Institutional drivers of born-public ventures
| Date | 12 March 2018 |
| Pages | 14-33 |
| Published date | 12 March 2018 |
| DOI | https://doi.org/10.1108/JEPP-D-17-00012 |
| Author | Kaitlyn DeGhetto,Trey Sutton,Michelle L. Zorn |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Institutional drivers of
born-public ventures
Kaitlyn DeGhetto
University of Colorado Colorado Springs, Colorado Springs, Colorado, USA
Trey Sutton
Robins School of Business, University of Richmond, Richmond, Virginia, USA, and
Michelle L. Zorn
Raymond J. Harbert College of Business, Auburn University, Alabama, USA
Abstract
Purpose –The purpose of this paper is to identify and theoretically delineate the government-based
institutional drivers of “born-public ventures”–ventures that seek to fulfill government contracts or sell
goods and services to government agencies.
Design/methodology/approach –The authors develop theory that explains how the government
influences the pursuit of public sector opportunities, thereby influencing where new ventures expend their
finite effort. Specifically, the authors use institutional theory to delineate the regulatory, cognitive, and
normative drivers of born-public ventures. In doing so, the authors highlight both the government’s
regulative and non-regulative institutional influences. Finally, the authors present a research agenda to
encourage further understanding of this important phenomenon.
Findings –The authors find that the government can affect the allocation of finite entrepreneurial effort
toward or away from public sector opportunities by using regulative, normative, and cognitive institutional
forces. This influence is important because entrepreneurship targeted at the public sector likely has broad
implications for the economy and society as a whole.
Originality/value –Despite recent attention to questions about entrepreneurial allocation, scholars have
largely overlooked the importance of why some new ventures choose to allocate their effort toward public
sector opportunities. Given the growing number of public sector opportunities andthe potential economic and
societal implications associated with pursuing these opportunities, research is needed to understand this
allocative choice. By introducing the phenomenon of born-public ventures and outlining important research
questions, this theoretical paper provides the foundation for further work on this topic.
Keywords Born-public ventures, Institutional theory, Entrepreneurial allocation, Entrepreneurship,
Public sector, New ventures, Public policy
Paper type Conceptual paper
More than 25 years have passed since Baumol wrote that “policy can influence the allocation of
entrepreneurship more effectively than it can influence its supply”(1990, p. 893). From that
prompt, scholars have addressed questions related to where new ventures choose to expend their
efforts based on the payoffs available (Boettke and Piano, 2016). For example, scholars have
studied allocation between high-growth and non-high-growth entrepreneurship (Bowen and De
Clercq, 2008), between high-impact and high-growth entrepreneurship (Stenholm et al., 2013),
between opportunity-driven and necessity-driven entrepreneurship (McMullen et al., 2008), and
among rent seeking, rent extraction, productive, and leisure activities (Dong et al., 2016).
Understanding why new ventures choose various types of activities is important considering
that entrepreneurial effort is finite, and, as we discuss below, allocation decisions can influence
venture success as well as broader economic outcomes.
While it is clear that prior research on entrepreneurial allocation has made important
contributions to our understanding of entrepreneurial activity, these studies, as well as the
Journal of Entrepreneurship and
Public Policy
Vol. 7 No. 1, 2018
pp. 14-33
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-D-17-00012
Received 28 July 2017
Revised 16 October 2017
Accepted 17 October 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
The second and third authors contributed equally to the development of this manuscript and are listed
alphabetically.
14
JEPP
7,1
broaderfield of entrepreneurship research, have largelyoverlooked animportant phenomenon:
new ventures that allocate efforts toward public sector opportunities. Thus, we highlight the
unique importance of “born-public ventures,”which we define as new ventures that seek to
fulfill government contracts or sell goods and services to government agencies. Considering the
substantial demand of the US Government, and governments worldwide, understanding how
public sector demand attracts the efforts of new ventures is an important pursuit for several
reasons. First, the public sector is likely to present different economic growth opportunities
than the private sector. In general, the goods and services procured by the government are
intended to serve public interest, whereas those in the private sector are market driven
(Klein et al., 2010). Second, public sector opportunities represent an extra-legal mechanism for
the government to influence private sector activity. Firms selling to the government must
adopt certain practices that may diffuse to other firms not engaged in private sector
entrepreneurship (e.g. higher minimum wage). Third, public sector opportunities hold the
potential to significantly affect entrepreneurial demography. In the USA, approximately 12.6
percent of the population is African American, but only 9.5 percent of business owners are
AfricanAmerican (McManus, 2016).Furthermore, thereis a significant disparity in saleswhen
comparing minority- and non-minority-owned firms (see Table V, McManus, 2016).
Governments may dictate, as the US Government does, that a certain portion of government
spending must be awarded to minority-owned firms. Thus, better understanding born-public
ventures has implications for new ventures, the government, and the economy as a whole.
With these implications in mind, we ask: What directs new ventures toward the pursuit of
public sector opportunities? In answering this question, we make three contributions to the
entrepreneurship and institutional theory literature. First, we extend the notion of
entrepreneurial allocation by developing theory to explain how a powerful institutional actor
–the government –has the ability to affect perceptions of public sector opportunities by shaping
regulatory, cognitive, and normative forces. This helps us to predict which opportunities new
ventures target, public or private. Prior research has primarily focused on predicting levels of
entrepreneurial effort rather than the type or allocation of that effort. However, Baumol’s(1990)
thesis underscored how allocation of effort has important economic implications. Following his
foundational work, the limited studies that evaluated allocation primarily focused on
high-growth, innovative opportunities (Bowen and De Clercq, 2008; Stenholm et al., 2013), or
allocation by motive (McMullen et al., 2008). Yet, the allocation of new ventures toward the public
sector can have implications for economic growth and societal welfare, and thus, is an important
type of entrepreneurial effort to understand. Second, in developing our theory, we also explain
how government action, which has largely been treatedaspartoftheregulative institutional
pillar, also can have cognitive and normative institutional effects. Whereas Holmes et al. (2013)
showed how informal institutions affect government action, we explain how government entities
use informal institutions to affect the private sector. Finally, because this is an introductory
theoretical examination of born-public ventures, we contribute by offering a future research
agenda. As previously noted, research on why new ventures choose the public sector over the
private sector is limited. However, existing studies make convincing arguments regarding the
importance of entrepreneurial allocation for the economy. Thus, in order to advance research in
this area, we outline multiple theoretical and empirical avenues for future research.
In what follows, we provide an introduction to born-public ventures, build on the
institutional theory literature to develop propositions related to entrepreneurial allocation to
the public sector, and finally, discuss avenues for future research.
Born-public ventures
Born-public ventures are new ventures that seek to fulfill government contracts or sell
goods and services to government agencies. Much like existing literature on “born-global”
firms, which are “business organizations that, from or near their founding, seek superior
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drivers
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