AMAR BHIDE

January 15, 1999

THE ORIGIN AND EVOLUTION OF NEW BUSINESSES THE OXFORD
UNIVERSITY PRESS (expected pub. Date: Nov. 1999)
Table of Contents
Acknowledgements
Preface

1.Introduction

Part 1: The Nature of Promising Startups.

2. Endowments and opportunities.
3. Planning versus Opportunistic Adaptation.
4. Securing Resources
5. Distinctive Qualities
6. Corporative Initiatives
7. VC backed Start- Ups
8 Revolutionary Ventures
Part 1: Summary and Generalization

Part 2: The evolution of Fledgling Businesses.

9. Missing Attributes
10. Existing Theories and Models
11. Critical Tasks
12. Exceptional qualities

Part 3: Societal Implications

13. Reexamining Schumpeter.
14. Facilitating conditions
15. Taking Stock
Appendices and References.

Acknowledgements
I cannot exaggerate, or even accurately describe, Howard Stevensons
contribution. Howard has had such a profound influence on my world view that a
great many of the ideas expressed in this book very likely derive from my
subconscious restatement of Howards wisdom. He has also been an
extraordinary mentor, who has unstintingly given me his time, loyalty and
support.
David Chaffetz, made copious notes in the course of many airplane journeys.
Besides providing insightful suggestions about the ideas and arguments, David
served as de facto editor and writing coach. Discussions with Srikant Datar
helped me formulate the investment- uncertainty- profit framework I used in
part 1. Iain Cockburn, Pankaj Ghemawat, Myra Hart, Josh Lerner, Mike Roberts,
Steve Kaplan and Hank Reiling read several drafts, identified my sins of
omission and commission, helped clean up the language and logic, and
provided data and references. Bill Sahlmas comments helped me think about
the overall message and positioning of this book. Bruce Scotts suggestions and
encouraging words about my rough early drafts kept me going forward.

Several colleagues at Harvard Business School (HBS) also gave generously of

their time and expertise, notably Chris Argyris, Joe Badaracco, Carliss Baldwin,
Joe Biotti, James Heskett, Linda Hill, Herminia Ibarra, Robert Kaplan, David
Kotchen, Walter Kuemmerle, Warren McFarlan, Richard Tedlow and Karen
Wruck. Lunches e-mail and snail mail correspondence whit Olivier Blanchard,
Glenn Hubbard, Andrei Sheifer, Jeremy Stein and Robert Shiller served as
valuable quality control mechanisms.
Sid balachandra, john Deihton, Ashish Nada, V.G. Narayanan, Gus Stuart and
George Wu spent many hours answering various against their pratical business
experience and knowledge

Deaver Brown, John Case, Paul De Rosa, Paul Eckbo, Richard Floor, George
Gendro, Alan Kennedy, Roger Kline, Marcia Radosevich, David Roux, and
Susan Webber provided a reality check by comparing my observations against
their practical business experience and knowledge.
Research associate Kevin Hinton helped organize and conduct most of the
interviews with entrepreneurs than this book draws on. Laura Pochop helped
complete the interviews and analysis of the data. Chalene Niles of inc. magazine
and Joanne guanine of McKinsey& co. provided informacion from their
database. Julie Yao Took charge in the final months of this project and made its
completion intro a breeze. Students from my MBA classes wrote over two
hundred paper that I have drawn on and helped test and refine my ideas about
entrepreneurs. Ken Macleod of the Oxford University Press has been very
responsive and a pleasure to work with. Rebeca Kohn edited the manuscript
with a light and thoughtful hand. Robert brown typed large portions of the
manuscript and kept my professional life in order.
Former HBS dean, John McArthur has been an enthusiastic supporter; his
successor Kim Clark and my research director Teresa Amabile, arranged for the
resoureces needed to see this work through completion.
As ever, my sister Gauri provided rock- like support and many excellent meals.
Ashley Wodtkes company and understanding helped me get started and saw
through much of the firsh iteration. Her mother, Carol Cross Wodtke,
volunteered her her artistic talents for the illustration. My daughter Lila provided
a delightful Saturday distraction, as she grew from a toddler to a self-possessed
pre-k lady. My mothers affection and example kept me going through a difficult
period. She passed, alas, just ten days after I had turned in the final.

To all of you, my heartfelt thanks. Your help has gone far beyond the call of
professional obligation and friendship. I hope I can it up to you someday.

PREFACE
This effort to demystify and organize our thinking about entrepreurs through
systematic research has practical roots. I undertook the research that has led to
this book in order to address a problem in business education. Courses in
entrepreneurship have gained great popularity, as increasing numbers of
students wants to start and build their own businesses. In 1979, the year I
graduated from the MBA program at Harvard Business School, a solitary course
in strating new venture attracted fewer than 100 students. In 1996, nine courses
filled over 1400 student seats. Similarly, Stanfords business school reports that
over 90 percent of its MBA students now elect at least one course in
entrepreneurship. We still lack. However, a solid base of ideas for such courses.
Over the last half-century, business school have devoted considerable
resources to studying the entrepreneurial activities of large companies- how
merck develops new drungs and Intel new microprocessors, how Disney
produces and markets the Jungle Book and McDonalds introduce Big Mac in
China. Little effort has been devoted to systematic research about atarting and
growing new businesses.
Researchers have focused on the initiatives of large corporations for several. As
business school and research in the United States came of age in the 1950s,
and 1960s, largo corporations dominated the economic landscape. According to
the historian Alfred Chandler, a new form of capitalism the large managerial
business enterprise appeared in the last half of the nineteenth century. This
new from, which was controlled by a hierarchy of salaried executives rather than
the owners, dominated the core industries in the United States by the end of
world war I and by the 1960s, it became ubiquitous. In 1967 Galbraith observed
that the five hundred largest corporations produced nearly half the goods and
services annually available in the United States. Galbraith wrote: seventy years
ago the corporation was still confined to those industries railroading, steam
boating, steel making, petroleum recovery and refining, some mining- where, it
seemed, production had to be on a large scale.
Now it also sells groceries, mills grain, publishes newspapers, and provides
public entertainment, all activities that were once the province of the proprietor
or the insignificant firm.
Large corporations represented as dynamic an economic force as the individual
entrepreneurs who had initially founded them. The economist Josef Schumpeter
had regarded the rise of the large corporations as inevitable and forecast that
such a development would doom capitalism by stifling the innovative energy of
the individual entrepreneur. The perfectly bureaucratized giant industrial unit,
Schumpeter wrote, not only ousts the small- or medium sized firm and
expropriates its owners, but in the end it also ousts the entrepreneur and
expropriates the bourgeoisie as a class which in the process stands to lose not
only its inco me but also what is infinitely more important, its function.
Schumpeters contemporary, the economist Frank Knight, also believed that
manager who did not own significant share of the enterprise would be much
more conservative and risk-averse that the founding entrepreneurs.
Pagina 3 o [5]