42 ENTREPRENEURSHIP
and technical factors. Even when organizations have all available information about their
competitors, they often are unable to answer such questions as:- What makes one firm’s sales force more effective than that of another?
- What makes one firm’s production more efficient than that of another?
- Why are one firm’s designs more appealing to the customer than that of another?
These are but a few of the ambiguous areas. No one can answer these questions.
What if there is no causal ambiguity? Consider a firm that understands the cause and
effect relationship between its resources and its performance. Can it keep that knowl-
edge secret from its competitors? Not in the long run. Competitors have strategies to
unearth the information they need, such as hiring workers and managers away from the
advantaged organization, and devising schemes to extract the needed information.
Competitors may spend time and money, but in the long run, they will know all the
firm’s vital secrets, as will the entire industry. The entrepreneur who started with an
advantage will not be able to sustain it indefinitely.
Complex Social Relationships. Social complexity is the third reason a firm’s capabili-
ties and resources may not be easily duplicated. As long as a firm uses human and orga-
nizational resources, social complexity may serve as a barrier to imitation. Why? The
interpersonal relationships of managers, customers, and suppliers are complex.
Someone, for example, could point out that customers like the firm’s salespeople, but
knowing this is the case does not make it possible for competitors to copy the likability
of their salespeople. The competitor can hire away the whole sales force, but even this
action may not reproduce the original relationship: The sales force may now work under
different conditions, with different managers, and for different incentives.
Perhaps the most complex social phenomenon is organizational culture.^26 The new
venture’s culture is a complex combination of the founder’s values, habits, and beliefs,
and the interaction of these elements with the newly created organization and the mar-
ket. The culture might be, among other things, very supportive, highly authoritarian,
very aggressive, extremely thrifty, or combinations of all these and more. As organiza-
tions grow, subcultures form, adding more complexity. Organizational cultures are dif-
ficult to “know” from the outside; they cannot be directly observed and they resist quan-
titative measurement, which makes them almost impossible to copy.
Despite this hard-to-copy element, strong forces are at work that make organizations
appear very similar. These forces are described by a framework known as institutional
theory.^27 At its most basic, institutional theory says that the forces for conformity in
organizational structure, practice, and culture are very strong. These forces are:- The shaping nature of the business environment
- The accepted wisdom of how to succeed
- The risk aversion that accompanies the prospect of doing something different
- The lack of diversity among the most powerful decision makers
- Organizational practices like benchmarking
Without doubt, these are powerful forces, which is why, when observing large corpora-
tions, we frequently find a great deal of conformity. Many new ventures also have look-