Comments for Mobilizing the right resources: Who and how much?

Shimazaki Kensuke
(Article) Shrader, R., & Siegel, D. S. (2007). Assessing the Relationship between Human Capital and Firm Performance: Evidence from Technology–Based New Ventures. Entrepreneurship Theory and Practice, 31(6), 893-908. INTRODUCTION This paper assesses the role of human capital in the development of new technology-based ventures and try to address 2 research questions: do the entrepreneurial team attributes have a relation with the strategy…
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(Article) Shrader, R., & Siegel, D. S. (2007). Assessing the Relationship between Human Capital and Firm Performance: Evidence from Technology–Based New Ventures. Entrepreneurship Theory and Practice, 31(6), 893-908.

INTRODUCTION

This paper assesses the role of human capital in the development of new technology-based ventures and try to address 2 research questions:
do the entrepreneurial team attributes have a relation with the strategy adopted by technology-based new ventures?
Is the adequacy between venture team characteristics and strategy actually reflects the financial performance of technology-based?
In their empirical analysis, the authors considered 5 types of strategies: low cost, differentiation, strategic aggressiveness, strategic breadth and internationalization. As for the characteristics, they focused on the team experience and distinct 3 types of experiences: technical, marketing and financial experience.

Key Insights

The article turns over the Upper Echelons theory, which was created in 1986 in the US. The theory states that organizational strategic choices and performance levels are partially predicted by managerial background characteristics. This means that the theory attempts to reveal how observable characteristics and strategic choices affect the performance.
Then, the article shows that the authors focus on three hypotheses among high-performing, technology-based ventures. These hypotheses are:
Hypothesis 1: Entrepreneurial team experience is strongly related to the strategies.
Hypothesis 2: Entrepreneurial team experience is directly related to the performance.
Hypothesis 3: The fit between entrepreneurial team experience and strategy is significantly related to the performance.
The results imply a strong connection between team experience and strategy. But there is a weak relationship between team experience and the performance. In addition, the fit between team experience and strategy is a key determinant of the long-term performance.

Implications

1) Proyect Managers/HR managers should build heterogeneous teams with not only the right technical skills but appropriate technical experience, corresponding to the industry characteristics.
2) Managers should know about their coworkers through a skill profile and evaluation system, in order to execute an effectively team building and manage people the best way possible. If you can’t measure human capital, you can’t manage it.
3) Managers should share customer’s feedback with the technical team because even if the team performs well, it’s important to be customer-oriented and not only problem-driven/solution-oriented.

Limitations

While applying the managerial implications that we suggest, managers should take into account the conflicts in heterogeneous team, the fairness of negative feedback and the failure of incentives. Even though a heterogeneous team can benefit from a strong dynamic within a group, it’s important to emphasize that the individuals’ characteristics can shock with each other. Seeing that by mixing different learnings styles and abilities, group members can find it difficult to communicate and understand each others ideas. This can lead to conflicts and disagreements inside the team creating an unhealthy working environment. In addition, managers should be aware that using the consumers’ feedback to evaluate the performance of employees is not a fair measure. Managers should first have a big sample of feedbacks before jump into conclusions, also that negative feedbacks do not represent the entire work done for the employees. Therefore, a misunderstanding by both parts can demotivate the workers and consequently lower productivity. Lastly, when managers apply an incentive strategy in the company, especially a monetary incentive, employees can become really competitive among each others, cross ethical boundaries and encourage isolating inside the company.

Conclusion

As a conclusion, we wanted to use a Steve Job’s quote saying “The great things in business are never done by one person. They’re done by a team of people”.

Further References
Trading on Talent: Human Capital and Firm Performance (2017): Anastassia Fedyk and James Hodson
Does Human Capital Matter?A Meta-Analysis of the Relationship Between Human Capital and Firm Performance (2011): T. Russell Crook, Samuel Y. Todd, James G. Combs and David J. Woehr

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ALEXANDRE Charline, BLANCKAERT Lucie, DEKIMPE Emilie, GENIN Alix

Wasserman, N. (2017). The throne vs. the kingdom: Founder control and value creation in startups. Strategic Management Journal, 38(2), 255-277.

Workshop 5 : executive summary “THE THRONE VS. THE KINGDOM: FOUNDER CONTROL AND VALUE CREATION IN STARTUPS” Through this article we discuss the “control dilemma” that is to say the choice for a founder of a firm to keep control or to delegate to make grown his start-up. Indeed, the founder has to find a tradeoff between attracting the resources required to…
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Workshop 5 : executive summary
“THE THRONE VS. THE KINGDOM: FOUNDER CONTROL AND VALUE CREATION IN STARTUPS”

Through this article we discuss the “control dilemma” that is to say the choice for a founder of a firm to keep control or to delegate to make grown his start-up.
Indeed, the founder has to find a tradeoff between attracting the resources required to build company value and being able to retain control of decision making. This dilemma highlights how founders, despite their best intentions, can make decisions that limit the value of the companies they created, or else can risk losing control of their companies.

For the key insights, we develop hypothesis about this tradeoff between value and control. The first hypothesis is the following: “The analyses show that, ceteris paribus, startups in which the founder is still in control of the board of directors and/or the CEO position are significantly less valuable than those in which the founder has given up a level of control”. This is particularly observable in the more than three-year-old companies. Furthermore, the second key insight concerns the ressources acquirement of the company. We can see that by raising capital from capitalist ventures, founders will retain less control. Otherwise, founders who raise capital from business angels keep more influence in their company. Finally, the third insight is about value creation. It shows that founders who want to keep control of the direction by refusing co founders have more difficulties to attract investors. Moreover, it blocks the value creation as the growth of the company is decreasing drastically.

Concerning the first implication, managers can hire experienced executives, build a team of employee, find people ready to finance and give them seats in the board of directors, but mainly they have to enhance business and finance skills in this board. Indeed, founders have technical knowledge and creativity which are fundamental for the launch, but they may sometimes miss business skills.
Furthermore, as seen in the second implication, one solution for the managers could be to develop a Work Breakdown Structure to divide each task in subtasks so that the project is more easily understandable and the founder can keep a close look at the project’s progress without controlling it entirely.

This article highlights also some limits. First, founders and investors can have divergent interests. One might think that the first motivation of everyone is the profit. Although managers have to maximize the company’s capital and and increase its pace of growth, entrepreneurs might have broader interests such as a wish for personal fulfillment, a desire to improve the quality of life of some, or a personal motivation. Another limit will be that a process of decentralization or delegation can lead to Agency Cost. This cost is the sum of control expenses by the principal, the expenditures by the liaison agent and the residual loss. Intangible soft skills must also to be take into account. Indeed, the founder has acquired non-pecuniary aspects and communication skills that aren’t easy to duplicate and to pass on the successors. The last limit is the subjectivity of the entrepreneurs. Many entrepreneurs are overconfident about their prospects and naive about the problems they will face. Founders’ attachment, overconfidence, and naivete may be necessary to get new ventures up and running, but it can later lead to problems. Many founders believe that if they’ve successfully led the development of the organization’s first new offering, that’s ample proof of their management prowess. They think investors should have no cause for complaint and should continue to back their leadership. After all, concerning the further references we learn that entrepreneurs face a new dilemma : starting a business whose main goal is to make money and another factor which motivates them : the drive to create and lead an organization. The surprising thing is that trying to maximize one imperils achievement of the other. [2]

Sources:

[1] Feng, L., Suraj, S., “Corporate governance when founders are directors” in Journal of Financial Economics, Volume 102, Issue 2 (2011), pp. 454-469.
https://ac.els-cdn.com/S0304405X11001462/1-s2.0-S0304405X11001462-main.pdf?_tid=03ecaa3e-8e00-4f70-8ba4-46447c047bdc&acdnat=1543828357_038f4db0ede7ba244aa11723247d44b3 consulted the 29.11.2018.

[2] Wasserman, N., “The Founder’s Dilemma” in Harvard Business Review (2008).
Online: https://hbr.org/2008/02/the-founders-dilemma consulted the 28.11.2018.

[3] Investopedia “What is the role of agency theory in corporate governance ?” (2015)
Online: https://www.investopedia.com/ask/answers/031815/what-role-agency-theory-corporate-governance.asp consulted the 30.11.2018

[4] Wikiquote “Agency Theory” (2016)
Online: https://en.wikiquote.org/wiki/Agency_theory consulted the 30.11.2018

[5] Beattie, A. “Steve Jobs and the Apple story” (Aug 2018)
Online: https://www.investopedia.com/articles/fundamental-analysis/12/steve-jobs-apple-story.asp consulted the 30.11.2018

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virgile vandeput
This executive summary talks about the paper called « Reconfiguring the value network ». The aims of the article is to develop the questions: " how value is created and where does it come from ? Key points The key business question in the knowledge economy is, as we have seen, "How is value created?" The traditional answer is, "Through the…
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This executive summary talks about the paper called « Reconfiguring the value network ». The aims of the article is to develop the questions: ” how value is created and where does it come from ?

Key points
The key business question in the knowledge economy is, as we have seen, “How is value created?” The traditional answer is, “Through the value chain” that were given by Porter. But in the new firms model, this has been replaced by the value network or value web.
The second key point goes with the fact that to if you want to be able to have a good understanding of the knowledge economy, you need to keep in mind the three currencies of value.
1) Goods, services and revenue : exchanges for services and goods, transactions, contracts, requests for proposals, confirmation, payments, etc.
2) Knowledge : exchange of strategic information, planning knowledge, process knowledge, technical knowledge, collaborative design, etc.
3) Intangible benefits : exchange of value and benefits that goes beyond the actual service and can’t be accounted in traditional measures.

Implications
The first implication is the fact that we can “map” these value exchanges as a flow diagram showing goods, services, and revenue (GSR), knowledge flow… With this level of detail we can outline value creation from multiple perspectives such as time, goals, resources, results, costs, or value added. Thereafter, it is also important to analyse this diagram and spot where value is.
Then the second implication puts in light the e-commerce. Actually, managers shouldn’t always seek for financial apport but could also work in collaboration with their concurrents in order to increase their knowledge.
So this case is a form of coopetition (mix between cooperation and competition). The idea is to bound you website with the one of your concurrents (to have direct links through theirs, etc). The benefit is to collect informations about your concurrents and their clients in order to increase your knowledge and have an advantage on this.
This increase of knowledge can have more value than a direct financial gain.

Limitations
We understood that that knowledge is something very important. It can create a real competitive advantage. However, it is important to show some nuances.
Indeed, everybody knows that having the knowledge is useful but you can’t do anything without the proper financial support, sometimes without the help of shareholders etc. Therefore, an equilibrium between these three types of value has to be found.
One of the other limitation would be the perception of the shareholders. Many shareholders focus their attention on 2 points: a good financial return and a short payback period. Therefor, there is a conflict between a long term strategy of the company based on intangible assets and the strategy from some shareholders based on short term view.
The third limitation a question relative to the second implication about the coopetition that managers can develop with competitors in order to collect data and improve knowledge. Coopetition can be beneficial for companies but we don’t have to forget and think about threats and risks relative to those kinds of situations. The coopetition between competitors can generate some advantages as : learning from allies, reduction of costs, stimulation of innovation,… But it exists also limitations, threats and risks. In our case, one can be the occurrence of opportunistic behavior. Opportunism often leads to unethical behavior, as companies break the rules of the market game. Probable consequences are a leakage of information and economic espionage so a risk of loss of control. It’s important that managers consider those limitations

Further Ref
Heiens, R., Leach, T., Mcgrath, C. (2007). The contribution of intangible assets and expenditures to shareholder value.
Journal of Strategic Marketing, 15:2-3, 149-159.

Cygler, J., & Wlodzimierz, S. (2017). Coopetition Disadvantages: The Case of the High Tech Companies. Engineering Economics 28(5).

Linden, G., Kraemer, K. L., & Dedrick, J. (2009). Who captures value in a global innovation network?: the case of Apple’s iPod. Communications of the ACM, 52(3), 140-144.

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