The Effects of Initial Location, Aspirations, and Resources on Likelihood of First Sale in Nascent Firms^*

* A previous version of this paper was presented at the 2003 Academy of Management Meeting in Seattle, Washington. The authors are grateful for the thoughtful suggestions of three anonymous reviewers and the editor for this article.

Abstract

The formation of a new venture includes initial choices that affect the process of start‐up. Primary among these decisions is the choice of location whether to start from home or from an away location. This paper examines the impact of initial firm location choices and aspirations of the entrepreneur on the resource assembly process and the likelihood of first sale. Results show that home‐based businesses assemble different types of resources from their away‐based counterparts. Higher aspirations were associated with greater accumulation of organizational resources. The combined influence of location and aspirations showed that home‐based firms with high aspirations were less likely to achieve first sale. A post hoc analysis examined these affects within a subgroup of service firms and confirmed the previous results. This study suggests that in the initial stages of the new venture, there are processes and routines that home‐based businesses engage in that lead them to achieve first sales in a timelier manner than those businesses that are located away from home. Furthermore, high aspirations are associated with greater scale of organizational resources but not necessarily with achievement of sales. Implications are discussed.

* A previous version of this paper was presented at the 2003 Academy of Management Meeting in Seattle, Washington. The authors are grateful for the thoughtful suggestions of three anonymous reviewers and the editor for this article.

* A previous version of this paper was presented at the 2003 Academy of Management Meeting in Seattle, Washington. The authors are grateful for the thoughtful suggestions of three anonymous reviewers and the editor for this article.

Notes

* A previous version of this paper was presented at the 2003 Academy of Management Meeting in Seattle, Washington. The authors are grateful for the thoughtful suggestions of three anonymous reviewers and the editor for this article.

1 The PSED also contains data on a control group, as well as oversamples for women and minority nascent entrepreneurs. See Gartner et al. (2004) for a full description of the data set architecture.

2 SBA data indicate that approximately 52 percent of all ventures are home based whereas the number of home‐based firms in our sample is higher (closer to 75 percent). One reason for this variance is that our sample captures firms in earliest stage, whereas relocations to an away location may occur as the firm grows.

3 A common concern in survival analysis is the fact that a firm may fail before it had experienced the event of interest. Given the fact that the population of interest in this study is still in the transition period from nascence to newness, this failure risk is not observed in the present study. It will be documented in the PSED project follow‐up studies (Reynolds 2000).

4 The industry distribution in the sample was as follows: agriculture: 14 (5 percent); construction: 13 (4.64 percent); manufacturing: 17 (6 percent); transportation: 3 (1 percent); wholesale: 7 (2.5 percent); retail: 70 (25 percent); business services: 85 (30 percent); consumer services: 47 (16.8 percent); health and education: 21 (7.5 percent); with missing data on three cases.

Additional information

Notes on contributors

Candida G. Brush

Candida G. Brush is professor of entrepreneurship and holder of the Paul T. Babson Chairin Entrepreneurship at Babson College.

Linda F. Edelman

Linda F. Edelman is associate professor of strategic management at Bentley College.

Tatiana S. Manolova

Tatiana S. Manolova is assistant professor of strategic management at Bentley College.