A CONCEPTUAL MODEL
5. CONCLUSIONS
important activities as well as an order in which the entrepreneur engages in the activities (Delmar & Shane, 2002). In addition, financial capital of the founder will be incorporated into the model as an influence factor. A well- founded financial base of a venture helps to protect it against random shocks and increase the scope of the entrepreneur’s actions (Cooper et al., 1994). In transition economies, lack of financial capital is one of the largest obstacles to small and medium-sized enterprises. In particular, it prevents the venture’s growth and modernization (Dallago, 2003). Financial capital will affect new venture performance and activities (e.g., creating a strategy).
The level of financial capital will be dependent upon entrepreneurs’ cultural and social capital (Bourdieu, 1986). For example, individuals with a high level of education are expected to gain higher wages than their less-educated counterparts (Becker, 1993). Therefore, we can assume that well-educated founders possess higher savings than less-educated ones. Likewise, entre- preneurs who have a large social network can increase their initial financial capital by the use of informal contacts, e.g., by getting private loans from friends. Further, entrepreneurs who have a high level of cultural capital, e.g., more industry experience, may possess large networks of contacts that can be valuable in the process of new venture creation and development (Jing, Pek-hooi, & Poh-kam, 2003).
Finally, in order to reflect an unstable and uncertain nature of the environment in transition economies, it is reasonable to incorporate the entrepreneur’s perception of the local business climate and the opportunities it provides into the model (Mueller & Goic, 2002). Environment will affect cultural capital of the entrepreneur, activities, and performance. We propose to examine the founder’s perception of economic infrastructure for entre- preneurship and small and medium-sized enterprises and of economic de- velopment in the region. Likewise, the corrupt practices in a venture industry may determine firm performance and the entrepreneur’s behavior and habits.
scarcity of resources, surviving the first year of operation is a main challenge to new ventures. A question that arises is what factors contribute to early survival and growth of new ventures in a transition context.
We have argued that the survival and growth of a new venture are de- pendent on the country’s stage of economic development and its cultural factors. However, the existing models of new venture performance usually do not consider the different situations of founders who open ventures in economies with still scarce resources and a short tradition of entrepreneur- ship. In addition, research on new venture survival and growth in emerging market economies is under-represented. We have proposed a longitudinal model of early venture performance in a transition economy. An essential role in the entrepreneurial process in post-communist countries is played by the entrepreneur who creates a venture under conditions of high uncer- tainty and in an unfavorable economic environment. We have argued the necessity of incorporating transition-related variables, especially social and cultural capital of the entrepreneur, into the model.
Cultural capital of entrepreneurs in transition economies is affected by the individuals’ investments in education, competences and skills, and their habits developed both under communism and in the emerging market economies. We have argued that entrepreneur’s investments in business education done under communism, work experience in state-owned enter- prises, and individual’s habits developed in the former socio-economic system, e.g., the production-first mentality, may have a negative impact on new venture performance in an emerging market economy. By contrast, previous work experience of the founder gained abroad as well as in Western enterprises acting on the markets in transition countries may have a positive influence on new venture performance.
Social capital of entrepreneurs in post-communist countries plays a very important role for new venture creation and performance. Its relevance results from the instability of the new socio-economic system, resource scar- city, and the considerable continuity of social contacts from the communist epoch. We have argued that in an unstable, non-transparent, and weak in- stitutionalized environment, strong ties may influence new venture perform- ance more strongly than weak ties. Because government and state-owned enterprises are still the key power brokers in transition economies, prior management experience of entrepreneurs in these institutions may affect new venture performance positively. Likewise, entrepreneurs’ close ties to these key organizations may have a positive impact on new venture performance.
By virtue of the high rate of failure in transition economies, it is required to improve the understanding of causal mechanisms between the founder’s
cultural and social capital and early firm performance. We have included founding and emerging activities into the model in order to better under- stand the role of the entrepreneur in acquiring resources and organizing the venture. Furthermore, we recommend examining the early performance of a new venture close to the business opening, and the subsequent firm per- formance – by the end of the first year after the business’ opening. The longitudinal model makes it possible to accompany the founder from the start-up moment and to find out what factors contribute to the new venture survival and growth, and what factors cause the failure of a new venture in transition economies.
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