To Patent or Not to Patent?

[We’re pleased to welcome authors Francesco Chirico of Jo¨nko¨ping International Business School and EGADE Business Schoo, Giuseppe Criaco of  Rotterdam School of Management, Massimo Bau`of Jo¨nko¨ping International Business School, Lucia Naldi of Jo¨nko¨ping International Business School, Luis R. Gomez-Mejia of W.P. Carey School of Business, and Josip Kotlar of Politecnico di Milano. They recently published an article in Entrepreneurship Theory and Practice entitled “To patent or not to patent: That is the question. Intellectual property protection in family firms,” which is currently free to read for a limited time. Below, they briefly describe the motivation and impact of their research.]

Patents help firms appropriate greater returns from innovation, leading to superior financial returns. However, patenting also entails significant costs, many of which are non-financial in nature. Family firms are a case in point: in these firms, the financial benefits of patenting may come at the expense of socioemotional losses for the family, such as diverting resources from traditional lines of business, disclosing tacit knowledge, increasing reputational risks, or creating dependence on external sources of finance and specialized human capital. Understanding these trade-offs and disentangling family firms’ decision to patent is the main purpose of this study.

We rely on a novel theoretical perspective – the mixed gamble logic – to conceptualize family firms’ patenting decisions as a trade-off between: (1) benefits in terms of gains in prospective financial wealth and (2) costs in terms of losses in the family’s current SEW. This theory suggests that family firms will not necessarily privilege financial or socioemotional wealth considerations; rather, it points to critical factors that are likely to shape the way family firms frame the value of benefits and costs of patenting.

We test these ideas using data about the patenting behavior of 4,198 small- and medium-sized family firms. First, we find that family firms’ propensity to patent changes depending on the level of family ownership: when family ownership raises beyond a threshold level, then current socioemotional wealth is safe and family firms become more likely to pursue the prospective financial gains attainable through patenting. Second, we also show that family firms’ patenting decisions change depending on the environment, as the trade-offs between financial and socioemotional wealth becomes more stringent when the availability of critical external resources is low.

These results elucidate the role of non-financial considerations in family firms’ strategies for capturing value from innovations and reconcile previous conflicting findings. The study also holds several practical implications for family firm owners and managers: it suggests that, in fact, their propensity to patent might be biased by their over-emphasis on socioemotional considerations. But our study also suggests that family firms can successfully reconcile the inherent trade-off between financial and socioemotional wealth by securing a high level of family control through majority family ownership. Thus, while the prior research has encouraged family firms to open up their innovation processes to facilitate value creation, our study rather encourages family owners to acquire or preserve a stronger controlling position in their respective firms to deploy more effective strategies for capturing value from innovations. This recommendation is likely to apply particularly in industries characterized by low environmental munificence.

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Guiding Entrepreneurs Through the Quagmire of Business Entities – Three Hypothetical Scenarios for Discussion

[We’re pleased to welcome authors Lynn M. Forsythe of California State University, Fresno, Lizhu Y. Davis of California State University, Fresno, and John M. Mueller
St. Edward’s University.They recently published an article in the Entrepreneurship Education and Pedagogy entitled “Guiding Entrepreneurs Through the Quagmire of Business Entities – Three Hypothetical Scenarios for Discussion,” which is currently free to read for a limited time. Below, they recount the motivation for this research.

EEX_72ppiRGB_powerpointWhat motivated you to pursue this research?

We felt there was a lack of teaching resources and materials for faculty who teach entrepreneurship courses when it comes to educating students (future entrepreneurs) about creating a business entity to support their new business idea.  Some faculty may be tempted to over simplify the topic or ignore it completely.  These cases help faculty illustrate the complexity of the decision. These cases are not particularly intended for business law faculty; however, they can definitely use them if they need a variety of tools to convey knowledge about legal entities for nascent companies.

In what ways is your research innovative, and how do you think it will impact the field?

The research is not innovation. Rather it is the method of conveying knowledge that is new and useful for faculty and students.  We intended to create more diverse pedagogical offerings.  Legal topics tend to be taught out of a textbook, and through results of court cases, not from case studies.  The three case scenarios we have written help students better understand the legal entity decision by engaging them in a context they can relate to with their business idea.  The case scenarios are an experiential means of engaging students on a topic that could be considered dry.

What did not make it into your published manuscript that you would like to share with us?

The main portion of the manuscript consists of three case scenarios, which are couched in different industries with different decision points.  We have provided outside of the manuscript, and online with the publisher, supporting materials that simplify the basic differences between various legal entities (sole proprietorship, limited liability partnership, limited liability corporation, C corporation). This information is normally found in textbooks, however, we have simplified it in a PowerPoint slide deck and chart format to easily and quickly enable both faculty and students to reference the additional material.

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Crowdfunding and Museums: A Field Trip Exemplar in the United Kingdom

[Professors Miriam Isabella Cavalcanti Junqueira and Allan Discua Cruz of Lancaster University Management School recently published an article in the Entrepreneurship Education and Pedagogy which is entitled “Crowdfunding and Museums: A Field Trip Exemplar in the United Kingdom.” We are pleased to welcome them as contributors and excited to announce that the case study will be free to access on our site for a limited time. Below they reveal the development and impact of this research.]

This crowdfunding and field trip exemplar grew out of an attempt to integrate intra and extra classroom activities that could accentuate innovative trends in entrepreneurship teaching bridging theory and real-life applications. Additional considerations included galvanizing engagement of an international and multidisciplinary classroom environment. In the past few years, new financial trends and challenges have infiltrated the creative industries. This has prompted organizations to examine new funding models that could promote innovative artistic representations as well as entrepreneurial opportunities to increase visibility and the commercialization of enhanced consumer experiences including new products and services. We chose a local museum in the Northwest region of the United Kingdom to provide a social context for a museum field trip. The purpose of the field trip was to inform students on the challenges these types of organizations face. Additionally, students were asked to help this museum devise a crowdfunding campaign for a specific project that could publicize the museums offerings and heighten its online presence. Reward-based crowdfunding is a popular crowdfunding model used in the creative industries. It is also one of the latest tools in entrepreneurial finance that could help a creative organization to develop innovative projects with the potential to engage stakeholders’ communities, local businesses and government entities. We hope that our learning activity will be an inspiration to new scholars and educators to research the development of educational experiences that can facilitate the understanding of theoretical perspectives coupled with the simulation of ‘real world ‘experiences.

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Entrepreneurs’ Utilization of Political and Family Ties in Emerging Markets

[We’re pleased to welcome authors Dr. Jianhua Ge of the Renmin University of China, Dr. Michael Carney of the Concordia University, and Dr. Franz Kellermanns of the University of North Carolina at Charlotte and WHU. They recently published an article in Entrepreneurship Theory and Practice entitled “Who Fills Institutional Voids? Entrepreneurs’ Utilization of Political and Family Ties in Emerging Markets,” which is currently free to read for a limited time. Below, Dr. Ge speaks about the motivations, innovations, and impact of this research :]

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What motivated you to pursue this research

Acquiring resources is always challenging for private entrepreneurs, particularly when the market channels are absent or poorly developed, which is common in many emerging markets including China. A possible solution suggested by prior studies is to engage in political networking, and entrepreneurs can pursue and utilize political ties to fill those prevalent institutional voids. But, as also suggested by prior research, to cultivate and maintain political ties is highly costly, and the “grabbing hand” of the political actor can also bring risks and harms. As such, entrepreneurs are not always willing and able to develop the political ties. Then how are they overcoming the resource barriers to start and grow their business? Actually, scholars in family business already mention the functional role of kin or family ties, but the empirical studies are rare and the efforts to bridge these two fields of political and family ties are missing. We are thus motivated to investigate the roles of political ties and family ties in filling institutional voids as entrepreneurs try to acquire resources.

In what ways is your research innovative, and how do you think it will impact the field?

While the fields of political networking and family business are disconnected, we draw on insights from political and family embeddedness and argue that both political ties and family ties can help entrepreneurs acquire resources when facing institutional voids. Our study suggests that when family ties are relatively available, entrepreneurs’ intentions to cultivate political ties to fill institutional voids are weaker. This is because family ties can be alternative sources of resources and, compared to potentially costly political ties, family tie has its own advantages. We further show that to effectively utilize these family ties, considering family members’ motivation to use their resources and the family owner’s mobilization capability are both necessary. These findings enrich and deepen our understanding of entrepreneurs’ networking strategies in acquiring resources. They also shed light on the unique value of family ties, which is largely ignored by the mainstream management but definitely should be considered.

What advice would you give to new scholars and incoming researchers in this particular field of study?

In this project, we integrated sociopolitical and cultural perspectives. As scholars extend key topics or processes in entrepreneurship and family firm research, we suggest linking different theoretical perspectives to generate new insights. Accordingly, we encourage scholars with distinct backgrounds further topics in entrepreneurship and family firm research.

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Case In Point: A For-Profit Model for Social Entrepreneurship

Is it possible for social entrepreneurs to improve the lives of others and make a profit? For Sanergy, a startup dedicated to making hygienic sanitation accessible, affordable, and prosperous for those in developing countries, the answer seems to be yes.

The story of this startup— now an entrepreneurship venture seeded by grants from the likes of USAID, MIT, and Berkeley, to name a few—is covered in Sanergy: Using Social Entrepreneurship to Solve Emerging Market Problems, a case study from SAGE Business Cases. Using Sanergy as an example, case author Carole Carlson discusses the fundamentals of social entrepreneurship and how early stage entrepreneur ventures can evaluate expansion and new market opportunities.

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Delving further into these topics, we interviewed Professor Carlson for our inaugural post in the new Case In Point series. Drawn from our business case collection and containing insights from thought leaders in business and management, posts from this series will be published monthly. Read on to see Professor Carlson’s interview and check back next month for a new installment.

Carole Carlson is the MBA Program Director and a Senior Lecturer at the Heller School for Social Policy and Management, Brandeis University.

  1. The case you wrote outlines an early stage, for-profit venture that addresses a real social need in a developing country. In your opinion, what are the top three takeaways for other budding entrepreneurs with a social mindset?

I think that the major takeaway is that it is possible for an entrepreneurial team to use out-of-the-box thinking to innovate and develop new ideas.

A second takeaway is that not all social problems need to be addressed by non-profit organizations.

Finally, at Sanergy, as in so many other places, entrepreneurial startups can be really challenging, and sustained focus and a committed high quality team are essential to success.

 

  1. How does the application of social entrepreneurship in the for-profit world differ from applications in the non-profit world? Have you seen a growth in for-profit social entrepreneurial ventures?

There are a number of differences, but perhaps the most important one is that for-profits and nonprofits usually access very different funding.  In short, they play in different capital markets.  And the best organizational approach typically depends on the organization’s business model and scaling ambitions.

  1. How does social impact measurement factor into social entrepreneurship?

In my view, measurement is essential.  Social entrepreneurs, whether working with for-profit or nonprofit organizations, are accountable to their stakeholders – and this requires transparent measurement of their results.  That said, fast-moving entrepreneurs also need to be pragmatic.  It would not make sense for a social venture, for example, to spend half of its resources measuring results.  The entrepreneurs need to focus on the most important indicators.

  1. How pervasive is the teaching of social entrepreneurship across your campus? What level of interest do you see from students?

We see a real groundswell of interest.  For example, this past semester we hosted the Heller Startup Challenge, which focused exclusively on mission-driven startups, and a regional competition for the Hult Prize.  Both graduate and undergraduate students are drawn to concepts where they can grow as entrepreneurs while making a difference in society.  The Heller MBA at Brandeis focuses squarely on students that want to explore their interest in social justice while receiving a rigorous business education.

Learn more by reading the full case study, Sanergy: Using Social Entrepreneurship to Solve Emerging Market Problems, from SAGE Business Cases, open to the public for a limited time. To learn more about SAGE Business Cases and to find out how to submit a case to the collection, please contact Rachel Taliaferro, Associate Editor: rachel.taliaferro@sagepub.com.

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Follow the leader?

entrepreneur-593358__340.jpgWe’ve all heard about them – huge successes and failures that undoubtedly color impressions of entrepreneurial risk and those involved. How do significant events change the subsequent threshold for organizations seeking to become market entries? Who fares better in this type of environment – consensus or non-consensus entrepreneurs?   In a recent article in Administrative Science Quarterly authors Elizabeth G. Pontikes and William P. Barnett look at this less-heralded area of entrepreneurship in “The Non-consensus Entrepreneur: Organizational Responses to Vital Events.”

The abstract for the article:

Salient successes and failures, such as spectacular venture capital investments or agonizing bankruptcies, affect collective beliefs about the viability of particular markets. Using data on software start-ups from 1990 to 2002, we show that collective sense-making in the wake of such vital events can result in consensus behavior among entrepreneurs. Market search is a critical part of the entrepreneurial process, as entrepreneurs frequently enter new markets to find high-growth areas. When spectacular financings result in a collective overstatement of the attractiveness of a market, a consensus emerges that the market is resource-rich, and the path is cleared for many entries, including those that do not have a clear fit. When notorious failures render a market unpopular, only the most viable entrants will overcome exaggerated skepticism and enter, taking the non-consensus route. Venture capitalists likewise exhibit herding behavior, following other VCs into hot markets. We theorize that vital events effectively change the selection threshold for market entries, which changes the average viability of new entrants. We find that consensus entrants are less viable, while non-consensus entrants are more likely to prosper. Non-consensus entrepreneurs who buck the trends are most likely to stay in the market, receive funding, and ultimately go public.

You can read “The Non-consensus Entrepreneur: Organizational Responses to Vital Events” from Administrative Science Quarterly free for the next Current Issue Covertwo weeks by clicking here.

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Listen to the radio interview with author Elizabeth Pontikes on WGN‘s “The Opening Bell” here.

Book Review: Beyond the Beat: Musicians Building Community in Nashville

Daniel B. Cornfield : Beyond the Beat: Musicians Building Community in Nashville.Princeton, NJ: Princeton University Press, 2015. 218 pp. $35.00, hardcover.

Amir Goldberg of Stanford Graduate School of Business recently published a book review in Administrative Science Quarterly. From the book review:

Drawing on rich interviews with 75 music professionals in Nashville, Cornfield develops both a typology of artist activism and a theory of its genesis. He distinguishes among three types of artist activists: “enterprising artists” produce their own and others’ music and mentor early-career artists; “artistic social entrepreneurs” create social spaces, such as schools and performance venues, that promote professional development; and “artist advocates” reshape unions to meet the needs of independent musicians. The majority of the book—four out of seven chapters—is dedicated to deep introductions of 16 individuals who exemplify these types. From Tina, a Nashville native in her late teens who is dedicated to her Asian–European multiethnic identity and her musical authenticity, to Rick, a union activist who has lived in Nashville since the 1950s, we learn about these music professionals’ artistic visions, audience orientations, and beliefs about risk.

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These individual perceptions, contends Cornfield, explain the emergence of artist activism but have thus far been largely neglected by a literature overly focused on structural and institutional factors. Members of the artist community who conceive of success as artistic freedom and who think of their peers as their audiences, he argues, are most likely to become artist activists. How they understand risk—whether as attributable to the individual, a product of interpersonal relationships, or a property of the market—determines what type of activists they will become.

This typology and theory of artistic activism is both elegant and useful. It provides the analytical clarity necessary to disentangle what would otherwise seem like an organic hodgepodge of loosely interdependent musical professionals into its constituent components, and it points to the necessary conditions for the emergence of artist activism. As Cornfield concludes, cities dense with music producers and consumers are more susceptible to activism-oriented artists coalescing into a community of the kind that emerged in Nashville. I wonder, however, where the individual orientations that catalyze artistic activism come from and whether they precede activism, as Cornfield suggests, or cohere retroactively as narratives that activists tell themselves about their experiences. If the latter, then other factors are necessary to piece together the puzzle of Nashville’s musical community.

You can read the full book review published in Administrative Science Quarterly free for the next two weeks by clicking here. Want to keep current on all of the latest research published by Administrative Science QuarterlyClick here to sign up for e-alerts! You can also follow the journal on Twitter–click here to read recent tweets from Administrative Science Quarterly!

You can also read additional blog content for Administrative Science Quarterly content from the ASQ Blog, as well as Editor Henrich Greve’s blog, Organizational Musings.