The Origin and Evolution of New Businesses [Hardcover]

Amar V. Bhidï¿1/2 (Author)

Book Description

ISBN-10: 0195131444 | ISBN-13: 978-0195131444 | Publication Date: January 1, 2000

What is this mysterious activity we call entrepreneurship? Does success require special traits and skills or just luck? Can large companies follow their example? What role does venture capital play?
In a field dominated by anecdote and folklore, this landmark study integrates more than ten years of intensive research and modern theories of business and economics. The result is a comprehensive framework for understanding entrepreneurship that provides new and penetrating insights. Examining hundreds of successful ventures, the author finds that the typical business has humble, improvised origins. Well-planned start-ups, backed by substantial venture capital, are exceptional. Entrepreneurs like Bill Gates and Sam Walton initially pursue small, uncertain opportunities, without much capital, market research, or breakthrough technologies. Coping with ambiguity and surprises, face-to-face selling, and making do with second-tier employees is more important than foresight, deal-making, or recruiting top-notch teams.
Transforming improvised start-ups into noteworthy enterprises requires a radical shift, from "opportunistic adaptation" in niche markets to the pursuit of ambitious strategies. This requires traits such as ambition and risk-taking that are initially unimportant. Mature corporations have to pursue entrepreneurial activity in a much more disciplined way. Companies like Intel and Merck focus their resources on large-scale initiatives that scrappy entrepreneurs cannot undertake. Their success requires carefully chosen bets, meticulous planning, and the smooth coordination of many employees rather than the talents of a driven few.
This clearly and concisely written book is essential for anyone who wants to start a business, for the entrepreneur or executive who wants to grow a company, and for the scholar who wants to understand this crucial economic activity.

Editorial Reviews

From Library Journal

The entrepreneurial function has long been overlooked both by economists and business theorists, though courses in entrepreneurship are increasingly popular in business schools. Bhid? (Harvard Business Sch.) draws on both of those disciplines for theory, which he then extends through the analysis of data from 100 interviews with leaders of high-growth companies. This groundbreaking work shows the complementary roles held by innovative startup companies in areas with high uncertainty and little financial investment and by more established companies, which focus on large-scale projects with more certain payoffs. The characteristics of promising startups and their founders are carefully outlined and contrasted with those of more established firms, and Bhid? explains why so few firms make the transition from successful startup to ongoing large enterprise. Offering a wealth of avenues for future research as well as insights for potential entrepreneurs, this book is sure to be cited for years to come.
-A.J. Sobczak, Covina, CA
Copyright 1999 Reed Business Information, Inc.

From Booklist

Bhidecautions the reader that this is not a how-to book on the popular subject of entrepreneurship; rather, it looks at entrepreneurs mainly from an economic point of view. His work represents systematic research about starting and growing a new business, and Bhidecontends this approach is unique in the field. The book examines the nature of the opportunities that entrepreneurs pursue, problems and tasks they face, traits and skills they require, and the social and economic contributions they make; and then compares those realities with features of large, established companies. Entrepreneurs pursue opportunities with different levels of uncertainty, investment requirements, and likely profit. They survive and prosper because of an ongoing ability to adapt to opportunities and problems, are subjected to many detours, and stumble often along the way. This theory book will find a welcome reception in business schools that are focusing on courses in entrepreneurship and may also appeal to corporate executives who are trying to instill an entrepreneurial spirit in their employees. Mary Whaley

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Product Details

• Hardcover: 432 pages
• Publisher: Oxford University Press, USA (January 1, 2000)
• Language: English
• ISBN-10: 0195131444
• ISBN-13: 978-0195131444
• Product Dimensions: 9.1 x 6.1 x 1.4 inches
• Shipping Weight: 15.2 ounces (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (15 customer reviews)
• Amazon Best Sellers Rank: #732,861 in Books (See Top 100 in Books)

More About the Author

Amar Bhidé, Schmidheiny Professor at the Fletcher School, has served as Glaubinger Professor of Business at Columbia University, a consultant at McKinsey & Company and a proprietary trader at E.F. Hutton. Bhidé is a founding member of the Center on Capitalism and Society, editor of Capitalism and Society, and has written about the financial crisis in the Wall Street Journal, Business Week, and Forbes.

Customer Reviews

Most Helpful Customer Reviews

66 of 67 people found the following review helpful:

5.0 out of 5 stars important step forward, January 6, 2000

By 

Arnold Kling (Silver Spring, Md USA) - See all my reviews
(REAL NAME)   

This review is from: The Origin and Evolution of New Businesses (Hardcover)

There are two books here. The first book, on the origin of new businesses, is a tour de force. The second book, on the evolution of businesses from fledgling businesses to large enterprises, is not as satisfying. I will confine my review to the first book.

The author gives us a new perspective on new business formation. He discusses five types:

1. marginal businesses. These are hair salons, lawn care services, and other businesses that are simple and small-scale.

2. promising businesses. These businesses also start out at a small scale, but they are much more complicated because they are launched in turbulent markets with high levels of uncertainty. You are going into a market before most people even realize that there is such a market.

3. VC funded firms. These firms require more capital and a more solid business plan than promising new businesses.

4. Revolutionary ventures. These are VC funded firms on steroids (the venture funding may have to come from large enterprises), who take large risks while aiming for large profits.

5. Large enterprise innovation. Here, established companies launch new projects, which require large investments but have a high probability of success (think of Intel maintaining its lead in microprocessors).

This is an excellent theoretical scaffolding, to which Bhide is able to attach many interesting insights. Some are statistical. For example, in a large sample of successful small businesses, only 12 percent thought that the originality of their idea was what produced success. The rest attributed their success to "exceptional execution of an ordinary idea." p.32

Other insights are anecdotal, such as the descriptions of how companies adapted to customer demands.

If I were the type who used a highlighter to mark interesting passages, my copy of the book would be mostly yellow.

With its solid theory, statistical support, and anecdotal color, this book sets a new standard for books about entrepeneurship. No professor of business can afford to ignore this work.

General readers may find some faults with this book. If an academic tone puts you off, too bad for you. Go read "Seven Habits in Search of Chicken Soup" or something.

Another shortcoming is that the Internet receives no real mention. Email me for references to some essays on Internet entrepreneurship that I think are fairly consistent with the thrust of this book.

Overall, I give the book my strongest favorable recommendation.

45 of 51 people found the following review helpful:

3.0 out of 5 stars Rich examples, interesting ideas, but inappropriate data, January 14, 2001

By 

Howard Aldrich (Chapel Hill, NC USA) - See all my reviews

This review is from: The Origin and Evolution of New Businesses (Hardcover)

Amar Bhide has written a richly illustrated book about new and growing firms, drawing eclectically on many social science disciplines. Although he makes frequent references to economics, he often invokes explanatory factors from cognitive psychology and organization theory. His resulting model thus has a strong ring of behavioral plausibility. Unfortunately, he draws on a database that is simply inappropriate for answering his central question: why do a small fraction of startups turn into promising firms, whereas the great majority do not?

Bhide committed a fundamental methodological error: he selected only successful firms and then tried to infer what differentiated them from the (non-selected) unsuccessful ones. He surveyed 100 founders of companies that appeared on the Inc. 500 list in 1989 and drew upon on several hundred case studies by his students at Harvard, plus cases of successful firms drawn from business periodicals and his own research. Although he shows some awareness of the methodological problem thus created, he nonetheless injudiciously draws strong inferences from empirical regularities among the successful firms.

Why is such selection bias problematic? Consider a hypothetical study, showing that 20 percent of the successful firms in the financial services industry were currently run by Harvard MBAs, compared to only 10 percent by Stanford MBAs. Would we be entitled to conclude Harvard MBAs were twice as successful as those from Stanford? What if we learned that Harvard MBAs started 80 percent of the firms in the financial services industry, compared to only 1 percent for Stanford? And, that most of the firms started by Harvard MBAs had failed? Now we see that Stanford MBAs are highly over-represented among the successful firms, compared to the initial population of startups, and that Harvard MBAs are substantially under-represented. Without information on the initial cohorts of firms starting out in an industry, we are in great danger of engaging in superstitious learning of the kind that Bhide actually reviews in his book (research conducted by Camerer, Kahneman, Tversky, and others).

By relying on information from firms that made it onto the Inc. 500 list or into the cases written up by his students, as well as on case histories of FedEx, Walmart, Microsoft, and other successful firms, Bhide cannot tell us why or how those firms got there. Only a research design that allowed him to follow startups and growing firms over time would give him the dynamic data he needs to answer the questions posed by his extremely interesting model.

4 of 4 people found the following review helpful:

4.0 out of 5 stars Insightful!, June 20, 2001

By 

Rolf Dobelli "getAbstract" (Switzerland) - See all my reviews
(HALL OF FAME REVIEWER)    (TOP 500 REVIEWER)    (REAL NAME)   

This review is from: The Origin and Evolution of New Businesses (Hardcover)

The Origin and Evolution of New Businesses When Jann Wenner launched Rolling Stone magazine, he did no market research and considered himself merely an "amateur journalist." When Bill Gates and Paul Allen started Microsoft, they had no business plan, only a brainstorm that they should write a program in the BASIC computer language. Such seat-of-the pants planning is typical among entrepreneurs, says author Amar Bhide. Successful entrepreneurs don't need unique ideas and long resumes, Bhide writes. Rather, they must be able to adapt quickly to changing business conditions, and they must enter industries in a state of upheaval, where established players are lacking. Bhide offers a revealing look at the characteristics that make for successful start-ups. In spite of his often-dense prose, Bhide gives plenty of real-world examples to illustrate his concepts. We [...] recommend this book to entrepreneurs and to those thinking of starting their own companies.