Untangling the complexity of innovativeness in new ventures: The interplay between causal entrepreneurial processes and social capital

Abstract

This study investigates how adopting causation process during early stages of venture development can impact long-term innovation outcomes directly and indirectly through its interactions with three forms social capital. To do so, we use a sample of 1,214 new ventures in the U.S. and offer several contributions to theory and practice. First, by drawing on theories of entrepreneurial approaches, social networks, and innovation, it advances the theoretical understanding of the intersection of these areas. Second, the study uses a longitudinal approach to offer empirical evidence supporting the enduring effect of decision-making logics during early stages of new venture development on long-term innovation performance. Third, the findings of this study suggest that the dimensionality of causation is complex as presented in the heterogenous effects of the dimensions of causation on innovativeness, ranging from positive, to negative, to nonsignificant effects. Lastly, it offers insights on the complex indirect effects of causal approaches on innovativeness in new ventures, as they can both diminish and enhance the benefits of the three forms of social capital.

Plain English Summary

How founders’ adoption of entrepreneurial approaches during early stages of venture development can impact long-term innovation outcomes directly and indirectly through its interaction with social capital. Innovation is critical for the success of new ventures, and entrepreneurs rely on decision-making strategies to create new and innovative products or services. The causal decision-making process, which represents predetermined, planned, and well-defined decision-making, promotes innovativeness in various settings (Sarasvathy, Sarasvathy, Academy of Management Review 26:243–263, 2001; Sarasvathy et al., Organization Studies 29:331–350, 2008, 2010; Dew, Sarasvathy, and Venkataraman, 2004; Alvarez & Barney, 2007). However, an interesting paradox emerges as organic, dynamic, and flexible mechanisms, such as social interactions, can also foster innovativeness (Carnabuci and Diószegi, Academy of Management Journal 58:881–905, 2015). Understanding how causal processes interact with other constructs, such as social capital, to either promote or impede innovative outcomes can guide entrepreneurs as they pursue opportunities. Additionally, it is important to understand the long-term implications of the entrepreneurial processes that founders adopt during the early stages of venture development. Taken together, this study investigates how adopting causal processes during the early stages of venture development can have enduring effects on long-term innovation outcome directly and indirectly through its interaction with social capital. To test these theoretical arguments, this study uses data from the second Panel Study of Entrepreneurial Dynamics (PSED II), which surveyed 1,214 U.S. entrepreneurs between 2006 and 2011 about their ventures. This study offers several contributions. First, by drawing on theories of entrepreneurial processes, social processes, and innovation, we advance our understanding of the intersection of these areas. Second, the longitudinal approach offers empirical evidence supporting the enduring effect of decision-making logics during early stages of new venture development on long-term innovation outcomes. Third, our findings suggest that the dimensionality of causation is complex as presented in the heterogenous effects of the dimensions of causation on innovativeness ranging from positive, to negative, to nonsignificant. Lastly, we offer insights on the complex indirect effect of causal approaches on innovativeness in new ventures.

Appendix

Tables 5, 6 and 7

Table 5 PSED II items used to represent 3 dimensions in EFA

Table 6 Results of EFA on a 50% sample of data

Table 7 PSED II Items included in EFA to measure Innovativeness