Movements, bandwagons, and clones: Industry evolution and the entrepreneurial process

Entrepreneurship research has paid insufficient attention to the context in which new businesses are started Consequently, efforts to identify factors that consistently lead to entrepreneurial success have failed. This is because what works in one context will not necessarily work in another Even worse, factors that lend to success in one context may lend to failure in another. This article addresses this problem by drawing from the concept of industry evolution to identify three broad but distinct organizing contexts-emerging, growth, and mature industries-and demonstrating how each context presents a different set of entrepreneurial challenges. An industry is defined not as a group of firms producing close substitutes, brit instead as a group of firms of the same organizational form. Industry evolution is understood therefore as the diffusion of an organizational form, with emerging, growth, and mature stages corresponding to the creation, exploitation and erosion of competitive advantage. Defining an industry in this manner makes it possible to overcome the problem of shifting industry boundaries and enables us to distinguish between entrepreneurial activities that shake rep existing industries by creating new and competing organizational forms and entrepreneurial activities that replicate well-known organizational forms and drive an industry toward equilibrium. It also enables us to draw from the work of industrial organization economics, strategy, and population ecology. Entrepreneurship is defined as the creation of new organizations and is view,ed as a context-dependent social process. New organizations are enacted as critical stakeholders change their behaviors in ways that allow the organization to emerge. The process is successful when the short-term existence of a new organization is no longer at risk. A typological theory of entrepreneurial success is developed by examining how the fit between context and four other critical dimensions cause successful foundings. The theory is multiplicative and probabilistic. It is multiplicative in that all dimensions need to fit for a founding to be successful. Poor fit in any one area can lend to failure. It is probabilistic in that the better the overall fit the better the odds of success. In addition to context, the dimensions we examine are entrepreneurial networks, entrepreneurial confidence-building behaviors, the motivation of stakeholders, and organizational structures and strategies. In terms of entrepreneurial networks, we examine whether entrepreneurs have weak-tie or strong-tie networks, and whether their networks are homogeneous or include subgroups that are unrelated In terms of confidence-building behaviors, we explore the rise of informal (e.g., repeated personal interaction) versus formal (e.g., contracts) mechanisms. With respect to stakeholder motivations, we ask whether stakeholders are driven by social or instrumental motivations. In terms of structure and strategy, we consider two issues. First, we explore whether the emerging organization is market or hierarchy based and we consider the extent to which the organization is innovative versus imitative. We argue that these various dimensions come together in three logical configurations, that we label movements, bandwagons, and clones.