Vice president wannabes not likely to be found inside start-ups
By Staff -- Manufacturing Business Technology, 11/1/2005 12:00:00 AM
The drive for success is a bedrock attribute for entrepreneurial zeal. But what's less obvious, until recently, is the principle that "organizations matter."
"There are a lot of theories about entrepreneurs that focus on market factors—or at the micro level, the special abilities of the individual," says Stanislav Dobrev, associate professor of strategy and organization at the University of Chicago Graduate School of Business. "All of this is true, but it tends to overlook the fact that it's not just money in the market or psychological profile that matters, but the immediate social contacts as well."
This and other findings were part of a research project Dobrev conducted in conjunction with Professor William Barnett of Stanford University.
The responses of nearly 6,000 MBAs (of 12,000 polled) were used by Dobrev and Barnett to develop a model that examines the roles of individuals working within organizations so as to predict who is most likely to leave and form a new venture. The model revealed that founders were more likely to leave enterprises to launch another start-up early in the maturing cycle of the first organization, before "rational bureaucracies" were fully in place.
Start-ups are characterized by charismatic leadership, whereas established companies rely on rational policies and procedures.
"Nobody goes to work for a start-up because they want to be a vice president," asserts Dobrev. "People are attracted to start-ups because of the environment."
In the process of building up one company, founders make important contacts with investors, regulators, customers, and other businesses that expose them to new opportunities. As investors and analysts become more demanding of quarterly results and management guided by established policies and procedures, founders leave because these are not the factors that motivate them. They depart seeking to work the same entrepreneurial magic again.
The savings chase
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