Origin and Evolution of New Businesses


My book appeared at the height of the Internet bubble.  Internet startups provided a fortuitous natural experiment for my theories: either I was looking at the world through a rear view mirror, or Internet startups represented an aberrant phenomenon.  Naturally I took the latter position in interviews with Inc magazine and the Industry Standard; (the Industry standard interview appeared, by pure chance, two weeks before the NASDAQ peaked in March 2000.  The slides that I used in talks about my book and my  closing keynote address at the annual TiE conference also reflected my skepticism. I avoided the issue in the book however; I wanted to discuss ideas that will remain relevant after the bubble has been forgotten.

Where to get it.  If your local bookstore no longer carries this tome, you will find it Amazon , Barnes and Noble.com, Oxford University Press.

Until the book appeared between hard covers, you could have downloaded drafts from this site. (Isn’t that the point of the web, to give away lots stuff to consumers?)  My contract with Oxford now precludes me from continuing to offer free drafts. You may still download drafts from the indicated links but you are not allowed to print them — I’ve switched on a feature in Acrobat that’s supposed to prevent you from doing so.  If you somehow get around this feature, you will be violating all kinds of copyright laws, and make my publisher very cross.

You may, for your personal use, download the slides that I use for the talks that I give about the book and a paperthat extends some of the central ideas.

Flap Copy

What is this mysterious activity we call entrepreneurship? What exactly do entrepreneurs do? Does success require special traits and skills or just luck? Can large companies follow their example? What role does venture capital play?

In a field dominated by anecdote and folklore, this landmark study integrates more than ten years of intensive research and modern theories of business and economics. The result is a comprehensive framework for understanding entrepreneurship that provides new and penetrating insights. Examining hundreds of successful ventures, the author finds that the typical business has humble, improvised origins. Well-planned startups, backed by substantial venture capital, are exceptional. Entrepreneurs like Bill Gates and Sam Walton initially pursue small, uncertain opportunities, without much capital, market research or breakthrough technologies. Coping with ambiguity and surprises, face-to-face selling, and making do with second-tier employees is more important than foresight, deal-making or recruiting top-notch teams.

Transforming improvised startups into noteworthy enterprises requires a radical shift, from ‘opportunistic adaptation’  in niche markets to the pursuit of ambitious strategies. This requires traits such as ambition and risk taking that are initially unimportant.

Mature corporations have to pursue entrepreneurial activity in a much more disciplined way. Companies like Intel and Merck focus their resources on large-scale initiatives that scrappy entrepreneurs cannot undertake. Their success requires carefully chosen bets, meticulous planning and the smooth coordination of many employees rather

than the talents of a driven few.

This clearly and concisely written book is essential for anyone who wants to start a business, the entrepreneur or executive who wants to grow a company and for the scholar who wants to understand this crucial economic activity.

Amar Bhidé, an Associate Professor on leave from the Harvard Business School, is teaching at the University of Chicago. A former consultant at McKinsey & Company and proprietary trader at E.F. Hutton, Bhidé received a doctorate and an MBA from the Harvard Business School where he was a Baker Scholar, and a B.Tech. from the Indian Institute of Technology. He has written eight Harvard Business Review articles, papers on corporate governance in the Journal of Financial Economics and the Journal of Applied Corporate Finance and Of Politics and Economic Reality (Basic Books).

Table of Contents

Preface and Introduction

1.The Nature of Promising Startups

Endowments and Opportunities

Planning vs Opportunistic Adaptation

Securing Resources

Distinctive Qualities

Corporate Initiatives

VC backed Start-ups

Revolutionary Ventures

Summary and Generalizations

2.The Evolution of Fledgling Businesses

Missing Attributes

Existing Theories and Models

Critical tasks

Exceptional qualities

3.Societal Implications

Reexamining Schumpeter

Facilitating conditions

Taking Stock

Select Press Reviews

Advance Comments

“I cannot say enough about The Origin and Evolution of New Businesses. It is, in my estimation, the single most significant contribution to our understanding of entrepreneurship to date. It illuminates what lies at the very heart of capitalism itself–the process by which men and women transform human capital (daring, imagination, resourcefulness) into financial capital (wealth). The only negative thing I have to say about this remarkable book is, ‘damn, I wish I had written it myself.’;

George Gendron, Editor in Chief, Inc. Magazine
“Anyone who wants to start or grow a business should read this book. It combines rigorous analysis with data and field research on hundreds of new ventures. As a third generation entrepreneur, I found Bhidé has accurately captured the challenges entrepreneurs face and their freewheeling strategies for success.”

– Dan Bricklin, Co-creator of VisiCalc, Co-founder of Software Arts, Software Garden, and Trellix
“After this impressive study reviews the difficulties and risks involved in starting new businesses, it provides well-selected examples of both successes and failures. Bhidé’s description and analysis of the continuing evolution of growth is placed in a broader historical setting, one that is related to more general economic and sociological analyses and theories. The book should be required reading for entrepreneurs at all stages in the development of their enterprises.”

– Alfred D. Chandler, Jr, Isidor Straus Professor of Business History, Emeritus, Harvard Business School

“Provocative, creative, and useful!”

– Steven N. Kaplan, Neubauer Family Professor of Entrepreneurship and Finance, GSB, University of Chicago
“Bhidé has done an outstanding job in analyzing new business development and growth and in deriving the critical social implications of the process…. This book provides a wonderful blend of conceptual thinking and clear advice on implementation.”

Peter Lorange, President and Maucher Nestle Professor,IMD

“Early drafts of The Origin and Evolution of New Business changed my thinking about start-ups and were a formative influence on the business I co-founded, Case Shiller Weiss, Inc. The book provides a substantial chunk of what people go to business schools for but don’t always find. It offers an inspiring perspective on how entrepreneurs can turn tiny, thinly capitalized start-ups into major businesses. And, in a broader sense, Bhidé’s insights help explain the success of our capitalist system and confirm the hopes of many countries around the world that are now encouraging entrepreneurship.”

– Robert Shiller, Stanley B. Resor Professor of Economics, Yale University, Author of “Irrational Exuberance”

“Combines an impressive amount of data with appropriate explanatory theory about successful start-ups and their growth. While examples are mostly from US companies, it is clear that the principles will apply to a broader audience in the global economy, including economies in transition.”

– Andrei Shleifer, Professor of Economics, Harvard University