A Stages Model of Music-Business Venturing
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A stages model of music-business venturing: Entrepreneurial intent, opportunity creation, and opportunity exploitation Laura Laaksonen Aalto University School of Economics Antti Ainamo IASM / Sociology, University of Turku Toni-Matti Karjalainen Aalto University School of Economics Keywords: Entrepreneurship, Effectuation, Prediction, Entrepreneurial opportunity, Music industry 1 Abstract In this paper we report on our study of how entrepreneurial prediction and effectuation combine in real-world setting. We represent the activities of the musicians in a heavy-metal music band as an entrepreneurial project to develop expertise in music, to create business opportunities, and to exploit those business opportunities. The musicians developed the expertise before they created business opportunities. They developed the opportunities before exploiting them. Taking across the board, our findings suggest that developing expertise is a predictable prelude to the process of entrepreneurial effectuation. 2 1. INTRODUCTION Entrepreneurship comes in many forms and shapes in today’s society, making it a relevant and fruitful field to study from many angles and disciplines. Effectuation is a theory about entrepreneurship that has recently been touted on the pages of top journals (Wiltbank et al. 2006, Sarasvathy et al. 2008). It is a theory about an alternative process of decision making in management literature, in comparison to the dominant one of causation or prediction (Sarasvathy 2001, Read et al. 2009). The theory has not been operationalized priorly outside laboratory studies, however. All of the papers have been classroom experiments or literature reviews. The process of effectuation is thus a process of decision making that has not been operationalized in real-world settings. In this paper, in the spirit of effectuation, we study entrepreneurship in the popular music industry and, more specifically, the heavy metal niche in the popular music industries. These research choices resonate also with who we are, what we know, and who we know. We represent evidence from our longitudinal ethnographic case study of musicians in a metal- music band to operationalizes the theory of effectuation.. Our focus in this paper is how and why Children of Bodom, a metal-music group coming from Finland generally went through cycles of entrepreneurial action, both predictive and effectual, from its founding in 1995 until 2010 or the time of writing this paper. More specifically, we show in this paper how the childhood dreams of the novice musicians who founded this band, drove them to eminate the songs of their influences, to develop expertise in playing and composing, to have tightly knit experiences together, and to create music on their 3 own right. Along this process of process of transformation, some of the original founders exited the venture even if artistic expertise and entrepreneurial opportunities had been created. Those who remained made decisions about exploiting the opportunities. The decisions included responsiveness to what worked from the perspectives of popularity and the overall business of selling live performance and recordings. In sum, the contribution of the study is an empirical operationalization of the theory of effectuation, which has not been operationalized priorly outside laboratory studies. Taking across the board, our findings suggest that developing expertise a predictable prelude to effectuation. In sum, we introduce ‘developing expertise’ as a phase that is prior to prediction. We propose that expertise, prediction and effectuation amount to a three-stage model of entrepreneurial effectuation. We also make evidence-based links between the theory of effectuation and theories of instrumental expertise, entrepreneurial intent (Thompson 2009), entrepreneurial action (McMullen and Shepherd 2006), and the discovery and exploitation of entrepreneurial opportunities (Shane & Venkataraman 2000). 2. ENTREPRENEURSHIP, EFFECTUATION, AND PREDICTION The recent research on effectuation has drawn a wide interest among researchers in the field of entrepreneurship (Baron, 2008; Chiles et al., 2008; Dew, 2009; Dew et al., 2009; Goel and Karri 2006; Harmeling, 2009; Read and Sarasvathy, 2005, Read et al., 2009; Sarasvathy, 2004, Sarasvathy et al., 2008, Wiltbank et al., 2006; Wiltbank et al., 2009), still only a few systematic empirical studies exist. In this paper, we first review entrepreneurial effectuation in the context of entrepreneurial theories to which it belongs. 4 Entrepreneurship has generally been defined as the process by which future goods and services come into being. Shane and Venkataraman (2000) specify that the central questions of entrepreneurship research are: (1) why, when, and how opportunities for the creation of goods and services come into existence; (2) why, when, and how some, people and not others discover and exploit these opportunities; and (3) why, when, and how different modes of action are used to exploit entrepreneurial opportunities. According to Autio et al. (2011), entrepreneurs operate in two interconnected knowledge and opportunity landscapes. On the one hand, entrepreneurs operate in a landscape associated with technical advances. On the other hand, they operate in a landscape associated with innovation opportunities (as opposed to, e.g., arbitrage opportunities) associated with evolving user needs. Knowledge characterizing the first landscape differs from the knowledge that characterizes the second landscape. Knowledge about technical advances is systemic and structured, organized around technological trajectories, and constrained by dominant designs and product technologies. In partial contrast to knowledge about technical advances, changes in cultural interpretations of appropriateness and value are produced through complex social interactions. Hence, knowledge about innovation opportunities is less predictable and transient. Opportunity discovery has also been viewed as dependent on the distribution of knowledge within social systems. (Autio et al. 2011). In this paper, we propose that in a creative and cultural industry such as the popular music industry, introducing new opportunities into the innovation landscape and learning to operate in the new landscape is a predictable systemic, structured and organized process of developing one’s musical and dramatic skills through intensive practice. Musical talent or even skills and abilities are no guarantee of becoming a successful recording artist, as the history of popular music has shown. The opportunity landscape related to audience and industry preferences is a socially constructed and unpredictable entirety where timing often 5 matters more than do talent, skills, or other abilities. In this paper we take on Harmeling’s (2009) broad definition of entrepreneurship relevant also in the realm of human enterprise, and we adapt it to study being a musician in the popular music business as a form of entrepreneurship. Harmeling (2009) discusses entrepreneurship in broad sense, as a realm of human enterprise in general, instead of a realm of existing commercial markets. She defines entrepreneurial opportunities both as made by an entrepreneur and discovered by others. Below, we review how the above ideas relate to theories, of effectuation, innovation landscapes, and expertise 2.1 The theory of effectuation Like Harmeling (2009), also Sarasvathy (2008) defines entrepreneurial opportunities as both discovered and made. In the standard version of the theory, effectuation (decision) process takes a set of means as given and focus on selecting between possible effects that can be created with that se of means (e.g. Sarasvathy 2001). This kind of decision-making is portrayed as a process of that takes a set of means (e.g. traits, tastes, skills and networks) as given and focuses on selecting between possible effects of the process. New ventures following the logic of effectuation open up new markets and industries, plugging into and exploiting social and technological contingencies that are difficult to plan for or to anticipate. As such, this process differs from prediction, or what Dew et al. (2004; see also Sarasvathy 2001) consider the dominant process of decision making in management literature. Prediction takes a particular effect as given and focuses on “how to achieve a preset goal” by selecting between means to create the effect. 6 Where predictions rests on the logic whereby reaching any goal in the future will be linked in more or linear ways to underlying causes, effectuation rests on logic of control of the present. The focus in effectuation is on choosing among alternative (desirable) effects that can be produced with the given set of means. While goals are not eliminated as such, what is key is that the assumption of preexistent goals and sticking to such goals is abandoned. Put differently, effectuation begins with a given set of causes consisting of mostly unalterable characteristics and circumstances of the decision maker, rather than with desired effect or goal. Effectuation and prediction are integral parts of human reasoning that may overlap and intertwine over different contexts of decisions and actions but the key insight is that a decision-maker will emphasize one or the other kind of decision-making process and logic (Sarasvathy 2001). With her theory Sarasvathy (2001) defines that an effectuator’s given set of means include who I am, what I know and whom I know. At individual level this includes tastes, traits and abilities,