Forschungsbericht der Otto-Friedrich-Universität Bamberg 2004

Entrepreneurial team cognitions in high-tech start-ups

Projektleitung:

Prof. Dr. Dodo zu Kny-

phausen-Aufseß

Beteiligte:

Dipl-Kffr. (Europa-Studi-

engang) Mirjam Walter

Stichwörter:

High-tech start-ups; Team 

cognitions

Beginn: 1.10.2003

Kontakt:

Dipl-Kffr. (Europa-Studi-

engang) Mirjam Walter

Tel.: [phone], 

Fax: [phone], E-

Mail: mirjam.walter@exist

-hightepp.de

Principal Topic

Strategy failures of young high technology start ups constantly at-

tract the attention of the public press. Unsuccessful attempts to re-

ceive financial resources or ineffective negotiations with potential

merger and acquisition candidates rank top among the news. Alt-

hough similar failures constantly occur in existing companies, they

are of matchless major importance in new ventures. The problem

that young ventures have less slack resources to balance particular

failures, which accordingly may endanger the very existence of the

venture, is not new. Stinchcombe (1965) attributed the failure of

young ventures to their "liabilities of newness". Yet despite the

increase in knowledge on failure reasons, the problem of high failure

rates has not changed since. For example, in their 2003 German

biotechnology report Ernst & Young comment on the failure of 7%

of the German biotech ventures. The majority of these companies

was not able to complete a second financing round. Considering this

data, the suspicion arises that there might exist a "logic of failure"

concerning management failures as well as a linkage to company

failure among young high technology ventures. Before something

can be said about the general nature and stability of the proposed

relationship between management and company failure, more

micro-level knowledge on the questions of how and when is required

with regard to management failure.

Research context

Practitioners and researchers alike consider the individual and/or

the top management team, who form and manage the venture, to

be critical to its success (e.g. Sandberg & Hofer, 1987; Shane &

Venkataraman, 2000; Riquelme & Watson, 2002; Mitchell et al.,

2002). As Meyer, Zhacharakis & De Castro (1993) found out, entre-

preneurs themselves typically ascribe the failure of their new ven-

ture to internal, i.e. management related, factors. Yet, if one turns

to the classic economic, personality psychological, or strategic at-

tempts to explain the failures of top management teams of high

technology start ups with regard to the above mentioned problems

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Seite 767

(e.g. attraction of financial resources), the results are disappointing

(Mitchell et al., 2002). Some insights stem from psychological

cognition research which has identified both positive and problema-

tic consequences of individual cognitions that account for a "logic of

failure" in complex problem solving (Dörner, 1989). Recently, a gro-

wing stream in the entrepreneurship field of research draws on such

findings from social cognition, managerial cognition, and informati-

on processing theory. Instead of personal traits, the focus is on the

cognitions and actual behavior of the individual entrepreneur. While

the entrepreneurial environment is characterized by complexity, in-

formation overload, high uncertainty, dynamism, strong emotions,

and time pressure, problematic consequences of entrepreneurial

cognitions arise. These include overconfidence, planning fallacy, self

justification etc. (for an overview see Mitchell et al., 2002). Up to

now, the results have been promising and helpful to better under-

stand how individual entrepreneurs think and why they act the way

they do. Still, little is known about cognitions in a entrepreneurial

team setting. According to Kamm et al. (1990), start-ups in high

technology sectors are often managed by teams rather than by in-

dividual entrepreneurs. Therefore, a number of important questions

need to be addressed. For example: What are the cognitive charac-

teristics of top management team members? How are they reflected

in their managerial behavior and actions? In which ways are these

cognitions determined or influenced by group processes and other

environmental variables? How do they help to explain the (succes-

ses and) failures of joint opportunity pursuit in the entrepreneurial

process?

Method

Due to the relatively low level of knowledge about cognitions in the

context of entrepreneurial top management teams and the comple-

xity of the phenomenon, a qualitative methodology seems most ap-

propriate to address the research questions. Therefore, an in-depth

case study approach is pursued. I aim at a research internship of se-

veral months within a high-technology start-up that should provide

the opportunity to gather relevant data from interviews with top

management team members, participant observations and maybe

even experimental group simulation. Here, I can hopefully rely to

some extent on research procedures established by the team of

Prof. Dörner whom I mentioned earlier. Data collection will start in

fall this year. To date, both qualitative and quantitative methods

seem appropriate to evaluate and interpret the research data. Yet,

beforehand, I have to examine the existing knowledge thoroughly

and develop a methodological and theoretical framework for my

own research.

Implications

This study is important for a number of reasons. With respect to the

research community, the results are expected to extend and enrich

the entrepreneurship literature and add both to entrepreneurial

cognitions research as well as to top management team research.

For practitioners it is important to gain insight about the relationship

between cognitions and action outcomes as shaped by the group

context. Here, the qualitative approach provides an excellent oppor-

tunity for self-reflection which could lead to a greater awareness of

Forschungsbericht der Otto-Friedrich-Universität Bamberg

Seite 768

cognitive factors, improving group action on the long run. The resul-

ts may be of special interest to the field of entrepreneurial education

as it shall provide substantial information about what factors should

be taken into account in the conceptualization of an entrepre-

neurship training program in order to avoid cognitive pitfalls. 

How to handle intrinsic and extrinsic motivation in German Start-Up companies

Projektleitung:

Prof. Dr. Dodo zu Kny-

phausen-Aufseß

Dr. rer. pol. Lars Schwei-

zer

Beginn: 1.5.2000

Growth-orientated Start-Up companies have a clear tendency of in-

troducing direct employees ownership or stock option programs

with the goal of significantly increasing the motivation and the long-

term commitment of their employees. This bears some problems, if

- besides the extrinsic motivation - the intrinsic motivation is consi-

dered as playing also an important role. This may result in a substi-

tution effect: the employees of the company are getting paralysed

by the introduction of these ownership-orientated incentive sy-

stems, because, somehow, they loose the joy of their work, and

from this moment on only aim at making much money as quickly as

possible. Hence, the introduction of such an incentive system, li-

mited to only a small number of executives, may make their co-em-

ployees, who are not participating in this program, jealous. As a

result, the collaboration between these two groups may become

much  more  difficult.  Especially  in  Start-Up  companies,  which  are

rather dominated by an egalitarian culture, this problem may cause

lots of trouble. Following this argumentation, it might be possible

that the mentioned positive correlation between the introduction of

a direct employees ownership or stock option program and the profit

of the company will be weakened or, even worse, will be overcom-

pensated by the negative impact of intrinsic de-motivation.

These reflections may indicate that the introduction of equity-based

incentive systems may be connected with a few puzzles, which are

neither theoretically nor empirically solved. On the basis of some

theoretical considerations concerning the substitution effect and an

empirical capturing of the direct employees ownership and stock op-

tion programs, which have been introduced by the companies listed

on the "Neuen Markt", the German equivalent to the NASDAQ in the

U.S. or the "Nouveau Marché" in France, we hope to make a contri-

bution in order to solve some of these puzzles. In our research we

want to answer the following questions: (1)How do the equity-based

incentive systems at the "Neuen Markt" look like? Of special interest

is of course: how many employees are allowed to participate, and

what is the relationship between the variable and fix part of their in-

comes? (2)Are there significant performance differences between

companies, which limit the participation in such incentive programs

to top-executives and, by this, following the logic of the traditional

economic theory, and those, which (intentionally or unintentionally)

enlarge the number of employees involved, considering the conse-

quences for the intrinsic motivation? (3)Are companies, having in-

troduced the first kind of incentive system, applying means in order

to prevent the substitution of intrinsic by extrinsic motivation? (4)Is

it possible to identify some specific conditions under which the one

or the other kind of incentive system is more promising? 

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Impact of UMTS auctions/ allocations on the market value of bidding (telecom) 

companies

Projektleitung:

Prof. Dr. Dodo zu Kny-

phausen-Aufseß

Beteiligte:

Krys, Christian

Dr. rer. pol. Lars Schwei-

zer

Beginn: 1.5.2000

Kontakt:

Dr. rer. pol. Lars Schwei-

zer

Tel.: [phone], 

Fax: [phone], E-

Mail: lars.schweizer@sowi

.uni-bamberg.de

Observation of the empirical phenomenon:

Recently, many UMTS auctions are taking place or have already ta-

ken place in Europe. The prices for UMTS licenses vary extremely

across the different countries. On the one hand, there are countries

like Germany or UK, where tremendous amounts of money have

been spent, whereas, on the other hand, in countries such as Italy

or Austria UMTS licenses could be acquired very cheaply. Some par-

ticipants in the high-priced auctions (e.g. Mobilcom in Germany)

have already demanded a refund on the prices paid from the secre-

tary of finance. As a consequence of this situation, capital markets

are still unsure whether the investment will result in a positive NPV

or not.

From this observation, we have drawn the following research que-

stions and hypotheses:

•Assuming the existence of efficient capital markets the most crucial

question is: Did the acquisition of UMTS licenses make a positive

contribution to shareholder value? •If not, what then are the moti-

ves leading companies to such a bidding decision? •Of special in-

terest will also be the analysis of the different developments of

market capitalization between high-priced and low-priced auctions.

Research methodology (data used and sources):

In our analysis, we want to evaluate five to six European countries

which have already undertaken an UMTS auction. Our focus will be

on all participating companies which either have acquired a license

or jumped out of the auction game in the respective countries. In

order to get a deeper understanding of the motives leading telecoms

to pay these tremendous UMTS prices, we will consider three high-

priced European telecommunication auctions (such as Germany,

United Kingdom and France) and compare them with three rather

low-priced markets (such as Netherlands, Austria and Italy). The re-

sults of this analysis will then be compared with other mechanisms

of UMTS license allocation which e.g. have been used in Spain.

Overall, we will thus end up in evaluating the development of mar-

ket capitalization of a certain number of telecom companies (which

still have to be specified) before, during and after the UMTS auction

process/ allocation. In addition to that, we will develop a questi-

onnaire analyzing the motives to step into the UMTS market, which

either will be carried out by face-to-face interviews or by sending

them to the heads of strategic planning and/ or business develop-

ment of all telecom companies included in our sample. To collect the

required information, we will draw on a set of databases, such as

e.g. Datastream, newspaper articles and company published data. 

Forschungsbericht der Otto-Friedrich-Universität Bamberg

Seite 770

International Entrepreneurship Research Project

Projektleitung:

Prof. Dr. Dodo zu Kny-

phausen-Aufseß

Beteiligte:

Martin Ihrig, MBS

Stichwörter:

Entrepreneurship

Beginn: 1.9.2003

Kontakt:

Martin Ihrig, MBS

Tel.: [phone], 

Fax: [phone], E-

Mail: martin.ihrig@sowi-

uni.bamberg.de

Every new venture creation process is based on a specific business

idea. The question that arises is how entrepreneurs arrive at these

ideas and how ideas develop or are developed into real opportuni-

ties? More and more researchers deal with the process of opportu-

nity recognition in order to clarify this topic (for example, see

Ardichvili, Cardozo & Ray, 2003). One of the most controversial que-

stions is whether entrepreneurs search, discover or construct op-

portunities. In any case, looking at the venture creation process as

a whole, it is important to analyse the new venture idea and its ori-

gins. This is especially challenging if international factors have to be

considered that influence the opportunity recognition process. So

far however, models of opportunity recognition lack to consider the

international perspective, and that despite more and more innova-

tive new venture ideas incorporate an international dimension right

from the start. Western entrepreneurs and entrepreneurial firms are

looking increasingly for international business opportunities in

emerging markets like China or in the European Union’s new acce-

ding countries. Therefore, many leading international entrepre-

neurship scholars call for further research in this area: Zahra and

George (2002) note that the international entrepreneurship process

is a promising area for future scholarly work. Oviatt and McDougall

(2003) call for the development of a process theory that describes

the dynamic process by which international new ventures form.

These observations underline the need to come up with an appro-

priate model that explains how entrepreneurs arrive at their inter-

national new venture ideas and what factors influence the

international opportunity recognition and realization process. Thus,

the goal of this research project is to design and test such a new mo-

del that takes account of the important international dimension of

many new venture creation processes that we observe nowadays. 

IP-Driven Business Development Strategien in der US Halbleiterindustrie

Projektleitung:

Prof. Dr. Dodo zu Kny-

phausen-Aufseß

Beteiligte:

Karsten Hoppe

Beginn: 1.11.2000

Förderer:

Bundesministerium für Bil-

dung und Forschung

Im letzten Jahrzehnt hat sich der Stellenwert von „Intellectual Pro-

perty" (IP) grundlegend gewandelt. Dies gilt insbesondere für Un-

ternehmen in dynamischen Industrien, welche auf kontinuierlich

neue Innovationen aufbauen müssen. Gerade in diesen Industrien

wird IP in Form von Patenten zunehmend strategisch - und nicht

mehr als eine rein juristische Angelegenheit - betrachtet. Dies hat

zur Folge, daß IP im zunehmenden Maße Business Development

(BD) Strategien bestimmt.

Das Dissertationsprojekt hat zum Ziel, ein Framework für existie-

rende IP-Driven Business Development Strategien aufzubauen. Aus

den durchgeführten Analysen werden darüber hinaus Aussagen

über den Aufbau von Markteintrittsbarrieren durch Incumbents und

die Generierung von Wettbewerbsvorteilen zur Abschreckung von

möglichen neu eintretenden Wettbewerbern/Start-ups gemacht.

Als Untersuchungsobjekt wurde die US Halbleiterindustrie gewählt.

Dieser Entscheidung liegen folgende Gedanken zugrunde: Erstens,

die Halbleiterindustrie ist eine gewachsene Industrie, welche „alte"

etablierte - teilweise sehr dominierende - Unternehmen aufweist

und trotzdem besitzt diese Industrie eine hohe Dynamik, welche

sich durch neue Technologie-/Produktsegmente und Newcomer

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Seite 771

auszeichnet. Somit müssen Incumbents permanent versuchen, sich

in dem sich ständig wandelnden Umfeld neue Wettbewerbsvorteile

zu verschaffen. Als zweiter Grund ist die Technologie-/Patentstruk-

tur anzuführen, welche die Notwendigkeit der Betrachtung von IP-

Driven Business Development Strategien noch unterstreichen. Man

spricht bei der Halbleiterindustrie von einer komplexen Industrie, in

welcher neue Patente von einer Vielzahl anderer Patente mit ver-

schiedenen Eignern abhängen. Da Incumbents große Patentportfo-

lios, mit oft grundlegenden Technologien, besitzen, stellt sich

gerade bei ihnen die Frage des strategischen Einsatzes dieses IPs.

Die amerikanische Halbleiterindustrie wurde somit wegen ihrer Grö-

ße und Unternehmenslandschaft für die Untersuchung ausgewählt.

Das Forschungsprojekt ist in einem industrieökonomischen Zusam-

menhang zu sehen. Primär spielen dabei der Aufbau von Marktein-

tritts- und Mobilitätsbarrieren sowie die Erlangung von Wettbe-

werbsvorteilen mittels IP eine Rolle. Dies führt zu einer vollkommen

neuen Wertung von Patenten in komplexen Industrien.

Die Untersuchung untergliedert sich in eine Datenerhebungs- und

eine Analysephase. Dabei werden drei auf IP-Driven BD Instruments

basierende Gruppen unterschieden: M&A, Lizenzabkommen und

Gerichtsverfahren (Patentverletzungsklagen). In jeder Gruppe wer-

den separat die Kernparameter wie zum Beispiel Teilnehmern, Um-

fang der Aktivität oder Häufigkeit erhoben. Anschließend wird jeder

Block einzeln analysiert, um Rückschlüsse auf den Einsatz und die

Wirkung jedes einzelnen Parameters zu ziehen. Eine abschließende

Aussage zu IP-Driven Business Development Strategien, deren Wir-

kung (Aufbau von Markteintrittsbarrieren) und Zusammenspiel

kann erst durch eine gemeinsame, integrierte Betrachtung der drei

Instrumente erfolgen. 

Making sense’ of the role of regional networks in new-venture creation processes

Projektleitung:

Prof. Dr. Dodo zu Kny-

phausen-Aufseß

Dr. Leona Achtenhagen

Beginn: 1.9.2000

During the 1990s, Germany was hit by the ‘Standortkrise’, the com-

petitiveness crisis, which led to the highest unemployment rates the

country had experienced in 60 years. The arising debate focused on

the relatively low entrepreneurial spirit and demanded that a better

infrastructure should be provided to facilitate starting up new ven-

tures. Start-up companies had complained that their entrepreneuri-

al activities were hindered by tough legal restrictions and policies,

as well as a lack of well-trained people and venture capital. Since

then, the government has started a range of activities to foster ent-

repreneurship. Among these initiatives is that of establishing regio-

nal networks of new technology-based ventures with a supporting

infrastructure, such as the biotechnology region ‘BioRegio Jena’.

While these regional networks are largely successful, a number of

institutional problems commonly seem to occur, especially regar-

ding the use of patents and overlapping jobs between research in-

stitutes and start-up companies. In addition, cultural peculiarities

continue to shape the entrepreneurial setting, which is very diffe-

rent e.g. from the situation in the US.

This research is embedded into the setting of the ‘BioRegio Jena’.

We will conduct an in-depth case study within a biotech research la-

boratory located in this region. We are following a new-venture

creation process by a team of molecular biologists, who aim at com-

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Seite 772

mercialising their research results. By applying an embedded, mul-

tiple level approach, we connect this process to the development of

the regional network and the ‘translation’, or ‘sense-making’ (cf.

Weick, 1995) of this development by the biotech research team.

Thus, a number of flaws of prior research done in this field shall be

overcome, such as lacking context-relatedness, uni-level approa-

ches, and the assumed rationality of actors. For the case study, in-

terviews with the research team as well as with other actors in the

regional network will be conducted over time; in addition, secondary

data on the development of BioRegio is employed.

Our first research results from studying the growing biotech region

around Jena suggest that the applied conservative, ‘slow’ approach

towards entrepreneurship might actually become a success factor

for developing more sustained ventures in the high-growth biotech

industry. Our first findings also indicate that a crucial step in the

venture-creation process seems to be a shift in the interpretation of

the regional network from an ‘infrastructure provider’ without a di-

stinct shape, towards a ‘framing’ unit with its own identity. This shift

seems to be related to the processes of ‘internal’ and ‘external’ ac-

quisition of management knowledge within the venture team. Pre-

viously, the team conducted their research in an ‘ivory tower’-

setting, resulting in a lack of knowledge about the potential mar-

ketability of research results; our case study highlights and analyses

the process from this initial stage to the actual foundation of a start-

up company, which is planned to take place in the near future.

This paper will contribute to the understanding of venture formati-

on, as well as of the functioning and the role of the regional network

for venture-formation processes and the difficulties encountered by

the research team; these findings could be helpful both to potential

entrepreneurs as well as institutional actors. Theoretically, the pa-

per draws mainly on the recent discussion of the intertwined orga-

nising/strategising processes (e.g. Whittington et al., 1999) as well

as the sense-making perspective (e.g. Weick, 1995); following our

belief that the studied processes are taking place ‘beyond rationali-

ty’ and therefore need to be studied by understanding the processes

of interpretation employed by the actors involved in the research

setting.

Weick, Karl (1995): Sensemaking in Organizations, Thousand Oaks/

London: Sage. Whittington, Richard/Pettigrew, Andrew/Melin, Leif/

Ruigrok, Winfried/Van Wijk, Raymond (1999): Organizing/Strategi-

zing, Paper presented to the INNFORM Symposium, BPS Division,

Academy of Management Conference, Chicago, August 1999.