The Origin and Evolution of New Businesses

by Amar V. Bhide

Book Overview

What is this mysterious activity we call entrepreneurship? Does success require special traits and skills or just luck? Can large companies follow their example? What role does venture capital play?

In a field dominated by anecdote and folklore, this landmark study integrates more than ten years of intensive research and modern theories of business and economics. The result is a comprehensive framework for understanding entrepreneurship that...

• Format: Hardcover
• Language: English
• ISBN: 0195131444
• ISBN13: 9780195131444
• Release Date: January 2000
• Publisher: Oxford University Press
• Length: 432 Pages
• Weight: 1.70 lbs.
• Dimensions: 1.4" x 6.5" x 9.5"

Customer Reviews

Rigor for the Entrepreneurs and Concepts for Intellectuals

This book provides both valuable practical insights for someone considering a new business and concise conceptual frameworks for those with an academic bent on the subject. Bhide makes excellent use of data to support his assertions, and this gives the book its academic flavor. But he also brings the subject alive with real world evidence and anecdotes. For example, he points to data that shows many entrepreneurs lack credentials one might expect to begin a successful business. He then explains a rational basis for the low credential (not to be confused with low skill) level of many entrepreneurs: that their opportunity cost is low because they "don't have the credentials and experience that could secure them highly paid employment." Hence they have less to lose. "[I]ndividuals who face high opportunity costs...usually do not start small, boot-strapped ventures." Entrepreneurs often even avoid the emotional costs of quitting satisfactory jobs. He then provides the entertaining quote of John Mineck who started Practice Management Systems in 1982 while still employed by the Personal Care Division of Gillete, Inc.: "You could do something on the side very easily; they seemed to discourage hard work."But the book is by no means all humorous anecdote. It has heavy data, with charts and graphs that are not simply conceptual in nature, but quite empirical. Overall an excellent text for both the intellectually curious and the entrepreneurially inspired.

First-Class Work on Entrepreneurship

When Bill Gates and Paul Allen started Microsoft, they had no business plan, only a brainstorm that they should write a program in the BASIC computer language. Such seat-of-the pants planning is typical among entrepreneurs, says author Amar Bhide. Successful entrepreneurs don't need unique ideas and long resumes, he writes. Rather, they must be able to adapt quickly to changing business conditions, and they must enter industries in a state of shake, where established players are lacking. I'd strongly recommend this book to entrepreneurs and to those thinking of starting their own companies. But this is not a "how to get-rich-quick" series book on how to start and grow a new business. This bright analytical work sets a new standard for books about entrepreneurship. Professor Bhide offers a revealing look at the characteristics that make for successful start-ups, and also gives plenty of real world examples to illustrate his concepts.

Additional insights

Arnold Kling has an oustanding review of this book, but I wanted to add my two cents on the subject.Basically, Bhide provides interesting insights into the entrepreneurs themselves as well. Entrepreneurs can generally be divided into two types: 1) those that plan a venture very carefully, and 2) everyone else. The former group gets most of the press because they tend to be associated with VC funding, corporate partnerships, and eventually IPOs. Careful planning can be a prerequisite to funding, but as the book notes, VC funding, especially with the amount of capital available today, does not automatically mean things have been well thought out. In many ways, I am more intrigued by the latter group of entrepreneurs focused on the marginal businesses. They lack the pedigree (i.e. MBA education and experience) and resources, but create many more businesses. The real key is that these investments make sense. Unlike the current state of Internet investing, these entrepreneurs look to make low-risk bets (say $50,000 of money from family and friends), which can be turned into a big hit but also have limited downside risk.

important step forward

There are two books here. The first book, on the origin of new businesses, is a tour de force. The second book, on the evolution of businesses from fledgling businesses to large enterprises, is not as satisfying. I will confine my review to the first book.The author gives us a new perspective on new business formation. He discusses five types:1. marginal businesses. These are hair salons, lawn care services, and other businesses that are simple and small-scale.2. promising businesses. These businesses also start out at a small scale, but they are much more complicated because they are launched in turbulent markets with high levels of uncertainty. You are going into a market before most people even realize that there is such a market.3. VC funded firms. These firms require more capital and a more solid business plan than promising new businesses.4. Revolutionary ventures. These are VC funded firms on steroids (the venture funding may have to come from large enterprises), who take large risks while aiming for large profits.5. Large enterprise innovation. Here, established companies launch new projects, which require large investments but have a high probability of success (think of Intel maintaining its lead in microprocessors).This is an excellent theoretical scaffolding, to which Bhide is able to attach many interesting insights. Some are statistical. For example, in a large sample of successful small businesses, only 12 percent thought that the originality of their idea was what produced success. The rest attributed their success to "exceptional execution of an ordinary idea." p.32Other insights are anecdotal, such as the descriptions of how companies adapted to customer demands.If I were the type who used a highlighter to mark interesting passages, my copy of the book would be mostly yellow.With its solid theory, statistical support, and anecdotal color, this book sets a new standard for books about entrepeneurship. No professor of business can afford to ignore this work.General readers may find some faults with this book. If an academic tone puts you off, too bad for you. Go read "Seven Habits in Search of Chicken Soup" or something. Another shortcoming is that the Internet receives no real mention. Email me for references to some essays on Internet entrepreneurship that I think are fairly consistent with the thrust of this book.Overall, I give the book my strongest favorable recommendation.

Tells your entrepreneurial future, so you can change it now.

At first, this book appears too thick to prove helpful to young entrepreneurs with little time. Of course you want to go and just do the thing and just need some guidelines from these kinds of books. You may think you don't need to read this one. But this is probably the only book on market which talks about ideas--rather than facts and events--in entrepreneurship. These ideas are very helpful in understanding your planned business's 'life-cyle'--where you will know what kind of a 'person' your business is, how it will evolve as you will work with it and how it will behave. You need to know your to-be business like you would wanna know your to-be born baby...except this baby may going to grow like Goliath in the Internet era or may die; so you need to know your stuff before it's too late.Bhide tells you how your venture is going to turn out, what you need to know, what you need to do well, and where you can't afford to fail. From setting the proper state of mind to the end, this book hands you ideas which you can use to change your future by reducing failures.This book is a telescope. Use it to see your future today and use the tools provided to change it as you want to succeed. Bhide gives you everything for your start-up to command a proactive position on your way ahead and not end up being reactive to the upcoming pressures and troughs.Excellent work by Professor Bhide.