What do entrepreneurs create? understanding four types of venture (2024)

Book by: Michael H. Morris and Donald F. Kuratko

Review by: Zahoor Ahmad Paray (EDII)

The ‘What do entrepreneurs create? Understanding Four Types of Ventures’ is a significant addition to the understanding of venture creation. The book vividly illustrates the venture creation phenomenon. It has an illustrative description of what entrepreneurs create and how these ventures transform and become different entities.

This book explains the nature and requirements of four types of ventures that exist: survival ventures, lifestyle ventures, managed growth ventures, and aggressive growth ventures, and provides evidence to highlight venture creation globally.

This book explains why ventures of one type rarely change and what kind of venture a person can create given his risks, investments, and outcomes.

The gap in the existing research for venture creation theories has led to an emphasis on high-growth firms, while this book dictates and shows that all the kinds of businesses created are essential for the country.

This book clearly illustrates a new theoretical foundation for building new enterprises and the kinds of ventures created throughout. All these four types of ventures are helping to grow and generate a global entrepreneurial revolution.

Chapter 1: The Entrepreneurial Journey: intention versus Emergence Intention versus emergence

The distinguishing characteristic of an entrepreneur is that they create a venture (Gartner, 1988). Moreover, innovations bring about change and make life more comfortable. Businesses that come up with innovations must be innovative for future growth and sustainability. A business may look straightforward, but it is an odd and chaotic process that requires resources, overcoming obstacles, seeking customers, and much more. It is messy, chaotic, and ambiguous.

The problems in a business can be countless. An uncertain roof leakage may look small, but a thousand other issues are awaiting to befall an entrepreneur in the meantime. The entrepreneur gets to a particular stage and encounters obstacles where entrepreneurs play multiple roles, leading to learning and the emergence of enterprises.

It is essential to know that in entrepreneurship, some are pushed by necessity, while others are pulled by opportunity. Some are one-time entrepreneurs, and some emerge as portfolio entrepreneurs (Sarasvathy, 2009). A soda shop and Elon Musk's SpaceX are both ventures, and both are important. This diversity has important implications for our ability to explain and predict many aspects of the venture creation process.

Chapter 2: Venture Types: What Entrepreneurs Create?

Ventures can vary in multiple ways: innovation, expansion plans, market visibility, productivity, family involvement, and many more factors. There have been attempts to distinguish the various types of ventures, but the definitional aspects provided by the researcher make it difficult to contextualise the entrepreneurial venture.

The authors in this book decipher the types of ventures that emerge after ideation until sustainability, with a timeline of 5 years. Using 14 different factors, the authors find that four kinds of ventures work in every country and show the business's existence. They include:

Survival Ventures: Provide bare subsistence for the entrepreneur and their family, allowing for little more than a hand-to-mouth existence.

Lifestyle Ventures: Provide a relatively stable income stream for owners based on a workable business model and a maintenance approach to management.

Managed Growth Ventures: Have a workable business model and seek stable growth over time, as reflected in occasional launches of new products or new lines of business, periodic entry into new markets, a steady expansion of facilities,

Aggressive Growth Ventures are frequently technology-based businesses with solid innovation capabilities that aim for exponential growth and receive equity capital funding. The venture's launch is opportunity-driven, with the founders (usually a team) seeking to transform industries and create new markets.

Ventures represent a diverse population, and no two ventures are alike. While there is considerable variability within each category, the differences between the categories are core to the nature and functioning of each venture type.

3. Survival ventures: just getting by

Survival is a venture that struggles to stay afloat and stagnant for years together. They also have little to nothing left to reinvest in the business. There is a vast number of these survival businesses throughout the world.

Another critical perspective related to this is the commodity trap, which is selling something that is not meaningfully different from what many others in the same market are selling. Survival ventures are the first to face rising prices and costs, leading to lower margins and the decline or demise of business.

The microcredit revolution has been the main power behind this change. Of the four venture types, the survivalist is arguably the least entrepreneurial, and yet, in some ways, these individuals demonstrate highly entrepreneurial behaviour.

4. Lifestyle ventures: seeking stability

More than a survival business, which exists on a hand-to-mouth basis just covering costs, a lifestyle venture can be relatively profitable. These are small in size, independent, usually full-time operations with employees, often family-owned, with limited capacity.

It can be identified as a one-person show. One entrepreneur does everything and sometimes may have a team of a few, but that is always limited. A key differentiator from a survival venture is the labour intensity versus capital intensity versus technology intensity of the company's operations.

Lifestyle ventures use minimum technology, and innovation may also look minimal, and sometimes, the entrepreneur intends to do innovations. Lifestyle ventures are not simply "little big businesses."

5. Managed growth ventures: learning to fly

A managed growth venture is a unique entity that combines stability with the ongoing pursuit of opportunity, innovation with efficiency, and expansion with control. However, managed enterprises are to expand the nature and scope of the business.

For a venture to sustain growth, there are three basic requirements: growth potential, a desire for growth, and the ability to manage growth (Sexton and Bowman-Upton, 1991). Although managed growth occurs in innumerable ways, steady and consistent growth is most apparent.

6. Aggressive growth ventures: changing the world

This is the most refined and highly growth-oriented venture, with household names like Amazon, Dell Computer, Facebook, and Uber. These are technology-driven and technology-based innovative businesses. They are smaller in number but are hugely competitive and growth-oriented.

7. A resource-based perspective on venture types

For small firms, resources are more vital than strategy. Each venture type has a unique resource portfolio, which includes the properties of these resources and how the organisation has combined and leveraged them.

The resource-based view theory argues that resources have particular properties that, when present, can provide a competitive advantage (Barney et al., 2001; Wernerfelt, 1984). They include physical capital, financial capital, human capital, social capital, and organisational capital (Barney and Clark, 2007).

8. How do ventures develop unique identities?

Identity, which is more likely to be entrepreneurial identity in this book, is related to the type of venture an entrepreneur wants to create and develop. Identity distinguishes one from the other. Entrepreneurs may change their identity by growing from survival to a lifestyle or managed growth firm. Still, it is a difficult position to move from an operating business to an aggressive growth identity.

9. The fit between venture type and entrepreneur

Understanding the basic idea behind or what leads to creating a particular venture type is essential. It often needs to be decided which kind of enterprise should be made. Competencies, skills, and circ*mstances often lead to the creation of enterprises.

It is also essential to highlight that the enterprise makes an entrepreneur. The kind of experience they gain and receive leads to the emergence of an entrepreneur and enterprise together. To the extent that being in a venture moulds one into an entrepreneur over time, the question becomes how differences in the experiences involved with each of our four venture types affect the kind of entrepreneur one becomes.

10. Types within types

A significant portion of this book is dedicated to understanding the various forms of enterprise that emerge out of the entrepreneurial endeavours of different individuals.

The beginning point is recognising how the characteristics of the category affect and are affected by characteristics of the sub-categories.

11. Why all ventures matter: towards a portfolio perspective

Every venture created is essential for a country. It is not just the number but also the employment generated, patents created, products manufactured, growth gained, and employment developed. All these things make all these enterprises necessary.

Let us consider seven counterarguments reinforcing the importance of all four venture types. Costs of Entry and Exit, Efficiency and Failure, Job Creation and Employment, Ecosystem and Community Effects, The Emergent Nature of Venture Creation, and Human Capital Development.

All these characteristics are distributed among all these venture types and highlight a great deal of understanding of why all these types of ventures are essential. Entrepreneurial ventures have an indelible impact on the economies in which they are developed.

However, not all ventures are the same. They differ in size, growth rates, focus, owner motivations, resource requirements, risks, and eventual outcomes for society.

12. Venture types, public policy and ecosystem support

A goal of public policy and support efforts of economic development agencies, educational institutions, nonprofits, and others in the so-called entrepreneurial ecosystem should be to "let a thousand flowers bloom" regarding new ventures.

Although policymakers and community leaders increasingly recognise the value of entrepreneurship development, their approaches to fostering entrepreneurship tend to be piecemeal, disjointed, and of questionable effectiveness.

In a time that some have referred to as the "age of entrepreneurship" (Kuratko and Morris, 2013), a more coordinated, integrated, and holistic approach is needed, and this can only be accomplished if stakeholders at all levels engage in more strategic and innovative thinking.