Entrepreneurship and Innovation

New venture creation and diversification strategies of family business groups in India

Kavil Ramachandran (Indian School of Business, Hyderabad, India), Prof. Ajay Bhalla (Cass Business School)

Family firms are of interest because there is little or no separation between the family members making decisions and consequences of those decisions. Hence, family firms are likely to make diversification choices, which maximize family's wealth. However, they are also likely to confront the challenge to maintain cohesion and familiness of the business, when they are presented with opportunities where expected profitability is higher than their own (Merino and Rodriguez, 1997). This is because senior family members who are also decision makers are considered to be stewards of family wealth, and called upon to take long-term view in the interest of family and the business (Zellweger, Meister and Fueglistaller, 2007; Ward, 1997). Furthermore, much of the research on family controlled businesses are based on data from the Western countries (Sharma, 2004) leaving a gap to study such businesses in emerging market economies such as India where most businesses are family controlled.

This study aims to fill this gap by exploring the strategies adopted by Indian family business groups while creating new ventures in their process of evolving as large conglomerates. Indian stock market is dominated by family business groups that constitute more than 60 percent of the total market capitalization. We also believe that understanding their evolution process and their success/failure strategies can throw light on the future direction of family entrepreneurship.

The UK as an innovation powerhouse: the hidden innovators

Microsoft, £50,000 (Sept 07-Jan 08). Researchers: Prof Julie Logan, Prof Chris Hendry, Jim Brown, Nigel Courtney

The study set out to investigate new venture trigger points for innovation, how these could become more effective, and how entrepreneurial success in the UK's minority cultures and groups could be transferred more widely within these groups and to UK society as a whole.

The report, 'Unlocking the potential of the UK's Hidden Innovators' finds that entrepreneurial self-confidence is a critical issue for all the hidden innovator groups and a major barrier in pursuing an entrepreneurial path. It makes several recommendations for ways to build a profile, for example by encouraging self- confidence through the creation of an entrepreneurial culture and tailored encouragement and support. The authors urge policy makers to make financial support and new ventures more equitable across all groups, and for business support services to take diversity seriously. They urge the UK Government to change the 'macho' image of entrepreneurship, and to send a clear message that entrepreneurship is not only about innovation but also improvement.

Read the final report 'Unlocking the potential of the UK's hidden innovators'

The effects of market and technological uncertainty on academic spinout formation

Economic and Social Research Council, £95,523 (2007-08). Researchers: Vangelis Souitaris and Djordje Djokovic

Commercialisation of academic new ventures is currently central to the innovation policy agenda of most developed nations as it contributes to their global competitiveness. In the UK, this commercialisation activity accelerated in the late 1990s, with the establishment of Technology Transfer Offices in universities and the creation of spinout firms. Spinout creation in UK universities is quite impressive; 338 spinout firms were generated between 1996-2000, while 175 spinouts were incorporated in 2001 alone (Wright et al., 2002). However, the Lambert review of business-university collaboration (Lambert 2003) suggested that spinning out is over-emphasised in the UK while licensing might be a better way forward for UK universities.

An ESRC-funded research project led by Professor Vangelis Souitaris at Cass Business School explored the reasons universities opt for spinouts instead of licensing. According to real options theory, technological and market uncertainty may affect the way academic new ventures will be commercialised. Using this theory, the proposed set out to explain the conditions of technological and market uncertainty that render new firm formation the dominant mechanism for commercialising academic new ventures.

The study used a dataset of the total population of patented new ventures (1313) from the German Max Planck Institute (the largest research institute in Europe) between 1979 and 2004. It found that both market and technological uncertainty have a positive effect on firm formation whereas threat of preemption is negatively influencing it. It additionally found that the probability of spinning out is increased by the previous failure experience of TTO managers to commercialize new ventures and by their spinout experience. Also, the new inventors' previous spinout experience and the experience of their network of co-inventors are positively related to the probability of spinning out.

The results are generalisable to other developed countries such as the UK, as the effect of technology and market uncertainty are generic forces applying universally to all market economies. The final report suggests that the study has important implications for the following practitioner audiences:
a) Technology transfer managers. The results point out that commercialisation decisions should consciously consider technology and market uncertainty and internal experience of TTO managers and new inventors and not be made only on the basis of university policy preferences.
b) Aspiring academic entrepreneurs. The results show that they should target new inventions with high uncertainty and low threat of pre-emption (having more chances of creating a spinout), learn from other new inventors with prior experience in spinning out and partner with TTO managers experienced in facilitating spinouts.
c) Venture capitalists investing in spinouts. They should also spot new inventions with high uncertainty and low threat of preemption and collaborate with teams of new inventors and TTO managers experienced in spinout creation.

Knowledge Management

Functional Stupidity in Knowledge Intensive Organisations

In this project, we will explore what role stupidity plays in smart organisations. We will ask how stupidity is created and supported, what the functional and dysfunctional consequences are, and how it might be challenged.

In order to explore this question, we will look at a range of apparently knowledge intensive organisations in areas such as the high-tech sector, consultancy, education and finance. We aim identify the processes which prompt stupidity within these organisations. In particular, we want to explore the collective and organizational dynamics that push smart people to do stupid things when they are work. We also want to explore what the outcomes of organisationally enforced stupidity might be. We think that these can be both positive (in the form of efficiency and less conflict) as well as negative (in the form of overlooking mistakes which can lead to disasters). Finally, we want to ask how organisations can overcome functional stupidity: are there organizational structures, work designs or cultures which can help to avoid problems occurring?

This project is being run in conjunction with Professor Mats Alvesson and his research team at Lund University in Sweden.

Recent publications:

Mats Alvesson and André Spicer (2012) 'A Stupidity Base Theory of Organization', Journal of Management Studies, 49(7): 1194-1220.

Selected media coverage:

Stupidity: Why are humans so varied in their mental abilities? (Cover story), New Scientist, 30 March

The quest for the right kind of stupidity, Financial Times, 15 January 2013.

The benefits of being stupid at workFortune, 17 April