October 23, 2009

Entrepreneurship and New Venture Creation Exercise 1

Examine an industry that you are familiar with, and assess the nature of the start-ups in that industry. Give examples of no more than four of these start-up firms and allocate them to Bhide’s categories. Why might this matter to an incumbent firm?

All firms have a natural evolution like any living things, some day are created after growth, research the mature and finally died and / or transform. Depending of the first phases of the each business and follow the Bhide’s theory there are four types of business that are: marginal business, promising start-up that can follow evolution in VC-backed start-up or corporate initiatives and the last type y the revolutionary ventures.

The main factors that affect to the type of business are the Investment and Uncertainly. Investment refer to the irreversible commitment of fund, reputation or other resources that the individual or firm undertaking the initiative makes with the expectation or earning a return and the uncertainly refer to unmeasurable and unquantifiable risk (Frank Knight, 1921).

I have some knowledge about the IT industry but to illustrate this exercise I would like to give some examples in other sector as are the retail industry mainly the bakery and diary sectors.

The companies which levels of investment and uncertainly are low, belongs to the marginal business. Some examples are mobility sellers of diary products. One example of company with promising start-up could be DANONE that is a company that started to operate in Spain at the middle of the last century, and now is a very big multinational and is example of corporate venture. It started with a low level of investment and with high degree of uncertainly. BIMBO is an example of company that started to operate in Spain at the middle of the last century with a medium-high level of investment and uncertainly because it was a company that started with capital of Mexican investors and could be an example of the type of VC-backed start-ups.

About the revolutionary ventures type of business is complicate to identify it in this industry because it is very mature market and is very is difficult to launch a venture that ensures a high level of profits. But companies as DANONE can launch a unit of new healthy products. Using its knowledge in the market, the possibilities of inversion monetary, resources and technology can be a example of revolutionary venture with high profit.

As conclusion I would like to remark the importance that each company knows its type of business. These types or archetypes can help us build a compressive map of the typical features of entrepreneurial activity and the entrepreneur can be ready to learn of previous experiences.


Andrew Burke (2009). ‘Entrepreneurship and New Venture Creation’ Study Notes, Warwick Business School.

Amar Bhidé (1999), 'The Origin and Evolution of New Businesses'. The Oxford University Press.

- One comment Not publicly viewable

  1. Harminder Singh

    Hi Luis,
    an appropriate use of Bhide, however because it was an historical example it has meant that you have not fully considered (or are able to) to look at how incumbent firms may react and so is incomplete – I suggest you at least make some general comments e..g imagine Danone looking at a promising start up which produces an alternative health drink?

    24 Oct 2009, 20:13

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  • Hi Luis, interesting to hear what happened in a real life situation – in your conclusion it would be… by Harminder Singh on this entry
  • Hi Luis, an appropriate use of Bhide, however because it was an historical example it has meant that… by Harminder Singh on this entry
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