Theory Building in the Presence of 'Randomness : ' the Case of Venture Creation and Performance

Considers the entrepreneurial process as experimentation and learning dominated by random events. The experimentation that occurs with venturing can be characterized as a learning process, which allows entrepreneurs to derive higher output from factor inputs as the entrepreneur develops over time. As a result, research with static equilibrium embedded in the theory must be reconsidered. This analysis critiques the prior research conducted using various theoretical frameworks, and lays out a different approach that focuses on process. The entrepreneur provides idiosyncratic interpretations based on belief, frames of reference, and domain of operant behaviors that affect the development and success of the venture. The sequence of experiences and events of the entrepreneur and the venture are also important, as learning is held to be path-dependent and the specific pattern of events can dramatically impact the learning process. The venture's success is also a result of feedback, which comes from its capacity to acquire information and process the resulting feedback. Intermixed with the learning that ventures do are random events, which can have a significant impact on the success of the venture. A venture's ability to insulate itself and cope with these random events is key to survival. The goal of this analysis is to aid in answering fundamental questions related to venture development and success. (SRD)