[.ca] The Origin and Evolution of New Businesses (ISBN 0195170318)

Rich examples, interesting ideas, but inappropriate data:
Amar Bhide has written a richly illustrated book about new and growing firms, drawing eclectically on many social science disciplines. Although he makes frequent references to economics, he often invokes explanatory factors from cognitive psychology and organization theory. His resulting model thus has a strong ring of behavioral plausibility. Unfortunately, he draws on a database that is simply inappropriate for answering his central question: why do a small fraction of startups turn into promising firms, whereas the great majority do not? Bhide committed a fundamental methodological error: he selected only successful firms and then tried to infer what differentiated them from the (non-selected) unsuccessful ones. He surveyed 100 founders of companies that appeared on the Inc. 500 list in 1989 and drew upon on several hundred case studies by his students at Harvard, plus cases of successful firms drawn from business periodicals and his own research. Although he shows some awareness of the methodological problem thus created, he nonetheless injudiciously draws strong inferences from empirical regularities among the successful firms. Why is such selection bias problematic? Consider a hypothetical study, showing that 20 percent of the successful firms in the financial services industry were currently run by Harvard MBAs, compared to only 10 percent by Stanford MBAs. Would we be entitled to conclude Harvard MBAs were twice as successful as those from Stanford? What if we learned that Harvard MBAs started 80 percent of the firms in the financial services industry, compared to only 1 percent for Stanford? And, that most of the firms started by Harvard MBAs had failed? Now we see that Stanford MBAs are highly over-represented among the successful firms, compared to the initial population of startups, and that Harvard MBAs are substantially under-represented. Without information on the initial cohorts of firms starting out in an industry, we are in great danger of engaging in superstitious learning of the kind that Bhide actually reviews in his book (research conducted by Camerer, Kahneman, Tversky, and others). By relying on information from firms that made it onto the Inc. 500 list or into the cases written up by his students, as well as on case histories of FedEx, Walmart, Microsoft, and other successful firms, Bhide cannot tell us why or how those firms got there. Only a research design that allowed him to follow startups and growing firms over time would give him the dynamic data he needs to answer the questions posed by his extremely interesting model.

do these endorsers bother to read the book?:
I've got to wonder if the writers of all these glowing endorsements for this book bothered to read it. What an embarrassment if you ask me -- not for Bide who has done a great job of analyzing data and crunching numbers, but for these endorsers who make Bide's book sound like another in a series of how to grow a business books. It's not that all. Had they bothered to read it, they would have better advised prospective readers that Bide's is more a snapshot than a prescription, more a look at what is rather than why it is or how it got that way. On that level, it's a great book. As a how-to, not so much.

What a marvelous piece of work ....:
It is amazing how much information Bhide packed in to a reader friendly book. This book was uncomparably informative in uncovering the vast world of entrepreneurship.

Rigor for the Entrepreneurs and Concepts for Intellectuals:
This book provides both valuable practical insights for someone considering a new business and concise conceptual frameworks for those with an academic bent on the subject. Bhide makes excellent use of data to support his assertions, and this gives the book its academic flavor. But he also brings the subject alive with real world evidence and anecdotes. For example, he points to data that shows many entrepreneurs lack credentials one might expect to begin a successful business. He then explains a rational basis for the low credential (not to be confused with low skill) level of many entrepreneurs: that their opportunity cost is low because they "don't have the credentials and experience that could secure them highly paid employment." Hence they have less to lose. "\oI\cndividuals who face high opportunity costs...usually do not start small, boot-strapped ventures." Entrepreneurs often even avoid the emotional costs of quitting satisfactory jobs. He then provides the entertaining quote of John Mineck who started Practice Management Systems in 1982 while still employed by the Personal Care Division of Gillete, Inc.: "You could do something on the side very easily; they seemed to discourage hard work." But the book is by no means all humorous anecdote. It has heavy data, with charts and graphs that are not simply conceptual in nature, but quite empirical. Overall an excellent text for both the intellectually curious and the entrepreneurially inspired.

Insightful!:
The Origin and Evolution of New Businesses When Jann Wenner launched Rolling Stone magazine, he did no market research and considered himself merely an "amateur journalist." When Bill Gates and Paul Allen started Microsoft, they had no business plan, only a brainstorm that they should write a program in the BASIC computer language. Such seat-of-the pants planning is typical among entrepreneurs, says author Amar Bhide. Successful entrepreneurs don't need unique ideas and long resumes, Bhide writes. Rather, they must be able to adapt quickly to changing business conditions, and they must enter industries in a state of upheaval, where established players are lacking. Bhide offers a revealing look at the characteristics that make for successful start-ups. In spite of his often-dense prose, Bhide gives plenty of real-world examples to illustrate his concepts. We \o...\c recommend this book to entrepreneurs and to those thinking of starting their own companies.