Business venture selection rationale of portfolio entrepreneurs in developing economies

Abstract

The role of small and medium enterprises in developing countries is growing in importance as they contribute to economic growth and employment generation (Carlsson et al., 2013). For this reason, research on entrepreneurial venture creation has received much attention to date. However, researchers have recently started to shift their attentions away from novice entrepreneurs to portfolio entrepreneurs. The portfolio entrepreneur is of particular interest in opportunity recognition and exploitation theory as these entrepreneurs have been characterised as venture creation 'experts' due to their repeated nature of creating and managing multiple ventures simultaneously. It is believed that studying this group of entrepreneurs would provide key insights into venture development in order to advance the theory of entrepreneurship (MacMillan, 1986; Parker, 2014). This research study subsequently aim to yield to this call as its objective is to explore the rationale of portfolio entrepreneurs in new venture selection as an addition to the entrepreneur's other ventures. Importantly, this study is performed in a developing country context as it is argued that entrepreneur behaviour is influenced by the level of institutionalism and hence new insight would be gained as the majority of portfolio entrepreneur studies have been performed in a develop economy context. A qualitative, exploratory study was carried out to gain insights into the reasons why portfolio entrepreneurs in developing countries select new business ventures as an addition to the entrepreneurs existing ventures. The results indicate that portfolio entrepreneurs in developing countries place high emphasis on risk mitigation and therefore commonly create new ventures that are diverse from the other ventures in the entrepreneur's portfolio. It was also established that portfolio entrepreneurs have a great need of excitement as they easily get bored with their existing ventures and subsequently engage in the new venture creation process. Other reasons for new venture selection that was identified include: serendipity and opportunism; personal expertise; family employment and the need to help others; resource orchestration for more effective operations; passion; decoupling of ventures to improve operational efficiencies; and business growth capacity limitations.