Knowledge, Entrepreneurship, and Others’ Health
Health plays an inarguably important role in people’s lives, so it is unsurprising that scholars are interested in investigating this topic. Although there is some entrepreneurship research focusing on health (e.g., the impact a career as an entrepreneur has on people’s psychological [e.g., Tetrick et al. 2000] and physical [Boyd and Gumpert 1983] well-being or research on startups in the biopharmaceutical industry that develop new drugs [e.g., Evans and Varaiya 2003; Deeds et al. 1999; Patzelt et al. 2008]), there are many opportunities left to substantially grow this research stream and thus contribute to our understanding of entrepreneurial phenomena (and, hopefully, people’s lives) (Shepherd and Patzelt 2015). When we use the term “health,” we are referring to both physical health (“the physiological and physical status of the body”) and mental health (“the state of the mind, including basic intellectual functions”) (Ware et al. 1981). Additionally, to ensure the scope of our task is feasible, we limit our discussion to personal health as these health-related aspects “end at the skin” and therefore have a clearly defined boundary (Ware et al. 1981).
Those who have prior knowledge about the health problems of others are likely to be the individuals who identify opportunities to improve these others’ health. Many individuals personally deal with health-related problems or gain familiarity with such problems by caring for loved ones. By directly or indirectly experiencing a particular health problem , an individual not only develops a strong understanding of the specifics of the problem but also gains in-depth knowledge of existing treatments and how those treatments fall short. In turn, this knowledge can lead the individual to recognize latent demand. For instance, Han Pham was infected by bacteria from a mishap with a dirty vaccination needle. Later, while in graduate school for design, Pham recognized an opportunity stemming from her needlestick injury and developed the YellowOne Needle Cap, which is a yellow cap made of plastic. The cap turns cans for soft drink into a safe receptacle for discarded needles by preventing the needles from coming back out (www.designtoimprovlife.dk).
While individuals who directly or indirectly experience health problems may recognize an opportunity for someone, they may not have the knowledge required to personally act on the opportunity (McMullen and Shepherd 2006). Acting on an opportunity to develop a new product to overcome a health problem, for instance, might require knowledge of marketing, production, and management in the particular health sector as well as the resources to do so. Take the example from above again: Pham’s invention of the YellowOne Needle Cap ultimately resulted from the design knowledge she gained in graduate school. Acting on an opportunity to overcome health problems could be an especially significant context in which individuals who create and use innovations to solve their own health problems begin a process (perhaps unintentionally) that results in the development and exploitation of the health opportunity. It appears that studies on this process could build on the concept of user innovation (Shah and Tripsas 2007; von Hippel 1988). This perspective might be useful to develop the field of health entrepreneurship.
While they have different knowledge from individuals who have directly and indirectly experienced health issues, people who have not experienced problems with their own health may also possess knowledge that leads to the identification and exploitation of health-improving opportunities. For instance, some people have a deep understanding of technologies with the potential to become health solutions, such as engineer Dean Kamien. Kamien realized that many people who live in third-world countries do not have access to clean drinking water. This lack of clean water represents a significant health problem since drinking water that is of bad quality is full of microbial pathogens. These pathogens, in particular when combined with bad sanitation and poor hygiene, contribute to more than 1.7 million deaths every year (Ashbolt 2004). Kamien’s goal was, in his words, to “solve the biggest world problem” by using his inventing and engineering knowledge to develop the Slingshot. The Slingshot is a system that is portable and requires little power but purifies water to an acceptable quality for humans (www.slingshotdoc.com).
Professionals in the field of medicine have particularly comprehensive knowledge about health problems across many different people, which makes them particularly capable of identifying opportunities that may address (some of these) problems (Simmons 2002). Studying patent data from the American Medical Association, Chatterji, Fabrizio, Mitchell, and Schulman (2008: 1532) discovered that “20% of the medical device patents filed in the United States during 1990–1996” came from doctors. However, while medical doctors may be in the position to identify opportunities for someone, they may ultimately feel they lack the knowledge necessary to exploit those opportunities, thus concluding that entrepreneurial action is infeasible (we address motivational issues in Chap. 3).
Prior Knowledge and Opportunities That Alleviate Others’ Suffering After a Disaster
Many situations can lead to human suffering. Natural disasters , however, are particularly frequent occurrences that cause suffering of many individuals. The International Federation of Red Cross and Red Crescent Societies reports that in 2010, 406 natural disasters (not counting, e.g., epidemics and wars) occurred throughout the world (Armstrong et al. 2011). The damages these events caused amount to more than $123 billion, and the people killed in these events amount to more than 304 million (Armstrong et al. 2011). Overall, 2010 was the year with the greatest number of people affected by natural disasters; however, the data show that natural disasters regularly lead to significant human suffering (Armstrong et al. 2011). For the individual, suffering involves “the experience of pain or loss that evokes a form of anguish that threatens an individual’s sense of meaning about his or her personal existence” (Dutton et al. 2006: 60; see also Sutcliffe and Vogus 2003).
Many organizations step in after natural disasters to aid victims and help the affected area recover. While these organizations do help many individuals, frequently they cannot address all victims’ urgent needs, so suffering continues (e.g., Schneider 1992; Van Wart and Kapucu 2011). However, my (Dean) colleague and I (Shepherd and Williams 2014; Williams and Shepherd 2016) found that in this context—namely, when there are numerous outside resources after a disaster but established organizations are ineffective at alleviating suffering—local venturing is often successful. More specifically, local ventures are very effective at recognizing opportunities to organize abundant resources (generally provided by sources that are not harmed by the disaster). These ventures are also effective in the fast delivery of resources to those in need. This type of entrepreneurial action works well since it is locally driven, rapid, and customized to the urgent needs of those suffering.
Before investigating prior knowledge’s role as a resource, it is important to understand how a disaster changes other resources. Disasters considerably reduce the amount of material, or tangible, resources in an area, such as infrastructure, shelter, water, food, and physical health, thus often worsening people’s suffering. Disasters can ruin people’s homes, including their houses, clothing, and belongings; devastate community infrastructure; kill or injure animals; destroy businesses, including business buildings, equipment, and inventory; and injure or kill community members.
While disasters cause significant damage at the local level, especially damage to much-needed resources, several non-physical, or intangible, resources are crucial for compassion venturing to ease victims’ suffering (Shepherd and Williams 2014). Intangible resources constitute the community’s social architecture. After a disaster, community members often maintain these non-physical resources. Moreover, sometimes they try to even improve them. For instance, after the Black Saturday bushfire disaster in Australia, “localness” or “being local” was influential in driving entrepreneurial actions, and an important factor of this localness was local knowledge (Shepherd and Williams 2014).
Referring to location-specific information, local knowledge i
ncludes a community’s terrain, history, social networks, community members’ skills, and available resources. After Black Saturday, local knowledge played a key role in facilitating collaboration among locals (individuals and organizations). Moreover, local knowledge triggered the cooperation between locals and non-locals and enabled more rapid delivery of customized solutions that helped address the victims’ suffering. Local knowledge was primarily informal and tacit as it was generally not documented and was frequently challenging to transmit to others (Shepherd and Williams 2014).
International Knowledge and Opportunities to Go Abroad
International knowledge constitutes a critical intangible resource for entrepreneurship in an international context. However, due to liabilities of newness and foreignness, it can be difficult for individuals and organizations to obtain this knowledge. Contrary to arguments based on absorptive capacity, entrepreneurial firms’ management teams (TMTs) having little international experience tend to capitalize on external sources providing international knowledge, such as venture capital organizations, alliance partners, and other firms in close proximity (Domurath and Patzelt 2016; Fernhaber et al. 2009).
International entrepreneurship comprises the “discovery, enactment, evaluation, and exploitation of opportunities across national borders to create future goods and services” (Oviatt and McDougall 2005). A majority of international entrepreneurship research has focused on new ventures (Zahra and George 2002), particularly on such ventures’ need to address substantial limitations stemming from their newness and smallness as a prerequisite for internationalization (Knight and Cavusgil 2004). To become international, a venture must have a competitive advantage as a basis for dealing with the added costs of foreign business operations and succeed in doing business abroad (Dunning 2000; Rugman 1981). These tasks require resources. While many firms tend to leverage resources that are tangible when they enter international markets, resources that are intangible are frequently more likely to yield competitive advantage because they are difficult for competitors to replicate (Kotha et al. 2001). Researchers have shown that international knowledge, particularly for new ventures, constitutes a crucial intangible resource for internationalizing business operations (Bloodgood et al. 1996; Carpenter et al. 2003; Reuber and Fischer 1997).
Most scholarly work on international entrepreneurship has concentrated on the international experience of entrepreneurial TMTs as the main source of international knowledge. Because prior knowledge and experience enable individuals and firms to more readily identify opportunities (Shane 2000; Wiklund and Shepherd 2003; Patzelt and Shepherd 2011; and discussed above), new ventures that have more international knowledge based on their TMTs’ prior experience will recognize a larger number of opportunities in foreign markets and therefore internationalize to a greater extent than ventures without such knowledge. New ventures may further utilize their TMTs’ international experience to attract alliance partners from the international business arena and thus build credibility in foreign markets. Moreover, many firms whose TMT has international experience are able to internationalize more quickly than their counterparts (Reuber and Fischer 1997). This faster internationalization facilitates such firms’ integration of international considerations into their organizational structure and processes sooner, thus speeding up growth in international markets (Autio et al. 2000) and yielding higher efficiency (Oviatt et al. 1995). Moreover, earlier internationalization can lead to a higher share of foreign sales of total sales (Reuber and Fischer 1997).
While prior research on international knowledge acquired internally through TMTs’ previous experience has provided important insights into new venture internationalization, scholars have failed to adequately investigate international knowledge that comes from outside new ventures. This research gap is surprising given the important role the external environment plays in new venture internationalization (e.g., Coviello 2006; Johanson and Vahlne 2003) and entrepreneurs’ assessments of opportunities in foreign markets (Domurath and Patzelt 2016), especially for overcoming liabilities of newness and foreignness. Most new ventures depend on knowledge sources that are external to the organization in order to confirm they are operating effectively and to enhance their overall chance of high performance (McGrath and MacMillan 1995). Internationalizing firms are likely to have a similar reliance on outside knowledge sources to learn how to effectively enter into foreign markets (Domurath and Patzelt 2016). While the internationalization process of new ventures can be influenced by their TMTs’ prior international experience, the international business environment constantly changes (Hitt et al. 1998), making the value of TMTs’ experience decline over time (Anand et al. 2002) and increasing the need for outside knowledge sources.
Alliance Partners
Strategic alliances are cooperative inter-firm agreements with the purpose of creating competitive advantages for all parties involved (Das and Teng 2000). These alliances represent an important formal relationship which provides entrepreneurial ventures with access to the resources they need for growth (Baum et al. 2000). In addition to gaining access to important resources, new firms are also likely to learn from the knowledge they obtain through these partnerships (Johannisson 2000; Haeussler et al. 2012). For instance, by interacting with alliance partners, entrepreneurial firms could access business intelligence or learn about new opportunities. Indeed, as Hite (2005: 113) contended, an entrepreneurial firm’s partners provide the “conduits, bridges and pathways through which the firm can find and access external opportunities and resources.” Scholars have also argued that strategic alliances provide the best access to new ideas and innovation (Dyer and Singh 1998) and are an important source of tacit knowledge about markets (Anand et al. 2002); these assets are indispensable for entrepreneurial ventures’ growth and survival.
Thus, strategic alliances are a key external source of knowledge for entrepreneurial ventures. Accordingly, a strategic partner’s level of business operations in or engagement with foreign markets likely affects to what extent the new venture’s recognized opportunity and knowledge resources are international. Previous theoretical work has suggested that there is a positive link between new ventures’ development of strategic partnerships and internationalization (Coviello and Munro 1995). The transmission of international knowledge influences this association to some degree (Johanson and Vahlne 2003), with higher levels of international knowledge among alliances having a larger influence on new ventures’ efforts to internationalize. Numerous studies back this notion. Through surveying new ventures, Coviello and Munro (1995) found that 64% of the ventures’ initial entry into international markets and the entry mode chosen stemmed from opportunities that were revealed to them by their alliance partners as opposed to the ventures’ own opportunity-identification efforts. Similarly, Chen and Chen (1998) contented that alliance partnerships lead to higher levels of direct foreign investment and that smaller firms generally depend on such partnerships when internationalizing to a greater extent than larger firms. This higher dependence on alliances is likely the result of a lack of options and decreased information for decision making among small firms. Unsurprisingly, entrepreneurial firms are typically smaller than older firms (Hanks et al. 1993). Thus, forming alliances with firms that have higher levels of international experience in addition to a strong presence in an international market can greatly aid the ventures hoping to internationalize through enhanced knowledge of the local market (Fernhaber et al. 2009; Lu and Beamish 2001).
Venture Capital Firms
Building relationships with venture capital firms is another crucial way for new ventures to grow their knowledge base for recognizing new business opportunities (Fernhaber et al. 2009). Existing research has suggested that venture capital firms often provide entrepreneurial ventures with more than just financial resources (Sapienza 1992). These firms add value to entrepreneurial ventures by providing reputations (Chang 2004), granting access to expertise in business management (Baum and Silverman 2004; Ru
hnka et al. 1992), assisting the ventures in finding and recruiting qualified personnel (MacMillan et al. 1989), and helping entrepreneurs formulate an appropriate strategy for their firm (Fried et al. 1998; MacMillan et al. 1989). An additional way venture capital organizations might be valuable to entrepreneurial ventures is by sharing knowledge related to foreign market entry, which likely occurs as a result of the managerial influence venture capitalists have over the entrepreneurial firms in their portfolios.
Venture capital firms generally take an active management role in their investees (Baum and Silverman 2004; Ruhnka et al. 1992); some even believe that they contribute directly to a venture’s human resources (Florin et al. 2003). High levels of involvement are rooted in the risks venture capital firms take on when financing new ventures. Moreover venture capitalists not only desire to safeguard their invested capital but also to guarantee a high return on it (Fried et al. 1998). Sometimes, a venture capital firm’s investment in a new venture can lead to the replacement of individuals in certain management positions (even the founder in some cases), participation in the board of directors, and continual monitoring of the investee’s performance (Carpenter et al. 2003; Fried et al. 1998). That is, because venture capital organizations own part of their investees and provide them with access to limited finance, they often have numerous possibilities to affect what strategic decisions their investees take.
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