Dollinger index

364 ENTREPRENEURSHIP

through a personal or professional favor, and the discharge of that debt (reciproci-

ty) is the mechanism for the cooperation.

4. Obligation. The target firm must repay some formal obligation to the entrepre-
   neur.^66
   In each of these cases, the entrepreneur has established a positive environment for coop-
   eration by “being nice” and by doing it first. What kinds of things can entrepreneurs do
   to encourage cooperative behavior?


5. Share information with the target firm.


6. Help the target firm solve a problem and/or accept help from the target firm.


7. Give and receive favors, both business and personal.


8. Create opportunities for others to receive recognition and achievement.


9. Build and use networks, and allow others access to them. The entrepreneur’s strong
   ties can be another’s weak ties.


10. Ask others to make their networks available and piggyback on the reputation and
    credibility of the partner.

TRADITIONAL ORGANIZATIONAL STRUCTURE

Virtual organizations can and do exist, but for how long? Kingston Technology may

be long-lived because its design capabilities are its source of sustainable competitive

advantage. In the case of Walden Paddlers, a Massachusetts maker of kayaks, the

alliances are built on trust, a much shakier foundation in a low-trust society such as the

United States.^67 Walden’s dealer and supplier networks were constructed in an infor-

mal, personal way based on an appreciation of the kayaking experience. The tradition-

al view of organizational boundaries is based on the strategy-structure hypothesis:^68

structure follows strategy. This means that the boundaries of the organization are

adjusted periodically to meet the requirements of the firm’s strategy. This process is a

component of the transition from entrepreneurial management to professional man-

agement.

Stage One: Simple Structure

An historical analysis of firm behavior provides the template for this hypothesis.^69 In the

earliest stages of firm creation, an organization’s boundaries begin and end with the

entrepreneur and a few close associates. The strategy pursued by the top management

team of such a new business is directed to increasing sales volume. This is the first stage

of the organizational structure life cycle.

Stage Two: Departmentalization

As the firm grows larger, entrepreneurs find themselves engaged in more and more

administration (e.g., allocating resources to specific functions) and fewer and fewer en-

trepreneurial tasks. This is detrimental to firm performance. When the volume of the

business grows so large that the entrepreneurs themselves can no longer make all the

executive decisions, they hire managers: production managers, marketing managers,