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Sociology 161/261:

Introduction to Social Science Theories of Entrepreneurship


Professor Patricia H. Thornton
Stanford University
Spring 2008
Table of Contents

Page

1. Syllabus.

2. The Case Method.

25

3. Robert Brockhaus and Pamela Horwitz, The Psychology of the Entrepreneur,


The Art and Science of Entrepreneurship, Donald Sexton and Raymond Smilor,
eds., Ballinger Publishing, 1986. Pp. 25 48.

27

4. George Gilder, A Patch of Sand The Spirit of Enterprise, Simon and Schuster,
1984. Pp. 23 41.

41

5. Scott Shane, Prior Knowledge and the Discovery of Entrepreneurial


Opportunities, Organization Science, 11(4), July August 2000. Pp. 448 469.

51

6. Scott Shane. Three Dimensional Printing, Darden Business Publishing Case No.
UVA-ENT-0006, 1999.

73

7. Ronald Burt, The Social Structure of Competition. Structural Holes: The Social
Structure of Competition, Harvard University Press, 1992. Pp. 8 49.

93

8. Scott Shane, Alex Laats and NBX Corporation, Darden Graduate School of
Business Administration Case No. UVA-ENT-0005, 1999.

115

9. Sascha Becker and Ludger Woessmann Was Weber Wrong? A Human Capital
Theory of Protestant Economic History, CESifo Working Paper No. 1987, May
2007.

141

10. Michael Roberts and Howard Stevenson, New Venture Financing, Harvard
Business School Note No. N9-802-131, January 8, 2002.

207

11. Patricia Thornton, Typology of Forms Competing for Venturing Space, 2002.

221

12. Paul Gompers, Paul and Josh Lerner, Venture Capital Glossary, The Venture
Capital Cycle, MIT Press, 2000. Pp. 343 349.

223

13. Michael Roberts and Lauren Barley, How Venture Capitalists Evaluate Potential
Venture Opportunities, Harvard Business School Case No. 9-805-019, December
1, 2004.

231

14. Alfred Chandler, The Emergence of Managerial Capitalism, The Sociology of


Economic Life, Mark Granovetter and Richard Swedberg, eds., 1992. Pp. 131
158.

251

Page
15. Oliver Williamson, The Multidivisional Structure, Markets and Hierarchies:
Analysis and Anti-trust Implications, The Free Press, 1975. Pp. 132 154.

267

16. Linda Stearns and Kenneth Allan, Economic Behavior in Institutional


Environments: The Corporate Merger Wave of the 1980s, American Sociological
Review, vol. 61, August 1996. Pp. 699 718.

279

17. Paul Gompers, Corporations and the Financing of Innovation: The Corporate
Venturing Experience, Economic Review, fourth quarter 2002. Pp. 1 17.

299

18. Alan Meyer and Vibha Gaba, Major Findings: NSF Grant #0120188 National
Science Foundation, 2004.

317

19. Lynne Zucker, Michael Darby, and Marilynn Brewer, Intellectual Human Capital
and the Birth of U.S. Biotechnology Enterprises, The American Economic Review,
March 1998. Pp. 290 306.

321

20. Howard Aldrich, Reproducing Populations: Foundings and Disbandings,


Organizations Evolving, SAGE Publications. Pp. 259 297.

339

21. Michael Porter, How Competitive Forces Shape Strategy, Harvard Business
Review, reprint no. 79208, July-August 1997. Pp. 2 10.

361

22. David Yoffie and Michael Slind, Apple Computer, 2006, Harvard Business School
Case No. 9-706-496, December 20, 2006.

371

23. W. Brain Arthur, Increasing returns and the New World of Business. Harvard
Business Review, reprint no. 96401, July-August 1996. Pp. 100 109.

403

24. Henry Chesbrough and David Teece, When is Virtual Virtuous? Organizing for
Innovation, Harvard Business Review, reprint no. 96103, January-February
1996. Pp. 65 73.

413

25. Michael Tushman and Philip Anderson, Technological Discontinuities and


Organizational Environments, Administrative Science Quarterly, vol. 31,
September 1986. Pp. 439 465.

423

26. Joseph Bower and Clayton Christensen Disruptive Technologies: Catching the
Wave, Harvard Business Review, Reprint 95103, January-February 1995. Pp 43
53.

451

27. John Campbell and Leon Lindberg, Property Rights and the Organization of
Economic Activity by the State, American Sociological Review, vol. 55, October
1990. Pp. 634 647.

463

28. Arie de Geus, The Living Company, Harvard Business Review, reprint no.
97203, March-April 1997. Pp. 51 59.

477

29. William Fulmer, Creating an Adaptive Culture, Shaping the Adaptive


Organization: Landscapes, Learning, and Leadership in Volatile Times, AMACOM,
2000. Pp. 152 73.

487

Page
30. Joanne Martin, Seeing Cultures from Different Points of View, Cultures in
Organizations: Three Perspectives, Oxford University Press, 1992. Pp . 3 21.

499

31. John van Maanen, The Smile Factory: Work at Disneyland, Reframing
Organizational Culture, Peter Frost, et al., eds., SAGE Publications, 1991. Pp. 58
76.

509

Permission to reprint has been granted by the publisher.


One-time permission to reprint all selections granted by Harvard
Business School Publishing.

The Social Science of Entrepreneurship


Sociology 161, 261, Spring 2008
Stanford University
MW 5:15-6:30 p.m.
Copyrighted material, do not distribute without permission
Professor Patricia Thornton
Office Hours: M W 6:30-7:15
and by appointment
Telephone: 650.380.5011
Email: thornton@duke.edu

Teaching Assistant
Office Hours:
and by appointment
Telephone:
Email:

Course Description
Who is likely to become an entrepreneur? How do you discover entrepreneurial
opportunities? What are the factors that affect the success of entrepreneurial ventures?
We will examine these questions in light of classic and contemporary theory and
empirical research in the social sciences.
We use action learning as a method of instructionwhich integrates theory and research
with interaction with expert practitioners in the venturing community. Readings
underscore universal principles; action learning teaches current practices and market
cycles.
Entrepreneurship is the endeavor to commercialize innovation. We examine how
individuals discover and create innovations, as well as how innovations are brought to
market by building a start-up venture, either independently or as a part of an existing
organization. We focus on the levels of both person and place persons with the ability
to recognize and create innovations, and places where innovations and resources to
develop innovation are highly concentrated. Students conduct interviews in places that
are rich sources of entrepreneurial innovations, such as technology licensing offices,
venture capital and corporate venturing firms, and entrepreneurial development
organizations.
The first part of the course focuses on how human, social, and cultural capital influences
the discovery of innovations. The second part examines how markets and organizations
are drivers of innovation and entrepreneurship. The model below summarizes these
relationships.
PERSON ----------------- PLACE ------------------ ENTREPRENEURSHIP
*Social Capital
*Environments
*Discover Innovations
*Networks
*Incubator Orgs/Regions *Develop Innovations
*Finance/Human Capital
*Prior Experience
*Cultures
*Markets
*Hierarchies
*States
t1, t2, ..

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The last part of the course we apply theories of competition, cooperation, technological
change, and leadership to understand how to anticipate windows of entrepreneurial
opportunity and how to manage the challenges of new venture development.
Who should take this course?
Undergraduate and co-term students who would like to have the analytical skills to found
their own companies and create innovation in existing companies.
What are the course prerequisites?
There are no prerequisites. The course recruits across majors. It is helpful if you have
courses in psychology, sociology, and economics and have taken sociology 160.
What are the course objectives? Knowledge of:
1. social science theories for discovering and developing innovations
2. how to use theory to recognize & solve problems & predict future outcomes
3. the organization of environments that are rich sources of innovations
4. the resources for founding new ventures
5. theories and strategies for leading the stages of growth in nascent companies
Why should I care about this course?
Entrepreneurship is a central determinant of innovation in societies, the accumulation and
distribution of wealth, and the social and economic status of individuals and
organizations.
Course format
Class sessions make use of lectures, discussions, film, and student and guest speaker
presentations. The study questions on the syllabus are designed to focus your attention on
the points to be discussed in class and are useful to prepare the case study and interview
assignments. To shorten the length of case study assignments use attachments.
Attachments are information in diagram, graph, and numeric form. I have paired a
theoretical reading with each case study. The theoretical reading will help you to interpret
the facts in the case and address the questions on the syllabus. The best grades go to
students who use the theory reading to construct an argument that guides insightful
statements about the meaning and implications of the facts in the case study. Logon on to
the CourseWork website to view the power point slides presented in class and an
annotated syllabus which motivates and summarizes key points of the readings and how
the readings as a whole fit together.
Teams
It is your responsibility to form a team and if you select to complete the innovation
environment interview assignment you will need to schedule a presentation date by the
second or third class. Also I emphasize that it takes considerable lead time to schedule
interviews with expert practitioners to complete this assignment. Please see me or the
teaching assistant if you are having any difficulties.

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Caveats
All forms of entrepreneurship cannot be adequately covered in one course. We will focus
on business innovations with the ability for high growth, not on non-profit social
entrepreneurship and lifestyle companies. However, with prior approval students have
the flexibility to craft assignments around these other forms of entrepreneurship. Students
do not develop a business plan in this course.
Due Dates and Relative Values of Course Assignments
ASSIGNMENT DUE
DATE
INDIVIDUAL
4/9
4/14
5/12
6/2
6/4
TEAM (select 1 of 2)
6/4

DESCRIPTION

% OF FINAL GRADE

Class Participation
3 D Printing Case
Alex Laats Case
Apple Case
Mission Evaluation
Smile Factory Case
Innovation Environment
interview & presentation
Case Study of Entrepreneur
Managing New Venture
Growth

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Co-term Students
In addition to the above assignments, co-term students will need to update the innovation
website addresses at the end of the syllabus. This update should identify any sites that
may have become inactive and add new sites. Please email this assignment to me no later
than the last day of finals.
Ph.D. Students
Class participation is required. The above assignments are optional. A 25 page paper
exploring new research questions in entrepreneurship is due the last day of class. Students
may make prior arrangements to study a phenomenon of interest in the field of
entrepreneurship.
Team Assignments (select 1 of 2)
Innovation Environments Interview Write-up OR Presentation
It may be easier to found new ventures in places that have more infrastructure, for
example regions with technology licensing offices, venture capital firms, angel
organizations, corporate venturing programs, incubators and other entrepreneurial
development organizations. An inherent part of the mission of these organizations is to
influence individuals on how to discover and exploit entrepreneurial opportunities. Your
assignment is to conduct an interview with an individual(s) with line responsibility in an
environment rich in entrepreneurial ideas and resources. The websites at the end of the

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syllabus may spark possible ideas. Your interview experience should allow you to
become familiar with one of these places and it should focus on how such
environments provide training, socialization, mentoring, and resources for individuals
who want to become entrepreneurs and develop innovative companies. Your report
should cover both the pros and the cons of discovering and developing innovations in
such environments from the perspective of the entrepreneur.
To learn from your interview experiences, student teams will present a 30 minute report
of their interview in the beginning of class. To organize your interview and to frame your
analysis you should draw on one or two of the theories covered in a prior class. Your
class presentation should use a combination of media, including video if possible. A
written report that summarizes your main findings is due one week after your class
presentation and should approximate 8 double spaced pages, plus attachments.
Attachments are information in diagram, graph, and numeric form. Please include a word
count at the end of the report and submit your presentation slides in hard and electronic
copy so that they can be placed on the course website.
While a combination of secondary research methods may be used, you are required to
take part in actual face-to-face conversations with at least one human being who is
knowledgeable about the organization/environment you are studying. Email chats and
phone conversations are not substitutes, but may be used in addition to face-to-face and
on-site conversations.
Case Study of Entrepreneur Managing New Venture Growth
Conduct a case study of an entrepreneur who is currently facing the challenges of
managing new venture growth. For guidance see the below articles at the end of the
syllabus.
1. Hamermesh, Heskett, and Roberts (2005). A Note on Managing the Growing
Venture, Harvard Business School Case 9-805-092.
2. Churchill, Neil C. and Virginia L. Lewis (1983). The Five Stages of Small Business
Growth, Harvard Business Review reprint 83301.
Select an individual on the founding team who is in a line management position of a
company that has grown beyond the initial start-up stage, but is not a mature business.
Your case should not focus on the individuals personal characteristics, but instead on the
entrepreneurs management style and strategies to overcome start-up challenges. You
should interview this person about growth-related stumbling blocks and alternative
strategies that may have been used to address these problems. Please do not interview a
friend or a family member. This assignment should be an opportunity to build your social
capital. This assignment should be informed by the readings and be approximately 20
pages double-spaced plus attachments. Secondary data sources are very useful for the
necessary background information. This assignment requires a face-to-face interview
unless the entrepreneur is located outside the geographic area. Please seek prior approval
for such cases.

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Specifically, your case study should demonstrate an understanding of:


Backgroundindustry structure and dynamics, review barriers to growth
common in the industry, overview of company history, including
information on founding date, founders, entry strategy, and performance to
date. Also note patterns of growth, previous hurdles, and enabling
strategies that were developed.
Leadership Stylehow does he or she motivate employees to accomplish
strategic goals?
Strategic Assessmentdescribe the companys current position and strategy,
pinpoint areas of competitive advantage and weakness. Highlight growthrelated challenges currently facing the company.
Recommendationsrecommend strategies for overcoming challenges
identified in your assessment.
Format for Submitting Assignments
Please submit assignments in hard copy at the beginning of class on the date designated
on p. 3 of the syllabus. Do not email assignments to me unless requested.
Class Participation
Your participation in class on teaching cases and guest speaker presentations is essential.
This course format is based on action learning and therefore you can not borrow notes
from people who attend and still develop a deep understanding of the material. Moreover,
speakers rely on interaction with their audience to make effective presentations so if you
do not attend this affects the class dynamics for speakers and all students. Class
participation is an opportunity for you to try on for size the careers of expert practitioners
and to understand how they promote innovation and make entrepreneurship happen. Your
class participation score is based on the quality of your verbal in-class contribution in
relation to others in the class, i.e., whether it constructively extends or challenges
information and arguments in the readings and presentations. While we make extensive
use of CourseWorks to aid learning, the course is not Internet based and class attendance
in excess of 2 excused absences may decrement your overall course grade as it is a sign
that you are not engaging in the course format.
Grading
The best grades are given to students who synthesize course material to develop a line of
reasoning that is supported by knowledge of course theories, research findings, interview
findings, and guest speaker presentations. Assignments should show your ability for
evaluative thinking, why your insights are not obvious, and support for your assertions
with logical reasoning and/or empirical evidence. Assignments should emphasize an
analytical, not a descriptive format. A descriptive format describes what the readings and
others have said. An analytical style presents your interpretive insights and conclusions
about the descriptive material.

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In grading your assignments I compare the analytical quality of written submissions


among all of you, selecting the best and the worst submissions to anchor the following
scale:
95-100 A
90-94 A87-89 B+
84-86 B
80-83 B75-79 C+
70-74 C, and so on
To determine your final grade your scores are weighted per the relative values in the
chart on p. 3. All members of a team receive the same grade. If for any reason you
believe that team members are not contributing equitably, please do not wait until the end
of the course to discuss this problem with me. In such rare cases I reserve the right to
survey team members and adjust individual grades based on a survey of student feedback.
Late Assignments and Emergencies
The five case analysis assignments cannot be late because they form the basis for
class discussion and feedback on the CourseWork website. Because emergencies tend
to happen, you have the option to drop 1 case assignment or if you complete all case
assignments to drop the one with the lowest score. Assignments other than discussion
cases will be down graded 10% of the earned grade for each week they are late.
Reading
You will have the opportunity to read the original theoretical arguments that are tested in
contemporary empirical research. There is one classic book, Leadership in
Administration by Philip Selznick and a course pack. All materials are available through
University Readers at www.universityreaders.com/students. You should be able to
download the first 20% of the course pack prior to purchase. An asterisk* identifies the
recommended reading. To reduce costs, recommended readings are not included in the
course pack and can be found on reserve in Green library or via the University Internet
journal stores.
W 4.2
Class Introduction and Overview
M 4.7
PersonsWho Becomes an EntrepreneurPsychology of Entrepreneurship
Reading:
1. Brockhaus and Horwitz (1986) "The Psychology of the Entrepreneur" in The Art
and Science of Entrepreneurship 25-44
2. Case: Guilder (1984) "A Patch of Sand" The Spirit of Enterprise 23-41.

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Case Preparation Questions:


1. In what ways are entrepreneurs psychologically distinct from other types of
individuals?
2. Is there an entrepreneurial personality?
3. What type of risk takers are entrepreneurs?
4. What do you think of the psychological research on entrepreneurs?
5. What questions are left unanswered in this research?
6. Which attribution(s) best explain Simplots entrepreneurial behavior?
a. NatureHard wiredIQ, Personality
b. NutureSocializationSchooling, Parenting
c. LuckEnvironmental Events, right place, right time
7. Is there attribution bias? If so, in what direction and why?
8. How would you rank Simplot on the psychological characteristics identified by
Brockhaus and Horwitz?
Class Activities:
1. Discuss reading and Simplot case
2. Pretend the world is simpler than it is and that you can select only one explanation
for Simplots entrepreneurial behavior. What is it6a, 6b, or 6c? Why? Come to
class prepared to vote on the question and argue for your choice.
W 4.9
PersonsInnovation Discovery
Distribution of Information and Prior ExperienceHuman Capital Theory
Reading:
1. Shane, Scott 2000. Prior Knowledge and the Discovery of Entrepreneurial
Opportunities, Organization Science, 11 (4) 448-469.
2. Case: Shane, Scott 1999. Three Dimensional Printing, pp. 1-20 (Darden UVAENT-0006)
Case Preparation Questions:
1. Why does the innovation of the 3DPTM process create a number of opportunities
to start new companies?
2. Why did the different entrepreneurs in the case discover and exploit such different
business opportunities for the 3DPTM Process?
3. Why did so few people discover these opportunities?
4. Based on the implications of the readings and the case, where should potential
entrepreneurs look to discover opportunities?
Class Activity and Assignment:
1. We will review the case preparation questions in class as we discuss the case.
2. Write a 1-2 page essay addressing the case preparation questions. In our discussion we
will explore two central teaching points, why certain types of innovations have the
potential to spawn multiple entrepreneurial opportunities, and how the prior experiences
of individuals determine the discovery process.

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M 4.14
NetworksStructural Holes vs. CohesionSocial Capital Theory
Reading:
1. Burt, Ronald (1992). The Social Structure of Competition. In Structural Holes:
The Social Structure of Competition. Cambridge, MA: Harvard University Press,
pp. 8-49.
2. Case: Shane, Scott (1999). Alex Laats and NBX Corporation (Darden UVA-ENT0005), pp. 1-25.
Case Preparation Questions:
1. Why did Alex Laats leave his law firm? Do you agree with his motivation? If yes,
why? If not, why?
2. Using your knowledge of Burts concept of structural holes, evaluate the
structure of Alexs network. Is Alexs network organized to produce high
entrepreneurial returns? If yes, why? If not, how should his network be
structured?
3. Do you agree or disagree with how Alex raised venture capital? Be prepared to
support your position.
4. Based on your evaluation of Alexs network, what advice would you give Alex
about his ability to use social capital to raise venture capital?
5. Should Alex have given MIT equity in NBX Corporation.
6. Should Alex have shopped the NBX deal around to more venture capitalists?
Class Activity and Assignment:
1. We will review the case preparation questions in class as we discuss the case.
2. Bring to class a diagram of Alexs network and be prepared to present and discuss your
analysis of Alexs network in light of the readings. Write a 1-2 page essay explaining the
benefits and detriments (with respect to discovering entrepreneurial opportunities and the
resources to develop them) for Alex of having a network high in cohesion versus high in
structural holes.
3. What is missing from Burts argument on structural holes in light of Alexs situation?
W 4.16
CultureInstitutional TheoryCultural Capital
Reading:
1. Becker, Sascha and Ludger Woessmann (2007). Was Weber Wrong? A Human
Capital Theory of Protestant Economic History, CESifo Working Paper No.
1987.
Questions:
1. Webers argument in his classic 1904 book The Protestant Ethic and the Spirit of
Capitalism concerns the cultural legitimation of individualism. Based on Webers
argument what are the key differences between Catholicism and reformed
Protestantism that laid the groundwork of Webers thesis?
2. How can Webers theory be interpreted as a human capital theory?
3. Is religion a good measure of the concept of culture?

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4. Based on the implications of the institutional logics case, where would you look
for innovative ideas with the potential for commercialization? Why?
5. Give an example of an innovation and entrepreneurial opportunity that comes
from bridging the cultures of different societal sectors.
6. Can you predict a future innovation based on the theoretical arguments of the
institutional logics case?
Class Activity and Assignment:
1. We will review the case preparation questions in class as we discuss the case.
2. Write a 1-2 page essay addressing the case preparation questions.
M 4.21
PlaceInnovation Discovery
MarketsAn Engine of Entrepreneurship
Reading:

1. Roberts, Michael J. and Howard Stevenson (2002). New Venture Financing,


Harvard Business School Note (N-9-802-131).
2. Thornton, Patricia (2002). Typology of Forms Competing for Venturing Space.
3. Gompers, Paul and Joshua Lerner (2000). Venture Capital Glossary, Venture
Capital Cycle, MIT Press.
Questions:

1. Can you associate the different types of funding with different types and stages of
development of start-ups?
2. What are the benefits and detriments for the entrepreneur of founding a company
with debt versus equity financing?
Class Activity:
1. Guest speaker: Angel Investor
W 4.23 Professor out of town, this class will be a session with the TA on your team
projects
Reading:
1. Roberts, Michael J. (2004). How Venture Capitalists Evaluate Potential Venture
Opportunities, Harvard Business School Case, 9-805-019.
Questions:
1. What is the number one determinant of the value of a start-up by a venture
capitalist?
2. What is the most important factor in determining whether or not a venture
capitalist funds an entrepreneur?
Class Activity:
1. Guest speaker: Venture Capital Investor

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M 4.28
HierarchiesAn Engine of Entrepreneurship
Entrepreneur as Aggregator; Entrepreneur as Broker of Companies
Contingency, Transaction Cost, and Institutional Theories
Reading:
1. Chandler, Alfred D. (1992). The Emergence of Managerial Capitalism, in
Mark Granovetter and Richard Swedberg (eds.) The Sociology of Economic Life.
2. Williamson, Oliver E. (1975). The Multidivisional Structure, chapter 8 in
Markets and Hierarchies: Analysis and Anti-trust Implications, Free Press.
3. Stearns, Linda B. and K. Allan (1996). Economic Behavior in an Institutional
Setting: The merger Wave of the 1980s, American Sociological Review, 61 (4)
699-718.
Questions:
1. Can you distinguish the differences between the unitary form (U-form) and multidivisional form (M-form) organization structures?
a. Which organization structure is more likely to facilitate innovation? Why?
b. Which organization structure is appropriate for an independent start-up
company? Why?
c. Which organization structure is appropriate for an internal corporate
venture? Why?
2. How does an M-form corporation function as an internal capital market for
founding new ventures?
3. What entrepreneurial advantages can be provided by organizational structure?
4. How does organization structure enable developing an M&A and capital markets
culture?
Class Activities:
1. Discuss reading and questions
W 4.30
Hierarchies as an Engine of Entrepreneurship
Corporate Venturing as a Founding Strategy
Reading:
1. Gompers, Paul A. (2002). Corporations and the Financing of Innovation: The
Corporate Venturing Experience. Federal Reserve Bank of Atlanta, Economic
Review, 4th Quarter.
2. Meyer, Alan and Vibha Gaba (2004). Major Findings on Corporate Venturing
National Science Foundation grant 0120188.
Questions:
1. What are the advantages and disadvantages of starting a new venture within an
M-form corporation (intrapreneurship) compared to the outside capital markets
(e.g., banks, venture capital, private placement)?

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a. How do the control mechanisms and incentive structures differ?


2. Can you describe the various models for organizing corporate venturing?
3. How do the models differ in terms of their degree of centralization? Speculate on
what are the implications of these differences for the entrepreneur and the startup?
4. If you were the CEO of the perfect Intrapreneurial firmhow would you describe
it?
Class Activity:
1. Guest speaker: Corporate Capital Investor
M 5.5
RegionsEngines of Entrepreneurship
Reading:
1. Zucker, Lynne, Michael Darby, and M. Brewer (1997). Intellectual Capital and the
Birth of U.S. Biotechnology Enterprises, American Economic Review, March.
Questions:
1. How would you explain regional high technology development using human capital
theory?
2. What role do star scientists and engineers play in high technology entrepreneurship and
company formation?
3. Based on Zucker and Darbys research, what is the most important factor in building a
businessthe person, the technology, or the patent?
4. Why do star scientists tend to cluster over time in a few communities?
Class Activity:
1. Entrepreneur Guest speaker
W 5.7
Theories of Market Creation and Change
Legitimacy & Competition Shape Windows of Opportunity to Found
Population Ecology and Resource Partitioning Theories
Reading:
1. Aldrich, Howard and Martin Ruef (2006). Organizations Evolving, chapter10,
Sage.
Questions:
1. Define the basic concepts of ecological theories that predict founding rates.
a. For example, density, legitimacy, density dependence, carrying capacity,
resource partitioning, specialist and generalist organizations.
2. What kinds of organizations prosper at different points in the life cycle of an
industry?

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3. According to population ecology theory, describe the characteristics of a market


or an industry that represent the best window of opportunity for an entrepreneur to
found a start-up?
4. According to resource partitioning theory, is there a second window of
opportunity for the entrepreneur? If so, Why?
Class Activities:
1. Discuss reading and questions
M 5.12
Competition and Market Structure Shapes Window of Opportunity to Found
Industrial Economic Theory
Reading:
1. Porter, Michael E. (1979). How Competitive Forces Shape Strategy. Harvard
Business Review, reprint 79208.
2. Apple Computer, 2006 Harvard Business School Case 9-706-496.
Questions:
1. Historically, what were Apples competitive advantages?
2. Who were the buyers and suppliers and how have they changed?
a. What were they like, what did they want?
3. Why did the buyers change so dramatically?
a. How is industry structure related to these changes?
i. What happened to the competitive forces, e.g., threat of substitutes,
the use of complements, rivalry, and barriers to entry within the
industry?
1. Why is rivalry so vicious despite high growth industry
wide?
2. Are there products that could replace PCs in the future that
are a threat?
4. Where does the balance of bargaining power lie between manufacturers and
suppliers?
5. How has the change in industry structure challenged Apples ability to sustain
competitive advantage?
6. Has Jobs finally solved Apples long-standing problems? Is the iPod different?
Class Activity and Assignment:
1. We will review the case preparation questions in class as we discuss the case.
2. Write a 3 page essay addressing the case preparation questions in light of Porters
model of the 5 competitive forces to analyze the market structure of the personal
computer industry and Apples position in that market. Trace Apples strategies in the
historical context of changes in the structure of the market place over the last 25 years.

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W 5.14
Cooperation and Market Structure Shapes Windows of Opportunity for Developing
Products and Partners
Increasing Returns Theory
Reading:
1. Arthur, W. Brian. (1996). Increasing returns and the new world of business.
Harvard Business Review July-August 74: 100-109.
2. Chesbrough, Henry W. and David J. Teece (1996). When is Virtual Virtuous?
Organizing for Innovation. pp. 65-73, Harvard Business Review (96103).
Questions:
1. Why do some markets tip to a dominant design, a single standard? What are the
implications of this market process for the start-up?
2. Are there instances of markets that do not tip? Why? What are the implications
for market entry strategy and product development for the start-up?
3. Knowing Arthurs theory of positive feedbacks, how can an entrepreneur improve
on their strategy to align with the right technology?
4. Can you define the concepts of Chesbrough and Teeces theory?
a. For example types of innovation, autonomous and systemic, and types of
knowledge, codified and tacit.
5. Given that knowledge sharing is essential to innovation, how do Chesbrough and
Teece solve the conundrum of knowledge exchange among firms in competitive
markets. What is their argument?
6. Knowing Chesbrough and Teeces theory, how can an entrepreneur improve on
knowing when to partner with other companies?
Class Activities:
1. Discuss reading and questions
M 5.19
Technological Innovation Changes the Structure of Markets and Windows of
Opportunity to Found
Punctuated Equilibrium Theory
Reading:
1. Tushman, Michael L. and Philip Anderson. (1986). Technological
Discontinuities and Organizational Environments. Administrative Science
Quarterly 31: 439-465.
2. Bower, Joseph L. and Clayton M. Christensen (1995). Disruptive Technologies:
Catching the Wave, Harvard Business Review, 43-53, 95103.
Questions:
1. Define the following concepts: dominant design, environmental munificence,
technological discontinuities, technological ferment.
2. How can technology innovations fundamentally change the structure of markets
and industries?

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13

3. What type of technology discontinuity is likely to lower market entry barriers for
start-up firms? Why?
4. Apply Tushman and Andersons theory to the dot.com companies. Would you
classify them as competence enhancing or destroying? How are the dot.com
companies different or similar from the distribution companies at the turn of the
centurythat were in many cases became vertically integrated?
5. Given Tushman and Andersons theory, what is wrong with the commonplace
statement, it is important to stay close to the customer?
Class Activites:
W 5.21
The Role of the State in Creating Windows of Opportunity to Found
Reading:
1. Campbell, John L. and Leon N. Lindberg. (1990). Property Rights and the
Organization of Economic Activity by the State. American Sociological Review
55: 634-647.Timmons, Jeffrey (1999).
Questions:
1. How do changes in property rights laws create entrepreneurial opportunities?
2. With respect to the structure of government, why is the U.S. a rich source of
entrepreneurial opportunities?
3. Can you think of counterpart examples from the recent business press of
Campbell and Lindbergs arguments?
4. Can you think of an international application of Campbell and Lindbergs theory?
5. What are the implications of Campbell and Lindbergs theory for globalization
entrepreneurship?
Class Activities:
1. Entrepreneur Guest speaker
W 5.28
Theories of Organizational Creation and Change
The Role of Leadership in Institutionalizing Meaning and Purpose
Institutional Theory and Organizational Culture
Reading:
1. De Geus, Arie (1997). The Living Company. Harvard Business Review, MarchApril
Questions:
1. According to Selzinick, what is the difference between a manager and a leader?
2. How is a leader an agent of institutionalization?
a. What does a leader need to know to understand how organizations become
institutionalized?
3. Why is the goal of the leader to embody the identity and culture of an
organization with institutions? Why is this important for a start-up organization?

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4. How might the alignment of a start-ups identity with institutions (i.e.,symbols,


rituals, codes of behavior) hinder or help the development of a nascent company
as it matures in the context of socio-political and market change?
a. Can you give examples of this?
Class Activities:
1. Short film segment of St. Crispens Day Speech by Henry VI
2. How does film illustrate the concept of the leader as an agent of
institutionalization?
M 6.2
Designing the Organizations Mission StatementBuilt to Last
Reading:
1. Fulmer, William E. (2000). Creating an Adaptive Culture, Shaping the
Adaptive Organization: Landscapes, Learning, and Leadership in Volatile Times,
American Management Association.
Questions:
1. Can you explain the role of the mission statement in creating organizational
culture and building an enduring organization?
2. What are the elements of an effective mission statement?
3. Why is the concept of learning a useful value for institutionalizing an
organizations culture?
4. How does a leader begin to make changes in an organization?
Class Activity and Assignment:
1. Discuss elements of an effective mission statement.
2. Bring to class a company mission statement that is either a good or a poor example of
Selznicks arguments on the institutional leaders role in defining the mission of an
organization. Please make your selection original and not an example from a
textbook, such as Starbucks. Why is the statement strong; why is it weak? Write a 1-2
page essay using Selznicks arguments to evaluate the mission statement. Will the
mission statement endure over time so as to keep pace with changes in product markets
and management styles? If not, why? Bring a power point slide to class of the mission
statement you have selected and be prepared to present the statement to the class and
discuss its intended and symbolic meaning to employees and the general public.
Company websites are a good source of mission statements.
W 6.4
Elements of Social Organization that Affect Conformity and Conflict in
Organization Culture
Reading:
1. Martin, Joanne M. (1992). Cultures in Organizations. 3-21. (focus on p. 13)
2. Van Maanen, John. (1991). The Smile Factory: Work at Disneyland. Pp. 59-76
in Reframing Organizational Culture edited by Peter J. Frost, Larry F. Moore,
Craig C. Lundberg, and Meryl Reis Louis. Newbury Park, CA: Sage.

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Questions:
1. According to Selznick what elements of the social structure of an organization
affect adherence to organizational culture?
2. What does Selznick mean when he argues that effective organizations have high
consensus between informal and formal organizational culture?
3. What characteristics of Disneyland presented in the Smile Factory case create
informal organizational culture?
4. How does Martins 3 analytic views of organization culture on p. 13 explain
conflict and conformity between the informal and formal aspects of organizational
culture?
5. How does Martins argument explain the culture of the workers and management
at Disneyland?
6. Is the organizational culture presented in the Smile Factory case constructive or
destructive to the mission of Disneyland?
7. If Disneyland were a start-up, what would be the consequences of its culture, as
portrayed by Van Maanen, on its probability of success? To help? To hinder? If
hinderwhat would you do to remedy?
Class Activity and Assignment:
1. We will review the case preparation questions in class as we discuss the case.
2. Write a 1-2 page essay addressing the case preparation questions.
Course Wrap-up

M 4-7

SOCIOLOGY 161/261 SUMMARY


TOPIC
INTRODUCTION
Course Overview
WHO BECOMES AN ENTREPRENEUR
Unique Personalities?

W 4-9

INNOVATION DISCOVERYPerson
Distribution of InformationPrior Experience

M 4-14

NetworksStructural holes vs. Cohesion

W 4-16

CultureInstitutional Theory

Human Capital Theory


Practice3 DP Printing
Case
Social Capital Theory
PracticeAlex Laats
Case
Cultural Capital Theory

INNOVATION DISCOVERYPlace
MarketsEngines of Entrepreneurship, The
Organization of Angel Investors
MarketsEngines of Entrepreneurship, The

PracticeAngel
Investor Group Speaker
Session with TA on

DATE
W 4-2

M 4-21
W 4-23

LEARNING TOOLS

Psychological Theories;
PracticeSimplot Case

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16

Organization of Venture Capital Investors


M 4-28

HierarchiesEngines of Entrepreneurship,
Entrepreneur as Aggregator; Entrepreneur as
Broker of Companies

W 4-30

HierarchiesEngines of Entrepreneurship, The


Organization of Corporate Venturing

M 5-5

RegionsEngines of Entrepreneurship

W 5-7

MARKET CREATION/CHANGE
Legitimacy & Competition Shape Windows of
Opportunity to Found

projects: Professor out


of town
Contingency,
Transaction Cost,
Institutional Theories;
PracticeBuy-Out Firm
Case
PracticeVenture
Capitalist Speaker
PracticeCorporate
Venture Capitalist
Speaker

Population Ecology,
Resource Partitioning
Theories

M 5-12

Competition & Market Structure Shapes


Window of Opportunity to Found

W 5-14

Cooperation & Market Structure Shapes


Windows of Opportunity for Developing
Products and Partners

M 5-19

Technology Innovation Changes the Structure of Punctuated Equilibrium


Markets, Window of Opportunity to Found
Theory; PracticeDisk
Drive Industry Case
State Creates Windows of Opportunity to Found
No Classes Memorial Day Holiday
ORGANIZATION CREATION/CHANGE
Establishing Leadership
Institutional Theory;
Practicefilm Henry V
Designing the Mission
Institutional Theory;
PracticeCritique
mission statements
Guiding the Mission with Organization Culture
Institutional Theory;
Course Wrap-up
PracticeSmile Factory
Case

W 5-21
M 5-26
W 5-28
M 6-2

W 6-4

Industrial Economic
Theory; Practice
Apple Case
Increasing Returns
Theory; Open Source
Movement, Practice

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Websites for Ideas for Innovation Environments Interviews

National Dialogue on Entrepreneurship www.publicforuminstitute.org/nde


Subscribe to the National Dialogue on Entrepreneurship for a useful weekly newsletter
Nde-news@nde-news.org
Corporate Venturing

Large companies rely on start-ups to drive innovation. Larger corporations invest in


researching technologies that they do not themselves develop. Large companies invest in
start-ups in multiple ways that represent varying degrees of centralizationfrom internal
corporate ventures to passive investors in venture funds and mergers and acquisitions
designed to capture and exploit new technological innovations.
Price Waterhouse Coopers/National Venture Capital Association MoneyTree Report on
Corporate Venture Capital Activity on the Rise in 2006,
http://www.nvca.org/pdf/CorporateVCReleasefinaldraft.pdf
NVCA Corporate Venture Group http://www.nvca.org/cvg/corporate.html
Nokia Venturing Organization
http://www.nokia.com/nokia/0,8764,54203,00.html
Intel Capital, http://www.intel.com/capital/
Sharp Technology Ventures
http://www.sharptechnologyventures.com/
Pfizer Strategic Investments Group http://www.pfizer.com/pfizer/subsites/psig/index.jsp
Steamboat Ventures (Steamboat and Disney media venturing) http://steamboatvc.com/
Motorola Ventures http://www.motorola.com/ventures.jsp
Lilly Ventures (capital arm of Eli Lilly) http://www.lillyventures.com/
Cargill Ventures http://www.cargillventures.com/
Venture Capital Firms and Industry

The National Venture Capital Association regularly reports the latest data on venture
capital and has a directory of all member venture capital firms www.nvca.org
For regional differences in venture capital deal flow see www.pwcmoneytree.com
Mid-Atlantic Venture Association www.mava.org
The European Private Equity and Venture Capital Association www.evca.com
The Intersouth Partners, www.intersouth.com

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Benchmark Capital, www.benchmark.com


Kleiner, Perkins, Caufield & Byers, http://www.kpcb.com/
Sequoia Capital, http://www.sequoiacap.com/
The Venture Capital Institute www.vcinstitute.org
Google Directory of Venture Capitalists
http://directory.google.com/Top/Business/Financial_Services/Venture_Capital/Industry_
Focus
British Venture Captial Association, http://www.bvca.co.uk
African Venture Capital Association, http://www.avcanet.com/
Canadas Venture Capital and Private Equity Association http://www.cvca.ca/
Hong Kong Venture Capital and Private Equity Association
http://www.hkvca.com.hk/2004/index.html
Japan Venture Capital Association, http://www.jvca.jp/en/
The Latin American Venture Capital Association, http://www.lavca.org/
Venture One Annual Industry Report http://www.ventureone.com/pubs/ireport.html
Directory of Venture Capital FirmsFinding funding http://www.vfinance.com/
Yahoo! Directory of Venture Capital
http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Financial_Services/
Finance_and_Receivables/Financing/Corporate_Finance/Venture_Capital/Industry_Speci
fic
Investor HomeVenture Capital http://www.investorhome.com/vc.htm
Incubators

The proliferation of incubators in the late 1990s to rapidly scale up organizational


experience for new ventures declined when the internet bubble burst, begging the
question of under what conditions incubators a viable business model.
The Entrepreneur Center in San Jose, http://www.ecenteronline.org/home.htm

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19

The National Business Incubation Association, www.nbia.org


First Flight Venture Capital Center, www.nctda.org

Yahoo! Directory Business Incubators


http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Corporate_Services/
Business_Development/Incubators
Google Directory Incubators
http://www.google.com/Top/Business/Small_Business/Start_Up/Incubators/
CORDIS: Incubators provides information on business incubators in Europe
http://cordis.europa.eu/incubators/
The Entrepreneurs Library
http://www.caycon.com/resources.php
Angel Investment Groups
The U.S. trade association for angel groups produces a directory of angel networks broken
down by geographical area and information about their performance.
http://www.angelcapitalassociation.org

The Angels Forum http://www.angelsforum.com/


Angel Capital Association, www.angelsummit.org
Washington Technology Center Angel Investors http://www.watechcenter.org/angels
Silicon Valley Angel Group http://www.bandangels.com
Life Science Angels www.lifescienceangels.com

Alliance of Angels, http://www.allianceofangels.com


Keiretsu Forum www.keiretsuforum.com

Angel Investor News, http://www.angel-investor-news.com/


2005 Rankings of Most Active Angel Investors and Largest Incubators in the Bay Area
http://www.wtc-sf.org/news_2005bookoflists.pdf
Technology Licensing Offices

The Association of University Technology Managers AUTM produces an annual survey


of university technology transfer, www.autm.net.
See AUTM data on spinout success rates with respect to the UK, US, and Canada
http://www.unico.org.uk/prelease.htm

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20

MIT: http://web.mit.edu/tlo/www/
Berkeley: http://otl.Berkeley.edu
Stanford http://otl.stanford.edu/flash.html
Harvard http://www.techtransfer.harvard.edu/
Caltech http://www.ott.caltech.edu/
National Institutes of Health Office of Technology Transfer monitors and handles transfer
of NIH inventions and also manages the patent and licensing activities for the Food and
Drug Administration

http://ott.od.nih.gov/about_nih/about.html
Linking Ideas and Innovation in Technology Transfer, http://www.ibridgenetwork.org
National University of Singapore Entrepreneurship Center: http://www.nus.edu.sg/nec/
Industry Associations and Entrepreneurship Policy

The Semiconductor Research Corporation, www.src.org. This organization signals


unmet growth areas of innovation from the perspective of industry.
The Research Triangle Council for Entrepreneurial Development, www.cednc.org.
Young Entrepreneurs Association
http://www.yea.ca/
Entrepreneur online magazine http://www.entrepreneur.com/mag/0,4430,,00.html
The North Carolina Biotechnology Center, www.ncbiotech.org.
North Carolina Electronics and Information Technologies Association www.nceita.org
Artists as Entrepreneurs, creative artists are often an under-appreciated asset for the
entrepreneurial economy, and smart regions are findings ways to nurture and support
local creative talent, http://store.yahoo.com/americans4thearts/builcreatec.html
Silicon Valley Association of Software Entrepreneurs, http://www.svase.org
Ewing Marion Kauffman Foundation www.kauffman.org
American Entrepreneurs for Economic Growth www.aeeg.org
SCORE, counselors to Americas small Business, http://www.score.org/

21
21

Small Business and Technology Development Center www.sbtdc.org


Women and Venture Capital, see the Diana project. A research program to study women
entrepreneurs and equity finance, www.esbri.se/diana.asp
National Womens Business Council, www.nwbc.gov
Immigrant Women Entrepreneurs, http://www.ailf.org/ipc/ipf011705.asp
New Venture Fund for Native Americans, www.nativeamericancapital.com
Cox Family Enterprise Center http://www.kennesaw.edu/fec/
Entrepreneur Magazines 2005 listing of the top 100 colleges and universities for
entrepreneurship, www.entrepreneur.com/topcolleges
Consortium for Entrepreneurship Education, http://www.entre-ed.org/Standards_Toolkit/
US Association for Small Business and Entrepreneurship
http://www.usasbe.org/
Forum for Women Entrepreneurs
http://www.fwe.org/
ASTIA: Where Women Innovators Succeed www.astia.org, formerly the Womens
Technology Cluster (wtc.org)
Center for Entrepreneurship Education and Development
http://www.ceed.info/
Entrepreneur Magazines 2006 listing of Hot Cities for Entrepreneurs
http://www.entrepreneur.com/listings/vc100/0,5946,,00.html
International and Emerging Markets
Entrepreneurship Initiatives in Iraq, exiled Iraqis are returning to rebuild their country.
There are plans to create venture capital funds to invest in businesses focused on Arab
firms and the Iraq market. www.privateequityonline.com
Entrepreneurship in U.K., UK Department of Trade and Industry-Small Business,
http://www.dti.gov.uk/bbf/small-business/index.html
Global Entrepreneurship Monitor, www.gemconsortium.org
World to Start and Grow a Business, http://www.sbs.gov.uk/content/7strategies/ActionPlan.pdf
Australian Venture Capital Journal http://www.vcjournal.com.au/

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22

Center for International Private Enterprise www.cipe.org


International Entrepreneurship Forum www.essex.ac.uk/conferences/ief/
Hispanic Business Fastest Growing 100 www.hispanicbusiness.com
E-Entrepreneur a new voice for young Arab entrepreneurs
http://www.ameinfo.com/news/E-Entrepreneur/
Irish Enterprise Strategy Group http://www.forfas.ie/esg/
Contact Singapore Website: The Best Place to Set Up Business (Opportunities for
Entrepreneurship): http://www.contactsingapore.org.sg/oppor_forEnt.shtml
Singapore Economic Development Board: http://www.edb.gov.sg
International Entrepreneurship Resources for Entrepreneurs
http://www.internationalentrepreneurship.com/
Global Entrepreneurship Institute, http://www.gcase.org/
Social Entrepreneurship
Describes social entrepreneurship and what this organization does to promote social
entrepreneurship, http://www.ashoka.org/fellows/social_entrepreneur.cfm
This site describes the different facets of social entrepreneurship with links to various
organizations illustrating different perspectives on social entrepreneurship.
http://www.managementhelp.org/soc_entr/soc_entr.htm
25 Best Social Entrepreneurship Organizations according to Monitor Group:
http://www.fastcompany.com/social/
Social Venture Partners, www.svpseattle.org
Springboard Forward (social entrepreneur in Mountain View)
www.springboardforward.org
Stanford Center for Social Innovation http://www.gsb.stanford.edu/csi/
The Institute for Social Entrepreneurs http://www.socialent.org./
Social Venture Network http://www.svn.org/
Community Development Venture Capital Association www.cdvca.org

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23

Business for Social Responsibility, www.bsr.org


The national foundation for teaching youth to build businesses, http://www.nfte.com/
Schwab Foundation for Social Entrepreneurship
http://www.schwabfound.org/
Research Initiative on Social Entrepreneurs (RISE)
http://www.riseproject.org/
Skoll World Forum on Social Entrepreneurship
http://www.skollfoundation.org/skollcentre/skoll_forum.asp
Social Edge
http://www.socialedge.org/
Social Enterprise Alliance
http://www.se-alliance.org/
Social Entrepreneurship, http://www.pbs.org/opb/thenewheroes/
The 2008 Social Capitalist Awards: http://www.fastcompany.com/social/2008/
Columbia Research Initiative on Social Entrepreneurship
http://www.riseproject.org/index.html
Center for the Advancement of Social Entrepreneurs (Fuqua)
http://www.fuqua.duke.edu/centers/case/
ChangeMakers : Open source social solutions http://www.changemakers.net/

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