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GENEAOLGY AS EVOLUTIONARY DYNAMICS. Shmuel Ellis Israel Drori Zur Shapira. The study deals with 3 related issues. Entrepreneurship. Israeli Hi-Tech. Evolution Of Industrial Sectors. What is the source of the Israeli Hi-Tech sector?.
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GENEAOLGY AS EVOLUTIONARY DYNAMICS Shmuel Ellis Israel Drori Zur Shapira
The study deals with 3 related issues Entrepreneurship Israeli Hi-Tech Evolution Of Industrial Sectors
What is the source of the Israeli Hi-Tech sector? • What is the secret of the Israeli Hi-Tech success? • How can we explain the rapid growth of this sector? • Can we find the answer in the characteristics of the founding parents of this sector and the genesis events of their founding firms? • Are founding parents with different entrepreneurial tendencies may have different effect on the potency of their progenies?
Existing Literature (in short) • Founders of new firms inherited their cultural beliefs, technological knowledge or managerial blueprints from industry incumbents through their parents (Franco, 2005; Klepper 2001, 2007, Phillips, 2000, 2005; Burton and Beckman, 2006). • According to this approach, founders of spawned start-ups carry with them ‘genes’ of experiences, skills, practices and knowledge and apply them to the new organization and consequently shape ‘the new firm behavior’.
Goals • We are not the first to study the dynamic interrelationships between founding firms and their spin-outs. However: • In contrast to previous research, we argue that parents –progenies relations may not fully explain the evolutionary dynamics of the emerging process of new industries as both parent and progenies are only a fraction of the entire process. • We suggest to adopt historical-genealogical perspective and to study. More specifically, to examine: • (a) how the entrepreneurial traits of the founding parents are being formulated, and -- • (b) how this trait and related blue-prints of incumbent firms are transferred by progenies along the affinity line (several generations) and affect the potency of the whole genealogy.
Genealogy: Definition • A genealogy is a record of descent or linage of a group from its ancestors to the recent generations. • By and large, the genealogical ties are modeled according to the natural relations of genealogical parenthood. However, inclusion into the genealogy may also be through affinity such as: mergers and acquisitions or founding event with an exogenous partner.
Organizational Genealogy: Endogenously Affiliated Members A firm is endogenouslyaffiliated with a particular genealogy if it is related by "birth“. We have several types of “birth”s. • Independent Startup (De Novo):A firm that was founded by 'deserters', ex-employees of one of the firms in the genealogy. In these offsprings, the original organization of the founders has no ownership stakes. • Acquisition: A firm that was acquired by the original organization or by one of its offsprings. • Spinoff: A firm that used to be a division of the original organization or of one of its offsprings, and became a separate organization. In these offsprings, the original organization has ownership stakes. • Initiated: A firm that was established as an initiative of the original organization or of one of its offsprings.
Organizational Genealogy: Exogenously Affiliated Members • A firm is exogenously affiliated with a particular genealogy if its origin is within a separate genealogy and related to the former by "marriage", making the joiner a co-founder, co-acquirer, or co-merger. All the firms from exogenous origins are affiliated with at least two genealogies, and are the nodes which link different genealogies. We call these firms “external affiliates” of the genealogy.
Research Model Genesis Events Entrepreneurial Tendencies Potency (Genealogical Growth) Imprinting Potential
A two dimensional model for genealogical evolution or potency • Entrepreneurial tendencies. • Imprinting potential: the degree to which the organizational blueprints, shared beliefs and values set up by the founders, can be transferred through the different generations of the genealogy.
Interviews: Identifying the Genealogies Data sources: companies internet websites, IVC, D&B, newspapers, press releases, etc. The first phase of the project focuses on the communication sector. We have 6 completed genealogies Tadiran, Telrad, ECI, Rad, Fibronics and Comverse). Number of firms (exogenous and endogenous): 1039. Data
Table 2: Major genesis events of the founding firms of the five genealogies
Table 2: (cont’d) Major genesis events of the founding firms of the five genealogies
Table 1b: Distribution of firms in each genealogy according to type of genealogical parenthood
Table 3: Potential imprinting indicators of the five founding firms
Ranking the 5 Genealogies along the 2 Dimensions RAD High imprinting potential Fibronics Comverse Tadiran ECI Low Entrepreneurial Tendencies High Entrepreneurial Tendencies Telrad Low imprinting potential
Table 4a: Potency measures of the five genealogies: Volume and pace of growth
Table 4b: Potency measures of the five genealogies across years: Potency rate
Conclusions • Diverse genealogical evolution which exhibits varied structures and inheritance characteristics play a key role in the emergence and growth of new industrial sectors. • The genealogical evolution is affected not only by the nature of the environment and the population that resides within it, but also by the capacity for internal imprinting of values such as entrepreneurial inclination. Each genealogy has specific structural characteristics that reflect its potency.
Overall the application of genealogical research to the study of the emergence of new organizational forms and new industrial sectors is still terra incognita. • More research should be done to test the genealogical effect on firms’ absorptive capacity, innovation potential and performance
