Understanding New Venture Failure due to Entrepreneur-Organization Goal Dissonance

Seshadri, D V R (2007) Understanding New Venture Failure due to Entrepreneur-Organization Goal Dissonance. Vikalpa, 32 (1). pp. 55-74.

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Abstract

New ventures tend to have an alarmingly high casualty rate. Those who take the most severe brunt in such failures are key managers, who unwittingly take on roles much beyond their formal job descriptions, in an effort to keep the venture alive, often ending up as ‘employee entrepreneurs.’ Employees taking ownership of their jobs far in excess of that specified by their formal roles, thereby manifesting entrepreneurial behaviour, are also referred to as intrapreneurs.This paper presents the real life case study (with names, identities, and situations disguised) of the chief executive of a start-up venture who tried to repeatedly salvage the start-up company from one crisis after another, over a span of seven years, when two successive promoters failed to deliver their part of the commitment through timely infusion of the required promoters equity. In addition, he also had to reckon with facing undue pressure from the promoters to cater to their short-term goals.Based on the case study of Global Optical Disc Company Ld., the author presents a model to better understand new venture failure arising out of goal dissonance between the promoter and the organization and proposes the following hypotheses: A low degree of psychological ownership by the professional top management and a low goal congruence of the promoter and the new venture can be lethal for a new venture.A high degree of psychological ownership by the professional top management and a high goal congruence of the promoter and the new venture could result in a likely success, provided the industry structure, strategy, financial structuring, etc., do not result in the creation of conditions to cause failure.The situation of a low degree of psychological ownership by the professional top management team and a high goal congruence of the promoter and the new venture may result in a weak beginning for the new venture despite heroic efforts of the professional top management team.A high degree of psychological ownership by the professional top management and a low degree of goal congruence of the promoter and the new venture would most likely result in an eventual failure of the new venture.The transition from an employee mindset on the part of the intrapreneurial chief executive in a new venture to that of an entrepreneurial mindset in the situation of distress in the new venture, due to failure on the part of the promoter, is not automatic.The paper concludes with lessons for those managers who may be put into similar testing by the fire situations. While there could be any number of reasons for the failure of entrepreneurial start-ups, this paper focuses in particular on the failure attributable to dissonance between promoters personal goals and the start-up organizations stated goals. Such lack of goal convergence is a phenomenon that occurs with alarmingly regular frequency. The paper describes some of the options that an employee-chief executive has under such adverse circumstances.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Seshadri, D V RUNSPECIFIED
Item Type: Article
Additional Information: The research article was published by the author with the affiliation of IIM Bangalore.
Uncontrolled Keywords: New Venture Failure, Intrapreneurship, Entrepreneurship, Goal Dissonance, Defining Moments, Global Optical, Compact Disc, Grounded Theory
Subjects: Marketing
Depositing User: Veeramani R
Date Deposited: 12 Apr 2019 13:30
Last Modified: 12 Apr 2019 13:30
URI: http://eprints.exchange.isb.edu/id/eprint/828
Publisher URL: https://journals.sagepub.com/doi/abs/10.1177/02560...
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