A founder’s strategy and entrepreneurial leadership are critical elements in growing and developing a mid-sized venture

Abstract

This thesis reports on a formal cross–sectional study undertaken over three years (starting in 2002). Since that the South African entrepreneurial scenario had only recently embraced the theories of entrepreneurship and its promotion, it sought to delineate the critical elements that one would link to developing a mid–sized venture, to venture growth (VG) and to leadership provided by the founder. Research within the Information Technology (IT) sector was driven by personal experience and by studies on strategic management, leadership, risk management, opportunity recognition, resource-leveraging and optimisation strategies. The researcher also sought empirical support in management and business strategy studies, in entrepreneurial organisational learning theories, “EOLT” (what this study terms “knowledge creation” and “knowledge – sharing”), and in scientific evidence that supports thinking on venture - creation, promotion or growth. The primary purpose of this study was to (a) ascertain the depth of leadership involved in venture growth (VG) and (b) investigate whether or not founding-entrepreneurs used their leadership abilities, management strategies and skills in VG. A primary and final respondent population (N = 186) of IT company General Managers/Chief Executive Officers (CEOs) was tested. Respondents also had to be active shareholders, founders and leaders, and operationally (i.e. managerially) involved, as well. Statistical considerations were applied to (i) sample-“validity and reliability” (VR), and (ii) sample-manipulation and prescription. Adoption of a two-pronged approach led to the refinement of assumptions, and to the formulation of initial entrepreneurial leadership and venture growth propositions and hypotheses. To accommodate the given research purposes, a pilot–test was initiated amongst a sample of 20 CEOs from five different industries. An analysis of the results of this test and the additional interviews conducted resulted in (a) the refinement of the initial propositions and (b) a topology and foundations for the final testing instrument. Discussions with a subset of the test respondents resulted in the final propositions. Guided by empirical research parameters, four fundamental hypotheses were derived and tested (within the context of the variables in the final testing instrument). Construct evolution resulted in these factors: Entrepreneurial Thinking/Risk perception (F1); Entrepreneurial Persistence (F2); and Unique Performance (F3). Extensive factor analysis testing was applied. The following hypothesis for F2 was also tested: -- H0: The greater the specific and general competencies of a founding entrepreneur, with regard to organisational skill, business knowledge and general past experience, the stronger the business output (i.e. success). -- The alternate hypothesis/Ha: The weaker the specific and general competencies of a founding entrepreneur, with regard to organisational skill, business knowledge and general past experience, the weaker the business output (i.e. success). For F2, a high percentage of variance resulted, the mean = 4.2, the standard deviation = 0.4, and, with the existence of strong statistical significance represented, Ha was rejected. Responses to associated variables were highly polarised. These were interpreted to be indicative of differences in the manner in which founding entrepreneurs perceived vision-establishment as an enabling tool for VG and strategy. A strong prediction for N = 162 also resulted, which here indicated that a strong relationship existed between F2 and F3. In relation to F1, F2 and F3, the prediction also seemed to indicate that motivation and specific competencies also have paths to VG (with significant coefficients; where t >2; and p < .05). Direct-effect domains, such as the specific skills associated with negotiating and contracting (IT deals), indicated the strongest relation to VG. Given the relevant age of most of the founding entrepreneurs in the population (36–45 years), this was not an unexpected result. Although some relationships were found to exist for the other relationships of factors to the tested overall hypothesis, these tended to yield somewhat weaker than expected significances. In relation to the above hypothesis, the study found that technical skill and industry experience exhibited reasonably significant relationships to and with VG. It was also found that in South Africa a very small number of authors have attempted to integrate their thinking concerning founding entrepreneurs into EOLT and VG strategies. No longitudinal studies on the relationship between these elements could be found, and even less research was also found were the topics were tackled in combination–form. The study also concludes that there is room for more research that integrates, links and shows the relationship between VG, founding entrepreneurs and leadership.