7b

Introduction

  • Digital entrepreneurship is a crucial form of entrepreneurship.
  • Many digital start-ups fail to scale despite their growth potential.
  • Growth for start-ups differs from established firms due to limited financial performance.
  • Traditional metrics (customers, revenue, profits) are not accurate for early-stage start-ups.
  • Key objectives:
    • Define growth using less tangible dimensions.
    • Identify characteristics of growing early-stage digital start-ups.
  • Research uses a mixed-methods approach: Delphi study, surveys, and case studies.
  • Results indicate that growing start-ups have:
    • Agile culture (clan + adhocracy)
    • Strong absorptive, innovative, and adaptive capabilities
    • Human capital with entrepreneurial skills and emotional attachment

Background

  • Digitalization and globalization offer opportunities for new entrepreneurship forms (Markus & Loebbecke, 2013).
  • Digital ventures integrate technology into their value proposition (Oestreicher-Singer & Zalmanson, 2012).
  • Digital start-ups are vital for economic growth and job creation (Chae, 2019).
  • Most ventures fail to grow due to the liability of newness (Nummela et al., 2016; Cafferata et al., 2009).
  • Firm growth is complex and multidimensional (Davidsson et al., 2010).
  • Established firms' growth dimensions don't fully explain new venture growth.
  • Young firms lack financial performance, making metrics like customers, revenues, profits, and turnover difficult to measure.
  • Researchers study survival, funding, resources, and capabilities instead (Audretsch, 2012; Coad et al., 2016; Patil et al., 2019).
  • This research aims to define growth in the early stages of new venture creation (nascent entrepreneurship) (Tuazon et al., 2018).
  • Empirical studies on entrepreneurship growth have mixed results (Sarto et al., 2020; Korshunova et al., 2021).
  • Nascent digital start-ups have higher variance in growth rates (Eliakis et al., 2020; Gilbert et al., 2006).
  • Research question: What are the characteristics of growing digital start-ups?
  • Early-stage growth complements various characteristics.
  • Prior research has investigated factors individually, but mainly in large firms (Cameron & Quinn, 2011; Calantone et al., 2002; Guenzi et al., 2016).
  • Identifying factors in growing digital start-ups is ongoing.
  • Characteristics are linked to company DNA, driven by founders' vision/values.

Objectives

  • O1: Define growth for digital start-ups in early stages.
  • O2: Examine characteristics of growing digital start-ups in early stages.

Mixed-Methods Approach

  • Delphi study and quantitative survey to understand expert/entrepreneur perceptions of growth dimensions.
  • Questionnaire-based survey and qualitative study (in-depth interviews) to identify crucial characteristics of growing digital start-ups.
  • Results categorize characteristics into:
    • Company culture
    • Ability to conserve and renew capabilities competitively
    • Human capital skills

Firm Growth at Early Stages

  • Growth definitions reviewed from entrepreneurial, firm, and corporate perspectives (Table 1).
  • Focus on influential studies shaping entrepreneurship literature and those concerning growth-oriented/high-growth young enterprises.
  • Studies identified across disciplines (HR, entrepreneurship, finance).
  • Definitions categorized into:
    • Qualitative descriptions
    • Quantitative descriptions
    • Mixed approaches
  • Commonalities: importance of resources, capabilities, and traditional financial measures.
  • Financial measures include turnover, profit, sales, customers, and employees (Audretsch, 2012; Coad et al., 2016; Patil et al., 2019).
  • Processes and routines support business expansion (Brush et al., 2009).
  • Many definitions contain subjective dimensions (Delmar, 1997; Shane et al., 2003; Miller et al., 2013).
  • Understanding growth ensures start-up survival (Lai & Lin, 2015), but consensus is lacking.
  • No current definition captures growth in the early entrepreneurial phase.
  • Definition should gauge growth by investigating actual metrics plus non-financial dimensions like skills/capabilities.
  • Including only objective measures can produce false results (Achtenhagen et al., 2010).
  • Financial data is often unavailable in early stages.
  • Entrepreneur and human capital characteristics impact venture growth (Aspelund et al., 2005; Colombo & Grilli, 2005).
  • Organizational culture is also crucial (Fuller & Unwin, 2005).
  • The study aims to define growth reflecting human capital profile, company culture, and capabilities.
  • These aspects influence innovative capabilities, sales, and profits (Selvarajan et al., 2007).

Characteristics of Growing Digital Start-ups

Company Culture
  • Company culture: shared values and beliefs (Cable et al., 2000).
  • Competing Values Framework (CVF) (Cameron and Quinn, 2011) identifies four types:
    • Clan Culture: internal maintenance with flexibility, concern for people, customer sensitivity
    • Adhocracy Culture: external positioning with high flexibility and individuality
    • Hierarchy Culture: internal maintenance with stability and control
    • Market Culture: results-oriented, external positioning, competition, fast decisions
  • Culture mix varies based on stage and situation (Yu & Wu, 2009).
  • Start-ups have an agile culture integrating Clan and Adhocracy, enabling continuous innovation growth (Goncalves et al., 2019; Steiber and Al¨ange, 2013).
  • Innovativeness is vital for start-ups:
    • Openness to new ideas (Calantone et al., 2002)
    • Adoption rate of innovations
    • Willingness to change
  • Innovativeness is a main driver for growth and competitive advantage, especially in smaller firms (Patterson, 1998; Yang, 2012; Rubera and Kirca, 2012).
  • Organizations need a learning culture for competitive advantage.
    • Commitment to Learning: values and promotes learning, encouraging knowledge development (Calantone et al., 2002; Schein, 2010).
  • Culture should emphasize customer service and quality for superior performance (Papadimitriou and Kargas, 2012).
    • Selling Orientation: focus on selling activities (Jaramillo et al., 2007).
    • Customer Orientation: understanding customer needs, helping them choose the best solution (Jaramillo et al., 2007).
Company Capabilities
  • Core competence and dynamic capabilities are a firm’s ability to conserve and renew capabilities (Dosi et al., 2001).
  • Core competencies are hard to imitate (Prahalad and Hamel, 1990; Wang et al., 2012).
  • Capabilities influence effectiveness (Gold et al., 2001).
  • Capabilities must be contextualized for competitive advantage (Augier and Teece, 2009).
  • Companies need to develop capabilities based on culture.
    • Absorptive Capacity: creates and uses knowledge to gain a competitive advantage (Zahra and George, 2002).
    • Essential for innovation and adapting to environmental changes (Camison ´ and For´es, 2010; Upadhyay and Kumar, 2020).
    • Marketing capabilities crucial for sustainable competitive advantage (Vorhies and Morgan, 2005).
    • Customer Satisfaction Capability: ability to satisfy customer needs (Guenzi et al., 2016; Vorhies and Morgan, 2005).
    • Selling Capability: ability to sell products/services (Guenzi et al., 2016; Vorhies and Morgan, 2005).
Human Capital Profile
  • Member skills are building blocks of organizational capabilities (Dosi et al., 2001).
  • Human capital affects SME growth (Zhou and de Wit, 2009).
  • Qualified, motivated employees are crucial (Blank and Dorf, 2012).
  • Organizational Fitness: match between members and organization (Cable and DeRue, 2002).
    • Influences performance (Meyer et al., 2020).
  • Entrepreneurial Self-Efficacy (ESE): belief in one's ability to perform entrepreneurial roles (Hmieleski et al., 2008).
    • Positively affects firm growth (Hmieleski and Corbett, 2008).
  • Intrapreneurship: enacted by all members, positively associated with firm growth (Antoncic and Antoncic, 2011; Stull and Singh, 2005).
  • Affective Commitment: Emotional bond to the organization (Rhoades et al., 2001).
    • Affects performance, especially in start-ups (Yang et al., 2019).

Materials and methods

  • Mixed-methods approach used: growth definition and characteristics of growing digital start-ups.
  • Followed principles for mixed-methods research (Harrison and Reilly, 2011; Venkatesh et al., 2016).

Methods

  • To define growth in digital startups (O1): Adapted Delphi study + quantitative survey.
  • Goal: Understand expert/entrepreneur perceptions of growth at early stages, formulate growth definition.
  • To assess the characteristics of digital start-ups (Q2):
  • quantitative study: questionnaire-based survey
  • qualitative study: in-depth interviews in two case studies.
  • Combined to identify important growth characteristics of digital start Ups. Quantitative informed Qualitative study.
  • Growth definition used to filter survey participants and select case studies.
  • Mixed-methods leveraged strengths of both approaches.
  • Quantitative: examined characteristics using data from founders, entrepreneurs, and employees, generalizing to explain growth.
  • Case studies for answering "how" and "why" questions (Yin, 2003).
  • Suitable for underdeveloped theory areas (Eisenhardt, 1989).
  • Enhances external validity.

Defining Growth at Early Stages

  • Used existing literature (Section 2.1) to articulate a working definition.
  • Asked for experts’ views via an adapted Delphi study.
  • Designed and employed a questionnaire for entrepreneurs of growing early-stage start-ups.

Adapted Delphi Study: Experts’ View

  • Working definition: "Within the early-stage entrepreneurial start-up setting, growth is a direct descendant of a venture’s founders’ entrepreneurial skills, innovation capability, absorptive capacity, and potential to expand its volume of business via product-market fit, partnerships, and client base".
  • Assessed working definition and collected expert judgments/perceptions (Flostrand et al., 2020).
  • Followed adapted Delphi study approach (Kraines et al., 2020).
  • Panel of 15 experts: VC funds, incubation centers, academia, practitioners, well-established start-ups (3 per category).
  • Independently consulted with each expert (to avoid bias; Hasson and Keeney, 2011) on the relevance of working definition.
  • Experts considered components of definition, relationships between them, and prerequisites.
  • Experts offered alternative wordings for inaccuracies.
  • Data aggregated, and two alternative definitions developed for the second round.
  • Major difference centered on whether growth “is a result of” or “depends on” given components.
  • The expert panel evaluated the alternative definitions individually via an online form.
  • Experts rated dimensions (1-10); all dimensions rated >7.3/10.
  • Consensus reached, resulting definition acceptable.

The final definition is

  • "In early-stage entrepreneurial start-ups, growth is the result of the company’s sales capability, ability to scale-up, entrepreneurial skills, adaptability skills, innovation capacity, absorptive capacity, and ability to attract funds".

Survey: Early-Stage Growing Entrepreneurs’ View

  • Designed survey to understand if proposed definition reflects entrepreneur views from early-stage growing start-ups.
  • via open ended question included important dimensions.The survey participants offered 273 statements in total.
  • Identified 5 prevailing topics: sales, financial, human capital, culture, innovation (Table 2).
  • Sales dimensions included customer engagement/volume, market penetration, product fit (43.96% of statements).
  • Entrepreneurs agree with existing literature that financial dimensions are important.
  • Ability to attract funds more important than revenue.
  • This aligned with the Delphi study input.
  • Human factors (employees, skills) important for growth dimensions.
  • They add innovation and culture (adaptability, trust, scalability) are also crucial.

Identifying the characteristics of growing start-ups

Quantitative study

-Two pillars: Enterprise Profile and Human Capital (reflect def of growth compoents)

  • Used established scales to measure each parameter (Table 3).
  • Data collection followed purposive sampling to ensure that we collect responses from early-stage start-ups that experience growth.
  • 75 complete questionnaires collected and analyzed with SPSS v.23
  • Most respondents (age 18-34), male(71.4%) and highly educated.
  • Education related to their company’s product service.
  • Vast Majority had not worked in another position before their current employer.
    -Cronbach