Welcome to a TAG Finance Seminar Series Presentation

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Welcome to a TAG Finance Seminar Series
Presentation
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Todays Presentation
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Keynote Presentation Jake Messersmith PhD,
George Washington University Panelists Michael
S. Salvador PhD, Michael J. Coles College of
Business, Kennesaw State University Lance
Weatherby, Venture Catalyst, ATDC Moderator Don
Campbell, President and CEO, Virtual Management
Technologies
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• TRANSFORMING CATERPILLARS INTO BUTTERFLIES A
  STUDY OF EMERGENT ORGANIZATIONS
• JAKE MESSERSMITH, PH.D.
• George Washington University

This research was funded in part by the Ewing
Marion Kauffman Foundation, the Department of
Management, Marketing, and Law at the University
of Kansas, and the School of Business Ph.D.
program at the University of Kansas. The
contents of this publication are solely the
responsibility of Jake Messersmith.
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Presentation Overview

• Research Purpose Definition of Terms
• Conceptual Overview
• Study Description
• Descriptive Results
• Results Implications
• Key Takeaways
• Concluding Thoughts

Digital Health Group
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Research Purpose To analyze the role that
managerial values and practices play in the
success of new and emerging companies in the
high-tech sector.
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• Key Terms
• Entrepreneurial Orientation (EO)
• A firm-level value emphasizing continued
  innovation, risk-taking, and pro-actively
  assessing market trends.
• Example Google
• Partnership Philosophy
• A managerial value emphasizing collaboration and
  open-communication between business
  owners/managers and employees.
• Example Ben Jerrys
• High Performance Work Systems (HPWS)
• The constellation of managerial practices related
  to selection, training, development, and
  compensation that are designed to attract,
  retain, and motivate employees.
• Example The SAS Institute

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• Conceptual Model

Entrepreneurial Orientation
Sales Growth
Partnership Philosophy
Turnover
HPWS
Innovation
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• Research Questions
• RQ1 What impact do high performance work
  systems have on various measures of firm
  performance?
• RQ2 What role does a philosophy of partnership
  play in the performance of growing firms?
• RQ3 What impact does an entrepreneurial
  orientation have on the performance of emerging
  organizations?
• RQ4 Do high performance work systems moderate
  the relationship between entrepreneurial
  orientation and firm performance in emerging
  firms?
• RQ5 Do high performance work systems moderate
  the relationship between partnership and firm
  performance?

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• Research Rationale
• Salience of entrepreneurial firms
• Strong connections between HPWS and EO and
  performance in large firms (e.g., Arthur, 1994
  Covin Slevin, 1991 Huselid, 1995 Guthrie,
  2001 Youndt, et al., 1996).
• Further understand the management values and
  practices that lead to success in new ventures
  (Baron, Burton, Hannan)

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• Study Background
• Targeted Sample Small firms in the high-tech
  sector (computer hardware, software, services)
• Initially contacted approximately 2,000 small and
  relatively young ventures across the U.S. with an
  online survey
• Received 215 responses (10.7 response rate)
• All firms used in analysis had at least 10
  employees and reported being less than 10 years
  of age.

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• Sample Characteristics
• Individual Level
• 89.7 of respondents were male
• Average age was 47 years
• 91 had received a minimum of a Bachelors degree
• Firm Level
• Average age 7.04 Years
• Average EEs 49
• Median EEs 25
• Average 2005 Net Sales 2.2M
• Median Net Sales 1.64M
• 84.3 still being led by firm founder
• 83.8 did not receive VC financing

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• HPWS Individual Practice Use

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Research Question 1

Partnership Philosophy
HPWS
Sales Growth

Turnover
Innovation

• A 1 standard deviation increase in HPWS
  utilization was associated with a 7.7 increase
  in sales growth
• No relationship was found between HPWS and
  turnover
• A positive relationship was found between HPWS
  and Innovation

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Research Question 2

• Research Results Partnership and Firm Sales
  Growth, Turnover

Partnership Philosophy
Sales Growth
-
Turnover
A 1 standard deviation increase in partnership
was associated with a 7.9 increase in sales
growth A 1 standard deviation increase in
partnership was associated with a 1 decrease in
turnover.
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Research Question 3

• Research Results EO and Firm Sales Growth

Entrepreneurial Orientation
Sales Growth
No significant relationship was found in
regression and structural equation modeling
analysis
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• Research Question 4
• - Pairing HPWS with an Entrepreneurial
  Orientation was significantly associated with
  higher levels of sales growth
• Research Question 5
• - Pairing HPWS with a Partnership Philosophy was
  not significantly associated with sales growth

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• Key Takeaways
• Employment practices matter, even in small firms.
• Merit-based compensation and promotion are
  particularly important.
• Emphasizing a partnership between owners/managers
  and employees matters.
• Firms with an entrepreneurial posture benefit the
  most from utilizing HPWS.
• A competitive advantage can be gained through a
  system of practices that help to select, retain,
  and motivate employees.

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• Key Findings from Qualitative Research
• Finding and retaining valuable employees is a key
  concern.
• Entrepreneurs develop unique strategies for
  overcoming staffing and retention issues.
• Innovative profit sharing
• Selection based on fit
• Building commitment and loyalty to overcome
  salary differences

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• Study Limitations
• Sample Size
• Response Rate
• Single Respondent per Firm

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• Conclusion
• Firm values and practices designed to increase
  and motivate human capital improve firm
  performance, particularly in more entrepreneurial
  firms.

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Questions?