three main environmental conditions act as a moderator force that shapes the way different individuals or firms pursue international opportunities [2]. The first factor spins around a technological advancement context that comprises the Internet and other information-andcommunication-technologies. The other two factors gravitate around a national and international context that includes legal, political, economic, social, and cultural features [2]. Specifically, these environmental factors are classified into formal institutions (laws, regulations, and government apparatuses enforcing social acceptability) and informal institutions (socio-cultural values and beliefs defining behavior legitimacy) that enable or constrain the way different actors pursue

Some studies highlight the moderating role of the technological advancement context that provides individuals and firms with new ways to pursue international opportunities [2, 33, 95]. The rapid pace of technological change has opened vast opportunities not only to big and established firms but also to smaller and youngerentrepreneurially oriented-competitive firms that efficiently exploit emerging opportunities facilitated by the liberalization of barriers to internationalization [2, 33, 96]. In general, these technological revolutions provide firms with new ways to conduct international business, acquire information and knowledge, communicate ideas, and co-create with others facilitating the pursuit of international

Regarding national and international contexts, some findings underscore the moderating role of formal institutions that enable or constrain different actor-specific behaviors, particularly how they discover, enact, evaluate, and exploit international opportunities [2, 98, 99]. Specifically, economic liberalization opens frontiers and allows firms to pursue international opportunities in an accelerated way [2, 22]. Likewise, nations' property rights protection and transparent laws [100] and regulations promote institutional stability leading to more opportunity-related behaviors [99]. Likewise, the lack of laws, regulations, and government agencies or inefficient and unregulated markets constrain different actors to pursue international opportunities [84, 100, 101]. According to some relevant IE research, institutional voids or weak formal institutions may eventually trigger opportunity-related behaviors oriented to solve social problems

Regarding informal institutions, relevant IE research suggests that sociocultural values and beliefs strongly influence how different individuals and firms pursue international opportunities [8, 23, 60, 69, 102] and that relationship [2]. Specifically, cultural values around the formation of social communities such as joint ventures or agglomerations influence individuals and firms in their opportunity development [43, 91, 100, 103]. Similarly, collective beliefs carrying with them societal and cultural expectations and a country's education system shape

opportunities quicker and more successfully [2, 22, 25, 33, 56, 95, 97].

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

markets [31, 61, 70, 71, 78, 89, 93, 94].

**2.3 Environmental-level analysis**

international opportunities [2].

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

reconfiguration-oriented strategy [2]. Through the firm's entrepreneurial orientation (understood as the posture to be risky, proactive, and innovative), the firm is alert and prepared to discover and enact international opportunities [39, 61, 63, 70, 77, 79, 87, 88]. Through the firm's decision-making rules (causal logic or effectual logic), the firm evaluates and exploit international opportunities [39, 44, 59, 89–92]. Through the firm's capabilities reconfiguration, the firm responds to changing environments and then combines, modifies, and deploys efficiently existing and new asset base are likely to pursue and exploit other opportunities across national markets [31, 61, 70, 71, 78, 89, 93, 94].

#### **2.3 Environmental-level analysis**

*Entrepreneurship - Contemporary Issues*

networks, and the firm's strategy [2].

tunities [14, 62, 63, 65–68].

knowledge [31, 40, 42, 44, 79].

opportunities [57, 72, 82–86].

The previous individual-level analysis asserted that the person's traits are vital factors to pursue international opportunities [2]. However, these features alone cannot be considered as sufficient to handle the complexities and challenges of discovering, enacting, evaluating, and exploiting international opportunities [2]. Influenced by the individual's unique characteristics, the firm must be able to embed the entrepreneurial vision and orientation of the founders into the company and build up an organizational structure that can facilitate the pursuit of international opportunities and thus achieve a competitive advantage [2]. At this firm-level, four significant variables have been identified in the process of discovering, enacting, evaluating, and exploiting international opportunities. They have been related to the firm's culture, the firm's knowledge-based resources, the firm's

Substantial IE research indicates the relevance of the firm's culture as a set of shared values and beliefs (a collective cognition) that help firms' members to understand organizational performance and thus provide norms for their behavior and actions in the organization [14, 61–64]. Such collective cognition (collective knowledge structures or articulated heuristics) serves the firm to pursue international opportunities and respond to external events they face [61, 64]. Thus, the firm's culture becomes a source of sustainable competitive advantage, and, most importantly, it enables the employees to pursue and exploit foreign market oppor-

Regarding the firm's knowledge-based resources, some findings suggest that access and control of unique resources, in particular, knowledge, enable the firm to gain competitive advantage by pursuing opportunities in international markets [2, 39, 69–71]. Although these knowledge-based resources are grounded on the individual's human capital capabilities [2], they are integrated into the firm through collective routines and processes by which the firm combines and reconfigures new and existing resources to pursue international opportunities and achieve competitive advantage [2, 24, 61, 71]. Furthermore, the firm leverages its capacity to discover, enact, evaluate, and exploit international opportunities through prior organizational knowledge acquired through experiential knowledge within international networks [72–74], international industry and market-specific knowledge [35, 56, 75, 76], internationalization knowledge [40, 47, 75, 77], technological knowledge [33, 35, 39, 78], and institutional

About the firm's networks, different studies contend that the firm's alliances and relationships provide better access to international opportunities [40, 41, 44, 47, 48, 72] and abilities to overcome the liabilities of newness and foreignness [40, 80, 81]. Some findings indicate that the firm's networks are sources of learning that offer information on risks, consumers, suppliers, politics, economics, and competitive resources leading to superior knowledge and incremental commitment that, in turn, enable the firm to pursue international opportunities successfully [34, 56, 65, 73]. Interestingly, some findings reveal that bonding—close ties offering trust and security—and bridging networks—open and weak ties offering new information)—enable firms to discover, enact, evaluate, and exploit international

Some IE research underscores that the firm's strategy is also essential because

it defines a roadmap to deal with the uncertain events which constitute the dynamic and changing business environment [2]. Some studies remark that the firm's strategy has three dimensions: an entrepreneurial posture-oriented strategy, a decision-making rule-oriented strategy, and organization capabilities

**2.2 Firm-level analysis**

**94**

At this level, different studies show that three main environmental conditions act as a moderator force that shapes the way different individuals or firms pursue international opportunities [2]. The first factor spins around a technological advancement context that comprises the Internet and other information-andcommunication-technologies. The other two factors gravitate around a national and international context that includes legal, political, economic, social, and cultural features [2]. Specifically, these environmental factors are classified into formal institutions (laws, regulations, and government apparatuses enforcing social acceptability) and informal institutions (socio-cultural values and beliefs defining behavior legitimacy) that enable or constrain the way different actors pursue international opportunities [2].

Some studies highlight the moderating role of the technological advancement context that provides individuals and firms with new ways to pursue international opportunities [2, 33, 95]. The rapid pace of technological change has opened vast opportunities not only to big and established firms but also to smaller and youngerentrepreneurially oriented-competitive firms that efficiently exploit emerging opportunities facilitated by the liberalization of barriers to internationalization [2, 33, 96]. In general, these technological revolutions provide firms with new ways to conduct international business, acquire information and knowledge, communicate ideas, and co-create with others facilitating the pursuit of international opportunities quicker and more successfully [2, 22, 25, 33, 56, 95, 97].

Regarding national and international contexts, some findings underscore the moderating role of formal institutions that enable or constrain different actor-specific behaviors, particularly how they discover, enact, evaluate, and exploit international opportunities [2, 98, 99]. Specifically, economic liberalization opens frontiers and allows firms to pursue international opportunities in an accelerated way [2, 22]. Likewise, nations' property rights protection and transparent laws [100] and regulations promote institutional stability leading to more opportunity-related behaviors [99]. Likewise, the lack of laws, regulations, and government agencies or inefficient and unregulated markets constrain different actors to pursue international opportunities [84, 100, 101]. According to some relevant IE research, institutional voids or weak formal institutions may eventually trigger opportunity-related behaviors oriented to solve social problems worldwide [2, 15, 36].

Regarding informal institutions, relevant IE research suggests that sociocultural values and beliefs strongly influence how different individuals and firms pursue international opportunities [8, 23, 60, 69, 102] and that relationship [2]. Specifically, cultural values around the formation of social communities such as joint ventures or agglomerations influence individuals and firms in their opportunity development [43, 91, 100, 103]. Similarly, collective beliefs carrying with them societal and cultural expectations and a country's education system shape

the way different actors discover, enact, evaluate, and exploit international opportunities [23, 60, 102, 104]. On the other hand, the social and structural stratification processes—a nation's labor division—[100] and the nation's socio-cultural structures [23] increase the likelihood that individuals and firms discover, enact international opportunities, as well as evaluate the types of costs and benefits [23], and exploit them due to the knowledge gap between the cultures [47, 105]. Other studies highlight that global wealth disparity and corporate social responsibility movements encourage individuals and firms to pursue international opportunities [15, 95], specially oriented to solve social problems originated from institutional voids in inactive governments [106].

#### **3. Mechanism in the international opportunities process**

A systematic literature review conducted in IE literature indicates that the international opportunities process can begin with an opportunity discovery—by serendipity or by active search—or with an opportunity enactment—by creation or co-creation as a continuum of behaviors of decision logics that are intertwined and complemented each other [2]. Different from the hot debate in the IE research around the nature and the conditions of the opportunity existence in which the discovery-creation-opportunity-related behaviors are considered as exclusive and contradictory, some findings reveal that both behaviors are indeed complementary and intertwined in entrepreneurial action [2, 6, 7, 88, 107–110]. Instead of making ontological or epistemological differentiation of the concepts, IE research has paved the way to enrich opportunity research theory by considering discovery and creation of opportunities as interdependent [9] and mutually enabling [88, 108, 110, 111] in a multilayer reality.

Broadly, the international opportunities process is an iterative entrepreneurial action moving between discovery and enactment as a continuum of behaviors of decision logics where it is involved not only individuals' and firms' activities but also the collaboration with other business and market firms, entrepreneurs, partners, customers, competitors, and institutions [2]. Regarding opportunity discovery, international opportunities can be discovered by serendipitous (accidental) encounters where individuals and firms are usually receptive to international opportunities, but they do not necessarily carry out a systematic search [35, 39, 74, 90, 112–114]. Thus, individuals and firms discover international opportunities through unplanned encounters initiated by inbound inquiries or others who find the focal firm [26, 37, 47, 57, 74, 77, 80, 90, 115, 116].

Similarly, international opportunities can be discovered by active search where individuals and firms discover international opportunities through a purposeful and deliberate exploration process and use trusted information sources and channels, prior knowledge, and networks to limit the length of the search [39, 51, 77, 78, 84, 112–114, 117]. Hence, individuals and firms strategically direct efforts via a formal planning process (Ciravegna, Majano, et al., 2014; [2, 65, 91]). This indicates that opportunity discoveries fluctuate between effectual and causal decisionmaking depending on different circumstances and entrepreneurial intentions [2, 7, 8, 37, 69, 110, 112].

Regarding opportunity enactment, international opportunities can be created through proactive [61, 77, 87] and imaginative thinking [6, 22, 56, 118, 119] where individuals and firms combine available resources in novel and productive ways [2, 51, 59, 88]. Thus, opportunities are created as a result of an iterative process of action and reaction, where individuals and firms learn by doing under conditions

**97**

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

of high uncertainty, flexibility, and adaptability [2]. Similarly, international opportunities can be co-created through constant interaction with different actors in experimental and mutual learning [8, 15, 24, 27, 31, 34, 37, 56, 80, 83, 91, 93, 120] rather than by acting alone [44]. In general, international opportunity enactment implies an iterative and incremental decision-making process in which the opportunity is actualized and constructed through social interaction with others and in which individuals and firms are continually evaluating information to weigh up the

Once an international opportunity is discovered or enacted, then, individuals and firms move to a development stage where the opportunity is evaluated to determine if it is valid and substantial enough to be exploited [2] overall, the way individuals and firms evaluate opportunities is not absolute [104, 115]. Arguably, some authors posit that the decision rules of individuals and firms fluctuate between causal logic and effectual logic [2] depending on a set of contingency factors such as experience [61, 72], resource availability (e.g., knowledge networks), time availability, type of stakeholders [115], or type of business conditions [34, 112, 119]. What is evident is that whether the opportunity is discovered or enacted, the opportunity requires a continual development process [2] in which individuals and firms gain more knowledge and experience about international opportunities and

Chandra [115] gives evidence that individuals (firms) evaluate opportunities as a result of the interaction of time and experience where they deploy simple (unstructured, minimalist simple rule-based reasoning), revised (elaborated rule-based reasoning oriented to choose the best opportunities), and complex rules (finer rulebased reasoning oriented to maximize expected returns). Consequently, not all the opportunity ideas survive in this evaluation process [2, 22], and only some of them are likely to be exploited, while others are likely to be abandoned due to insufficient

On the other hand, international opportunities exploitation requires various individuals' abilities and firms' capabilities where actions and behaviors oscillate from nonstrategic planning to deliberate and rational planning [2, 34, 59, 88], depending on the level of foreign market uncertainty and the kind of opportunity. Broadly stated, international opportunities can be exploited through various individuals' abilities, namely cognitive heuristics [23, 61], proactive and risk-taking behavior [51, 65, 79], self-efficacy [118], and firms' capabilities such as international market knowledge, international experience, information-andcommunication-technology competencies, linguistic, cultural and experiential knowledge [33, 39, 51, 54, 63, 78, 79], as well as active participation in international

Similarly, international opportunities can be exploited through specific and specialized knowledge-based resources leveraged with other market partners [2], namely via joint-ventures [90], multinational subsidiary stakeholders [42], business partners [55, 80, 93], clients [22, 27, 56, 83], industry agglomerations [100], government agency officials [15, 27, 101], and via financial resources in the form of

The IE literature research reveals that different from two common proxies capturing outcomes (e.g., international growth and performance), there is a broader set of outcomes that can be classified into financial and nonfinancial performances [2]. Regarding financial performances, some studies reveal that prevalent indicators

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

can then assess them more objectively [5, 115].

networks [47, 48, 52, 55, 75, 80, 93, 94, 121].

**3.1 Outcomes of the international opportunities process**

risks, gains, and losses [8].

resource support [2, 61].

venture capital [35, 116].

#### *International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

of high uncertainty, flexibility, and adaptability [2]. Similarly, international opportunities can be co-created through constant interaction with different actors in experimental and mutual learning [8, 15, 24, 27, 31, 34, 37, 56, 80, 83, 91, 93, 120] rather than by acting alone [44]. In general, international opportunity enactment implies an iterative and incremental decision-making process in which the opportunity is actualized and constructed through social interaction with others and in which individuals and firms are continually evaluating information to weigh up the risks, gains, and losses [8].

Once an international opportunity is discovered or enacted, then, individuals and firms move to a development stage where the opportunity is evaluated to determine if it is valid and substantial enough to be exploited [2] overall, the way individuals and firms evaluate opportunities is not absolute [104, 115]. Arguably, some authors posit that the decision rules of individuals and firms fluctuate between causal logic and effectual logic [2] depending on a set of contingency factors such as experience [61, 72], resource availability (e.g., knowledge networks), time availability, type of stakeholders [115], or type of business conditions [34, 112, 119]. What is evident is that whether the opportunity is discovered or enacted, the opportunity requires a continual development process [2] in which individuals and firms gain more knowledge and experience about international opportunities and can then assess them more objectively [5, 115].

Chandra [115] gives evidence that individuals (firms) evaluate opportunities as a result of the interaction of time and experience where they deploy simple (unstructured, minimalist simple rule-based reasoning), revised (elaborated rule-based reasoning oriented to choose the best opportunities), and complex rules (finer rulebased reasoning oriented to maximize expected returns). Consequently, not all the opportunity ideas survive in this evaluation process [2, 22], and only some of them are likely to be exploited, while others are likely to be abandoned due to insufficient resource support [2, 61].

On the other hand, international opportunities exploitation requires various individuals' abilities and firms' capabilities where actions and behaviors oscillate from nonstrategic planning to deliberate and rational planning [2, 34, 59, 88], depending on the level of foreign market uncertainty and the kind of opportunity. Broadly stated, international opportunities can be exploited through various individuals' abilities, namely cognitive heuristics [23, 61], proactive and risk-taking behavior [51, 65, 79], self-efficacy [118], and firms' capabilities such as international market knowledge, international experience, information-andcommunication-technology competencies, linguistic, cultural and experiential knowledge [33, 39, 51, 54, 63, 78, 79], as well as active participation in international networks [47, 48, 52, 55, 75, 80, 93, 94, 121].

Similarly, international opportunities can be exploited through specific and specialized knowledge-based resources leveraged with other market partners [2], namely via joint-ventures [90], multinational subsidiary stakeholders [42], business partners [55, 80, 93], clients [22, 27, 56, 83], industry agglomerations [100], government agency officials [15, 27, 101], and via financial resources in the form of venture capital [35, 116].

#### **3.1 Outcomes of the international opportunities process**

The IE literature research reveals that different from two common proxies capturing outcomes (e.g., international growth and performance), there is a broader set of outcomes that can be classified into financial and nonfinancial performances [2]. Regarding financial performances, some studies reveal that prevalent indicators

*Entrepreneurship - Contemporary Issues*

voids in inactive governments [106].

110, 111] in a multilayer reality.

the focal firm [26, 37, 47, 57, 74, 77, 80, 90, 115, 116].

the way different actors discover, enact, evaluate, and exploit international opportunities [23, 60, 102, 104]. On the other hand, the social and structural stratification processes—a nation's labor division—[100] and the nation's socio-cultural structures [23] increase the likelihood that individuals and firms discover, enact international opportunities, as well as evaluate the types of costs and benefits [23], and exploit them due to the knowledge gap between the cultures [47, 105]. Other studies highlight that global wealth disparity and corporate social responsibility movements encourage individuals and firms to pursue international opportunities [15, 95], specially oriented to solve social problems originated from institutional

A systematic literature review conducted in IE literature indicates that the international opportunities process can begin with an opportunity discovery—by serendipity or by active search—or with an opportunity enactment—by creation or co-creation as a continuum of behaviors of decision logics that are intertwined and complemented each other [2]. Different from the hot debate in the IE research around the nature and the conditions of the opportunity existence in which the discovery-creation-opportunity-related behaviors are considered as exclusive and contradictory, some findings reveal that both behaviors are indeed complementary and intertwined in entrepreneurial action [2, 6, 7, 88, 107–110]. Instead of making ontological or epistemological differentiation of the concepts, IE research has paved the way to enrich opportunity research theory by considering discovery and creation of opportunities as interdependent [9] and mutually enabling [88, 108,

Broadly, the international opportunities process is an iterative entrepreneurial action moving between discovery and enactment as a continuum of behaviors of decision logics where it is involved not only individuals' and firms' activities but also the collaboration with other business and market firms, entrepreneurs, partners, customers, competitors, and institutions [2]. Regarding opportunity discovery, international opportunities can be discovered by serendipitous (accidental) encounters where individuals and firms are usually receptive to international opportunities, but they do not necessarily carry out a systematic search [35, 39, 74, 90, 112–114]. Thus, individuals and firms discover international opportunities through unplanned encounters initiated by inbound inquiries or others who find

Similarly, international opportunities can be discovered by active search where individuals and firms discover international opportunities through a purposeful and deliberate exploration process and use trusted information sources and channels, prior knowledge, and networks to limit the length of the search [39, 51, 77, 78, 84, 112–114, 117]. Hence, individuals and firms strategically direct efforts via a formal planning process (Ciravegna, Majano, et al., 2014; [2, 65, 91]). This indicates that opportunity discoveries fluctuate between effectual and causal decisionmaking depending on different circumstances and entrepreneurial intentions [2, 7,

Regarding opportunity enactment, international opportunities can be created through proactive [61, 77, 87] and imaginative thinking [6, 22, 56, 118, 119] where individuals and firms combine available resources in novel and productive ways [2, 51, 59, 88]. Thus, opportunities are created as a result of an iterative process of action and reaction, where individuals and firms learn by doing under conditions

**3. Mechanism in the international opportunities process**

**96**

8, 37, 69, 110, 112].

of international profitability [16, 33, 37, 42, 46, 58, 122], sales growth and sales volume [69, 75, 76, 83, 101, 123], operational efficiency [38, 124], opportunity selling [27, 42, 69], venture capital [39, 46], licensing [125, 126], tax incentives and grants [98, 99], new ventures [37, 127].

Regarding nonfinancial performances, other studies found intangible and immaterial benefits at the individual level and the firm level [2]. At the individual level, the international opportunities process generally enables individuals to expand their cognitive schemas and enhance heuristic decisions to face uncertainty [21, 128]. As such, individuals address international market uncertainties with better perceptions of self-efficacy and perceived-desirability and they are equipped with a greater entrepreneurial behavior [87] characterized by high-risk propensity [43], personal proactiveness and commitment [26] that elevates motivation and willingness to face and tolerate uncertainty [21, 51]. Furthermore, individuals improved their evaluation reasoning [115] through trial-and-error learning [23, 43]. International opportunities also improve individuals' human capital and social capital traits [2]. Specifically, individuals enhance social capital in foreign market networks, which results in new opportunities in the form of new business, access to information, new knowledge [75, 80], and superior opportunity development [37].

At the firm level, the international opportunities process leads the firm to achieve better and sophisticated organization capabilities and routines [31, 33, 61, 71, 94, 125, 129], stronger organizational culture [75], more innovative strategies [78, 123], novelty [37], and new products and services [73], early internationalization [31, 122], firm's growth and market diversity [47, 71, 75, 76, 87, 101], success [16, 31, 37, 76], competitive advantage [31, 125], survival [83], more efficient entry modes [58, 115, 130, 131], and international expansion [34, 75, 123, 132].

#### **4. Conclusions**

International entrepreneurship (IE) research draws on the notion that internationalization is an entrepreneurial behavior oriented to the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create value and get a competitive advantage [2, 12]. Hence, the international opportunity process has become a central concept in the IE literature and then it leads the IE field to advance to a point where the field has broadened its territory and boundaries with a robust conceptual basis that should consider not only the entrepreneurial behaviors of small and young firms but also the entrepreneurial behaviors of large and established companies [2].

Abundant IE research reveals that this international opportunity discoveryenactment-evaluation-exploitation process is a multidimensional, dynamic, and iterative phenomenon [2] that develops over time and interacts with the outside world [2, 6, 8, 16, 17, 100] in a complex system that embraces numerous dimensions and various levels (individual, firm, and environment [2, 18, 19]. Broadly stated, individual, organizational, and institutional level aspects interact in the market to enable or constrain the pursuit of new international opportunities [2, 102]. As Reuber et al. [5] suggest, the pursuit of international opportunities can be assessed by an individual-level cognitive activity, constructed by a firm-level innovative activity and shaped by an institutional-level structuring activity [5] in a notion of a distributed, global ecosystem of opportunities and opportunity seekers.

**99**

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

In the evolving IE field, different definitions have determined common conceptual elements suggesting that the IE field implies a dynamic behavioral process oriented to the pursuit of international opportunities to achieve value creation to different stakeholders. Interestingly, the last definition in the IE research proposed by Tabares et al. [2], who extend and acknowledge previous conceptualizations, suggest that "IE is a socially constructed behavioral processes associated with the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and environmental." With this definition, IE research has a robust conceptual basis around opportunity-related behaviors and then incorporates a notion of a social context that influences and shapes the way individuals, firms, organizations discover, enact, evaluate, and exploit to create value not only financial but also social and environmental. Second, the definition makes the IE domain independent of firm size and age analysis and enable scholarly studies to set the objective criteria around opportunities that could encourage researchers to go beyond the legal entity of the focal firm and consider multiple actors, and resources, processes, history, and context [2, 5, 102], giving a 360° view of opportunity-related

As Reuber [5] stated in her JIBS collections, IE research, like any social science research, has been cumulative with successive studies building on past insights, resulting in an impressive body of findings that can be integrated and interpreted based on shared assumptions about what constitutes interesting and relevant research questions. The potential downside to such consensus is that it is difficult to move away from it and consider alternate perspectives and prospects [20]. Hence, all the antecedent and outcome factors identified in this chapter and classified within each proposed level do not represent either a fixed or complete list. Neither do the mechanisms that describe the international opportunities process. Rather, this chapter opens critical directions for future

Future research could explore other antecedents, mechanisms, and outcomes of this entrepreneurial behavior oriented to the pursuit of international opportunities. One direction is to call for scholarly studies that could increase our understanding of how individuals (managers and entrepreneurs) pursue international opportunities to reconfigure firm resources and capabilities to respond to dynamic and changing market environments. Specifically, future research can examine in greater detail the effect of the three individuals' aspects—cognition, human capital, and social capital—and their corresponding performance patterns under a dynamic managerial capability perspective and/or use a broader interdisciplinary approach [2]. Further, research is needed to develop a deeper theoretical understanding of the cognitive approach and expand the scope of the analysis on risk-taking, proactiveness, and innovativeness aspects of their international entrepreneurial orientation and their actions within the different phases of the international opportunities

While much research has been conducted on social capital aspects, it is crucial to focus on how individuals (managers) develop weak and strong ties with strategic networks and what impact these ties have on the international opportunities

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

behaviors [133].

research.

**5. Suggestions for future research**

process and their ultimate performance [2].

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

In the evolving IE field, different definitions have determined common conceptual elements suggesting that the IE field implies a dynamic behavioral process oriented to the pursuit of international opportunities to achieve value creation to different stakeholders. Interestingly, the last definition in the IE research proposed by Tabares et al. [2], who extend and acknowledge previous conceptualizations, suggest that "IE is a socially constructed behavioral processes associated with the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and environmental." With this definition, IE research has a robust conceptual basis around opportunity-related behaviors and then incorporates a notion of a social context that influences and shapes the way individuals, firms, organizations discover, enact, evaluate, and exploit to create value not only financial but also social and environmental. Second, the definition makes the IE domain independent of firm size and age analysis and enable scholarly studies to set the objective criteria around opportunities that could encourage researchers to go beyond the legal entity of the focal firm and consider multiple actors, and resources, processes, history, and context [2, 5, 102], giving a 360° view of opportunity-related behaviors [133].

#### **5. Suggestions for future research**

*Entrepreneurship - Contemporary Issues*

[98, 99], new ventures [37, 127].

development [37].

**4. Conclusions**

of international profitability [16, 33, 37, 42, 46, 58, 122], sales growth and sales volume [69, 75, 76, 83, 101, 123], operational efficiency [38, 124], opportunity selling [27, 42, 69], venture capital [39, 46], licensing [125, 126], tax incentives and grants

Regarding nonfinancial performances, other studies found intangible and immaterial benefits at the individual level and the firm level [2]. At the individual level, the international opportunities process generally enables individuals to expand their cognitive schemas and enhance heuristic decisions to face uncertainty [21, 128]. As such, individuals address international market uncertainties with better perceptions of self-efficacy and perceived-desirability and they are equipped with a greater entrepreneurial behavior [87] characterized by high-risk propensity [43], personal proactiveness and commitment [26] that elevates motivation and willingness to face and tolerate uncertainty [21, 51]. Furthermore, individuals improved their evaluation reasoning [115] through trial-and-error learning [23, 43]. International opportunities also improve individuals' human capital and social capital traits [2]. Specifically, individuals enhance social capital in foreign market networks, which results in new opportunities in the form of new business, access to information, new knowledge [75, 80], and superior opportunity

At the firm level, the international opportunities process leads the firm to achieve better and sophisticated organization capabilities and routines [31, 33, 61, 71, 94, 125, 129], stronger organizational culture [75], more innovative strategies [78, 123], novelty [37], and new products and services [73], early internationalization [31, 122], firm's growth and market diversity [47, 71, 75, 76, 87, 101], success [16, 31, 37, 76], competitive advantage [31, 125], survival [83], more efficient entry

modes [58, 115, 130, 131], and international expansion [34, 75, 123, 132].

International entrepreneurship (IE) research draws on the notion that internationalization is an entrepreneurial behavior oriented to the discovery, enactment, evaluation, and exploitation of opportunities across national borders to create value and get a competitive advantage [2, 12]. Hence, the international opportunity process has become a central concept in the IE literature and then it leads the IE field to advance to a point where the field has broadened its territory and boundaries with a robust conceptual basis that should consider not only the entrepreneurial behaviors of small and young firms but also the entrepreneurial

Abundant IE research reveals that this international opportunity discoveryenactment-evaluation-exploitation process is a multidimensional, dynamic, and iterative phenomenon [2] that develops over time and interacts with the outside world [2, 6, 8, 16, 17, 100] in a complex system that embraces numerous dimensions and various levels (individual, firm, and environment [2, 18, 19]. Broadly stated, individual, organizational, and institutional level aspects interact in the market to enable or constrain the pursuit of new international opportunities [2, 102]. As Reuber et al. [5] suggest, the pursuit of international opportunities can be assessed by an individual-level cognitive activity, constructed by a firm-level innovative activity and shaped by an institutional-level structuring activity [5] in a notion of a distributed, global ecosystem of opportunities and opportunity

behaviors of large and established companies [2].

**98**

seekers.

As Reuber [5] stated in her JIBS collections, IE research, like any social science research, has been cumulative with successive studies building on past insights, resulting in an impressive body of findings that can be integrated and interpreted based on shared assumptions about what constitutes interesting and relevant research questions. The potential downside to such consensus is that it is difficult to move away from it and consider alternate perspectives and prospects [20]. Hence, all the antecedent and outcome factors identified in this chapter and classified within each proposed level do not represent either a fixed or complete list. Neither do the mechanisms that describe the international opportunities process. Rather, this chapter opens critical directions for future research.

Future research could explore other antecedents, mechanisms, and outcomes of this entrepreneurial behavior oriented to the pursuit of international opportunities. One direction is to call for scholarly studies that could increase our understanding of how individuals (managers and entrepreneurs) pursue international opportunities to reconfigure firm resources and capabilities to respond to dynamic and changing market environments. Specifically, future research can examine in greater detail the effect of the three individuals' aspects—cognition, human capital, and social capital—and their corresponding performance patterns under a dynamic managerial capability perspective and/or use a broader interdisciplinary approach [2]. Further, research is needed to develop a deeper theoretical understanding of the cognitive approach and expand the scope of the analysis on risk-taking, proactiveness, and innovativeness aspects of their international entrepreneurial orientation and their actions within the different phases of the international opportunities process and their ultimate performance [2].

While much research has been conducted on social capital aspects, it is crucial to focus on how individuals (managers) develop weak and strong ties with strategic networks and what impact these ties have on the international opportunities

process [2]. Future research might also focus on the precise ways in which trust and commitment are developed in these types of ties. One of the most fertile areas for future analysis is to clarify the sectors, markets, and circumstances in which networks generate superior performance [2]. Furthermore, future researchers could also explore the role of political network actors and institutional settings in this process. About this institutional networking, one interesting avenue is to analyze how the institutional actors vary across countries and how they contribute or constrain their discovery, evaluation, and exploitation of international opportunities [2]. In line with this, another avenue is to examine why some individuals do not gain access to institutional networks or gain other network resources in the same way others do.

In respect to human capital, future studies could better examine the impact of information-and-communication-technology capabilities on the international opportunities process, which in turn drives firms' international market performance [2]. Given that language skills seem to play a specific role in the international opportunities process and firm performance, research in this stream is needed to develop a deeper theoretical understanding of this managerial capability [2]. Forthcoming research could also explore how managers assess and reconfigure their learning capabilities and how they affect learning at the firm level, and how this affects firm performance [2]. Other research areas where scholarship could advance in human capital capability include international market orientation, branding decisions, marketing communication, pricing, product design, and customer equity [2].

At an environmental-level analysis, future research needs to understand better how different economies and political contexts influence opportunity-related behaviors and how social, cultural, and institutional settings shape distinctively the way different actors pursue international opportunities and exploit them. Increasingly, there is a need to explore how different actors from emerging economies pursue international opportunities and deal with turbulent and dynamic markets to achieve international performance. For instance, more research from emerging economies is required to understand how different actors overcome their resource constraints and pursue international opportunities under uncertainty and institutional voids. Related, there is a need for further research on how formal and informal institutions shape and influence international opportunity-related behaviors.

As for future research in the international opportunities process, one fruitful line would be to analyze the international entrepreneurial process on different types of individuals (one-shot, drop-out, nascent, novice, serial, and portfolio entrepreneurs) or firms and understand their opportunity-related behaviors and their decision-making rule process through the evaluation and exploitation of international opportunities [2]. Specifically, further research is needed to understand the best type of reasoning that entrepreneurial decision-makers should use to deal with different types of uncertainty and how managers respond to serendipitous encounters or unexpected discoveries. As for the development phase of the international opportunities process, further research is required to understand how individuals and firms evaluate opportunities and their decisions to exploit opportunities [2].

A promising line would be to explore decision-making models—effectuation or causation—individuals and firms utilize to evaluate international opportunities [2, 20]. Future research could examine the international opportunities process under the effectuation theory and understand the transition from effectual reasoning to causal reasoning to provide a connection between entrepreneurship and strategy

**101**

purposes [2].

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

through a decision-making rule process [2, 20]. Different from current research studies on failed international attempts and their evaluation process would also provide rich insights. Also, there is a need to understand why international opportunities that are discovered are not successfully exploited. Along with this line, researchers could explore how individuals and firms can exploit new international business opportunities through different entry modes. It is worth noting that the operationalization of the international opportunities process—discovery, enactment, evaluation, and exploitation—is at an embryonic stage and needs further

As for methodology, further research is needed to explore the contexts, dynamics, and types of international entrepreneurial firms. Specifically, a diverse sample of firms, including ranges in age, size, sector, internationalization pace, and scope, are promising and needed research lines [2]. Future research could explore how micro-multinationals and multinationals pursue international opportunities and what entrepreneurial behaviors they deploy in that process. They behave in different ways facing diverse challenges [2]. Also, future studies from agriculturebased and low-value-adding commodity-based industries, as well as from emerging economies, would enrich the debate and deepen our understanding of international entrepreneurial behavior and its antecedents and outcomes [2]. The field would also benefit from additional tools and techniques based on simulation methods (e.g., agent-based modeling and ethnographic and system dynamics), as well as contingency models (structural equation modeling). Future quantitative and qualitative data analyses can be used to capture development over time. Along with this line, further qualitative studies with longitudinal approaches could follow up with international performance and depict a more holistic picture of the effects of

Additionally, knowledge in this stream needs to be extended to other antecedents for international opportunities; for instance, studies could investigate the moderator and/or mediator roles of the different driving factors (e.g., managerial capabilities and environmental aspects as examined in this study) with international performance [2]. Future research could investigate the various indicators analyzed here regarding international performance as an outcome of the international opportunities process. Moreover, further studies are needed to explore the links between financial and nonfinancial performance, as well as the relationship between exporting performance and other dimensions of business performance [2]. Lastly, another potentially fruitful area could be to amply the variety of subjective and objective indicators and contrast them for reliability

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

operationalization [2].

international opportunities [2].

#### *International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

through a decision-making rule process [2, 20]. Different from current research studies on failed international attempts and their evaluation process would also provide rich insights. Also, there is a need to understand why international opportunities that are discovered are not successfully exploited. Along with this line, researchers could explore how individuals and firms can exploit new international business opportunities through different entry modes. It is worth noting that the operationalization of the international opportunities process—discovery, enactment, evaluation, and exploitation—is at an embryonic stage and needs further operationalization [2].

As for methodology, further research is needed to explore the contexts, dynamics, and types of international entrepreneurial firms. Specifically, a diverse sample of firms, including ranges in age, size, sector, internationalization pace, and scope, are promising and needed research lines [2]. Future research could explore how micro-multinationals and multinationals pursue international opportunities and what entrepreneurial behaviors they deploy in that process. They behave in different ways facing diverse challenges [2]. Also, future studies from agriculturebased and low-value-adding commodity-based industries, as well as from emerging economies, would enrich the debate and deepen our understanding of international entrepreneurial behavior and its antecedents and outcomes [2]. The field would also benefit from additional tools and techniques based on simulation methods (e.g., agent-based modeling and ethnographic and system dynamics), as well as contingency models (structural equation modeling). Future quantitative and qualitative data analyses can be used to capture development over time. Along with this line, further qualitative studies with longitudinal approaches could follow up with international performance and depict a more holistic picture of the effects of international opportunities [2].

Additionally, knowledge in this stream needs to be extended to other antecedents for international opportunities; for instance, studies could investigate the moderator and/or mediator roles of the different driving factors (e.g., managerial capabilities and environmental aspects as examined in this study) with international performance [2]. Future research could investigate the various indicators analyzed here regarding international performance as an outcome of the international opportunities process. Moreover, further studies are needed to explore the links between financial and nonfinancial performance, as well as the relationship between exporting performance and other dimensions of business performance [2]. Lastly, another potentially fruitful area could be to amply the variety of subjective and objective indicators and contrast them for reliability purposes [2].

*Entrepreneurship - Contemporary Issues*

way others do.

equity [2].

behaviors.

opportunities [2].

process [2]. Future research might also focus on the precise ways in which trust and commitment are developed in these types of ties. One of the most fertile areas for future analysis is to clarify the sectors, markets, and circumstances in which networks generate superior performance [2]. Furthermore, future researchers could also explore the role of political network actors and institutional settings in this process. About this institutional networking, one interesting avenue is to analyze how the institutional actors vary across countries and how they contribute or constrain their discovery, evaluation, and exploitation of international opportunities [2]. In line with this, another avenue is to examine why some individuals do not gain access to institutional networks or gain other network resources in the same

In respect to human capital, future studies could better examine the impact of information-and-communication-technology capabilities on the international opportunities process, which in turn drives firms' international market performance [2]. Given that language skills seem to play a specific role in the international opportunities process and firm performance, research in this stream is needed to develop a deeper theoretical understanding of this managerial capability [2]. Forthcoming research could also explore how managers assess and reconfigure their learning capabilities and how they affect learning at the firm level, and how this affects firm performance [2]. Other research areas where scholarship could advance in human capital capability include international market orientation, branding decisions, marketing communication, pricing, product design, and customer

At an environmental-level analysis, future research needs to understand better

As for future research in the international opportunities process, one fruitful line would be to analyze the international entrepreneurial process on different types of individuals (one-shot, drop-out, nascent, novice, serial, and portfolio entrepreneurs) or firms and understand their opportunity-related behaviors and their decision-making rule process through the evaluation and exploitation of international opportunities [2]. Specifically, further research is needed to understand the best type of reasoning that entrepreneurial decision-makers should use to deal with different types of uncertainty and how managers respond to serendipitous encounters or unexpected discoveries. As for the development phase of the international opportunities process, further research is required to understand how individuals and firms evaluate opportunities and their decisions to exploit

A promising line would be to explore decision-making models—effectuation or causation—individuals and firms utilize to evaluate international opportunities [2, 20]. Future research could examine the international opportunities process under the effectuation theory and understand the transition from effectual reasoning to causal reasoning to provide a connection between entrepreneurship and strategy

how different economies and political contexts influence opportunity-related behaviors and how social, cultural, and institutional settings shape distinctively the way different actors pursue international opportunities and exploit them. Increasingly, there is a need to explore how different actors from emerging economies pursue international opportunities and deal with turbulent and dynamic markets to achieve international performance. For instance, more research from emerging economies is required to understand how different actors overcome their resource constraints and pursue international opportunities under uncertainty and institutional voids. Related, there is a need for further research on how formal and informal institutions shape and influence international opportunity-related

**100**

*Entrepreneurship - Contemporary Issues*

### **Author details**

Alexander Tabares Universidad de Medellín, Medellin, Colombia

\*Address all correspondence to: atabares@udem.edu.co

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

**103**

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

[8] Fletcher D. International entrepreneurship and the small business. Entrepreneurship and Regional Development. 2004;**16**(4):289-305. DOI: 10.1080/0898562042000263267

[9] Mathews JA, Zander I. The

10.2307/4540430

international entrepreneurial dynamics of accelerated internationalisation. Journal of International Business Studies. 2007;**38**(3):387-403. DOI:

[10] Peiris IK, Akoorie MEM, Sinha P. International entrepreneurship: A critical analysis of studies in the past two decades and future directions for research. Journal of International Entrepreneurship. 2012;**10**(4):279-324. DOI: 10.1007/s10843-012-0096-3

Opportunities for marketing researchers in international entrepreneurship. International Marketing Review. 2006a;**23**(2):126-145. DOI: 10.1108/02651330610660056

[12] Zahra S, George G. International Entrepreneurship: The Current Status of the Field and Future Research Agenda. In: Strategic Entrepreneurship: Creating

[13] McDougall P, Oviatt B. International entrepreneurship: The Intersection of two research paths. Academy of Management Journal. 2000;**43**(5): 902-906. DOI: 10.2307/1556418

[14] Dimitratos P, Plakoyiannaki E. Theoretical foundations of an international entrepreneurial culture. Journal of International Entrepreneurship. 2003;**1**(2):187-215. DOI: 10.1023/A:1023804318244

[15] Zahra S, Newey LR, Li Y. On the frontiers: The implications of social

an Integrated Mindset. Strategic Management Series, Oxford. Oxford:

Blackwell; 2002

[11] Styles C, Seymour RG.

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

[1] Jones MV, Coviello N, Tang YK. International Entrepreneurship research (1989-2009): A domain ontology and thematic analysis. Journal of Business Venturing. 2011;**26**(6):632-659. DOI: 10.1016/j.jbusvent.2011.04.001

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[2] Tabares A, Chandra Y, Alvarez C, Escobar-Sierra M. Opportunityrelated behaviors in international entrepreneurship research: A multilevel analysis of antecedents, processes, and outcomes. International Entrepreneurship and Management Journal. 2020:1-48. [In press]. DOI: 10.1007/s11365-020-00636-3

[3] Oviatt BM, McDougall PP. Toward a theory of international new ventures. Journal of International Business Studies. 1994;**25**(1):45-64. DOI: 10.1057/

[4] Coviello N. Re-thinking research on born globals. Journal of International Business Studies. 2015;**46**(1):17-26.

[5] Reuber AR, Knight GA, Liesch PW, Zhou L. International entrepreneurship:

[6] Mainela T, Puhakka V, Servais P. The Concept of international opportunity in international entrepreneurship: A review and a research agenda. International Journal of Management Reviews. 2014;**16**(1):105-129. DOI:

The pursuit of entrepreneurial opportunities across national borders. Journal of International Business Studies. 2018;**49**(4):395-406. DOI:

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10.1111/ijmr.12011

[7] Oviatt B, McDougall P. Defining international

entrepreneurship and modeling the speed of internationalization. Entrepreneurship Theory and Practice. 2005;**29**(5):537-554. DOI: 10.1111/j.1540-6520.2005.00097.x

palgrave.jibs.8490193

DOI: 10.1057/jibs.2014.59

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

#### **References**

*Entrepreneurship - Contemporary Issues*

**102**

**Author details**

Alexander Tabares

Universidad de Medellín, Medellin, Colombia

provided the original work is properly cited.

\*Address all correspondence to: atabares@udem.edu.co

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

[1] Jones MV, Coviello N, Tang YK. International Entrepreneurship research (1989-2009): A domain ontology and thematic analysis. Journal of Business Venturing. 2011;**26**(6):632-659. DOI: 10.1016/j.jbusvent.2011.04.001

[2] Tabares A, Chandra Y, Alvarez C, Escobar-Sierra M. Opportunityrelated behaviors in international entrepreneurship research: A multilevel analysis of antecedents, processes, and outcomes. International Entrepreneurship and Management Journal. 2020:1-48. [In press]. DOI: 10.1007/s11365-020-00636-3

[3] Oviatt BM, McDougall PP. Toward a theory of international new ventures. Journal of International Business Studies. 1994;**25**(1):45-64. DOI: 10.1057/ palgrave.jibs.8490193

[4] Coviello N. Re-thinking research on born globals. Journal of International Business Studies. 2015;**46**(1):17-26. DOI: 10.1057/jibs.2014.59

[5] Reuber AR, Knight GA, Liesch PW, Zhou L. International entrepreneurship: The pursuit of entrepreneurial opportunities across national borders. Journal of International Business Studies. 2018;**49**(4):395-406. DOI: 10.1057/s41267-018-0149-5

[6] Mainela T, Puhakka V, Servais P. The Concept of international opportunity in international entrepreneurship: A review and a research agenda. International Journal of Management Reviews. 2014;**16**(1):105-129. DOI: 10.1111/ijmr.12011

[7] Oviatt B, McDougall P. Defining international entrepreneurship and modeling the speed of internationalization. Entrepreneurship Theory and Practice. 2005;**29**(5):537-554. DOI: 10.1111/j.1540-6520.2005.00097.x

[8] Fletcher D. International entrepreneurship and the small business. Entrepreneurship and Regional Development. 2004;**16**(4):289-305. DOI: 10.1080/0898562042000263267

[9] Mathews JA, Zander I. The international entrepreneurial dynamics of accelerated internationalisation. Journal of International Business Studies. 2007;**38**(3):387-403. DOI: 10.2307/4540430

[10] Peiris IK, Akoorie MEM, Sinha P. International entrepreneurship: A critical analysis of studies in the past two decades and future directions for research. Journal of International Entrepreneurship. 2012;**10**(4):279-324. DOI: 10.1007/s10843-012-0096-3

[11] Styles C, Seymour RG. Opportunities for marketing researchers in international entrepreneurship. International Marketing Review. 2006a;**23**(2):126-145. DOI: 10.1108/02651330610660056

[12] Zahra S, George G. International Entrepreneurship: The Current Status of the Field and Future Research Agenda. In: Strategic Entrepreneurship: Creating an Integrated Mindset. Strategic Management Series, Oxford. Oxford: Blackwell; 2002

[13] McDougall P, Oviatt B. International entrepreneurship: The Intersection of two research paths. Academy of Management Journal. 2000;**43**(5): 902-906. DOI: 10.2307/1556418

[14] Dimitratos P, Plakoyiannaki E. Theoretical foundations of an international entrepreneurial culture. Journal of International Entrepreneurship. 2003;**1**(2):187-215. DOI: 10.1023/A:1023804318244

[15] Zahra S, Newey LR, Li Y. On the frontiers: The implications of social

entrepreneurship for international entrepreneurship. Entrepreneurship Theory and Practice. 2014;**38**(1): 137-158. DOI: 10.1111/etap.12061

[16] Jones MV, Coviello NE. Internationalisation: Conceptualising an entrepreneurial process of behaviour in time. Journal of International Business Studies. 2005;**36**(3):284-303. DOI: 10.1057/palgrave.jibs.8400138

[17] Keupp MM, Gassmann OO. The past and the future of international entrepreneurship: A review and suggestions for developing the field. Journal of Management. 2009;**35**(3):600-633. DOI: 10.1177/0149206308330558

[18] Carlsson B, Braunerhjelm P, McKelvey M, Olofsson C, Persson L, Ylinenpää H. The evolving domain of entrepreneurship research. Small Business Economics. 2013;**41**(4): 913-930. DOI: 10.1007/s11187-013-9503-y

[19] Terjesen S, Hessels J, Li D. Comparative international tntrepreneurship. Journal of Management. 2016;**42**(1):299-344. DOI: 10.1177/0149206313486259

[20] Reuber AR, editor. International Entrepreneurship. Cham: Springer International Publishing; 2018. DOI: 10.1007/978-3-319-74228-1

[21] Acedo FJ, Jones MV. Speed of internationalization and entrepreneurial cognition: Insights and a comparison between international new ventures, exporters and domestic firms. Journal of World Business. 2007;**42**(3):236-252. DOI: 10.1016/J.JWB.2007.04.012

[22] Oyson MJ, Whittaker H. Entrepreneurial cognition and behavior in the discovery and creation of international opportunities. Journal of International Entrepreneurship. 2015;**13**(3):303-336. DOI: 10.1007/ s10843-015-0156-6

[23] Zahra S, Korri JS, Yu J. Cognition and international entrepreneurship: Implications for research on international opportunity recognition and exploitation. International Business Review. 2005;**14**(2):129-146. DOI: 10.1016/j.ibusrev.2004.04.005

[24] Kauppinen A, Juho A. Internationalisation of SMEs from the perspective of social learning theory. Journal of International Entrepreneurship. 2012;**10**(3):200-231. DOI: 10.1007/s10843-012-0093-6

[25] Muzychenko O, Liesch PW. International opportunity identification in the internationalisation of the firm. Journal of World Business. 2015;**50**(4):704-717. DOI: 10.1016/j. jwb.2014.12.001

[26] Nowiński W, Rialp A. The impact of social networks on perceptions of international opportunities. Journal of Small Business Management. 2016;**54**(2):445-461. DOI: 10.1111/ jsbm.12149

[27] Lehto I. International entrepreneurial selling as construction of international opportunities. Journal of International Entrepreneurship. 2015;**13**(3):277-302. DOI: 10.1007/ s10843-015-0147-7

[28] Andersson S, Evers N. International opportunity recognition in international new ventures—a dynamic managerial capabilities perspective. Journal of International Entrepreneurship. 2015;**13**(3):260-276. DOI: 10.1007/ s10843-015-0149-5

[29] Di Gregorio D, Musteen M, Thomas DE. International new ventures: The cross-border nexus of individuals and opportunities. Journal of World Business. 2008;**43**(2):186-196. DOI: 10.1016/j.jwb.2007.11.013

[30] Butler JE, Doktor R, Lins FA. Linking international entrepreneurship

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2016;**69**(5):1567-1571. DOI: 10.1016/J.

[39] Chandra Y, Styles C, Wilkinson I.

Marketing Review. 2009;**26**(1):30-61. DOI: 10.1108/02651330910933195

[40] Johanson J, Vahlne J-E. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies. 2009;**40**(9):1411-1431. DOI: 10.1057/

The recognition of first time international entrepreneurial opportunities. International

[41] Weerawardena J, Mort GS,

Liesch PW, Knight G. Conceptualizing accelerated internationalization in the born global firm: A dynamic capabilities perspective. Journal of World Business. 2007;**42**(3):294-306. DOI: 10.1016/j.

[42] Angeli F, Grimaldi R. Leveraging offshoring: The identification of new business opportunities in international settings. Industry and Innovation. 2010;**17**(4):393-413. DOI: 10.1080/13662716.2010.496245

[43] Muzychenko O. Cross-cultural entrepreneurial competence in identifying international business opportunities. European Management

Journal. 2008;**26**(6):366-377. DOI: 10.1016/j.emj.2008.09.002

[44] Schweizer R, Vahlne J-E, Johanson J. Internationalization as an entrepreneurial process. Journal

[38] Bhatti WA, Larimo J, Coudounaris DN. The effect of experiential learning on subsidiary knowledge and performance. Journal of Business Research.

JBUSRES.2015.10.018

jibs.2009.24

jwb.2007.04.004

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

to uncertainty, opportunity discovery, and cognition. Journal of International Entrepreneurship. 2010;**8**(2):121-134. DOI: 10.1007/s10843-010-0054-x

[31] Karra N, Phillips N, Tracey P. Building the born global firm:

[32] Eriksson T, Nummela N, Saarenketo S. Dynamic capability in a small global factory. International Business Review. 2014;**23**(1):169-180. DOI: 10.1016/J.IBUSREV.2013.03.007

s10843-016-0191-y

s10843-015-0151-y

[33] Glavas C, Mathews S, Bianchi C. International opportunity recognition as a critical component for leveraging internet capabilities and international market performance. Journal of International Entrepreneurship. 2017;**15**(1):1-35. DOI: 10.1007/

[34] Laperrière A, Spence M. Enacting international opportunities: The role of organizational learning in knowledgeintensive business services. Journal of International Entrepreneurship. 2015;**13**(3):212-241. DOI: 10.1007/

[35] Nordman ER, Melén S, Nordman ER, Melén S. Journal of World Business. Vol. 43. Elsevier Science Inc.; 2008. Available at: http://econpapers.repec. org/article/eeeworbus/v\_3a43\_3ay\_ 3a2008\_3ai\_3a2\_3ap\_3a171-185.htm

[36] Zolfaghari Ejlal Manesh SM, Rialp-Criado A. International ecopreneurs: The case of eco-entrepreneurial new ventures in the renewable energy industry. Journal of International Entrepreneurship. 2019;**17**(1):103-126. DOI: 10.1007/s10843-017-0222-3

[37] Chandra Y, Styles C, Wilkinson IF. Opportunity portfolio: Moving beyond single opportunity explanations

Developing entrepreneurial capabilities for international new venture success. Long Range Planning. 2008;**41**(4): 440-458. DOI: 10.1016/j.lrp.2008.05.002 *International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

to uncertainty, opportunity discovery, and cognition. Journal of International Entrepreneurship. 2010;**8**(2):121-134. DOI: 10.1007/s10843-010-0054-x

*Entrepreneurship - Contemporary Issues*

entrepreneurship for international entrepreneurship. Entrepreneurship Theory and Practice. 2014;**38**(1): 137-158. DOI: 10.1111/etap.12061

[23] Zahra S, Korri JS, Yu J. Cognition and international entrepreneurship:

international opportunity recognition and exploitation. International Business Review. 2005;**14**(2):129-146. DOI: 10.1016/j.ibusrev.2004.04.005

Implications for research on

[24] Kauppinen A, Juho A.

Internationalisation of SMEs from the perspective of social learning theory. Journal of International

[25] Muzychenko O, Liesch PW.

in the internationalisation of the firm. Journal of World Business. 2015;**50**(4):704-717. DOI: 10.1016/j.

jwb.2014.12.001

jsbm.12149

[27] Lehto I. International

s10843-015-0147-7

s10843-015-0149-5

[29] Di Gregorio D, Musteen M, Thomas DE. International new ventures: The cross-border nexus of individuals and opportunities. Journal of World Business. 2008;**43**(2):186-196.

DOI: 10.1016/j.jwb.2007.11.013

[30] Butler JE, Doktor R, Lins FA. Linking international entrepreneurship

Entrepreneurship. 2012;**10**(3):200-231. DOI: 10.1007/s10843-012-0093-6

International opportunity identification

[26] Nowiński W, Rialp A. The impact of social networks on perceptions of international opportunities. Journal of Small Business Management. 2016;**54**(2):445-461. DOI: 10.1111/

entrepreneurial selling as construction of international opportunities. Journal of International Entrepreneurship. 2015;**13**(3):277-302. DOI: 10.1007/

[28] Andersson S, Evers N. International opportunity recognition in international new ventures—a dynamic managerial capabilities perspective. Journal of International Entrepreneurship. 2015;**13**(3):260-276. DOI: 10.1007/

Internationalisation: Conceptualising an entrepreneurial process of behaviour in time. Journal of International Business Studies. 2005;**36**(3):284-303. DOI: 10.1057/palgrave.jibs.8400138

[17] Keupp MM, Gassmann OO. The past and the future of international entrepreneurship: A review and suggestions for developing the field. Journal of Management. 2009;**35**(3):600-633. DOI: 10.1177/0149206308330558

[18] Carlsson B, Braunerhjelm P, McKelvey M, Olofsson C, Persson L, Ylinenpää H. The evolving domain of entrepreneurship research. Small Business Economics. 2013;**41**(4):

[19] Terjesen S, Hessels J, Li D. Comparative international tntrepreneurship. Journal of

10.1177/0149206313486259

10.1007/978-3-319-74228-1

[21] Acedo FJ, Jones MV. Speed of

DOI: 10.1016/J.JWB.2007.04.012

in the discovery and creation of international opportunities. Journal of International Entrepreneurship. 2015;**13**(3):303-336. DOI: 10.1007/

[22] Oyson MJ, Whittaker H.

s10843-015-0156-6

internationalization and entrepreneurial cognition: Insights and a comparison between international new ventures, exporters and domestic firms. Journal of World Business. 2007;**42**(3):236-252.

Entrepreneurial cognition and behavior

913-930. DOI: 10.1007/s11187-013-9503-y

Management. 2016;**42**(1):299-344. DOI:

[20] Reuber AR, editor. International Entrepreneurship. Cham: Springer International Publishing; 2018. DOI:

[16] Jones MV, Coviello NE.

**104**

[31] Karra N, Phillips N, Tracey P. Building the born global firm: Developing entrepreneurial capabilities for international new venture success. Long Range Planning. 2008;**41**(4): 440-458. DOI: 10.1016/j.lrp.2008.05.002

[32] Eriksson T, Nummela N, Saarenketo S. Dynamic capability in a small global factory. International Business Review. 2014;**23**(1):169-180. DOI: 10.1016/J.IBUSREV.2013.03.007

[33] Glavas C, Mathews S, Bianchi C. International opportunity recognition as a critical component for leveraging internet capabilities and international market performance. Journal of International Entrepreneurship. 2017;**15**(1):1-35. DOI: 10.1007/ s10843-016-0191-y

[34] Laperrière A, Spence M. Enacting international opportunities: The role of organizational learning in knowledgeintensive business services. Journal of International Entrepreneurship. 2015;**13**(3):212-241. DOI: 10.1007/ s10843-015-0151-y

[35] Nordman ER, Melén S, Nordman ER, Melén S. Journal of World Business. Vol. 43. Elsevier Science Inc.; 2008. Available at: http://econpapers.repec. org/article/eeeworbus/v\_3a43\_3ay\_ 3a2008\_3ai\_3a2\_3ap\_3a171-185.htm

[36] Zolfaghari Ejlal Manesh SM, Rialp-Criado A. International ecopreneurs: The case of eco-entrepreneurial new ventures in the renewable energy industry. Journal of International Entrepreneurship. 2019;**17**(1):103-126. DOI: 10.1007/s10843-017-0222-3

[37] Chandra Y, Styles C, Wilkinson IF. Opportunity portfolio: Moving beyond single opportunity explanations

in international entrepreneurship research. Asia Pacific Journal of Management. 2015;**32**(1):199-228. DOI: 10.1007/s10490-014-9400-1

[38] Bhatti WA, Larimo J, Coudounaris DN. The effect of experiential learning on subsidiary knowledge and performance. Journal of Business Research. 2016;**69**(5):1567-1571. DOI: 10.1016/J. JBUSRES.2015.10.018

[39] Chandra Y, Styles C, Wilkinson I. The recognition of first time international entrepreneurial opportunities. International Marketing Review. 2009;**26**(1):30-61. DOI: 10.1108/02651330910933195

[40] Johanson J, Vahlne J-E. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies. 2009;**40**(9):1411-1431. DOI: 10.1057/ jibs.2009.24

[41] Weerawardena J, Mort GS, Liesch PW, Knight G. Conceptualizing accelerated internationalization in the born global firm: A dynamic capabilities perspective. Journal of World Business. 2007;**42**(3):294-306. DOI: 10.1016/j. jwb.2007.04.004

[42] Angeli F, Grimaldi R. Leveraging offshoring: The identification of new business opportunities in international settings. Industry and Innovation. 2010;**17**(4):393-413. DOI: 10.1080/13662716.2010.496245

[43] Muzychenko O. Cross-cultural entrepreneurial competence in identifying international business opportunities. European Management Journal. 2008;**26**(6):366-377. DOI: 10.1016/j.emj.2008.09.002

[44] Schweizer R, Vahlne J-E, Johanson J. Internationalization as an entrepreneurial process. Journal of International Entrepreneurship. 2010;**8**(4):343-370. DOI: 10.1007/ s10843-010-0064-8

[45] Vinogradov E, Jørgensen EJB. Differences in international opportunity identification between native and immigrant entrepreneurs. Journal of International Entrepreneurship. 2017;**15**(2):207-228. DOI: 10.1007/ s10843-016-0197-5

[46] Domurath A, Patzelt H. Entrepreneurs' assessments of early international entry: The role of foreign social ties, venture absorptive capacity, and generalized trust in others. Entrepreneurship Theory and Practice. 2016;**40**(5):1149-1177. DOI: 10.1111/ etap.12164

[47] Ellis P. Social ties and international entrepreneurship: Opportunities and constraints affecting firm internationalization. Journal of International Business Studies. 2011;**42**(1):99-127. DOI: 10.1057/ jibs.2010.20

[48] Leite YVP, de Moraes WFA, Salazar VS. Expressions of relationship networking in international entrepreneurship. Journal of International Entrepreneurship. 2016;**14**(2):213-238. DOI: 10.1007/ s10843-016-0166-z

[49] Sharma DD, Blomstermo A. The internationalization process of Born Globals: A network view. International Business Review. 2003;**12**(6):739-753. DOI: 10.1016/J.IBUSREV.2003.05.002

[50] Lindstrand A, Melén S, Nordman ER. Turning social capital into business: A study of the internationalization of biotech SMEs. International Business Review. 2011;**20**(2):194-212. DOI: 10.1016/J.IBUSREV.2011.01.002

[51] Chandra Y, Styles C, Wilkinson IF. An opportunity-based view of rapid internationalization. Journal of

International Marketing. 2012;**20**(1):74- 102. DOI: 10.1509/jim.10.0147

[52] Kontinen T, Ojala A. Network ties in the international opportunity recognition of family SMEs. International Business Review. 2011b;**20**(4):440-453. DOI: 10.1016/j.ibusrev.2010.08.002

[53] Calabrò A, Brogi M, Torchia M. What does really matter in the internationalization of small and medium-sized family businesses? Journal of Small Business Management. 2016;**54**(2):679-696. DOI: 10.1111/ jsbm.12165

[54] Hurmerinta L, Nummela N, Paavilainen-Mäntymäki E. Opening and closing doors: The role of language in international opportunity recognition and exploitation. International Business Review. 2015;**24**(6):1082-1094. DOI: 10.1016/j.ibusrev.2015.04.010

[55] Vasilchenko E, Morrish S. The role of entrepreneurial networks in the exploration and exploitation of internationalization opportunities by information and communication technology firms. Journal of International Marketing. 2011;**19**(4): 88-105. DOI: 10.1509/jim.10.0134

[56] Chandra Y, Coviello N. Broadening the concept of international entrepreneurship: Consumers as international entrepreneurs. Journal of World Business. 2010;**45**(3):228-236. DOI: 10.1016/J.JWB.2009.09.006

[57] Crick D, Chaudhry S, Batstone S. An investigation into the overseas expansion of small Asian-owned U.K. firms. Small Business Economics. 2001;**16**(2):75-94. DOI: 10.1023/A:1011180017485

[58] Ellis P. Social ties and foreign market entry. Journal of International Business Studies. 2000;**31**(3):443-469. DOI: 10.1057/palgrave.jibs.8490916

**107**

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global performance. International Marketing Review. 2009;**26**(4/5):439- 452. DOI: 10.1108/02651330910971977

[67] Tuomisalo T. Emergence of an entrepreneurial opportunity: A case within a Finnish telecommunication international new venture. Journal of International Entrepreneurship. 2019;**17**(3):334-354. DOI: 10.1007/

s10843-019-00247-2

[68] Zhou L, Barnes BR, Lu Y.

DOI: 10.1057/jibs.2009.87

s10843-015-0152-x

[69] Åkerman N. International opportunity realization in firm

[70] Jantunen A, Nummela N,

[71] Jantunen A, Puumalainen K, Saarenketo S, Kyläheiko K.

capabilities and international

[72] Hohenthal J, Johanson J,

ibusrev.2013.08.002

Entrepreneurial orientation, dynamic

performance. Journal of International Entrepreneurship. 2005;**3**(3):223-243. DOI: 10.1007/s10843-005-1133-2

Johanson M. Network knowledge and business-relationship value in the foreign market. International Business Review. 2014;**23**(1):4-19. DOI: 10.1016/j.

[73] Vahlne J-E, Bhatti WA. Relationship development: A micro-foundation for

internationalization: Non-linear effects of market-specific knowledge and internationalization knowledge. Journal of International Entrepreneurship. 2015;**13**(3):242-259. DOI: 10.1007/

Puumalainen K, Saarenketo S. Strategic orientations of born globals—Do they really matter? Journal of World Business. 2008;**43**(2):158-170. DOI: 10.1016/J.JWB.2007.11.015

Entrepreneurial proclivity, capability upgrading and performance advantage of newness among international new ventures. Journal of International Business Studies. 2010;**41**(5):882-905.

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

[59] Galkina T, Chetty S. Effectuation and networking of internationalizing SMEs. Management International Review. 2015;**55**(5):647-676. DOI: 10.1007/s11575-015-0251-x

Entrepreneurial decision-making in internationalization: Propositions from mid-size firms. International Business Review. 2008;**17**(3):310-330. DOI: 10.1016/J.IBUSREV.2007.10.001

[61] Bingham CB, Eisenhardt KM, Furr NR. What makes a process a capability? Heuristics, strategy, and effective capture of opportunities. Strategic Entrepreneurship Journal. 2007;**1**(1-2):27-47. DOI: 10.1002/sej.1

[62] Dimitratos P, Johnson JE, Plakoyiannaki E, Young S. SME internationalization: How does the opportunity-based international entrepreneurial culture matter? International Business Review. 2016;**25**(6):1211-1222. DOI: 10.1016/j.

[63] Dimitratos P, Voudouris I,

[64] Kumar N, Sharma DD. The role of organisational culture in the internationalisation of new ventures. International Marketing Review. 2018;**35**(5):806-832. DOI: 10.1108/

[65] Dimitratos P, Plakoyiannaki E, Pitsoulaki A, Tüselmann HJ. The global smaller firm in international entrepreneurship. International Business Review. 2010;**19**(6):589-606. DOI: 10.1016/J.IBUSREV.2010.03.005

[66] Kocak A, Abimbola T. The effects of entrepreneurial marketing on born

IMR-09-2014-0299

Plakoyiannaki E, Nakos G. International entrepreneurial culture—Toward a comprehensive opportunity-based operationalization of international entrepreneurship. International Business Review. 2012;**21**(4):708-721. DOI: 10.1016/j.ibusrev.2011.08.001

ibusrev.2016.03.006

[60] Perks KJ, Hughes M.

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

[59] Galkina T, Chetty S. Effectuation and networking of internationalizing SMEs. Management International Review. 2015;**55**(5):647-676. DOI: 10.1007/s11575-015-0251-x

*Entrepreneurship - Contemporary Issues*

of International Entrepreneurship. 2010;**8**(4):343-370. DOI: 10.1007/

International Marketing. 2012;**20**(1):74-

[52] Kontinen T, Ojala A. Network ties in the international opportunity recognition of family SMEs. International Business Review. 2011b;**20**(4):440-453. DOI: 10.1016/j.ibusrev.2010.08.002

[53] Calabrò A, Brogi M, Torchia M. What does really matter in the internationalization of small and medium-sized family businesses? Journal of Small Business Management. 2016;**54**(2):679-696. DOI: 10.1111/

[54] Hurmerinta L, Nummela N,

[55] Vasilchenko E, Morrish S. The role of entrepreneurial networks in the exploration and exploitation of internationalization opportunities by information and communication

International Marketing. 2011;**19**(4): 88-105. DOI: 10.1509/jim.10.0134

[56] Chandra Y, Coviello N. Broadening

[57] Crick D, Chaudhry S, Batstone S. An investigation into the overseas expansion of small Asian-owned U.K. firms. Small Business Economics. 2001;**16**(2):75-94. DOI: 10.1023/A:1011180017485

[58] Ellis P. Social ties and foreign market entry. Journal of International Business Studies. 2000;**31**(3):443-469. DOI: 10.1057/palgrave.jibs.8490916

technology firms. Journal of

the concept of international entrepreneurship: Consumers as international entrepreneurs. Journal of World Business. 2010;**45**(3):228-236. DOI: 10.1016/J.JWB.2009.09.006

Paavilainen-Mäntymäki E. Opening and closing doors: The role of language in international opportunity recognition and exploitation. International Business Review. 2015;**24**(6):1082-1094. DOI: 10.1016/j.ibusrev.2015.04.010

jsbm.12165

102. DOI: 10.1509/jim.10.0147

[45] Vinogradov E, Jørgensen EJB. Differences in international opportunity identification between native and immigrant entrepreneurs. Journal of International Entrepreneurship. 2017;**15**(2):207-228. DOI: 10.1007/

s10843-010-0064-8

s10843-016-0197-5

etap.12164

jibs.2010.20

[46] Domurath A, Patzelt H.

and generalized trust in others.

[48] Leite YVP, de Moraes WFA, Salazar VS. Expressions of relationship

[49] Sharma DD, Blomstermo A. The internationalization process of Born Globals: A network view. International Business Review. 2003;**12**(6):739-753. DOI: 10.1016/J.IBUSREV.2003.05.002

[50] Lindstrand A, Melén S, Nordman ER. Turning social capital into business: A study of the internationalization of biotech SMEs. International Business Review. 2011;**20**(2):194-212. DOI: 10.1016/J.IBUSREV.2011.01.002

[51] Chandra Y, Styles C, Wilkinson IF. An opportunity-based view of rapid internationalization. Journal of

networking in international entrepreneurship. Journal of International Entrepreneurship. 2016;**14**(2):213-238. DOI: 10.1007/

s10843-016-0166-z

Entrepreneurs' assessments of early international entry: The role of foreign social ties, venture absorptive capacity,

Entrepreneurship Theory and Practice. 2016;**40**(5):1149-1177. DOI: 10.1111/

[47] Ellis P. Social ties and international entrepreneurship: Opportunities and constraints affecting firm internationalization. Journal of International Business Studies. 2011;**42**(1):99-127. DOI: 10.1057/

**106**

[60] Perks KJ, Hughes M. Entrepreneurial decision-making in internationalization: Propositions from mid-size firms. International Business Review. 2008;**17**(3):310-330. DOI: 10.1016/J.IBUSREV.2007.10.001

[61] Bingham CB, Eisenhardt KM, Furr NR. What makes a process a capability? Heuristics, strategy, and effective capture of opportunities. Strategic Entrepreneurship Journal. 2007;**1**(1-2):27-47. DOI: 10.1002/sej.1

[62] Dimitratos P, Johnson JE, Plakoyiannaki E, Young S. SME internationalization: How does the opportunity-based international entrepreneurial culture matter? International Business Review. 2016;**25**(6):1211-1222. DOI: 10.1016/j. ibusrev.2016.03.006

[63] Dimitratos P, Voudouris I, Plakoyiannaki E, Nakos G. International entrepreneurial culture—Toward a comprehensive opportunity-based operationalization of international entrepreneurship. International Business Review. 2012;**21**(4):708-721. DOI: 10.1016/j.ibusrev.2011.08.001

[64] Kumar N, Sharma DD. The role of organisational culture in the internationalisation of new ventures. International Marketing Review. 2018;**35**(5):806-832. DOI: 10.1108/ IMR-09-2014-0299

[65] Dimitratos P, Plakoyiannaki E, Pitsoulaki A, Tüselmann HJ. The global smaller firm in international entrepreneurship. International Business Review. 2010;**19**(6):589-606. DOI: 10.1016/J.IBUSREV.2010.03.005

[66] Kocak A, Abimbola T. The effects of entrepreneurial marketing on born global performance. International Marketing Review. 2009;**26**(4/5):439- 452. DOI: 10.1108/02651330910971977

[67] Tuomisalo T. Emergence of an entrepreneurial opportunity: A case within a Finnish telecommunication international new venture. Journal of International Entrepreneurship. 2019;**17**(3):334-354. DOI: 10.1007/ s10843-019-00247-2

[68] Zhou L, Barnes BR, Lu Y. Entrepreneurial proclivity, capability upgrading and performance advantage of newness among international new ventures. Journal of International Business Studies. 2010;**41**(5):882-905. DOI: 10.1057/jibs.2009.87

[69] Åkerman N. International opportunity realization in firm internationalization: Non-linear effects of market-specific knowledge and internationalization knowledge. Journal of International Entrepreneurship. 2015;**13**(3):242-259. DOI: 10.1007/ s10843-015-0152-x

[70] Jantunen A, Nummela N, Puumalainen K, Saarenketo S. Strategic orientations of born globals—Do they really matter? Journal of World Business. 2008;**43**(2):158-170. DOI: 10.1016/J.JWB.2007.11.015

[71] Jantunen A, Puumalainen K, Saarenketo S, Kyläheiko K. Entrepreneurial orientation, dynamic capabilities and international performance. Journal of International Entrepreneurship. 2005;**3**(3):223-243. DOI: 10.1007/s10843-005-1133-2

[72] Hohenthal J, Johanson J, Johanson M. Network knowledge and business-relationship value in the foreign market. International Business Review. 2014;**23**(1):4-19. DOI: 10.1016/j. ibusrev.2013.08.002

[73] Vahlne J-E, Bhatti WA. Relationship development: A micro-foundation for

the internationalization process of the multinational business enterprise. Management International Review. 2019;**59**(2):203-228. DOI: 10.1007/ s11575-018-0373-z

[74] Zaefarian R, Eng T-Y, Tasavori M. An exploratory study of international opportunity identification among family firms. International Business Review. 2016;**25**(1):333-345. DOI: 10.1016/j.ibusrev.2015.06.002

[75] Lindstrand A, Hånell SM. International and market-specific social capital effects on international opportunity exploitation in the internationalization process. Journal of World Business. 2017;**52**(5):653-663. DOI: 10.1016/J.JWB.2017.05.002

[76] Mejri K, Umemoto K. Smalland medium-sized enterprise internationalization: Towards the knowledge-based model. Journal of International Entrepreneurship. 2010;**8**(2):156-167. DOI: 10.1007/ s10843-010-0058-6

[77] Hilmersson M, Papaioannou S. SME international opportunity scouting—empirical insights on its determinants and outcomes. Journal of International Entrepreneurship. 2015;**13**(3):186-211. DOI: 10.1007/ s10843-015-0155-7

[78] Miocevic D, Morgan RE. Operational capabilities and entrepreneurial opportunities in emerging market firms. International Marketing Review. 2018;**35**(2):320-341. DOI: 10.1108/IMR-12-2015-0270

[79] Faroque AR. Strategic orientations and international opportunity recognition and development in emerging country born globals: the moderating role of environmental dynamism. International Journal of Entrepreneurship and Small Business. 2015;**24**(2):163. DOI: 10.1504/ IJESB.2015.067258

[80] Blankenburg Holm D, Johanson M, Kao PT. From outsider to insider: Opportunity development in foreign market networks. Journal of International Entrepreneurship. 2015;**13**(3):337-359. DOI: 10.1007/ s10843-015-0154-8

[81] Fiedler A, Fath BP, Whittaker DH. Overcoming the liability of outsidership in institutional voids: Trust, emerging goals, and learning about opportunities. International Small Business Journal. 2017;**35**(3):262-284. DOI: 10.1177/0266242616662510

[82] Fang H, Kotlar J, Memili E, Chrisman JJ, De Massis A. The pursuit of international opportunities in family firms: Generational differences and the role of knowledge-based resources. Global Strategy Journal. 2018;**8**(1):136- 157. DOI: 10.1002/gsj.1197

[83] Gabrielsson P, Gabrielsson M. A dynamic model of growth phases and survival in international business-tobusiness new ventures: The moderating effect of decision-making logic. Industrial Marketing Management. 2013;**42**(8):1357-1373. DOI: 10.1016/J. INDMARMAN.2013.07.011

[84] Oparaocha GO. SMEs and international entrepreneurship: An institutional network perspective. International Business Review. 2015;**24**(5):861-873. DOI: 10.1016/J. IBUSREV.2015.03.007

[85] Santangelo GD, Meyer KE. Extending the internationalization process model: Increases and decreases of MNE commitment in emerging economies. Journal of International Business Studies. 2011;**42**(7):894-909. DOI: 10.1057/jibs.2011.25

[86] Tian Y (Anna), Nicholson JD, Eklinder-Frick J, Johanson M. The interplay between social capital and international opportunities: A processual study of international

**109**

10.1111/etap.12088

Marketing Management.

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

2017;**70**:167-179. DOI: 10.1016/J. INDMARMAN.2017.07.004

[94] Mort G, Weerawardena J.

entrepreneurship. International

[95] Zahra SA, Rawhouser HN, Bhawe N, Neubaum DO,

Hayton JC. Globalization of social entrepreneurship opportunities. Strategic Entrepreneurship Journal. 2008;**2**(2):117-131. DOI: 10.1002/sej.43

[96] McDougall P, Shane S, Oviatt BM.

[97] Reuber AR, Fischer E. International entrepreneurship in internet-enabled markets. Journal of Business Venturing. 2011;**26**(6):660-679. DOI: 10.1016/J.

Explaining the formation of international new ventures: The limits of theories from international business research. Journal of Business Venturing. 1994;**9**(6):469-487. DOI: 10.1016/0883-9026(94)90017-5

JBUSVENT.2011.05.002

[98] Lundberg H, Rehnfors A. Transnational entrepreneurship: Opportunity identification and venture creation. Journal of International Entrepreneurship. 2018;**16**(2):150-175. DOI: 10.1007/s10843-018-0228-5

[99] Young SL, Welter C, Conger M. Stability vs. flexibility: The effect of regulatory institutions on opportunity

Business Studies. 2018;**49**(4):407-441. DOI: 10.1057/s41267-017-0095-7

[100] Baker T, Gedajlovic E, Lubatkin M.

type. Journal of International

A framework for comparing entrepreneurship processes across nations. Journal of International Business Studies. 2005;**36**(5):492-504. DOI: 10.1057/palgrave.jibs.8400153

[101] Webb JW, Kistruck GM, Ireland RD, Ketchen DJ Jr. The

Networking capability and international

Marketing Review. 2006;**23**(5):549-572. DOI: 10.1108/02651330610703445

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

'take-off' episodes in Chinese SMEs. Industrial Marketing Management. 2018;**70**:180-192. DOI: 10.1016/J. INDMARMAN.2017.07.006

[87] Autio E, Sapienza HJ, Almeida JG. Effects of age at entry, knowledge intensity, and imitability on international growth. Academy of Management Journal. 2000;**43**(5): 909-924. DOI: 10.2307/1556419

[88] Chetty S, Ojala A, Leppäaho T. Effectuation and foreign market entry of entrepreneurial firms. European Journal of Marketing.

2015;**49**(9/10):1436-1459. DOI: 10.1108/

improvisation: How entrepreneurial firms create success in foreign market entries over time. Strategic

2009;**3**(4):321-345. DOI: 10.1002/sej.77

[91] Mainela T, Puhakka V. Organising new business in a turbulent context: Opportunity discovery and effectuation for IJV development in transition markets. Journal of International Entrepreneurship. 2009;**7**(2):111-134. DOI: 10.1007/s10843-008-0034-6

[92] Sarasvathy S, Kumar K, York JG, Bhagavatula S. An effectual approach to international entrepreneurship: Overlaps, challenges, and provocative possibilities. Entrepreneurship Theory and Practice. 2014;**38**(1):71-93. DOI:

[93] Bai W, Johanson M. International opportunity networks. Industrial

EJM-11-2013-0630

[89] Bingham CB. Oscillating

Entrepreneurship Journal.

[90] Crick D, Spence M. The internationalisation of 'high performing' UK high-tech SMEs: A study of planned and unplanned strategies. International Business Review. 2005;**14**(2):167-185. DOI: 10.1016/J.IBUSREV.2004.04.007

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

'take-off' episodes in Chinese SMEs. Industrial Marketing Management. 2018;**70**:180-192. DOI: 10.1016/J. INDMARMAN.2017.07.006

*Entrepreneurship - Contemporary Issues*

the internationalization process of the multinational business enterprise. Management International Review. 2019;**59**(2):203-228. DOI: 10.1007/

[80] Blankenburg Holm D, Johanson M, Kao PT. From outsider to insider: Opportunity development in foreign market networks. Journal of International Entrepreneurship. 2015;**13**(3):337-359. DOI: 10.1007/

[81] Fiedler A, Fath BP, Whittaker DH. Overcoming the liability of outsidership in institutional voids: Trust, emerging goals, and learning about opportunities.

International Small Business Journal. 2017;**35**(3):262-284. DOI: 10.1177/0266242616662510

[82] Fang H, Kotlar J, Memili E, Chrisman JJ, De Massis A. The pursuit of international opportunities in family firms: Generational differences and the role of knowledge-based resources. Global Strategy Journal. 2018;**8**(1):136-

157. DOI: 10.1002/gsj.1197

[83] Gabrielsson P, Gabrielsson M. A dynamic model of growth phases and survival in international business-tobusiness new ventures: The moderating

effect of decision-making logic. Industrial Marketing Management. 2013;**42**(8):1357-1373. DOI: 10.1016/J.

INDMARMAN.2013.07.011

IBUSREV.2015.03.007

DOI: 10.1057/jibs.2011.25

[86] Tian Y (Anna), Nicholson JD, Eklinder-Frick J, Johanson M. The interplay between social capital and international opportunities: A processual study of international

[84] Oparaocha GO. SMEs and international entrepreneurship: An institutional network perspective. International Business Review. 2015;**24**(5):861-873. DOI: 10.1016/J.

[85] Santangelo GD, Meyer KE. Extending the internationalization process model: Increases and decreases of MNE commitment in emerging economies. Journal of International Business Studies. 2011;**42**(7):894-909.

s10843-015-0154-8

[74] Zaefarian R, Eng T-Y, Tasavori M. An exploratory study of international opportunity identification among family firms. International Business Review. 2016;**25**(1):333-345. DOI: 10.1016/j.ibusrev.2015.06.002

[75] Lindstrand A, Hånell SM. International and market-specific social capital effects on international opportunity exploitation in the

[76] Mejri K, Umemoto K. Smalland medium-sized enterprise internationalization: Towards the knowledge-based model. Journal of International Entrepreneurship. 2010;**8**(2):156-167. DOI: 10.1007/

[77] Hilmersson M, Papaioannou S. SME international opportunity scouting—empirical insights on its determinants and outcomes. Journal of International Entrepreneurship. 2015;**13**(3):186-211. DOI: 10.1007/

s10843-010-0058-6

s10843-015-0155-7

[78] Miocevic D, Morgan RE. Operational capabilities and entrepreneurial opportunities in emerging market firms. International Marketing Review. 2018;**35**(2):320-341. DOI: 10.1108/IMR-12-2015-0270

[79] Faroque AR. Strategic orientations

and international opportunity recognition and development in emerging country born globals: the moderating role of environmental dynamism. International Journal of Entrepreneurship and Small Business.

2015;**24**(2):163. DOI: 10.1504/

IJESB.2015.067258

internationalization process. Journal of World Business. 2017;**52**(5):653-663. DOI: 10.1016/J.JWB.2017.05.002

s11575-018-0373-z

**108**

[87] Autio E, Sapienza HJ, Almeida JG. Effects of age at entry, knowledge intensity, and imitability on international growth. Academy of Management Journal. 2000;**43**(5): 909-924. DOI: 10.2307/1556419

[88] Chetty S, Ojala A, Leppäaho T. Effectuation and foreign market entry of entrepreneurial firms. European Journal of Marketing. 2015;**49**(9/10):1436-1459. DOI: 10.1108/ EJM-11-2013-0630

[89] Bingham CB. Oscillating improvisation: How entrepreneurial firms create success in foreign market entries over time. Strategic Entrepreneurship Journal. 2009;**3**(4):321-345. DOI: 10.1002/sej.77

[90] Crick D, Spence M. The internationalisation of 'high performing' UK high-tech SMEs: A study of planned and unplanned strategies. International Business Review. 2005;**14**(2):167-185. DOI: 10.1016/J.IBUSREV.2004.04.007

[91] Mainela T, Puhakka V. Organising new business in a turbulent context: Opportunity discovery and effectuation for IJV development in transition markets. Journal of International Entrepreneurship. 2009;**7**(2):111-134. DOI: 10.1007/s10843-008-0034-6

[92] Sarasvathy S, Kumar K, York JG, Bhagavatula S. An effectual approach to international entrepreneurship: Overlaps, challenges, and provocative possibilities. Entrepreneurship Theory and Practice. 2014;**38**(1):71-93. DOI: 10.1111/etap.12088

[93] Bai W, Johanson M. International opportunity networks. Industrial Marketing Management.

2017;**70**:167-179. DOI: 10.1016/J. INDMARMAN.2017.07.004

[94] Mort G, Weerawardena J. Networking capability and international entrepreneurship. International Marketing Review. 2006;**23**(5):549-572. DOI: 10.1108/02651330610703445

[95] Zahra SA, Rawhouser HN, Bhawe N, Neubaum DO, Hayton JC. Globalization of social entrepreneurship opportunities. Strategic Entrepreneurship Journal. 2008;**2**(2):117-131. DOI: 10.1002/sej.43

[96] McDougall P, Shane S, Oviatt BM. Explaining the formation of international new ventures: The limits of theories from international business research. Journal of Business Venturing. 1994;**9**(6):469-487. DOI: 10.1016/0883-9026(94)90017-5

[97] Reuber AR, Fischer E. International entrepreneurship in internet-enabled markets. Journal of Business Venturing. 2011;**26**(6):660-679. DOI: 10.1016/J. JBUSVENT.2011.05.002

[98] Lundberg H, Rehnfors A. Transnational entrepreneurship: Opportunity identification and venture creation. Journal of International Entrepreneurship. 2018;**16**(2):150-175. DOI: 10.1007/s10843-018-0228-5

[99] Young SL, Welter C, Conger M. Stability vs. flexibility: The effect of regulatory institutions on opportunity type. Journal of International Business Studies. 2018;**49**(4):407-441. DOI: 10.1057/s41267-017-0095-7

[100] Baker T, Gedajlovic E, Lubatkin M. A framework for comparing entrepreneurship processes across nations. Journal of International Business Studies. 2005;**36**(5):492-504. DOI: 10.1057/palgrave.jibs.8400153

[101] Webb JW, Kistruck GM, Ireland RD, Ketchen DJ Jr. The entrepreneurship process in base of the pyramid markets: The case of Multinational Enterprise/ Nongovernment Organization Alliances. Entrepreneurship Theory and Practice. 2010;**34**(3):555-581. DOI: 10.1111/j.1540-6520.2009.00349.x

[102] Mainela T, Puhakka V, Sipola S. International entrepreneurship beyond individuals and firms: On the systemic nature of international opportunities. Journal of Business Venturing. 2018;**33**(4):534-550. DOI: 10.1016/J. JBUSVENT.2018.04.002

[103] Haaja E. Why do some SMEs engage in joint internationalisation and others do not? Exploring the role of mental images in collective international opportunity recognition. Journal of International Entrepreneurship. 2020;**18**:15-43. DOI: 10.1007/s10843- 019-00253-4

[104] Williams DW, Wood MS. Rule-based reasoning for understanding opportunity evaluation. Academy of Management Perspectives. 2015;**29**(2):218-236. DOI: 10.5465/amp.2013.0017

[105] Lorenz MP, Ramsey JR, Richey RG. Expatriates' international opportunity recognition and innovativeness: The role of metacognitive and cognitive cultural intelligence. Journal of World Business. 2018;**53**(2):222-236. DOI: 10.1016/J. JWB.2017.11.004

[106] Chen J, Saarenketo S, Puumalainen K. Internationalization and value orientation of entrepreneurial ventures—a Latin American perspective. Journal of International Entrepreneurship. 2016;**14**(1):32-51. DOI: 10.1007/s10843-016-0169-9

[107] Short JC, Ketchen DJ, Shook CL, Ireland RD. The concept of "Opportunity" in entrepreneurship research: Past accomplishments and future challenges. Journal of Management. 2010;**36**(1):40-65. DOI: 10.1177/0149206309342746

[108] Vaghely I, Julien P-A. Are opportunities recognized or constructed? An information perspective on entrepreneurial opportunity identification. Journal of Business Venturing. 2010;**25**(1):73-86. Available at: http://econpapers.repec.org/article/ eeejbvent/v\_3a25\_3ay\_3a2010\_3ai\_3a1\_ 3ap\_3a73-86.htm

[109] Venkataraman S, Sarasvathy SD, Dew N, Forster WR. Reflections on the 2010 AMR decade award: Whither the promise? Moving forward with entrepreneurship as a science of the artificial. Academy of Management Review. 2012;**37**(1):21-33. DOI: 10.5465/ amr.2011.0079

[110] Zahra SA. The virtuous cycle of discovery and creation of entrepreneurial opportunities. Strategic Entrepreneurship Journal. 2008;**2**(3):243-257. DOI: 10.1002/sej.47

[111] Chiasson M, Saunders C. Reconciling diverse approaches to opportunity research using the structuration theory. Journal of Business Venturing. 2005;**20**(6):747-767. DOI: 10.1016/j.jbusvent.2004.07.004

[112] Chetty S, Karami M, Martín OM. Opportunity discovery and creation as a duality: Evidence from small firms' foreign market entries. Journal of International Marketing. 2018;**26**(3): 70-93. DOI: 10.1509/jim.17.0005

[113] Ciravegna L, Lopez LE, Kundu SK. Country of origin and network effects on internationalization: A comparative study of SMEs from an emerging and developed economy. Journal of Business Research. 2014a;**67**(5):916-923. DOI: 10.1016/J.JBUSRES.2013.07.011

[114] Ciravegna L, Majano SB, Zhan G. The inception of internationalization of small and medium enterprises: The role of activeness and networks. Journal of Business Research. 2014b;**67**(6):1081- 1089. DOI: 10.1016/j.jbusres.2013.06.002

**111**

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit…*

[122] Zhou L, Wu W-P, Luo X. Internationalization and the performance of born-global SMEs: The mediating role of social networks. Journal of International Business Studies. 2007;**38**:673-690. DOI: 10.1057/

[123] Prashantham S. New venture internationalization as strategic renewal. European Management Journal. 2008;**26**(6):378-387. DOI:

[124] Birkinshaw J. Entrepreneurship in multinational corporations: The characteristics of subsidiary initiatives.

Strategic Management Journal. 1997;**18**(3):207-229. DOI: 10.1002/ (SICI)1097-0266(199703)18:3<207::

[125] Ahsan M, Fernhaber SA. Multinational enterprises:

Leveraging a corporate international entrepreneurship lens for new insights into subsidiary initiatives. Journal of International Management. 2019;**25**(1):51-65. DOI: 10.1016/J.

[126] Dimitratos P, Plakoyiannaki E, Thanos IC, Förbom YK. The overlooked distinction of multinational enterprise subsidiary learning: Its managerial and entrepreneurial learning modes. International Business Review. 2014;**23**(1):102-114. DOI: 10.1016/J.

[127] McGaughey SL. Hidden ties in international new venturing: The case of portfolio entrepreneurship. Journal of World Business. 2007;**42**(3):307-321.

DOI: 10.1016/J.JWB.2007.04.011

[128] Mostafiz MI, Sambasivan M, Goh SK. Impacts of dynamic managerial capability and international opportunity identification on firm performance. Multinational Business Review. 2019;**27**(4):339-363. DOI: 10.1108/

AID-SMJ864>3.0.CO;2-Q

INTMAN.2018.07.002

IBUSREV.2013.08.003

MBR-09-2018-0061

palgrave.jibs.8400282

10.1016/J.EMJ.2008.09.005

*DOI: http://dx.doi.org/10.5772/intechopen.93675*

[115] Chandra Y. A time-based process model of international entrepreneurial opportunity evaluation. Journal of International Business Studies. 2017;**48**(4):423-451. DOI: 10.1057/

s41267-017-0068-x

[116] Spence M, Crick D. A

2011a;**49**(3):490-514. DOI: 10.1111/j.1540-627X.2011.00326.x

s10843-016-0181-0

IBUSREV.2013.11.004

JWB.2007.08.001

s11575-006-0043-4

[120] Lee SH, Williams C. Dispersed entrepreneurship within multinational

perspective. Journal of World Business. 2007;**42**(4):505-519. DOI: 10.1016/J.

development in the internationalization

corporations: A community

[121] Johanson J, Vahlne J-E. Commitment and opportunity

process: A note on the Uppsala internationalization process model. Management International Review. 2006;**46**(2):165-178. DOI: 10.1007/

[119] Kalinic I, Sarasvathy S, Forza C. 'Expect the unexpected': Implications of effectual logic on the internationalization process. International Business Review. 2014;**23**(3):635-647. DOI: 10.1016/J.

comparative investigation into the internationalisation of Canadian and UK high-tech SMEs. International Marketing Review. 2006;**23**(5):524-548. DOI: 10.1108/02651330610703436

[117] Kontinen T, Ojala A. International opportunity recognition among small and medium-sized family firms. Journal of Small Business Management.

[118] Hannibal M, Evers N, Servais P. Opportunity recognition and international new venture creation in university spin-offs—Cases from Denmark and Ireland. Journal of International Entrepreneurship. 2016;**14**(3):345-372. DOI: 10.1007/

*International Entrepreneurship: An Entrepreneurial Behavior Oriented to the Pursuit… DOI: http://dx.doi.org/10.5772/intechopen.93675*

[115] Chandra Y. A time-based process model of international entrepreneurial opportunity evaluation. Journal of International Business Studies. 2017;**48**(4):423-451. DOI: 10.1057/ s41267-017-0068-x

*Entrepreneurship - Contemporary Issues*

entrepreneurship process in base of the pyramid markets: The case of Multinational Enterprise/ Nongovernment Organization Alliances. Entrepreneurship Theory and Practice. 2010;**34**(3):555-581. DOI: 10.1111/j.1540-6520.2009.00349.x

[108] Vaghely I, Julien P-A. Are opportunities recognized or

on entrepreneurial opportunity identification. Journal of Business Venturing. 2010;**25**(1):73-86. Available at: http://econpapers.repec.org/article/ eeejbvent/v\_3a25\_3ay\_3a2010\_3ai\_3a1\_

3ap\_3a73-86.htm

amr.2011.0079

[110] Zahra SA. The virtuous cycle of discovery and creation of entrepreneurial opportunities. Strategic Entrepreneurship Journal. 2008;**2**(3):243-257. DOI: 10.1002/sej.47

[111] Chiasson M, Saunders C. Reconciling diverse approaches to opportunity research using the structuration theory. Journal of Business Venturing. 2005;**20**(6):747-767. DOI: 10.1016/j.jbusvent.2004.07.004

[112] Chetty S, Karami M, Martín OM. Opportunity discovery and creation as a duality: Evidence from small firms' foreign market entries. Journal of International Marketing. 2018;**26**(3): 70-93. DOI: 10.1509/jim.17.0005

[113] Ciravegna L, Lopez LE, Kundu SK. Country of origin and network effects on internationalization: A comparative study of SMEs from an emerging and developed economy. Journal of Business Research. 2014a;**67**(5):916-923. DOI: 10.1016/J.JBUSRES.2013.07.011

[114] Ciravegna L, Majano SB, Zhan G. The inception of internationalization of small and medium enterprises: The role of activeness and networks. Journal of Business Research. 2014b;**67**(6):1081- 1089. DOI: 10.1016/j.jbusres.2013.06.002

constructed? An information perspective

[109] Venkataraman S, Sarasvathy SD, Dew N, Forster WR. Reflections on the 2010 AMR decade award: Whither the promise? Moving forward with entrepreneurship as a science of the artificial. Academy of Management Review. 2012;**37**(1):21-33. DOI: 10.5465/

[102] Mainela T, Puhakka V, Sipola S. International entrepreneurship beyond individuals and firms: On the systemic nature of international opportunities.

Journal of Business Venturing. 2018;**33**(4):534-550. DOI: 10.1016/J.

[103] Haaja E. Why do some SMEs engage in joint internationalisation and others do not? Exploring the role of mental images in collective international

opportunity recognition. Journal of International Entrepreneurship. 2020;**18**:15-43. DOI: 10.1007/s10843-

[104] Williams DW, Wood MS. Rule-based reasoning for understanding opportunity evaluation. Academy of Management Perspectives. 2015;**29**(2):218-236. DOI:

[105] Lorenz MP, Ramsey JR, Richey RG. Expatriates' international opportunity recognition and innovativeness: The role of metacognitive and cognitive cultural intelligence. Journal of World Business. 2018;**53**(2):222-236. DOI: 10.1016/J.

JBUSVENT.2018.04.002

019-00253-4

10.5465/amp.2013.0017

JWB.2017.11.004

[106] Chen J, Saarenketo S,

ventures—a Latin American

Ireland RD. The concept of

Puumalainen K. Internationalization and value orientation of entrepreneurial

perspective. Journal of International Entrepreneurship. 2016;**14**(1):32-51. DOI: 10.1007/s10843-016-0169-9

[107] Short JC, Ketchen DJ, Shook CL,

"Opportunity" in entrepreneurship research: Past accomplishments and future challenges. Journal of Management. 2010;**36**(1):40-65. DOI: 10.1177/0149206309342746

**110**

[116] Spence M, Crick D. A comparative investigation into the internationalisation of Canadian and UK high-tech SMEs. International Marketing Review. 2006;**23**(5):524-548. DOI: 10.1108/02651330610703436

[117] Kontinen T, Ojala A. International opportunity recognition among small and medium-sized family firms. Journal of Small Business Management. 2011a;**49**(3):490-514. DOI: 10.1111/j.1540-627X.2011.00326.x

[118] Hannibal M, Evers N, Servais P. Opportunity recognition and international new venture creation in university spin-offs—Cases from Denmark and Ireland. Journal of International Entrepreneurship. 2016;**14**(3):345-372. DOI: 10.1007/ s10843-016-0181-0

[119] Kalinic I, Sarasvathy S, Forza C. 'Expect the unexpected': Implications of effectual logic on the internationalization process. International Business Review. 2014;**23**(3):635-647. DOI: 10.1016/J. IBUSREV.2013.11.004

[120] Lee SH, Williams C. Dispersed entrepreneurship within multinational corporations: A community perspective. Journal of World Business. 2007;**42**(4):505-519. DOI: 10.1016/J. JWB.2007.08.001

[121] Johanson J, Vahlne J-E. Commitment and opportunity development in the internationalization process: A note on the Uppsala internationalization process model. Management International Review. 2006;**46**(2):165-178. DOI: 10.1007/ s11575-006-0043-4

[122] Zhou L, Wu W-P, Luo X. Internationalization and the performance of born-global SMEs: The mediating role of social networks. Journal of International Business Studies. 2007;**38**:673-690. DOI: 10.1057/ palgrave.jibs.8400282

[123] Prashantham S. New venture internationalization as strategic renewal. European Management Journal. 2008;**26**(6):378-387. DOI: 10.1016/J.EMJ.2008.09.005

[124] Birkinshaw J. Entrepreneurship in multinational corporations: The characteristics of subsidiary initiatives. Strategic Management Journal. 1997;**18**(3):207-229. DOI: 10.1002/ (SICI)1097-0266(199703)18:3<207:: AID-SMJ864>3.0.CO;2-Q

[125] Ahsan M, Fernhaber SA. Multinational enterprises: Leveraging a corporate international entrepreneurship lens for new insights into subsidiary initiatives. Journal of International Management. 2019;**25**(1):51-65. DOI: 10.1016/J. INTMAN.2018.07.002

[126] Dimitratos P, Plakoyiannaki E, Thanos IC, Förbom YK. The overlooked distinction of multinational enterprise subsidiary learning: Its managerial and entrepreneurial learning modes. International Business Review. 2014;**23**(1):102-114. DOI: 10.1016/J. IBUSREV.2013.08.003

[127] McGaughey SL. Hidden ties in international new venturing: The case of portfolio entrepreneurship. Journal of World Business. 2007;**42**(3):307-321. DOI: 10.1016/J.JWB.2007.04.011

[128] Mostafiz MI, Sambasivan M, Goh SK. Impacts of dynamic managerial capability and international opportunity identification on firm performance. Multinational Business Review. 2019;**27**(4):339-363. DOI: 10.1108/ MBR-09-2018-0061

[129] Weerawardena J, Mort GS, Liesch PW. Capabilities development and deployment activities in born global B-to-B firms for early entry into international markets. Industrial Marketing Management. 2019;**78**:122-136. DOI: 10.1016/J. INDMARMAN.2017.06.004

[130] Schwens C, Kabst R. Internationalization of young technology firms: A complementary perspective on antecedents of foreign market familiarity. International Business Review. 2011;**20**(1):60-74. DOI: 10.1016/J.IBUSREV.2010.06.003

[131] Styles C, Genua T. The rapid internationalization of high technology firms created through the commercialization of academic research. Journal of World Business. 2008;**43**(2):146-157. DOI: 10.1016/J. JWB.2007.11.011

[132] Hohenthal J, Johanson J, Johanson M. Market discovery and the international expansion of the firm. International Business Review. 2003;**12**(6):659-672. DOI: 10.1016/J. IBUSREV.2003.06.001

[133] Styles C, Gray S. Advancing research in international entrepreneurship. International Marketing Review. 2006;**23**(5):467-485. DOI: 10.1108/imr.2006.03623eaa.001

**113**

**Chapter 7**

**Abstract**

different secondary sources.

**1. Introduction**

Halal Entrepreneurship: Concept

The concept of entrepreneurship is not something new in Islam as it can be observed from the history as a noble profession practiced by the Prophet (PBUH) and His companions. However, in recent times, scholars of the Islamic economy have introduced a new term, "Halal entrepreneurship" or "*Halalpreneurship*" to define and differentiate entrepreneurs in the Halal industry from the conventional entrepreneurs. The integration of Islamic values reshapes the entrepreneurs in the Halal industry through certain features that justify using the term Halalpreneurs and *Halalpreneurship*. However, a limited number of research papers have

attempted to define *Halalpreneurship*. In this context, this chapter aims to achieve two main objectives. Firstly, to provide a comprehensive overview of Halal entrepreneurship (*Halalpreneurship*) by identifying its salient features that differentiates from entrepreneurs. Such understanding and knowledge will help someone to identify his/her role as *Halalpreneur* in the Halal industry. Secondly, to explore the business opportunities in different sectors of the global halal industry for the *Halalpreneurs* to tap. To achieve the objectives, the chapter adopts the methodology of content analysis by reviewing research papers, books, journals, and articles from

**Keywords:** *Halalpreneurship*, *Halalpreneurs*, halal industry, business opportunities

The economic development of both developed and developing countries is now largely enhanced by entrepreneurship development. The term is often used as the synonym of job creation, and innovation that contributes to societal improvement. The established entrepreneurs are classified as Micro, Small, and Medium Enterprises (MSMEs). These MSMEs constitute more than 95% of the total establishment of an economy globally. The entrepreneurs are engaged in different industries of the global economy. The Halal industry, which represents the global Islamic economy, is one of the fastest-growing markets in the world. The key contributors to this global Halal industry are the Halal entrepreneurs (Halalpreneurs). Entrepreneurship has been defined by many scholars, researchers, industry players, and academicians globally. The definition has been acknowledged and adopted in

However, the concept of "entrepreneurship" in the Islamic economy is not exactly the same as the conventional economy. Although the nature of activities and literal definition is similar, the concept in Islam becomes different in some certain ways and is perceived as "*Halalpreneurship*." The term has been used in the

more or less similar ways by most of the economies globally.

and Business Opportunities

*Moha Asri Abdullah and Md. Siddique E Azam*

**Chapter 7**

*Entrepreneurship - Contemporary Issues*

[129] Weerawardena J, Mort GS, Liesch PW. Capabilities development

and deployment activities in born global B-to-B firms for early entry into international markets. Industrial Marketing Management. 2019;**78**:122-136. DOI: 10.1016/J. INDMARMAN.2017.06.004

[130] Schwens C, Kabst R. Internationalization of young technology firms: A complementary perspective on antecedents of foreign market familiarity. International Business Review. 2011;**20**(1):60-74. DOI: 10.1016/J.IBUSREV.2010.06.003

[131] Styles C, Genua T. The rapid internationalization of high technology firms created through the commercialization of academic research. Journal of World Business. 2008;**43**(2):146-157. DOI: 10.1016/J.

[132] Hohenthal J, Johanson J, Johanson M. Market discovery and the international expansion of the firm. International Business Review. 2003;**12**(6):659-672. DOI: 10.1016/J.

[133] Styles C, Gray S. Advancing

Marketing Review. 2006;**23**(5):467-485. DOI: 10.1108/imr.2006.03623eaa.001

IBUSREV.2003.06.001

research in international entrepreneurship. International

JWB.2007.11.011

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## Halal Entrepreneurship: Concept and Business Opportunities

*Moha Asri Abdullah and Md. Siddique E Azam*

#### **Abstract**

The concept of entrepreneurship is not something new in Islam as it can be observed from the history as a noble profession practiced by the Prophet (PBUH) and His companions. However, in recent times, scholars of the Islamic economy have introduced a new term, "Halal entrepreneurship" or "*Halalpreneurship*" to define and differentiate entrepreneurs in the Halal industry from the conventional entrepreneurs. The integration of Islamic values reshapes the entrepreneurs in the Halal industry through certain features that justify using the term Halalpreneurs and *Halalpreneurship*. However, a limited number of research papers have attempted to define *Halalpreneurship*. In this context, this chapter aims to achieve two main objectives. Firstly, to provide a comprehensive overview of Halal entrepreneurship (*Halalpreneurship*) by identifying its salient features that differentiates from entrepreneurs. Such understanding and knowledge will help someone to identify his/her role as *Halalpreneur* in the Halal industry. Secondly, to explore the business opportunities in different sectors of the global halal industry for the *Halalpreneurs* to tap. To achieve the objectives, the chapter adopts the methodology of content analysis by reviewing research papers, books, journals, and articles from different secondary sources.

**Keywords:** *Halalpreneurship*, *Halalpreneurs*, halal industry, business opportunities

#### **1. Introduction**

The economic development of both developed and developing countries is now largely enhanced by entrepreneurship development. The term is often used as the synonym of job creation, and innovation that contributes to societal improvement. The established entrepreneurs are classified as Micro, Small, and Medium Enterprises (MSMEs). These MSMEs constitute more than 95% of the total establishment of an economy globally. The entrepreneurs are engaged in different industries of the global economy. The Halal industry, which represents the global Islamic economy, is one of the fastest-growing markets in the world. The key contributors to this global Halal industry are the Halal entrepreneurs (Halalpreneurs). Entrepreneurship has been defined by many scholars, researchers, industry players, and academicians globally. The definition has been acknowledged and adopted in more or less similar ways by most of the economies globally.

However, the concept of "entrepreneurship" in the Islamic economy is not exactly the same as the conventional economy. Although the nature of activities and literal definition is similar, the concept in Islam becomes different in some certain ways and is perceived as "*Halalpreneurship*." The term has been used in the Halal industry implying to entrepreneurship by Global Islamic Economy (GIE) report-2018 by Thompson Reuters' and Dinar Standard. However, the industry is lacking a proper definition of the term. Simultaneously, numerous scholars in the Islamic economy have introduced entrepreneurs in Islam in their studies. For example, the activities, responsibilities, and objectives of Muslim entrepreneurs in the Islamic economy have been discussed by Ramdani et al. in their study [1]. Alternatively, entrepreneurs in Islam have been termed as Islamic entrepreneurs negating the assumption that Islam is intrinsically anti-modernization and antidevelopment [2]. Similarly, the same term, Islamic entrepreneurship, was justified to explain entrepreneurship in Islam [3]. Moreover, entrepreneurs in the halal food industry have been investigated as halal food entrepreneurs [4]. Finally, the term *Halalpreneurship* has been used to define halal-minded entrepreneurship to realize the motivation of the small and medium entrepreneurs (SMEs) to become *Halalpreneurs* [5]. However, none of these studies have defined or clarified the term *Halalpreneurs* or *Halalpreneurship*. Moreover, it has been identified as one of the significant gaps that the halal industry is lacking a universally accepted definition and proper understanding of *Halalpreneurship* [5].

**Research questions:** The research questions addressed by the current chapter are: (1) What is the concept of *Halalpreneurship?* (2) What is the definition of *Halalpreneurship?* (3) Who are the *Halalpreneurs?* (4) How *Halalpreneurs* are different from entrepreneurs? and (5) what business opportunities are there in the global halal industry for *Halalpreneurs*?

**Objectives:** Entrepreneurs in the Halal industry must have a proper understanding of the concept from Maqasid-al-Sharia'h perspective which is needed to justify the term "*Halalpreneurship*" and to differentiate *Halalpreneurs* from entrepreneurs. In this regard, the main objective of this chapter is to define and provide a comprehensive understanding of *Halalpreneurship* from *maqasid-al-shari'ah* perspective. Additionally, the chapter attempts to realize the underlying business opportunities for *Halalpreneurs* in different segments of the halal industry.

**Methodology:** To achieve the objectives stated above, an extensive review of literature from previous researches has been carried out. Simultaneously, to justify the Islamic point of view, analogies and explanations of relevant *hadith* and Quranic verses were studied. Moreover, recent reports, news articles, and web articles on the halal industry and global Islamic economy were critically analyzed.

**Organization of the chapter:** This chapter starts with defining the concept of entrepreneurship and *Halalpreneurship* following an overview of Maqasid-al-Sharia'h to justify the definition of Halalpreneurs (Section 2). Then, the chapter explores different aspects of *Halalpreneurs* that differentiate them from entrepreneurs (Section 3). Finally, in Section 4, the chapter identifies potential opportunities for *Halalpreneurs* in different sectors of the halal industry.

#### **2. Concept and definition**

#### **2.1 Concept of entrepreneurship**

The term entrepreneurship stems from the French word *entreprendre* that suggests "to accomplish something" or "to embrace". It is an imaginative activity that relies upon the ability to make and set up something from about nothing. Kuratko explained business entrepreneurship as facing challenges, responding to circumstances, bearing vulnerability and creating a balance between demand and supply in the market [6]. At the same time, as per Peter Drucker, entrepreneurship is ascribed as an efficient headway, which grasps in the purposeful and arranged

**115**

*Halal Entrepreneurship: Concept and Business Opportunities*

which make a significant impact on the market.

**2.2 Concept of** *Halalpreneurship*

*2.2.1 Understanding halal*

good and sustainable.

*toyyib,* and *haram.*

*2.2.2 Understanding Halalpreneurship*

society, the world and humanity.

outlook for changes, and it is the coherent perception of the open opportunities where such changes add to financial and social advancement. A comparative definition was given by Shane and Venkataraman [7]. Rindova et al. have characterized entrepreneurship as the business foundations that are coordinated to accomplish a few objectives towards social, cultural, monetary, and institutional through the activities of an individual or a group of individuals [8]. Additionally, Lumpkin and Dess [9], Low and MacMillan [10] and Gartner [11] characterized entrepreneurship as the arrangement of new pursuits or associations. Entrepreneurship may likewise infer looking for advantages of chances by the creative use of assets in manners

The word "*Halal*" is an Arabic or Quranic word related to the Islamic lifestyle where the literal meaning of the word is permissible or lawful. That means the implication of the term is applicable to every conduct of human life whether it is a social, personal, economic, cultural, or political matter. When it comes to an economic perspective, the term has been used to denote the Islamic economy as the Halal industry. The Malaysian Standard (MS) provides an elaborated definition with all the requirements to be adopted in the halal industry [12]. Additionally, the application of the concept of halal adopts the concept "*Toyyib*" as well [13]. This is because in several places of the Quran, human beings are instructed to consume what is *halal* and *toyyib.* The meaning of *toyyib* can be translated as good, quality, healthy, sustainable and others. Hence, the association of the *toyyiban* aspect broadens the meaning and implication of halal in the economy [14]. Therefore, when we say halal, it means what is permissible or lawful in Islam, at the same time what is

The opposite of *halal* is *haram* which means prohibited. In the Quran, Allah (SWT) has also prescribed what is prohibited and what to avoid in consumption as well as human conduct of Muslims and whole *ummah.* For example, consuming alcohol and pork is prohibited in Islam. Simultaneously, gambling, pornography, *riba* (usury), hoarding goods, deceiving customers, etc. are also prohibited. The gist is, to define *Halalpreneurship,* one must consider all the three concepts, i.e. *halal,* 

Entrepreneurship is an important aspect of life which is also inseparable from Islam where it is perceived as *Halalpreneurship*. The scope of *Halalpreneurship* is within the *Shari'ah* ("*Aqidah, Fiqh, Akhlaq*") which ensures that its activities do not deviate from the guidelines of Islam. In Islam, *Halalpreneurship* is perceived as the role of *Khalifah* (Caliph) on the earth. The mission of *Khalifah* is to worship Allah *Subhanahu Wa Taala* (SWT) and to develop and prosper the world. Such a role implies the actions of entrepreneurship contributing to the good and prosperity of

The term *Halalpreneurship* is recently being used in the fields of the global Halal industry that connects halal advancement with business practices through halalpreneurial activities. This includes the capacity and capability, exercises, and activities seeking opportunities and developing business establishment. The procedure of creativity and innovation in *Halalpreneurship* is complex. However, this phenomenon is significantly important to be understood for halalpreneurial development.

*DOI: http://dx.doi.org/10.5772/intechopen.93657*

*Halal Entrepreneurship: Concept and Business Opportunities DOI: http://dx.doi.org/10.5772/intechopen.93657*

outlook for changes, and it is the coherent perception of the open opportunities where such changes add to financial and social advancement. A comparative definition was given by Shane and Venkataraman [7]. Rindova et al. have characterized entrepreneurship as the business foundations that are coordinated to accomplish a few objectives towards social, cultural, monetary, and institutional through the activities of an individual or a group of individuals [8]. Additionally, Lumpkin and Dess [9], Low and MacMillan [10] and Gartner [11] characterized entrepreneurship as the arrangement of new pursuits or associations. Entrepreneurship may likewise infer looking for advantages of chances by the creative use of assets in manners which make a significant impact on the market.

#### **2.2 Concept of** *Halalpreneurship*

#### *2.2.1 Understanding halal*

*Entrepreneurship - Contemporary Issues*

and proper understanding of *Halalpreneurship* [5].

global halal industry for *Halalpreneurs*?

Halal industry implying to entrepreneurship by Global Islamic Economy (GIE) report-2018 by Thompson Reuters' and Dinar Standard. However, the industry is lacking a proper definition of the term. Simultaneously, numerous scholars in the Islamic economy have introduced entrepreneurs in Islam in their studies. For example, the activities, responsibilities, and objectives of Muslim entrepreneurs in the Islamic economy have been discussed by Ramdani et al. in their study [1]. Alternatively, entrepreneurs in Islam have been termed as Islamic entrepreneurs negating the assumption that Islam is intrinsically anti-modernization and antidevelopment [2]. Similarly, the same term, Islamic entrepreneurship, was justified to explain entrepreneurship in Islam [3]. Moreover, entrepreneurs in the halal food industry have been investigated as halal food entrepreneurs [4]. Finally, the term *Halalpreneurship* has been used to define halal-minded entrepreneurship to realize the motivation of the small and medium entrepreneurs (SMEs) to become *Halalpreneurs* [5]. However, none of these studies have defined or clarified the term *Halalpreneurs* or *Halalpreneurship*. Moreover, it has been identified as one of the significant gaps that the halal industry is lacking a universally accepted definition

**Research questions:** The research questions addressed by the current chapter are: (1) What is the concept of *Halalpreneurship?* (2) What is the definition of *Halalpreneurship?* (3) Who are the *Halalpreneurs?* (4) How *Halalpreneurs* are different from entrepreneurs? and (5) what business opportunities are there in the

**Objectives:** Entrepreneurs in the Halal industry must have a proper understanding of the concept from Maqasid-al-Sharia'h perspective which is needed to justify the term "*Halalpreneurship*" and to differentiate *Halalpreneurs* from entrepreneurs. In this regard, the main objective of this chapter is to define and provide a comprehensive understanding of *Halalpreneurship* from *maqasid-al-shari'ah* perspective. Additionally, the chapter attempts to realize the underlying business opportunities for *Halalpreneurs* in different segments of the halal industry.

**Methodology:** To achieve the objectives stated above, an extensive review of literature from previous researches has been carried out. Simultaneously, to justify the Islamic point of view, analogies and explanations of relevant *hadith* and Quranic verses were studied. Moreover, recent reports, news articles, and web articles on the

**Organization of the chapter:** This chapter starts with defining the concept of entrepreneurship and *Halalpreneurship* following an overview of Maqasid-al-Sharia'h to justify the definition of Halalpreneurs (Section 2). Then, the chapter explores different aspects of *Halalpreneurs* that differentiate them from entrepreneurs (Section 3). Finally, in Section 4, the chapter identifies potential opportunities for

The term entrepreneurship stems from the French word *entreprendre* that suggests "to accomplish something" or "to embrace". It is an imaginative activity that relies upon the ability to make and set up something from about nothing. Kuratko explained business entrepreneurship as facing challenges, responding to circumstances, bearing vulnerability and creating a balance between demand and supply in the market [6]. At the same time, as per Peter Drucker, entrepreneurship is ascribed as an efficient headway, which grasps in the purposeful and arranged

halal industry and global Islamic economy were critically analyzed.

*Halalpreneurs* in different sectors of the halal industry.

**2. Concept and definition**

**2.1 Concept of entrepreneurship**

**114**

The word "*Halal*" is an Arabic or Quranic word related to the Islamic lifestyle where the literal meaning of the word is permissible or lawful. That means the implication of the term is applicable to every conduct of human life whether it is a social, personal, economic, cultural, or political matter. When it comes to an economic perspective, the term has been used to denote the Islamic economy as the Halal industry. The Malaysian Standard (MS) provides an elaborated definition with all the requirements to be adopted in the halal industry [12]. Additionally, the application of the concept of halal adopts the concept "*Toyyib*" as well [13]. This is because in several places of the Quran, human beings are instructed to consume what is *halal* and *toyyib.* The meaning of *toyyib* can be translated as good, quality, healthy, sustainable and others. Hence, the association of the *toyyiban* aspect broadens the meaning and implication of halal in the economy [14]. Therefore, when we say halal, it means what is permissible or lawful in Islam, at the same time what is good and sustainable.

The opposite of *halal* is *haram* which means prohibited. In the Quran, Allah (SWT) has also prescribed what is prohibited and what to avoid in consumption as well as human conduct of Muslims and whole *ummah.* For example, consuming alcohol and pork is prohibited in Islam. Simultaneously, gambling, pornography, *riba* (usury), hoarding goods, deceiving customers, etc. are also prohibited. The gist is, to define *Halalpreneurship,* one must consider all the three concepts, i.e. *halal, toyyib,* and *haram.*

#### *2.2.2 Understanding Halalpreneurship*

Entrepreneurship is an important aspect of life which is also inseparable from Islam where it is perceived as *Halalpreneurship*. The scope of *Halalpreneurship* is within the *Shari'ah* ("*Aqidah, Fiqh, Akhlaq*") which ensures that its activities do not deviate from the guidelines of Islam. In Islam, *Halalpreneurship* is perceived as the role of *Khalifah* (Caliph) on the earth. The mission of *Khalifah* is to worship Allah *Subhanahu Wa Taala* (SWT) and to develop and prosper the world. Such a role implies the actions of entrepreneurship contributing to the good and prosperity of society, the world and humanity.

The term *Halalpreneurship* is recently being used in the fields of the global Halal industry that connects halal advancement with business practices through halalpreneurial activities. This includes the capacity and capability, exercises, and activities seeking opportunities and developing business establishment. The procedure of creativity and innovation in *Halalpreneurship* is complex. However, this phenomenon is significantly important to be understood for halalpreneurial development.

The concept of *Halalpreneurship* is based on *Maqasid-al-Shari'ah* (objectives of Islamic law). *Maqasid* means objective and *Shari'ah* implies to Islamic law. The five objectives of *Shari'ah* (**Figure 1**) are derived from the necessities (*dharuriyat*) of humankind. This is the first level of need in the human need model of *Shari'ah* which was proposed by Hamid-Al-Ghazali (d. 1111). Although the concept of Maqasid and the human need model in Islam dates back to 1399 C.E., the pioneering, and systematic study of the higher objectives of Islamic law was developed and introduced through the work on Maqasid-al-sharia'h by Muhammad al-Tahir ibn Ashur in 1946 [15]. *Halalpreneurship* management adopts the human need model (**Figure 2**) by Ghazali that implies the fundamental factors of motivation for *Halalpreneurs*.

In *Halalpreneurship,* it is the responsibility of *Halalpreneurs* to understand the product priorities of the consumers as illustrated in **Figure 2**. To address the objectives of *Shari'ah, Halalpreneurs* should prioritize the products and services that are in the category of necessity in their production. They should serve what the Muslim *ummah* and humanity need. They should not focus on luxury (*Tahsiniyat*) products or services when there is a need for basic goods and services in a society. Therefore, the first priority is to meet the demand for necessities and then luxury and embellishments.

#### **2.3 Definition of** *Halalpreneurship* **and** *Halalpreneurs*

The term was used by Professor Moha Asri Abdullah, International Institute for Halal Research and Training (INHART), International Islamic University Malaysia (IIUM) in a talk on "*Halalpreneurs:* Realities and Opportunities". The institute has recently produced a book on this topic entitled "Halal Entrepreneurship", funded by the International Institute of Islamic Thought (IIIT), Malaysia. The book provides

**117**

report-2018.

**Figure 2.**

with *Maqasid-al-Shari'ah.*

**3.** *Halalpreneurship* **vs. entrepreneurship**

other salient points of *Halalpreneurship.*

based on *Maqasid-al-Shari'ah.*

*Halal Entrepreneurship: Concept and Business Opportunities*

the concept and definition of *Halalpreneurship.* The term has also been used implying to entrepreneurship in the Halal industry by Global Islamic Economy (GIE)

*Classification of human need in* Shari'ah*.* Source: *[15], Figure author's generated.*

Any Muslim individual conducting entrepreneurial business in the global halal industry with the objective of producing only halal products and services and maintains his/her business conduct in a *Shari'ah-*compliant way is called an *Halalpreneur* [16]. However, according to Islamic scholars, non-Muslims can also be involved in the fields of the halal industry and become *Halalpreneurs* given the condition that they comply with *Maqasid-al-Shari'ah.* Non-Muslims are allowed to be *Halalpreneurs* based on the *maslaha* (public interest) for the benefit of *ummah* and mankind. It is to mention that, anyone who wants to conduct business providing halal products and services, must obtain a halal certificate for the particular product or service. Given that, to obtain a halal certificate he/she must comply to halal standard for respective products and services required by the authorizing bodies in respective countries. And, all the halal standards are developed complying with *Maqasid-al-Shari'ah.* Therefore, in this chapter, the term *Halalpreneurship* refers to Halal entrepreneurship i.e. entrepreneurship in the halal industry that complies

In conventional economy unlimited wants and limited resources create scarcity which gives rise to the fundamental questions that are, what to produce, for whom to produce, and how to produce [17]? However, *Halalpreneurs* believe that there are always enough resources. If there is any scarcity, it is due to a lack of skill and knowledge, and inefficient use and distribution of the resources. Hence, the answers to the fundamental questions in *Halalpreneurship* are different from entrepreneurship. **Figure 3** shows the differences between *Halalpreneurship* and entrepreneurship regarding the fundamental questions of economics and some

Additionally, *Halalpreneurs* exhibit some unique characteristics that distinguish

them from conventional entrepreneurs. The characteristics enlisted below, are

a.*Takwa***:** It is the fear of Allah (SWT) that makes *Halalpreneurs* always conscious about all their deeds, whether it is bad or good, believing that they are

*DOI: http://dx.doi.org/10.5772/intechopen.93657*

**Figure 1.**

*Five objectives of* Shari'ah*.* Source: *Author's generated.*

*Halal Entrepreneurship: Concept and Business Opportunities DOI: http://dx.doi.org/10.5772/intechopen.93657*

**Figure 2.**

*Entrepreneurship - Contemporary Issues*

*Halalpreneurs*.

and embellishments.

The concept of *Halalpreneurship* is based on *Maqasid-al-Shari'ah* (objectives of Islamic law). *Maqasid* means objective and *Shari'ah* implies to Islamic law. The five objectives of *Shari'ah* (**Figure 1**) are derived from the necessities (*dharuriyat*) of humankind. This is the first level of need in the human need model of *Shari'ah* which was proposed by Hamid-Al-Ghazali (d. 1111). Although the concept of Maqasid and the human need model in Islam dates back to 1399 C.E., the pioneering, and systematic study of the higher objectives of Islamic law was developed and introduced through the work on Maqasid-al-sharia'h by Muhammad al-Tahir ibn Ashur in 1946 [15]. *Halalpreneurship* management adopts the human need model (**Figure 2**) by Ghazali that implies the fundamental factors of motivation for

In *Halalpreneurship,* it is the responsibility of *Halalpreneurs* to understand the product priorities of the consumers as illustrated in **Figure 2**. To address the objectives of *Shari'ah, Halalpreneurs* should prioritize the products and services that are in the category of necessity in their production. They should serve what the Muslim *ummah* and humanity need. They should not focus on luxury (*Tahsiniyat*) products or services when there is a need for basic goods and services in a society. Therefore, the first priority is to meet the demand for necessities and then luxury

The term was used by Professor Moha Asri Abdullah, International Institute for Halal Research and Training (INHART), International Islamic University Malaysia (IIUM) in a talk on "*Halalpreneurs:* Realities and Opportunities". The institute has recently produced a book on this topic entitled "Halal Entrepreneurship", funded by the International Institute of Islamic Thought (IIIT), Malaysia. The book provides

**2.3 Definition of** *Halalpreneurship* **and** *Halalpreneurs*

**116**

**Figure 1.**

*Five objectives of* Shari'ah*.* Source: *Author's generated.*

*Classification of human need in* Shari'ah*.* Source: *[15], Figure author's generated.*

the concept and definition of *Halalpreneurship.* The term has also been used implying to entrepreneurship in the Halal industry by Global Islamic Economy (GIE) report-2018.

Any Muslim individual conducting entrepreneurial business in the global halal industry with the objective of producing only halal products and services and maintains his/her business conduct in a *Shari'ah-*compliant way is called an *Halalpreneur* [16]. However, according to Islamic scholars, non-Muslims can also be involved in the fields of the halal industry and become *Halalpreneurs* given the condition that they comply with *Maqasid-al-Shari'ah.* Non-Muslims are allowed to be *Halalpreneurs* based on the *maslaha* (public interest) for the benefit of *ummah* and mankind. It is to mention that, anyone who wants to conduct business providing halal products and services, must obtain a halal certificate for the particular product or service. Given that, to obtain a halal certificate he/she must comply to halal standard for respective products and services required by the authorizing bodies in respective countries. And, all the halal standards are developed complying with *Maqasid-al-Shari'ah.* Therefore, in this chapter, the term *Halalpreneurship* refers to Halal entrepreneurship i.e. entrepreneurship in the halal industry that complies with *Maqasid-al-Shari'ah.*

#### **3.** *Halalpreneurship* **vs. entrepreneurship**

In conventional economy unlimited wants and limited resources create scarcity which gives rise to the fundamental questions that are, what to produce, for whom to produce, and how to produce [17]? However, *Halalpreneurs* believe that there are always enough resources. If there is any scarcity, it is due to a lack of skill and knowledge, and inefficient use and distribution of the resources. Hence, the answers to the fundamental questions in *Halalpreneurship* are different from entrepreneurship. **Figure 3** shows the differences between *Halalpreneurship* and entrepreneurship regarding the fundamental questions of economics and some other salient points of *Halalpreneurship.*

Additionally, *Halalpreneurs* exhibit some unique characteristics that distinguish them from conventional entrepreneurs. The characteristics enlisted below, are based on *Maqasid-al-Shari'ah.*

a.*Takwa***:** It is the fear of Allah (SWT) that makes *Halalpreneurs* always conscious about all their deeds, whether it is bad or good, believing that they are


#### **Figure 3.**

*Salient features:* Halalpreneurship *vs. entrepreneurship.* Source: *Author's generated.*

being watched by Allah (SWT), the Al-Aleem (all-knowing), even if the deed is done by their heart or thoughts only. Such, attribute of *Halalpreneurs* never allows them to involve with any activity which is not permissible (Haram) in Islam. As Allah recommends consuming halal (Quran 5:88) as well as to earn from halal only (Quran 2:168).


**119**

**Figure 4.**

*Model of* Halalpreneurship*. Source: [19].*

*Halal Entrepreneurship: Concept and Business Opportunities*

**4. Business opportunities for** *Halalpreneurs*

production, packaging, storage and others. Hence, any *Halalpreneur* should learn on the implementation of *Shari'ah* and halal standards in all the aspects

of entrepreneurship under the condition of *Maslaha* (public interest).

*Halalpreneurs* is the source of creativity and innovation that postulates the Islamic economy in many ways. Unlike entrepreneurs, *Halalpreneurs* are driven towards *Al-Falalh* (success in this world and the world hereafter) with the motivation of pleasing Allah (SWT) and serving humanity. In this regard, *Halalpreneurs* thrive for business opportunities with knowledge and wisdom and having faith in Allah (SWT). Simultaneously, they tap the opportunities and conduct their business activities following the guidelines of the Quran, and the advice and practice of the Prophet (PBUH). Most importantly, they believe that opportunities are created by Allah (SWT). Such a conceptual model of *Halalpreneurship* was illustrated by

The business opportunities for *Halalpreneurs* in the global halal industry can be realized by looking into the current market status of the different fields of the halal industry. Therefore, this section explores different components of the halal industry (**Figure 5**) where market opportunities can be tapped by *Halalpreneurs.*

The current market value of the global halal industry is estimated to be US\$4.7

trillion in 2018 including Islamic finance. This value is projected to be US\$6.9 trillion by 2024 with a CAGR growth of 6.2% [21]. **Figure 6** exhibits the current market shares of different fields of the halal industry and their projection by 2024. It shows that after Islamic finance, the biggest sector of the halal industry is the halal food and beverage industry followed by modest fashion, media and recreation, Muslim friendly tourism, halal pharmaceuticals, and halal cosmetics.

*DOI: http://dx.doi.org/10.5772/intechopen.93657*

Ramdani [19] as shown in **Figure 4**.

*Entrepreneurship - Contemporary Issues*

from halal only (Quran 2:168).

**Figure 3.**

priority for *Halalpreneurs* [18]*.*

(Al-Tirmidhi, Book 14: #1213).

contribute to the uplifting of social well-being.

being watched by Allah (SWT), the Al-Aleem (all-knowing), even if the deed is done by their heart or thoughts only. Such, attribute of *Halalpreneurs* never allows them to involve with any activity which is not permissible (Haram) in Islam. As Allah recommends consuming halal (Quran 5:88) as well as to earn

*Salient features:* Halalpreneurship *vs. entrepreneurship.* Source: *Author's generated.*

b.**Prioritizing** *Solat* **(prayer)**: Entrepreneurship is encouraged in Islam. The Prophet (PBUH) himself was a merchant and successful *Halalpreneur*. However, any worldly affairs including business conduct in *Halalpreneurship* come after *solat* (Al-Quran 62:10; 15:67)*.* The obligatory prayers become first

c.**Truthfulness**: *Halalpreneurs* should be trustworthy regarding their social and business conduct. Truthful and trustworthy merchants are said to be with the Prophet (PBUH) together with the martyrs on the day of judgment

d.**Philanthropist**: Islam permits us to make benefits by making business in society. Simultaneously, *Halalpreneurs* are recommended to give back to the same society they are being benefitted from. Giving charity in the form of *Zakat* is one of the five obligations for Muslims (Al-Quran 2:3,43,83,177; 7:156; 19:31; 19:55; 21:73; 22:35,41,78; 23:4; 27:3; 30:39; 31:4; 41:7 and more). Therefore, *Halalpreneurs* find themselves as philanthropists in their business venture and

e.*Shari'ah* **knowledge:** Another important characteristic of *Halalpreneurs* is to have the basic knowledge and understanding of *Maqasid-al-Shari'ah*, the concept of *halalan toyyiban*, and Islamic guidelines. This knowledge is crucial for all as the non-Muslim can also become *Halalpreneur.* For example, the halal and *toyyib* concept is to be implemented in the procurement process, logistics,

**118**

production, packaging, storage and others. Hence, any *Halalpreneur* should learn on the implementation of *Shari'ah* and halal standards in all the aspects of entrepreneurship under the condition of *Maslaha* (public interest).

### **4. Business opportunities for** *Halalpreneurs*

*Halalpreneurs* is the source of creativity and innovation that postulates the Islamic economy in many ways. Unlike entrepreneurs, *Halalpreneurs* are driven towards *Al-Falalh* (success in this world and the world hereafter) with the motivation of pleasing Allah (SWT) and serving humanity. In this regard, *Halalpreneurs* thrive for business opportunities with knowledge and wisdom and having faith in Allah (SWT). Simultaneously, they tap the opportunities and conduct their business activities following the guidelines of the Quran, and the advice and practice of the Prophet (PBUH). Most importantly, they believe that opportunities are created by Allah (SWT). Such a conceptual model of *Halalpreneurship* was illustrated by Ramdani [19] as shown in **Figure 4**.

The business opportunities for *Halalpreneurs* in the global halal industry can be realized by looking into the current market status of the different fields of the halal industry. Therefore, this section explores different components of the halal industry (**Figure 5**) where market opportunities can be tapped by *Halalpreneurs.*

The current market value of the global halal industry is estimated to be US\$4.7 trillion in 2018 including Islamic finance. This value is projected to be US\$6.9 trillion by 2024 with a CAGR growth of 6.2% [21]. **Figure 6** exhibits the current market shares of different fields of the halal industry and their projection by 2024. It shows that after Islamic finance, the biggest sector of the halal industry is the halal food and beverage industry followed by modest fashion, media and recreation, Muslim friendly tourism, halal pharmaceuticals, and halal cosmetics.

**Figure 4.** *Model of* Halalpreneurship*. Source: [19].*

**Figure 5.** *Components of global halal industry.* Source: *[20].*

#### **4.1 Halal food**

The Global Islamic Economy (GIE) report 2019/2020 reveals that the Muslim spending for halal food and beverage (F&B) in 2018 was US\$1.3 billion which has been projected to reach US\$1.9 billion by 2024. The hot growth sectors of the F&B market are halal ingredients, and meat-based meals and snacks. The production of gelatine is 450,000 tons globally of which only 10 percent is halal. There is a gap in the supply of other ingredients as well. *Halalpreneurs* can tap the opportunities in these sectors by their innovative halal products and exploring the gap in demand and supply chain. The opportunity is further spread over halal organic and healthy foods, baby foods, emerging exporters, online restaurant booking, retail commerce, social media marketing, etc.

#### **4.2 Modest fashion**

The Muslim millennials are the target consumer in this sector of the halal industry. The market of modest fashion was estimated to be US\$283 billion in 2018 and projected to reach US\$402 billion by 2024 (**Figure 6**). Innovative *Halalpreneurs* have the opportunity to offer products and services in this market in terms of modest luxury wears, modest sportswear, fashionwear for teens and tween, role modeling, blogging, etc.

"Follow This" is a web series by BuzzFeed which is one of the most popular websites for information on different topics like culture, religion, politics, technology, etc. This show has recently started streaming on Netflix from 2018 and covered an episode on modest fashion titles "Covered-up Culture." The writer of the episode reveals how modest fashion has become a \$billion worth market from a religious niche [22]. Modest fashion as a lifestyle is becoming the mainstream among the millennials. For example, the release of a modest clothing range by H&M in 2018, launching of "modest fashion edit" in 2019 by the collaboration of ASOS and

**121**

*Halal Entrepreneurship: Concept and Business Opportunities*

Verona collection. More success stories that are making headlines globally include Vogue Arabia, Harper's Bazaar Arabia, Harper's Bazaar Singapore [23]. In India, mubarakdeals.com is another example of success in the market of modest fashion [24]. Opportunities for *Halalpreneurs* in the field of modest fashion can be explored in terms of online shopping, fashion week or events, magazine publishers, styling

*Market size of the global halal industry in 2018 and 2024 (US\$ billion)***.** Source: *[20].*

Halal media and recreation refer to content targeting or suitable for Muslims. According to the GIE report 2019/2020, total Muslim spending in his sector was US\$283 billion and projected to reach \$US402 billion in 2024. Strong performance has been identified by the member countries of the Organization of Islamic Cooperation (OIC) in producing more Islamic themed content from the region. This sector of the halal industry targets the Muslim millennials, mainly. It has been forecasted that 54 percent of the Muslim population will be below 30 years old by 2030 (Thompson and Reuters, 2019). In Saudi Arabia, the ban on cinema has been lifted after 35 years in 2018. With the 2030-vision of achieving the goal of diversifying the Kingdom's economy and output, more than 300 screens in multiple theaters are scheduled to be open by 2020 [25]. This will create thousands of opportunities for *Halalpreneurs* in different roles that include journalist, editor, photographer, designer, researcher or producer, technical staff, copyrighter, presenters, content writer, graphics designer, and many more roles. The opportunities can be tapped in other OIC member countries as well, as the industry is growing significantly.

Global Muslim spending on travel in 2018 was US\$189 billion and projected to reach US\$274 billion by 2024 (**Figure 6**). Simultaneously, global Muslim travelers are expected to grow 156 million in 2020 which was 121 million in 2017 [26]. Opportunities in this sector of the halal industry can be realized by realizing both the demand-supply side of the market. The demand for Muslim travelers comprises in terms of leisure, business, healthcare, and religious travel. On the other side, the supply side encompasses transport (bus, train, flights, etc.), accommodation (hotels, villas, resorts, apartments, homestays, etc.), F&B, travel agents, attractions and activities, Muslim friendly tour guides, and others related to travel and tourism.

*DOI: http://dx.doi.org/10.5772/intechopen.93657*

services, influencer, designer and many more.

**4.3 Media and recreation**

**Figure 6.**

**4.4 Muslim friendly tourism**

*Halal Entrepreneurship: Concept and Business Opportunities DOI: http://dx.doi.org/10.5772/intechopen.93657*

*Entrepreneurship - Contemporary Issues*

**120**

**4.1 Halal food**

**Figure 5.**

social media marketing, etc.

*Components of global halal industry.* Source: *[20].*

**4.2 Modest fashion**

modeling, blogging, etc.

The Global Islamic Economy (GIE) report 2019/2020 reveals that the Muslim spending for halal food and beverage (F&B) in 2018 was US\$1.3 billion which has been projected to reach US\$1.9 billion by 2024. The hot growth sectors of the F&B market are halal ingredients, and meat-based meals and snacks. The production of gelatine is 450,000 tons globally of which only 10 percent is halal. There is a gap in the supply of other ingredients as well. *Halalpreneurs* can tap the opportunities in these sectors by their innovative halal products and exploring the gap in demand and supply chain. The opportunity is further spread over halal organic and healthy foods, baby foods, emerging exporters, online restaurant booking, retail commerce,

The Muslim millennials are the target consumer in this sector of the halal industry. The market of modest fashion was estimated to be US\$283 billion in 2018 and projected to reach US\$402 billion by 2024 (**Figure 6**). Innovative *Halalpreneurs* have the opportunity to offer products and services in this market in terms of modest luxury wears, modest sportswear, fashionwear for teens and tween, role

"Follow This" is a web series by BuzzFeed which is one of the most popular websites for information on different topics like culture, religion, politics, technology, etc. This show has recently started streaming on Netflix from 2018 and covered an episode on modest fashion titles "Covered-up Culture." The writer of the episode reveals how modest fashion has become a \$billion worth market from a religious niche [22]. Modest fashion as a lifestyle is becoming the mainstream among the millennials. For example, the release of a modest clothing range by H&M in 2018, launching of "modest fashion edit" in 2019 by the collaboration of ASOS and

**Figure 6.** *Market size of the global halal industry in 2018 and 2024 (US\$ billion)***.** Source: *[20].*

Verona collection. More success stories that are making headlines globally include Vogue Arabia, Harper's Bazaar Arabia, Harper's Bazaar Singapore [23]. In India, mubarakdeals.com is another example of success in the market of modest fashion [24]. Opportunities for *Halalpreneurs* in the field of modest fashion can be explored in terms of online shopping, fashion week or events, magazine publishers, styling services, influencer, designer and many more.

#### **4.3 Media and recreation**

Halal media and recreation refer to content targeting or suitable for Muslims. According to the GIE report 2019/2020, total Muslim spending in his sector was US\$283 billion and projected to reach \$US402 billion in 2024. Strong performance has been identified by the member countries of the Organization of Islamic Cooperation (OIC) in producing more Islamic themed content from the region. This sector of the halal industry targets the Muslim millennials, mainly. It has been forecasted that 54 percent of the Muslim population will be below 30 years old by 2030 (Thompson and Reuters, 2019). In Saudi Arabia, the ban on cinema has been lifted after 35 years in 2018. With the 2030-vision of achieving the goal of diversifying the Kingdom's economy and output, more than 300 screens in multiple theaters are scheduled to be open by 2020 [25]. This will create thousands of opportunities for *Halalpreneurs* in different roles that include journalist, editor, photographer, designer, researcher or producer, technical staff, copyrighter, presenters, content writer, graphics designer, and many more roles. The opportunities can be tapped in other OIC member countries as well, as the industry is growing significantly.

#### **4.4 Muslim friendly tourism**

Global Muslim spending on travel in 2018 was US\$189 billion and projected to reach US\$274 billion by 2024 (**Figure 6**). Simultaneously, global Muslim travelers are expected to grow 156 million in 2020 which was 121 million in 2017 [26]. Opportunities in this sector of the halal industry can be realized by realizing both the demand-supply side of the market. The demand for Muslim travelers comprises in terms of leisure, business, healthcare, and religious travel. On the other side, the supply side encompasses transport (bus, train, flights, etc.), accommodation (hotels, villas, resorts, apartments, homestays, etc.), F&B, travel agents, attractions and activities, Muslim friendly tour guides, and others related to travel and tourism. Such demand and supply are based on Muslim faith-based needs. *Halalpreneurs* have potential opportunities in the market of the travel industry to meet the faithbased needs that include halal food, prayer facilities, water usage friendly toilets, Ramadan services and facilities, halal spa, gender-segregated swimming pool and gymnasium, assurance of elimination of any non-halal activity, recreational activities with privacy, Muslim friendly tour guide, etc.

#### **4.5 Halal pharmaceuticals**

The industry of halal pharmaceuticals valued US\$92 billion in 2018 and expected to grow US\$134 billion by 2024, and the market expansion may even be greater as the target consumer is not limited to the Muslim population only. The demand for halal pharmaceuticals among Muslim consumers is increasing due to the *Toyyiban* concept that assures efficacy, quality, safety, halal, and hygiene factors. Additionally, it has gained acceptance among non-Muslim consumers as well because of the ethical aspect and the requirements to comply with the halal standard that include good manufacturing practices (GMP) as a prerequisite before meeting other requirements of halal certification. Such quality assurance sets a high benchmark in the market which enables "*Halal"* to become a recognized value in the pharmaceutical industry globally. A number of pharmaceutical companies in Malaysia are leading the industry, as Malaysia is the first country to come up with a strong and comprehensive halal standard for the pharmaceutical industry [27].

#### **4.6 Halal cosmetics**

Halal cosmetics and personal care is another booming market in the global halal industry. As of 2018, the Muslim spending on halal cosmetics was US\$64 billion which is expected to grow US\$95 billion by 2024. The product base of this industry is expanded to personal care products, color cosmetics (face, eyes, lips, nails), and fragrance products. Additionally, these product lines are applied for hair care, face care, skincare, and beauty care. *Halalpreneurs* can feasibly tap the opportunities and generate revenues in this market. Some hot sectors of this industry for growth in 2020 are halal nail polish, lipstick, halal face cream, scents, and perfumes. The potential growth has been identified through e-commerce [21]. The cosmetics and personal care products are even demanded by men as they are conscious about their appearance as well. The halal certification, i.e. the halal logo gives a competitive advantage to the *Halalpreneurs* over competitors who do not have halal certification.

#### **4.7 Potential markets**

The GIE report (**Figure 7**) of 2019 shows the top 15 countries in the halal industry globally based on the global Islamic economy indicator (GIEI). Overall, Malaysia is leading the Islamic economy securing the number one position for Islamic finance and Muslim friendly travel. However, UAE is leading the other sectors of the halal industry securing the rank of number one. The figure also shows the top 10 potential markets in halal food, Muslim friendly tourism, modest fashion, media and recreation, and cosmetics and pharmaceuticals industry. Interestingly, some non-Muslim majority countries have also made their position in the list of top 10 GIE countries. Similarly, [28] categorized the global potential market by region which is, North America (U.S., Canada, Mexico), Europe (Germany, France, UK, Italy, Spain), Asia-Pacific (Indonesia, Malaysia, India, Rest of Asia Pacific), and Latin America, Middle East, Africa (LAMEA).

**123**

and mankind.

**5. Conclusions**

**Figure 7.**

The chapter introduces and explains a new term, "*Halalpreneurship*," similar

to entrepreneurship. To understand and define *Halalpreneurship,* one must understand and consider what is *halal, toyyib,* and *haram. Halalpreneurship* refers to halal entrepreneurship which revolves around the Islamic economy and the individuals in *Halalpreneurship* are called *Halalpreneurs*, whereas entrepreneurship is a concept that is used in the conventional economy. Both *Halalpreneurs* and entrepreneurs imply business individuals who offer innovative products and services to the consumers, take risks, look for opportunities by the creative use of assets in manners that make a significant impact on the market. However, the concept of *Halalpreneurship* differs from entrepreneurship in certain aspects which comprise mainly the implication of ethical and religious (Islamic) values and guidelines in all kinds of activities in an economy that are related to entrepreneurship. The concept of *Halalpreneurship* is based on *Maqasid-al*-*Shari'ah* (five objectives of Islamic law). Any Muslim individual conducting entrepreneurial business in the global halal industry with the objective of producing only halal products and services and maintains his/her business conduct in a *Shari'ah-*compliant way is called a *Halalpreneur*. Non-Muslims are also allowed to be *Halalpreneurs* based on the *maslaha* (public interest) for the benefit of *ummah*

*Top 15 markets of the global halal industry according to GIEI 2019/2020***.** Source: *[21].*

*Halal Entrepreneurship: Concept and Business Opportunities*

*DOI: http://dx.doi.org/10.5772/intechopen.93657*

*Halal Entrepreneurship: Concept and Business Opportunities DOI: http://dx.doi.org/10.5772/intechopen.93657*

**Figure 7.**

*Entrepreneurship - Contemporary Issues*

**4.5 Halal pharmaceuticals**

**4.6 Halal cosmetics**

certification.

**4.7 Potential markets**

Latin America, Middle East, Africa (LAMEA).

ties with privacy, Muslim friendly tour guide, etc.

Such demand and supply are based on Muslim faith-based needs. *Halalpreneurs* have potential opportunities in the market of the travel industry to meet the faithbased needs that include halal food, prayer facilities, water usage friendly toilets, Ramadan services and facilities, halal spa, gender-segregated swimming pool and gymnasium, assurance of elimination of any non-halal activity, recreational activi-

The industry of halal pharmaceuticals valued US\$92 billion in 2018 and expected to grow US\$134 billion by 2024, and the market expansion may even be greater as the target consumer is not limited to the Muslim population only. The demand for halal pharmaceuticals among Muslim consumers is increasing due to the *Toyyiban* concept that assures efficacy, quality, safety, halal, and hygiene factors. Additionally, it has gained acceptance among non-Muslim consumers as well because of the ethical aspect and the requirements to comply with the halal standard that include good manufacturing practices (GMP) as a prerequisite before meeting other requirements of halal certification. Such quality assurance sets a high benchmark in the market which enables "*Halal"* to become a recognized value in the pharmaceutical industry globally. A number of pharmaceutical companies in Malaysia are leading the industry, as Malaysia is the first country to come up with a strong and comprehensive halal standard for the pharmaceutical industry [27].

Halal cosmetics and personal care is another booming market in the global halal industry. As of 2018, the Muslim spending on halal cosmetics was US\$64 billion which is expected to grow US\$95 billion by 2024. The product base of this industry is expanded to personal care products, color cosmetics (face, eyes, lips, nails), and fragrance products. Additionally, these product lines are applied for hair care, face care, skincare, and beauty care. *Halalpreneurs* can feasibly tap the opportunities and generate revenues in this market. Some hot sectors of this industry for growth in 2020 are halal nail polish, lipstick, halal face cream, scents, and perfumes. The potential growth has been identified through e-commerce [21]. The cosmetics and personal care products are even demanded by men as they are conscious about their appearance as well. The halal certification, i.e. the halal logo gives a competitive advantage to the *Halalpreneurs* over competitors who do not have halal

The GIE report (**Figure 7**) of 2019 shows the top 15 countries in the halal industry globally based on the global Islamic economy indicator (GIEI). Overall, Malaysia

is leading the Islamic economy securing the number one position for Islamic finance and Muslim friendly travel. However, UAE is leading the other sectors of the halal industry securing the rank of number one. The figure also shows the top 10 potential markets in halal food, Muslim friendly tourism, modest fashion, media and recreation, and cosmetics and pharmaceuticals industry. Interestingly, some non-Muslim majority countries have also made their position in the list of top 10 GIE countries. Similarly, [28] categorized the global potential market by region which is, North America (U.S., Canada, Mexico), Europe (Germany, France, UK, Italy, Spain), Asia-Pacific (Indonesia, Malaysia, India, Rest of Asia Pacific), and

**122**

*Top 15 markets of the global halal industry according to GIEI 2019/2020***.** Source: *[21].*

#### **5. Conclusions**

The chapter introduces and explains a new term, "*Halalpreneurship*," similar to entrepreneurship. To understand and define *Halalpreneurship,* one must understand and consider what is *halal, toyyib,* and *haram. Halalpreneurship* refers to halal entrepreneurship which revolves around the Islamic economy and the individuals in *Halalpreneurship* are called *Halalpreneurs*, whereas entrepreneurship is a concept that is used in the conventional economy. Both *Halalpreneurs* and entrepreneurs imply business individuals who offer innovative products and services to the consumers, take risks, look for opportunities by the creative use of assets in manners that make a significant impact on the market. However, the concept of *Halalpreneurship* differs from entrepreneurship in certain aspects which comprise mainly the implication of ethical and religious (Islamic) values and guidelines in all kinds of activities in an economy that are related to entrepreneurship. The concept of *Halalpreneurship* is based on *Maqasid-al*-*Shari'ah* (five objectives of Islamic law). Any Muslim individual conducting entrepreneurial business in the global halal industry with the objective of producing only halal products and services and maintains his/her business conduct in a *Shari'ah-*compliant way is called a *Halalpreneur*. Non-Muslims are also allowed to be *Halalpreneurs* based on the *maslaha* (public interest) for the benefit of *ummah* and mankind.

A number of salient points differentiate *Halalpreneurship* from entrepreneurship. The points are concept, what to produce, how to produce, for whom to produce, the scope of knowledge, motivational factors, and stakeholders. Additionally, there are certain characteristics of *Halalpreneurs* that make them unique and differentiated from conventional entrepreneurs. Some of these characteristics include fear of Allah, the nature of prioritizing prayer, truthfulness, philanthropist, and knowledge of Islamic law.

Halalpreneurs is the source of creativity and innovation that postulates the Islamic economy in many ways. Halalpreneurs thrives for business opportunities with knowledge and wisdom and having faith in Allah (SWT). Simultaneously, they tap the opportunities and conduct their business activities following the guidelines of the Quran, and the advice and practice of the Prophet (PBUH). Business opportunities of Halalpreneurs are spread over the entire global halal industry that had a market value of US\$4.7 trillion in 2018 including Islamic finance. The opportunities can be explored in different potential sectors of the halal industry that include Halal F&B, modest fashion industry, Halal media and recreation, Muslim friendly tourism, Halal pharmaceuticals, and Halal cosmetics. Furthermore, the emerging markets to explore opportunities are Halal logistic and supply chain, Halal technology, and Halal talent and skills (Human resources) development.

The potential markets for *Halalpreneurs* are the top 15 countries in the GIE where Malaysia is leading with maximum GIEI score followed by UAE in the second position. The other markets in the list include Bahrain, Saudi Arabia, Indonesia, Oman, Jordan, Pakistan, Kuwait, Qatar, Brunei, Sudan, Turkey, Iran, and Bangladesh, respectively. Interestingly, Brazil has ranked the third position in the halal F&B industry. Additionally, some other non-Muslim countries have also made their positions in the top 10 list of the GIE report in 2018.

**Limitations of the chapter:** The general objective of this chapter was limited to elucidate and explain the concept of halal entrepreneurship, i.e. *Halalpreneurship.* As the concept is new, limited literature was available relevant to the topic specifically. Although, the chapter attempts to provide an overview of the underlying opportunities for *Halalpreneurs* in different fields of the halal industry, to carry out a research and field survey in every filed was beyond the scope of the current chapter.

**Recommendations for future study:** Future study should carry out an in-depth investigation of each field of the halal industry to explore the business opportunities of *Halalpreneurs* in detail. Simultaneously, the issues and challenges faced by the *Halalpreneurs* in the halal industry need to be identified and addressed. Additionally, the factors driving the growth of the halal industry need to be realized so that policymakers can emphasize those forces more to enhance the expansion of the halal industry globally.

**125**

**Author details**

Moha Asri Abdullah\* and Md. Siddique E Azam

provided the original work is properly cited.

\*Address all correspondence to: mosri@iium.edu.my

Islamic University Malaysia (IIUM), Kuala Lumpur, Malaysia

International Institute for Halal Research and Training (INHART), International

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

*Halal Entrepreneurship: Concept and Business Opportunities*

*DOI: http://dx.doi.org/10.5772/intechopen.93657*

*Halal Entrepreneurship: Concept and Business Opportunities DOI: http://dx.doi.org/10.5772/intechopen.93657*

*Entrepreneurship - Contemporary Issues*

and knowledge of Islamic law.

A number of salient points differentiate *Halalpreneurship* from entrepreneurship. The points are concept, what to produce, how to produce, for whom to produce, the scope of knowledge, motivational factors, and stakeholders. Additionally, there are certain characteristics of *Halalpreneurs* that make them unique and differentiated from conventional entrepreneurs. Some of these characteristics include fear of Allah, the nature of prioritizing prayer, truthfulness, philanthropist,

Halalpreneurs is the source of creativity and innovation that postulates the Islamic economy in many ways. Halalpreneurs thrives for business opportunities with knowledge and wisdom and having faith in Allah (SWT). Simultaneously, they tap the opportunities and conduct their business activities following the guidelines of the Quran, and the advice and practice of the Prophet (PBUH). Business opportunities of Halalpreneurs are spread over the entire global halal industry that had a market value of US\$4.7 trillion in 2018 including Islamic finance. The opportunities can be explored in different potential sectors of the halal industry that include Halal F&B, modest fashion industry, Halal media and recreation, Muslim friendly tourism, Halal pharmaceuticals, and Halal cosmetics. Furthermore, the emerging markets to explore opportunities are Halal logistic and supply chain, Halal technol-

The potential markets for *Halalpreneurs* are the top 15 countries in the GIE where Malaysia is leading with maximum GIEI score followed by UAE in the second position. The other markets in the list include Bahrain, Saudi Arabia, Indonesia, Oman, Jordan, Pakistan, Kuwait, Qatar, Brunei, Sudan, Turkey, Iran, and

Bangladesh, respectively. Interestingly, Brazil has ranked the third position in the halal F&B industry. Additionally, some other non-Muslim countries have also made

**Limitations of the chapter:** The general objective of this chapter was limited to elucidate and explain the concept of halal entrepreneurship, i.e. *Halalpreneurship.* As the concept is new, limited literature was available relevant to the topic specifically. Although, the chapter attempts to provide an overview of the underlying opportunities for *Halalpreneurs* in different fields of the halal industry, to carry out a research and field survey in every filed was beyond the scope of the current

**Recommendations for future study:** Future study should carry out an in-depth investigation of each field of the halal industry to explore the business opportunities of *Halalpreneurs* in detail. Simultaneously, the issues and challenges faced by the *Halalpreneurs* in the halal industry need to be identified and addressed. Additionally, the factors driving the growth of the halal industry need to be realized so that policymakers can emphasize those forces more to enhance the expansion of

ogy, and Halal talent and skills (Human resources) development.

their positions in the top 10 list of the GIE report in 2018.

**124**

chapter.

the halal industry globally.

### **Author details**

Moha Asri Abdullah\* and Md. Siddique E Azam International Institute for Halal Research and Training (INHART), International Islamic University Malaysia (IIUM), Kuala Lumpur, Malaysia

\*Address all correspondence to: mosri@iium.edu.my

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Section 3

Entrepreneurial Finance

Section 3
