'Venture Capital for the Future - Implications of Founding Visions in the Venture Capital Setting'
Ph.D. Dissertation by Miriam Garvi, Jönköping International Business School
Chapter Two: Human Initiatives in the Venture Capital Setting (pp. 23-44)
Understanding human initiatives
Historically,
various paradigms have promoted a rationalistic view of research,
seeking, in the words of Elliot Eisner and Kimberly Powell, to
“...advance a conception of scientific rationality free from forms of
feeling that they believed had little or nothing to do with matters of
truth.” (2002:132; cf. Christians 2000). In argument with contemporary
empiricists who advocated such a view, German philosopher Wilhelm
Dilthey employed two different verbs to distinguish between the
divergent purposes of opposing strands of research; erklären (explain)
and verstehen (understand). Whilst emphasising the role of Erklären in
the study of nature, Dilthey argued for the study of human conduct to
be based on Verstehen, moving away from the empirically verified,
demonstrated and explained towards interpretation and understanding
‘from within’ (in Martin 2000). In the move from objectivist to
subjectivist views of research lies implicit the recognition that human
initiative is not readily reduced to formulae of cause and effect,
bringing focus to a diversity of interpretive perspectives.
This
research product is a work of exploration, conversation and reflection
based on my own experience and that of others who have volunteered
theirs as ‘empirical evidence’ subject to interpretation. Here the
researcher is active in processing and interpreting much like a crafter
of knowledge (see Andersen, Borum, Kristensen & Kamøe 1995). A
research initiative is taken within the framework of a life unfolding,
as we are acting out our roles as social inquirers. Such a process is
difficult to adequately convey with reference to the by now plethora of
labels for paradigms and perspectives. However, regardless of the
labelling of one’s particular position, research involves dealing with
issues and points of tensions which serve to shape one’s identity as a
researcher:
... what we face is not a choice of which label –
interpretivist, constructivist, hermeneuticist, or something else –
best suits us. Rather, we are confronted with choices about how each of
us wants to live the life of a social inquirer. (Schwandt 2000:205).
In this chapter, I will discuss such choices by articulating the focus for my research and the process as it unfolded.
When an initiative bears meaning and purpose
Interpretitive
research departs from a notion that the world is, to some extent,
interpretable (see Schwandt 2000) and that it is therefore meaningful
to strive to understand human action, even if such action can never be
predicted. As Barbara Czarniawska argues, “... if sense-data were to
become the basis for the formulation of laws, all reference to
intentions, purposes, and reasons – all that which changes behavior
into a human action – would have to be removed.” (1997:12). The purpose
of understanding something, which follows from (inter-subjective)
interpretation, makes sense when we see human actions as manifestations
of intentions, purposes and reasons. To bring an active dimension of
initiative into play, is, to use the language of sociologist George
Mead, to acknowledge an ‘I’ in interplay with a ‘me’ that brings with
it a sense of freedom and of choice (1934 in Hatch & Schultz 2004).
Some may argue that this serves to distinguish the human being from the
animal or the robot – separating ‘motivation’ from ‘movement’,
initiative from response (Herzberg 1971). Psychiatrist Viktor Frankl,
founder of logotherapy, based this so-called third Viennese school of
psychoanalysis on the idea that the search for meaning and fulfilment
is inherent to the human condition (rather than the ‘lust principle’
held forth by Sigmund Freud or the ‘will to power’ suggested by Alfred
Adler; see Frankl 1959/2006; Scully 1995), and that what is considered
meaningful by any one individual is subjectively determined. In this
sense, choices we make serve to define who we are, but they are also a
reflection of how we understand ourselves and what we consider to be
meaningful.
The interplay of ‘I’ and ‘me’ opens up for diverse
motives and conduct, triggering one’s curiosity as to the intended
purpose of a particular initiative – such as the founding of an
enterprise. With motivation rather than movement, a similar initiative
may be taken by two people but for entirely different reasons,
depending on the particular intentions of each of these two
individuals, coloured by their own particular subjective filters. In
her book on the founding of Massachussetts, Dorothy Carpenter contrasts
the ideals and ambitions of two colonists, who each played a role in
shaping the nation.”The leaders of the two settlements were motivated
in very different ways, and it is from the study of these men that we
can gain insight into the influence both colonies had on the heritage
of the nation.” (2004:vi). Carpenter’s manuscript illustrates how two
individuals, though faced with a similar crossroad, came to choose
diverging pathways. It reflects the different implications entailed by
fundamental differences in terms of motivation, even though the two
initiatives could be identically labelled as ‘the founding of a
settlement in Massachussets’. And we are faced with an element of
unpredictability, where a human being may choose an unconventional
path, and where the actions of one individual may have a bearing on a
wider context.
When human nature is reflected in (business) initiatives
The
discussion above reflects my beliefs about human nature and the role of
human beings in a wider social and historical context. Unlike many
other disciplines, such beliefs are at the centre of social sciences,
“...since human life is essentially the subject and object of
inquiry...”, as Gibson Burrell and Gareth Morgan observe (1979:2). Some
theoretical traditions base their theories on the assumption that man
is opportunistic – i.e. strives to maximise his own utility, be it at
the expense of others. Other traditions, such as the human relations
movement, have sprung from the opposite assumption that man strives
towards a higher level of being; what is often referred to as
self-actualisation (see Maslow 1954/1987). Reflecting on how human
nature is captured in theories of economics and social sciences, Amitai
Etzioni turns attention towards the complexities of human (economic)
life:
Are men and women akin to single-minded, “cold” calculators,
each out to “maximize” his or her own well-being? … Is society mainly a
marketplace, in which self-serving individuals compete with one
another...? Or do we typically seek to do both what is right and what
is pleasurable, and find ourselves frequently in conflict when moral
values and happiness are incompatible? (1988:ix).
Empirical
evidence on opportunistic behaviour, illustrated by recent scandals in
governance, highlights the need for agency mechanisms to govern
relationships. But the inevitably self-maximising nature of man is put
into question by individuals who value a concern for the collective or
for others. Calls for a principle of complexity challenge a ‘separation
thesis’ which considers the realm of ethics/morality as distinct from
that of business/economic activity. As Edward Freeman and Robert
Phillips (2002:343) argue, “What is missing is a complex psychology of
the actors in business. Surely, some are self-interested, and, just as
surely, some are other-regarding.” Such complexity has fuelled debates
on business and ethics, highlighting tensions between stockholder and
stakeholder, in terms of, for instance, who a business is for and whose
interests it should consider (see Freeman 1994) Likewise, it has long
puzzled motivation theorists, looking to identify a theory of
motivation that will reconcile the different conceptions of human
nature (e.g. Steel & König 2006).
The apparent complexity of
human nature is delicate to handle in theory (cf. the ‘standard story’
in Freeman & Phillips 2002). In the business setting, it tends to
be narrowed down to the pursuit of profits, a pathway that was
advocated by Milton Friedman in his notorious phrase “The social
responsibility of business is to increase profits.” (1970; cf. Jensen
2001). Some will go so far as to assert that the pursuit of profits is
the essential purpose or reason for a business organisation to exist
(raison d’être; see definition in Hirsch, Keth & Trefil 2002), and
that the adherence to any other kind of mission or ideal is a matter of
gaining legitimacy (see Thøger Christensen & Cheney 2000). And here
discourse becomes à la fois descriptive and normative, as ‘value
maximisation’ or ‘profit maximisation’ are seen as the real and sole
purpose for business in a world where market forces will ensure a
self-regulative system. In effect, the ‘language of money’, as Peter
Pruzan points out, narrows down possible options to one single end;
“With the aid of our time’s alchemists – economists – money has been
transmuted from a means to the end.” (1998:1383). At issue is our
conception of human nature and of intended purpose of initiatives
within the business setting, where the institutionalisation of a given
end leaves the complex simplistic.
Chester Barnard once wrote about
business organisations that “…non-economic motives, interests, and
processes, as well as the economic, are fundamental in behavior from
the boards of directors to the last man.” (1938/1968:xxxi). In argument
for a satisficing theory of decision-making, Herbert Simon (1959)
discusses the utility maximisation of an entrepreneur, allowing for the
pursuit of ‘psychic income’ alongside the pursuit of profits.
Reflecting on the role of vision in the business setting, Mark Lipton
proposes that “Profit is the metaphorical equivalent of the oxygen,
food, and water that the body requires. They are not the point in life,
but without them, there is no life.” (1996:87; cf. discussion in
Schwarz, Kerr, Mowday, Starbuck, Tung & von Glinow 2006:358). In
this sense, what may very well be the very ‘lifeblood of an
organisation’ (see Mintzberg 1979) can be found in aspects beyond
financial performance. If we hold this to be probable, then should not
a diversity of motives, interests and processes, both economic and
non-economic, be left open to investigation? Such research would then
be in accordance with a principle of complexity acknowledging that
“..human beings are psychological creatures capable of acting from many
different values and points of view.” (Freeman & Phillips 2002:343).
Founding visions in the limelight
Conflicting
positions as to human nature and to the purpose of business can be
discussed normatively or be treated implicitly assumptions underlying
the issues we identify and the questions that we pose. It is difficult
to envisage a consensus view on human nature as it relates to larger,
existential issues. But precisely because such a fundamental aspect of
the human experience remains unpredictable, I will take a step back so
that the intended purpose of a particular initiative is left open to
investigation. Below I discuss visions for founding as a helpful
concept for understanding business initiatives (in the venture capital
setting).
From a vision that symbolises meaning...
There
seems to be a strong interest today in ascribing meaning to
organisational life – consistent with a growing concern with issues
such as organisational identity (see Cornelissen, Haslam & Balmer
2007), where focus lies on understanding who we are, why we are here,
why we are doing this now and what does this mean? (Albert in Whetten
& Godfrey 1998:276). The connection between a perceived sense of
meaning and motivation is not a novel idea. With Herzberg’s ideas of
job enrichment in the workplace emerged the realisation that a sense of
accomplishment and doing a meaningful job are important keys to more
sustainable motivation (cf. Hackman & Oldham 1975). Incorporating
such elements into working life became an interesting challenge, as a
way of dealing with employee alienation, i.e. a sense of detachment
from or apathy towards one’s work. The interplay between identity and
motivation can be seen as a leadership problem. In their book ‘In
Search for Excellence’ (1982/2004), Tom Peters and Robert Waterman
capture the sentiment in the heading of chapter three: ‘Man waiting for
motivation’.
Such a vacuum in meaning is no less acutely felt in a
post-industrial society. As Mats Alvesson contends, we are now living
in an age of “...real problems with the meaning of work...” (1990:375),
where the role of leadership becomes the ‘management of meaning’ and
interest in motivational aspects can be seen as a ‘surrogate for
meaning’. In fact, as Abraham Zaleznik argued, leadership distinguishes
itself from management because it deals with inspiration, vision and
human passion (1977; see also Bennis 1989). Here it is not uncommon to
refer to a ‘vision management’ (e.g. Andersen 1987), which places
emphasis on leading the future with visions rather than strategic
plans, as a means of motivating people towards new achievements, and of
implementing change (cf. ‘leader visioning’; e.g. Zaccaro & Banks
2004). The essential idea is that vision will provide a sense of
meaning by reflecting a (compelling) image for the future, inspiring
towards new accomplishments (as in transformational leadership, see
Bass 1998) and charting out a direction within organisations of
increasing complexity and diversity (see Westley & Mintzberg 1989;
Collins & Porras 1991). As Ira Levin contends:
Vision possesses
potent orienting capacities. It can play a key role in providing a
connection to a sense of purpose and meaning greater than oneself and
can serve as a beacon of inspiration during times of change and
disruption. (2000:92).
Vision plays a key role in charismatic
leadership, where it is recognised as a powerful means of aligning the
organisation into joint efforts. Jay Conger and Rabindra Kanungo put
forth the image of leaders who are ‘charismatic’ not in the sense that
they are more visionary than others, but in that they possess an
ability to articulate a vision and to ‘sell’ it to organisational
members: “...charismatic leaders are able to construct highly
meaningful visions through their choice of words, descriptions of
images, and well-constructed justifications.” (1998:157). By being so
strongly associated with a sense of meaning, vision becomes not only an
instrument for achieving superior performance, but a symbol for the
‘soul’ of an organisation, for the existence of something beyond the
material, something that can appeal to the intrinsic motivation of a
human being. In this vein, Lars Thøger Christensen and George Cheney
argue that “By placing more emphasis on the identity of products or
services, organizations hope to add some uniqueness or ‘soul’ to an
otherwise anonymous and unstable world of goods.” (2000:247). And here
vision relates to ‘prospective sense-making’ (Gioia & Mehra 1996)
attempting to make sense for the future, and to developing an
‘organizational saga’ (Clark 1972) that generates shared understanding
of unique accomplishment.
When vision is seen in this symbolic
sense, it becomes important to define what issues to be answered in a
visioning process, to be included in vision (statements) and to be
communicated to followers. Questions relating to the “...development,
articulation, communication and implementation...” of the vision have
occupied research on vision content for some time (Larwood, Falbe,
Kriger & Miesing 1995:741). Crafting vision statements has become a
management fashion (see Ederlé 2000; 2002), as an expected ingredient
of effective leadership and an important – yet challenging – piece of
the strategic puzzle (cf. Lipton 1996; Raynor 1998).
In general,
these vision statements are so peppered with en vogue phrases,
buzzwords, and managementese that not only do they resemble bumper
slogans, but they can be readily interchanged across companies with
minimal editing. (...) Is it [sic] no wonder that organization members
often view such clichés with scepticism and ridicule, or at best
indifference. (Levin 2000:93).
The term ‘vision’ then typically
designates a ‘desired future state’ of a business, reflecting the view
that visions can be built or handpicked to express a desired position
or image of the organisation which need not be rooted in who we are or
what motivates us in the long term. In this sense, they become lofty
statements with at best a loose connection with those people involved
in the organisation (cf. dialogue in Schwarz et al. 2006). Considering
that the value of a symbol lies in its ascribed meaning, it is perhaps
ironic when vision-making is diluted to the extent as to question
whether such statements express anything meaningful about the
organisation at all.
...to vision that reflects intended purpose...
At
the root of any deed lies an initiative that leaves an imprint of some
kind on subsequent life. In the field of entrepreneurship with its
attention towards the emergence of new ventures, what the founder is
seeing in terms of his/her vision and how s/he views the environment
(cf. Greenberger & Sexton 1988) is recognised as
initiative-propelling. As Barbara Bird writes:
New ventures are
not coerced into being nor are they the random or passive product of
environmental conditions. Ventures get started and develop through
initial stages largely based on the vision, goals, and motivations of
individuals. (1992:11. See also Shaver & Scott 1991).
In his
research on organisational culture, Edgar Schein (1983) discusses the
powerful extent to which an organisation may mirror the vision of its
founder. Here, vision and identity are interlinked, as founders “… are
able to take a long-range point of view because they are building their
own identities through their enterprises.” and “…often start with
humanistic and social concerns that become reflected in organizational
structure and process.” (:25).
Initiative involves the intertwining
of idea, vision and action (cf. Czarniawska & Joerges 1996). The
word ‘vision’ comes from the Latin noun visio, meaning act of seeing,
sight, or thing seen, which stems from the verb videre, to see
(Larousse 1997). Much effort has been invested in attempting to
pin-point a precise definition of the concept, especially as
distinguished from related terms such as ‘mission’, ‘values’ or
‘strategy’ (e.g. Raynor 1998). In the face of persistent ambiguities,
Mohamed Bayad and Denis Garand (1998) define vision in subjective
terms, reflecting the values, beliefs, desires and intentions of an
entrepreneur or business founder; more or less consciously felt,
brought to life through heterogeneous decisions and actions with
strategic bearing. As such it deals with “...affective, emotional and
intuitive experiences and ideals...” (Bird & Brush 2003:20) and is
laden with subjective meaning. This comes close to Peter Senge’s idea
of vision as anchored in a subjective sense of purpose: “Real vision
cannot be understood in isolation from the idea of purpose. By purpose,
I mean an individual’s sense of why he or she is alive.”
(1990/2006:137). By relating to such fundamental ‘why’ questions,
vision becomes part of the understanding of, as well as the shaping of,
one’s identity. It reflects what is inherently meaningful to pursue as
the envisaged fulfilment of intended purpose leading to rewards in
terms of psychic income.
The view of vision as anchored in the
values and intentions of a founder can be related to the
way-of-thinking of strategists, as discussed by Bo Hellgren and Leif
Melin (1993), which includes not only cognition in its narrow sense but
the emotions, values and hopes of human actors such as business leaders
who play an influential role in the strategic process. Whilst allowing
for processes of learning, Hellgren and Melin conclude that the
way-of-thinking of a strategic actor is consistent when applied in
different contexts, as a ‘personal logic’ that interacts with other
cognitive spheres at the organisational (corporate culture) or
industrial (industrial wisdom) levels. Though their discussion concerns
strategic leaders (who are brought into organisations with an
established history where it is possible to follow the subsequent
orientation of the firm), a parallel can be drawn to the strategic
implications of a founding vision on the emergent organisation. Drawing
on Schein’s ideas on the reflection of a founder’s ideology in the
organisational culture, Lloyd Harris and Emmanuel Ogbonna (1999)
suggest that an organisation can be considered a materialisation of a
founding vision. In this sense, a particular initiative may be seen as
a vehicle for bringing a founding vision to life that is anchored in
the intended purpose of its founder(s).
...in the context of unfolding initiatives
Understanding
the intended purpose and meaning of particular (venture capital)
initiatives implies that we are not satisfied with seeing similarities,
but that we are reaching out also for that which is unique and which
sets us apart. In the words of John Kimberly and Hamid Bouchikhi, “No
effort to understand individual behavior would be complete without
taking both the unique and the common into account.” (1995:10). The
vulgarisation of vanilla-like vision statements conveys the view that
vision has little to offer in terms of such dynamics and richness. This
is challenged by an empirical study of visioning thoughts by Alfie
Morgan (1996) using a grounded approach. Meting out multiple dimensions
regarding both the enterprise and the setting, Morgan’s study suggests
that (entrepreneurial) visions provide a rich canvas for interpretation.
Phenomena
which bear the markings of the unique and the common cannot be readily
pigeonholed since they require understanding based on their individual
merits. As David Whetten puts it:
…our scientific models simplify
the human experience in hopes of better understanding it… The identity
question comes from a humanities tradition, and it may not lend itself
to the standard scientific methodology because it resists being
simplified ... categorized and analyzed and quantified because its
native condition is inherently paradoxical and enigmatic. (in Whetten
& Godfrey 1998:283).
Through its affinity with identity, the
‘native condition’ of founding vision will then be paradoxical and
enigmatic, thus lending itself well to an interpretative approach that
is grounded in the human experience of the actors. Though the action
may be more readily observable, understanding the vision in terms of
what the founder is seeing requires an introspective window on matters
which have not yet been given concrete, determined form. In this sense,
directing attention towards background or origin will be helpful for
understanding subsequent life, as suggested by John Kimberly: “There is
the possibility, at least, that, just as for a child, the conditions
under which an organization is born and the course of its development
in infancy have nontrivial consequences for its later life.”
(1979:438). New organisations represent settings where it possible to
study the materialisation of visions or ideas as they are brought to
life, where one can observe “..the translation of ideas into structural
and expressive forms.” (Pettigrew 1979:574). Such emergent processes
appear particularly fruitful for grasping the original intent of an
idea beyond its subsequent manifestation.
Context, in terms of the
setting that surrounds human action, is important for understanding an
initiative. Referring to Alfred Schütz, Czarniawska asserts that “We
cannot understand human conduct if we ignore its intentions, and we
cannot understand human intentions if we ignore the settings in which
they make sense.” (1997:12). Human actions spring from the mind and
heart of people who interact within settings where they are triggered
to initiatives coloured by their own backgrounds. “…as we get older a
host of social attitudes grow within us, a consequence of the kind of
life we have lived, and they bear down on us constantly, making us
sensitive here, relatively indifferent or even callous there.” writes
psychiatrist Robert Coles (1998:4-5). Deeds and initiatives thus come
to life within the context of lives unfolding. When out aim is to
understand what people want to achieve and what they are trying to do,
the social and historical context in which the unfolding initiative is
embedded merits attention.
One way of making sense of a phenomenon
is to interpret and reflect upon particular initiatives within that
realm so as to understand human action in terms of the vision that
transpires through individual, historical and social context. Returning
to the roots of an initiative leads us to a founding vision that
reflects the origin of an idea and the meaning that it carries to the
founder(s) who have committed to the enterprise. To return to the
literary world of Vilhelm Moberg, if we know nothing about the context
surrounding Karl-Oskar and Kristina’s migration to America, then how
would we be able to interpret their initiative? Making sense of their
adventure as they sailed off to new lands is dependent on understanding
the origins of their decision – not only the social environment and the
hardships that they were enduring at the time, but how they perceived
these hardships and how they in turn responded to factors in their
social environment (cf. ‘prehistory’ in Kimberly & Bouchikhi 1995).
Or to use Senge’s terminology (1990/2006), it would involve
understanding the ‘creative tension’ between the world as they lived
and saw it and the world as they believed it could or should be.
Reflecting on the intended purpose of particular initiatives thus
involves searching for the vision for their founding – a vision
triggered by creative tension with the lived surroundings.
Interpreting implications of founding visions
This
piece of research reflects the story of a novice who had yet to find
her place in the academic realm, as she plunged into the unfamiliar
‘out there’. In this story, the process of reflection cannot be
described according to a linear logic (see Gioia & Pitre 1990) with
the achievement of a priori defined objectives and milestones. It is a
process of reasoning, triggered by an initial spark, sustained and
developed through a quagmire of increasing richness. Interviewing
researchers from a variety of disciplines, Eisner and Powell (2002)
reflect on the discrepancy between public and personal stories of
research. Whilst the public story is formalistically ‘narrated’ in
scientific publications and at various academic fora, the personal has
to do with what actually happens during the research process and how
this is experienced by the researcher (cf. Czarniawska 1999). My own
research narrative reflects a challenging learning process, one of
reflexivity (see Alvesson & Sköldberg 2000), of venturing into
unfamiliar (though not unknown) waters with an emerging vision in mind,
but with no certainty as to the outcome. It mirrors my own ambition and
motivation while grappling with tensions regarding the identity of a
researcher – and by extension, my identity as a human being. As Jean
Clandinin and Michael Connelly observe: “We all, novice and experienced
researchers alike, come to inquiry with views, attitudes, and ways of
thinking about inquiry. (...) ... we are forever struggling with
personal tensions as we pursue narrative inquiry.” (:46). Here I am
attempting to reconcile the personal and public stories of research, so
as to bring the reader into the reasoning process, where I have
repeatedly been challenged to reconsider in my struggle to progress.
The Listening Phase: initial spark lost in confusion
The
first phase (roughly sketched) of my research process started in late
1999 as I embarked on a research project to explore two regional
venture capital initiatives. These two initiatives had been taken by
individuals with entrepreneurial careers (cf. Politis & Landström
2002). The initial question that presented itself was whether these
formalised associations of private financiers, situated in the
borderline between formal and informal segments of the capital market
(cf. Mason & Harrison 1999; Isaksson 2006), offered examples of an
emerging business logic different from that associated with mainstream
venture capital. The project was labeled an exploratory study, and
after a brief orientation in the venture capital literature I set out
to interview the actors involved.
In chapter one, I discuss the
background that surrounded my early encounters with venture capital. As
I sought to familiarise myself with the phenomenon, what quickly
sparked my interest was the idea that venture capital affiliation would
shape the development of a venture, and that this force could just as
well be destructive in the company as it could be constructive or
impotent (see Fried & Hisrich 1995). The limited insight accorded
to an entrepreneur into the realities of the venture capitalist
contrasted with the scrutinisation of the investment prospect through
lengthy processes of due diligence. On the other hand, the strong
association of venture capital with rapid growth would from the
entrepreneur’s side encourage a plunge into such affiliation based on
high expectations. It seemed to me that if one could contribute to an
entrepreneur’s understanding of the ways-of-thinking of venture
capitalists, the human and strategic implications of such affiliation
could be more carefully considered beforehand.
If my early concerns
were directed towards implications for the entrepreneur, the
opportunity that presented itself involved venture capitalists who had
only recently entered into the profession, but who did not feel at home
in the mainstream of venture capital at the time. In a ‘grounded’ vein
(see Charmaz 2000; Corbin & Strauss 1990), I set out to explore the
phenomenon up close in a case study of Alpha 1998-2000 and Lucina
1995-2000 (which was renamed Lucina, see chapters 3-4). A third case,
Gamma, emerged from the Lucina sphere in the form of a venture capital
initiative within the domain of life sciences, where some of the Lucina
people remained involved. The three cases thus mirrored venture capital
in various investment milieus, ranging from service companies (Alpha)
to high-tech companies (Lucina) to ventures in life sciences (Gamma).
In view of the relative paucity of case studies focusing on the micro
level (see Willquist 2001), such richness seemed particularly
interesting.
My encounters involved open and loosely structured
conversations with the people behind these initiatives (the founders),
those implementing the initiatives (the managers), as well as those
affected by the initiatives (the ‘entrepreneurs’ of the affiliated
companies). My role was primarily that of an active listener (cf.
Holstein & Gubrium 1995) absorbing stories rich with detail. My
focus was not so much on the subjective experience of each
interlocutor, as on the potentially contrasting perspectives of
‘venture capitalist’ and ‘entrepreneur’, in accordance with a
relationship view on venture capital. The result was a total of 33
conversations (lasting 1.5 – 4 hours) conducted from December 1999 to
June 2000, with 4 follow-up conversations in August – September that
same year. Furthermore, my fieldwork was ethnographically inspired, in
the sense that every visit to the Lucina, Alfa or Gamma milieu offered
the opportunity to take in (observe) action and interaction beyond what
is actually said in conversation. I relied on written documentation in
order to obtain a better overview of events that had occured prior to
my meetings, and as a source of inspiration for my questions. (However,
considering the fact that these were smaller, private companies, the
amount of available documentation was limited.) Documents and other
artifacts (such as the products of an affiliate or a logotype) proved
to be valuable ‘cues’ as they opened up for conversations around
perceived meaning and purpose. It was also interesting to compare my
impressions from talking with the people involved with the official
story that was then communicated to shareholders in the annual report.
Using
a computer graphics tool called GoalScreen (Unilogo Invest 1999) to
overview and structure the rich material, I contrasted the stories of
the narrators – venture capital providers and receivers alike – with
each other, looking for inconsistencies in terms of what venture
capital meant to the people involved and what it was for. The result
was a ninety-page field report that described these various
perspectives on venture capital in detail. The material illustrated how
different visions for the founding of various initiatives within the
same setting of venture capital could be, revealing a diversity of
ambitions and self-conceptions that went beyond specific
industry/technology investment preferences. These dynamics were
explored further in terms of organisational identity (Brunninge &
Garvi 2001).
The empirical material involved more complexities
than the contrasting, potentially conflicting perspectives of two
parties in an interorganisational relationship, recalling Øistein
Fredriksen’s observation (1997) that the venture capitalist plays a
dual role both as an ‘insider’ and an ‘outsider’. In particular, the
Alpha story highlighted inconsistencies in terms of conflicting
meanings of venture capital within the investor group (cf. Melin 1977),
presenting more intriguing dynamics within the ‘black box’ of the
venture capital firm itself (see Wasserman 2002) than between provider
and receiver. In particular, conflicts pertained to the degree of risk
propensity, where some owners argued for the venturing on innovative
ideas with little collateral, whilst others emphasised the need for
security and stability. The question was whether there was, in effect,
any other cohesiveness to the association than a sense of ‘community
responsibility’ for the region, and the fact that funds had been
invested. In the autumn of 2000, the group of owners was dissolved.
Alpha abandoned its venture capital ambitions and was reorganised into
a holding company with the expressed aim of enhancing its portfolio
holdings. Recalling an original investment prospect that had seemed to
include ‘a little bit of everything’, the reorientation questioned
whether Alpha had ever really followed the logic of temporary partner
that is seen to distinguish venture capital from other types of risk
capital activities (see Olofsson 1986).
Filled with these stories,
I found myself wondering about how next to proceed. By the end of 2001,
what was at first an exploratory study had led to a research proposal
outlining a project designed for the purpose of understanding the
relationship between venture capital provider and receiver. The design
emphasised multiple cases, rich material, a processual perspective and
suggested theoretical concepts that could be helpful for making sense
of the relationship. What remained in my mind was a process of
implementation, of applying the case study instrument to a processual
setting and seeing something emerge (much as the stepwise process of
building theory from cases studies outlined in Eisenhardt 1989a). Soon
enough, however, I was restrained by ‘so what’ questions that left me
uncertain and confused. I struggled to position my research as the
faces and voices of formalised associations of private investors with
entrepreneurial backgrounds conformed neither with the typical business
angel nor with the typical venture capital institution. Without the
link of identity issues with performance and the creation of financial
value (cf. the debate on value added which has occupied venture capital
scholars for some time, see Mason & Harrison 1999), these stories
were met with little interest. Instead, they were brushed off as
initiatives of quasi-venture capital which did not appear particularly
successful anyway and therefore had little to contribute to the
existent body of research in the field. In a rage of self-criticism, I
put my initial report and my research proposal on the shelf, and
decided to re-think my dissertation project from the beginning.
The
story could have ended there, culminating in frustration and
resignation. But it did not. Revisiting my material after half a year’s
absence from research, I was puzzled by the fact that though venture
capital was strongly associated with socio-economic development, the
utility of the particular technology, product or service that was being
commercialised with venture capital was absent from my three stories.
Without the voice of stakeholders such as customers or end users,
venture capitalists’ own concerns with socio-economic development
amounted, as in the Alpha case, to lofty ideas of a Swedish Silicon
Valley. How then did venture capital gain such a strong connotation
with innovation and development, if the nature of the impact of a
technology or service that was sponsored was of minor concern? Applying
Perry’s typology (1988), such a discrepancy could be explained by an
increasing dominance of investor and advisor over (long-term,
innovation-focused) partner logics. The question was whether there were
other forms of venture capital which incorporated a broader stakeholder
perspective. My encounters with Alpha, Lucina and Gamma brought the
realisation that though these three initiatives professed to the same
label or ‘umbrella concept’, the implications of their respective
founding visions were quite different. With this heterogeneity in mind,
I looked for ways to broaden my study. I spent another couple of months
designing a questionnaire based on the differences that I had found in
my initial study and those outlined by Perry. But capturing founding
visions with a survey instrument requires the ability to concretise
implications on multiple levels, and I found that I lacked the
pre-understanding to do this in a comprehensive way. Seeking to
understand the why, but not searching for causal explanations, I
back-traced my steps yet again, returning to the case study as a
strategy that is acknowledged for its merit when trying to understand
why and how something occurs, whilst allowing specific issues to emerge
from the real-life setting (see Yin 1994).
In my research
proposal, I had planned to continue studying the Alpha, Lucina and
Gamma cases and their affiliates. However, there was a contrast in the
venture capital literature between the informal segment - where one
would find the individual as a level of analysis and where internal
dynamics were perhaps to be expected, and the formal segment, where
what was happening within the venture capital firm itself was
downplayed (see Wasserman 2002). Not satisfied with such an anonymous
view of a venture capital firm, I was determined to broaden my study in
such a way as to include also cases that would belong to the formal
segment of the market. Consequently, I set out to select my cases
instrumentally (see Stake 2000) based on a criterion of
differentiation. Looking at how the venture capital market was
organised, one such criterion was the ownership structure of a venture
capital organisation, depending on whether it was captive or
independent, private or public, for instance (see Isaksson 1999). As
institutional ownership differs from individual ownership (Schneider
2000), this could involve distinct roles as corporate owners. I decided
to select four cases (with the aim of in-depth, rather than surface
studies; see Gibb Dyer & Wilkin’s response (1991) to Eisenhardt
1989a) based on their ownership structures, where one case (Lucina)
would represent individual ownership, a second public ownership, a
third institutional ownership, and a fourth corporate ownership. With
this criterion of differentiation, Gamma was dropped, as well as a
re-oriented Alpha that no longer professed to any venture capital
activities. Using the member listings of the SVCA (the Swedish Venture
Capital Association), I contacted companies that met this criterion,
ending up with three cases: Lucina, Delta, and Acacia. (To my
knowledge, there was only one firm in Sweden that corresponded to the
fourth category without being wholly owned by one single corporation.
However, this company declined participation.) This time I widened the
perspective to include not only the venture capitalists themselves as
well as the ‘entrepreneurs’, but to give voice to representatives for
the institutional financiers, the government (as the ‘principal’ of
public venture capital) and for the customers of an affiliate of
choice. (In order to go deeper into the relationship, I focused on one
particular affiliate. The selection of affiliate was left to the
discretion of the venture capitalist, as an illustration of what was
considered a ‘typical’ investment object. Whether this affiliate was
considered financially successful or not was of little relevance for
understanding the implications of their founding visions).
The Concretisation Phase: a pathway emerges out of tension
I
returned to the field in May 2003 with a ‘visit at the mansion’ (see
first scene of the second act in chapter 5), meeting with 32 different
people on 31 occasions (see list in appendix A) over a period of 14
months. By now familiar with the what, I was even more determined to
pursue the why. The fieldwork in 2003-2004 was based on meetings with
people involved in the various spheres, where an element of participant
observation was important for generating impressions of each sphere
that served as a frame for my interpretation of the conversations
(these impressions are described in chapters 4 and 6, under the heading
of ‘initial impressions’). I experienced these milieus very
differently, something that I have synthesised into a ‘Robin
Hood-style’ anecdote which appears twice in chapter 4 (bringing out the
contrast between Lucina in 2000 and Lucina in 2003-4) and once in
chapter 6.
Reflecting on these encounters, I realise that my role as
a researcher had evolved. Though this occurred gradually, it was
especially prompted by a confrontation with one of the founders of
Alpha, annoyed with my interpretation of the case, insisting that ‘I
told you that this was the reason things turned out the way they did –
and that’s not what it says here!’. Having revisited but not revised my
conclusions, I realised that what I had initially perceived as a less
than pleasant confrontation with a chairman more than twice my own age
actually provided me with a valuable piece of story that, if treated as
a narrative, shed more light on the subjective perspective of this
venture capitalist, than it served to question the reliability of my
research findings. I emerged from this experience with a heightened
awareness of my role as a researcher and the importance of integrity in
such a process, not because my own interpretation was necessarily the
right interpretation, but because it would no longer be my
interpretation if reflections were dictated by authority. Fieldwork,
especially when it relates to empathic knowledge, involves concern and
respect for the research subjects, but this can be inhibiting. And so
the experience of a ‘clash’ brought with it a break with the
self-conception of the inquirer as an intruder, which had been causing
me to reflect twice before asking a question that I feared could be
sensitive, and to formulate it diplomatically so as not to cause
unnecessary tension.
Strengthened in my role as a researcher, I was
liberated from ‘negotiating a way to be useful’ (see Clandinin &
Connelly 2000). And in so doing I found myself recovering that initial
spark, facing yet again aspects that intrigued me and that I felt the
urge to pursue further. I wanted to understand what venture capital
actually meant to those involved with the initiative, not taking things
at face value but questioning what they appeared to take for granted. I
was digging deeper into the involvement of each individual that I met,
hearing stories that moved them, realising, as Stephen Fineman writes,
that “What is important, worth thinking about, is cued by feelings —
including those of the ‘gut’.” (2000:11). I found I could explore
further not only the professional aspects of their activities, but the
human side. And in this process, stories were shared - some compelling,
others distressing, even painful - reflecting a reality not of black
and white, but of multiple shades and colours.
As my focus was
geared on the individual, these conversations bore much resemblance to
a ‘life story interview’ (see Atkinson 1998), where a narrative
presented the opportunity to learn about individual perceptions of
founding vision and how they related to this in the context of lives
unfolding. In this sense, they were windows on personal experience
seldom captured in official documents that provided insight into the
‘vécu subjectif’ (see Bertaux 1980). Written documentation was a
valuable source for triggering recollections of events that surrounded
a particular text, or giving access to an individual’s interpretation
of the written. Bearing in mind that such stories do not account to
‘full explanations’ of actions or intentions (see Denzin & Lincoln
2000), what one individual remembered, brought attention to, how s/he
rationalised the past and envisioned the future provided valuable
insights into subjective experience. As Robert Coles concludes with
regard to stories:
What patients say tells us to think about what
hurts them; and what we say tells us what is happening to us – what we
are thinking, and what may be wrong with us… (...) ...we owe it to each
other to respect our stories and learn from them. (in Clandinin &
Connelly 2000:13-4).
Dramatising the stories
Armed
with an array of stories, I proceeded to construct my case reports as
organisational biographies (see Kimberly 1987; Kimberly & Bouchikhi
1995; Salama 1992) recounting the unfolding lives of organised
initiatives. I was concerned with writing rich descriptions that would
give the reader the ‘aha’ experience that Gibb Dyer and Wilkins refer
to (1991). But drafting these reports, I felt upon reading that much of
the dynamics in the material was lost in this format. I found myself
looking for other ways of conveying the experienced, heeding to Ewert
Gummesson’s challenge that research is handicraft involving both
empathic interpretation and the ability to communicate a message in a
skillful way; “A good scholar crafts his or her presentations and
publications to become legible, even exciting.” (2002:342). And so the
idea came to present the material as a theatre play, as a way of
resolving tensions between formalistic and literary requirements (cf.
Sanders 1999). The dramatised form presented an arena for multiple
voices, where the reader could sense the dynamics of clashing
perspectives that was lurking behind adopted labels and language. It
would put the human being and her interaction with other human beings
at the forefront – the very essence of social studies. As Johnny
Saldaňa holds:
Dialogue is the playwright’s way of showing
character interaction and interplay, terms found regularly in the
qualitative research literature. Through dialogue we not only advance
the action, we reveal character reaction, the symbolic interactionist’s
playing field. (2003:226).
By ‘reenacting’ dialogue and setting,
this presented a means to draw the reader into these micro worlds in
which empathic knowledge emerges.
In this process, the Delta ‘case’
was eventually dropped. This public foundation had been contacted in
the first place because it had recently undergone a process of
reorientation, with the expressed ambitions of its present management
to provide venture capital (in addition to subsidised loans). But I
found the people alienated from the stories; they were narrating to me
events which were occurring at a distance, shaped by the anonymous
force of government or implemented by a syndicate partner (when
investing in affiliates, another venture capitalist would take on the
leading role in the relationship, and most of Delta’s dealings with its
investee firms would thus occur indirectly).
The literary form for
this dissertation draws on the ‘ethnodrama’ relying on selections of
the empirical material that have been processed and dramatised (see
Saldaňa 2003). This has been done by putting it in a theatre setting,
and structuring it according to acts and scenes, whilst striving to
remain as faithful to (my interpretation of) the storied material as
possible. The resulting text is the result of extensive interpretation
(and in this sense the activity of dramatising the stories has been a
helpful step in the analysis of these stories) yet remains close to its
empirical source (which is particularly visible in the second act,
structured as a series of conversations with the Research Apprentice).
I have not aspired to write play that is inspired by the empirical
material (such as Czarniawska-Joerges and Jacobsson’s 1995 rendering of
decision-making in political organisations as commedia dell’arte). To
juxtapose various accounts of similar events brings attention beyond
the micro dynamics surrounding the plot - uncovering nuances, details,
accentuations which might otherwise go unnoticed. It is constructed
around the main points of the stories based on my interpretation of the
material. In the Acacia story, an interesting point is the contrast
between the individual perspectives (in terms of language, issues
emphasised, and issues reflected upon or taken-for-granted) as one
descends the hierarchical ladder. In the Lucina story, the contrast
between initial collective enthusiasm and what subsequently happened
was more interesting to follow, and so this first act was structured
accordingly.
The result is an inter-subjective ‘ensemble play’, with
the opportunity to write the researcher more actively into the text.
The dramatised chapters (3 and 5) narrate the main character’s (the
Research Apprentice) quest for understanding, as she goes into the
field looking for answers, featuring multiple characters in a variety
of vignettes, where the leading role is present and absent alternately.
The dialogue is based on a processing of the conversation transcripts,
and consists of excerpts from the actual conversations with the people
I encountered which have been translated from Swedish into English. The
lines of the Research Apprentice are based on the actual conversations
with each interlocutor, but have been adapted to suit the flow of the
dialogue. In order to maintain the theatre metaphor throughout the
entire book, I have added scenes to the non-dramatised chapters one and
seven. Finally, at the very beginning of this book, a Prologue
introduces the play as a frame for the dramatised story.
Making sense of a patchwork of stories
Analysis
is a central ingredient of research, though what it implies in practice
varies between traditions. Particularly, so-called qualitative research
has been widely criticised for the lack of structured methods for
analysis, or the inarticulation of such a method (see Denzin &
Lincoln 1994; Miles & Huberman 1994). It is generally suggested to
apply a theoretical perspective as a lens for the material, or to
follow a more formalistic, step-wise process of comparative analysis
(e.g. Eisenhardt 1989a; Yin 1994) with the aim of generating or
building theory. With a grounded approach, issues which come through as
pregnant in the (more or less structured) processing of the material
will allow theory to emerge from the empirical material. To me, this
image of grounded research became a central point of tension in my
reflective process. As I read Clandinin and Connelly, I realised that
the difficulty lay in reconciling my own expectations of finding a
structuring framework for the analysis, while at the same time engaging
in a mental conversation between the literature, myself, and the
empirical stories:
The tension often appears as a tension between
literature reviewed as a structuring framework and literature reviewed
as a kind of conversation between theory and life, or, at least,
between theory and the stories of life contained in the inquiry.
(2000:41).
Connecting stories to on-going academic dialogues
presents the challenge of adopting the terminology that will direct
attention towards the points of the story. As Czarniawska contends: “In
a good story, the events are its facts, and the point is its theory.”
(1999:15). When the researcher is making sense of what s/he experiences
in the field, then it is also meaningful to communicate that particular
interpretation. The eyeopening ‘aha’ experience implies that someone is
seeing something, an experience which may not be easy to convey,
especially when relating to aspects that are difficult to encapsulate.
As a research apprentice you learn to choose your wording with care,
because the language that you adopt will have implications on so many
levels – signalling the tradition within which you position your
research, the kind of dialogue that you wish to engage in and with
whom; affecting the way in which you interpret your findings and the
conclusions that are subsequently drawn (see Alvesson & Sköldberg
2000). Sifting out the visionary thoughts and ideas that transpired in
the stories, I found it helpful to articulate my interpretations in
metaphors; concretisations of complexities and nuances in the stories
(which would have been easy to brush aside when I did not know how to
make sense of them); images which helped me concretize a perceived
point in a story.
There is little more frustrating than the feeling
of having something to say, but not being able to find a way to
articulate and express it so that an audience will (be able to) listen.
“Narrative inquirers, in developing or explaining their work with other
researchers, find themselves almost inevitably at the formalistic
inquiry boundary, as other researchers read through their work for the
formalistic terms that apply…” (Clandinin & Connelly 2000:45).
Sometimes words seem feeble and insignificant; sometimes one word can
open up a whole world of fruitful dialogue around matters which appear
important. Eventually, having travelled through various terminology
such as ‘goals’, ‘values’, ‘logics’, my reflections crystallised into
‘founding visions’ as a helpful concept for articulating a conversation
between theory and the stories of life contained in the inquiry.
The
quest for the ‘why’ brought me to the roots of a phenomenon where I
encountered the story of an early pioneer (see chapter 7). Bringing in
the dimension of original intention thus provided a greater framework
in which to place the founding visions of Lucina and Acacia, leading me
to reflect on the wider implications of venture capital not only for an
affiliate, but also for the future of society (see chapter 8). In my
process of rechurning the material, triggered by repeated writing and
re-writing (culminating in the two dramatised stories), certain points
were protrusive. With this, I felt that my interpretation was maturing
into understanding.
A note to the Reader
Before
reading on, I recommend a revisit to the Prologue preceding the first
chapter of this dissertation, which sets the stage for the dramatised
stories of Lucina (chapter three) and Acacia (chapter five). Each Act
is followed by an (abbreviated) biographic account of the venture
capital firm in question, and an analysis of the vision for its
founding (Lucina chapter four; Acacia chapter six). From these stories
of initiatives still in the making the journey brings us half a century
back in time to venture capital as it was once taught and enacted, as
we are invited to attend a lecture of Professor Doriot (scene two,
chapter seven). The analysis of the founding vision for venture capital
of Doriot and his associates is found in chapter seven, setting the
stage for concluding reflections regarding how we picture our future to
be in the light of the past and the present.
Read Chapter Three (The Lucina Act)
Read Entire Play