DANCEST 805 Lecture Notes - Lecture 15: Management Buyout, Social Capital, Hypothecated Tax
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Habitual entrepreneurs
• Novice entrepreneurs – individuals with no prior minority or majority firm ownership
experience, either as a firm founder or acquirer
o Currently own minority or majority stake in an independent firm that is either new
or purchased
• Habitual entrepreneurs – individuals who hold or have held minority or majority stake in
two or more firms, at least one of which was founded or purchased
o Serial entrepreneurs – individuals who have sold/closed at least one firm that they
had majority or minority claim in
▪ Currently have minority or majority stake in single independent firm
▪ Engage in sequential entrepreneurship
o Portfolio entrepreneurs – individuals who currently have minority or majority
ownership stakes in two or more independent firms
▪ Engage in concurrent entrepreneurship
• Opportunity-based conceptualisation of entrepreneurship --> involves identification and
exploitation of at least one business opportunity
• Serial and portfolio acquirers have become owners of established independent firms
o Includes individuals from outside who undertake straight purchase of management
buy-in (mbi)
o Also includes those from inside the firm who undertake a management buy-out
(mbo)
o Some buyouts may involve the selling and re-purchasing
▪ May be secondary buy-outs – same management acquires large stake in firm
through financial restructuring
The habitual entrepreneur phenomenon
• Habitual entrepreneurship is widespread
• Difference in widespread-ness related to
o Infrastructural variations
o Cultural variations
o Government policies
o Attitudes towards entrepreneurship and risk
• Demographic characteristics of the different entrepreneurial individuals
o Habitual entrepreneurs fairly young when they start first business, predominantly
male
▪ Have acquired more resource pools than novice entrepreneurs
• Can impact subsequent behaviour and performance
▪ Generally more highly uneducated and have higher levels of managerial
human capital
o Portfolio entrepreneurs generally more likely to not have parents that are business
owners
Motivations for habitual entrepreneurship
• Initial motivations for creating/purchasing business may impact opportunities identified
o Later impact on strategies adopted
• Habitual entrepreneurs report variety of motivations
o For independence and autonomy
o For personal income and wealth creation
o To grow the activities of an existing business
• Reasons for start-up vary --> with type of entrepreneur and type of locality
o Rural portfolio founder --> welfare concerns
o Novice/portfolio urban founders --> autonomy reasons
▪ Opportunity appeared
o Novices -> wants to achieve something and get recognition
o Serial urban --> continuation of family tradition
• Materialistic reasons come fore during initial stages
o Monetary gain less important in subsequent stages
▪ Particularly as less novel ventures are desired
• Three main motivations for starting group of businesses
o Growth
o Entrepreneurial dynamics
o Desire for capital accumulation
• Portfolio entrepreneurs motivated to add new ventures for the following reasons