Governing The Search For Value: A Preliminary Theory of Entrepreneuring

41 Pages Posted: 17 Mar 2016 Last revised: 21 Apr 2020

See all articles by Nathan Furr

Nathan Furr

INSEAD

Jackson A. Nickerson

Washington University in St. Louis - John M. Olin Business School

Robert Wuebker

University of Utah - David Eccles School of Business

Date Written: March 14, 2016

Abstract

Although both entrepreneurship and strategy scholars agree that search strategies are crucial for the creation and capture of new value, little research considers which strategies to use and under what conditions, when to change course, or how to allocate decision rights associated with these choices. This paper develops a theory of entrepreneurial search grounded in a governance perspective, showing how systematic cognitive biases give rise to search hazards that can lead to ineffective or inefficient—i.e., maladaptive—search. We identify and compare three alternative archetypal governance structures that can help to mitigate search hazards. Drawing from the literature on governance and financial contracting, we analyze how contracts between entrepreneurs and financiers vary in their costs and capabilities with respect to cash flow and liquidation rights, “entrepreneuring” rights, and control rights. Our theory predicts when different types of financing contracts, and hence governance modes, will be used between entrepreneurs and financiers.

Keywords: Entrepreneurship, Experimentation, Search, Governance, Problem-Solving Perspective

Suggested Citation

Furr, Nathan and Nickerson, Jackson A. and Wuebker, Robert, Governing The Search For Value: A Preliminary Theory of Entrepreneuring (March 14, 2016). INSEAD Working Paper No. 2016/16/STR, Available at SSRN: https://ssrn.com/abstract=2747458 or http://dx.doi.org/10.2139/ssrn.2747458

Nathan Furr (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Jackson A. Nickerson

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6366 (Phone)
314-935-6359 (Fax)

Robert Wuebker

University of Utah - David Eccles School of Business ( email )

1645 East Campus Circle Drive
Salt Lake City, UT 84112-9304
United States

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