Regarding the entrepreneurial firm as an idiosyncratic asset among co-founders
If some two individuals make a relationship, their relationship itself can be an idiosyncratic asset between two relational-actors. But even the governance mechanism -relationship as an idiosyncratic asset- can be contaminated by one's opportunistic behavior. This occurs especially because of asymmetry of emotional investment of that relationship which turns into emotional failing cost or grief at the point of broken up.
So, there is even stronger governance mechanism for a relationship. This is about building an idiosyncratic asset as a legal entity; marriage. But even so,there are also opportunistic behaviors so that deceiving and cheating ones' spouse is prevailing!
Starting new enterprise is similar to marriage if an entrepreneur starts up with one or more partners. Like marriage for husband-wife relationship, the entrepreneurial firm they co-founded is an idiosyncratic asset for the entrepreneurial partners. And like as marriage, there are so many way to deceiving partners for opportunistic behavior. So, just like a marriage, there are two destinations for this opportunistic-behavior-driven partnership; being terminated or being as exploitation.
If an entrepreneurial partnership is terminated, the entrepreneurial firm could also be terminated or at least jeopardized which means business failure. The negative impact of terminating a partnership is especially crucial at the initial stage of a firm. This news makes the entrepreneurial firm hard to raising fund and the opportunistic partner can establish a competing business with the same market opportunity and knowledge which means the isolate mechanisms are failing and harming economical rent of initially established entrepreneurial firm. (Alvares & Barney, 2004)
At this moment, there works the persistence mechanisms (Shepherd et al., 2009)in the entrepreneur's mind. In this mechanism, the more invested in their entrepreneurial firm -financially and emotionally-, the weaker in this game and of course the weaker cannot control the stronger so that the weaker can do nothing but allowing his/her partner's opportunistic behavior. Thus,
Proposition 1. The more financially invested an entrepreneur in their entrepreneurial firm, the more exposed to partners' opportunistic behaviors.
Proposition 2. The more emotionally invested an entrepreneur in their entrepreneurial firm, the more exposed to partners' opportunistic behaviors.
In the context of entrepreneurial theory of the firm, an entrepreneurial firm is works as a place holder of entrepreneurial rent until the specific rent turns into quasi-rent so that entrepreneurs can make appropriation and negotiation for rent appropriation would be on-going and repeated activities following the firm's growing stages. (Alvarez, 2007) So, rent proposition process could be influenced by power games among co-founding entrepreneurs. Thus;
Proposition 3. The more financially invested an entrepreneur in their entrepreneurial firm, the less appropriate from the entrepreneurial firm created rent.
Proposition 3. The more emotionally invested an entrepreneur in their entrepreneurial firm, the less appropriate from the entrepreneurial firm created rent.
I acknowledge that my understanding of TEC especially about the opportunistic behavior is insufficient so that use the term as it was a synonym of agency problem. Maybe more reading in this subject would help solve that problem.
References
Alvarez S. A., Barney J. B., 2004. Organizing rent generation and appropriation: toward a theory of the entrepreneurial firm. Journal of Business Venturing 19, 621-635.
Alvarez S. A., 2007. Entrepreneurial rents and the theory of the firm. Journal of Business Venturing 22, 427-442.
Dean A. S., Wiklund J., Haynie J. M., 2009. Moving forward: Balancing the financial and emotional costs of business failure. Journal of Business Venturing 24, 134-148.
If some two individuals make a relationship, their relationship itself can be an idiosyncratic asset between two relational-actors. But even the governance mechanism -relationship as an idiosyncratic asset- can be contaminated by one's opportunistic behavior. This occurs especially because of asymmetry of emotional investment of that relationship which turns into emotional failing cost or grief at the point of broken up.
So, there is even stronger governance mechanism for a relationship. This is about building an idiosyncratic asset as a legal entity; marriage. But even so,there are also opportunistic behaviors so that deceiving and cheating ones' spouse is prevailing!
Starting new enterprise is similar to marriage if an entrepreneur starts up with one or more partners. Like marriage for husband-wife relationship, the entrepreneurial firm they co-founded is an idiosyncratic asset for the entrepreneurial partners. And like as marriage, there are so many way to deceiving partners for opportunistic behavior. So, just like a marriage, there are two destinations for this opportunistic-behavior-driven partnership; being terminated or being as exploitation.
If an entrepreneurial partnership is terminated, the entrepreneurial firm could also be terminated or at least jeopardized which means business failure. The negative impact of terminating a partnership is especially crucial at the initial stage of a firm. This news makes the entrepreneurial firm hard to raising fund and the opportunistic partner can establish a competing business with the same market opportunity and knowledge which means the isolate mechanisms are failing and harming economical rent of initially established entrepreneurial firm. (Alvares & Barney, 2004)
At this moment, there works the persistence mechanisms (Shepherd et al., 2009)in the entrepreneur's mind. In this mechanism, the more invested in their entrepreneurial firm -financially and emotionally-, the weaker in this game and of course the weaker cannot control the stronger so that the weaker can do nothing but allowing his/her partner's opportunistic behavior. Thus,
Proposition 1. The more financially invested an entrepreneur in their entrepreneurial firm, the more exposed to partners' opportunistic behaviors.
Proposition 2. The more emotionally invested an entrepreneur in their entrepreneurial firm, the more exposed to partners' opportunistic behaviors.
In the context of entrepreneurial theory of the firm, an entrepreneurial firm is works as a place holder of entrepreneurial rent until the specific rent turns into quasi-rent so that entrepreneurs can make appropriation and negotiation for rent appropriation would be on-going and repeated activities following the firm's growing stages. (Alvarez, 2007) So, rent proposition process could be influenced by power games among co-founding entrepreneurs. Thus;
Proposition 3. The more financially invested an entrepreneur in their entrepreneurial firm, the less appropriate from the entrepreneurial firm created rent.
Proposition 3. The more emotionally invested an entrepreneur in their entrepreneurial firm, the less appropriate from the entrepreneurial firm created rent.
I acknowledge that my understanding of TEC especially about the opportunistic behavior is insufficient so that use the term as it was a synonym of agency problem. Maybe more reading in this subject would help solve that problem.
References
Alvarez S. A., Barney J. B., 2004. Organizing rent generation and appropriation: toward a theory of the entrepreneurial firm. Journal of Business Venturing 19, 621-635.
Alvarez S. A., 2007. Entrepreneurial rents and the theory of the firm. Journal of Business Venturing 22, 427-442.
Dean A. S., Wiklund J., Haynie J. M., 2009. Moving forward: Balancing the financial and emotional costs of business failure. Journal of Business Venturing 24, 134-148.
덧글