Virtual Entrepreneurship

Strategies for Entrepreneurship in a Virtual Organization

Abstract
In this master thesis a literature research on topic of Virtual Organizations and Entrepreneurship is conducted to determine if Entrepreneurs establishing a Virtual Organization instead of a traditional institution are facing different challenges and draw on different strategies as it comes to Entrepreneurial opportunity utilization. Three forces and corresponding characteristics are identified and constructed out of both theories about Virtual Organizations and Entrepreneurship enabling, motivating and moderating the feasibility of Virtual Entrepreneurship. The overall findings are that generally capital constraints of young and ambitious Entrepreneurs at first motivate them to exploit opportunities virtually instead of establishing a traditional institution and second enables them or might be their only choice to in fact be able to utilize the recognized opportunity at all. The relatively low or complete absence of coordination costs caused by intense usage of information and communication technologies seem to make Virtual Entrepreneurship feasible and eventually will make it less relevant to establish a traditional institutional based organization and unlock possibilities to exploit opportunities without the need to establish an organization at all.

Keywords: Virtual Organization, Entrepreneurship, Virtual Entrepreneurship, Opportunity, Strategies, Coordination costs.

Adobe PDFVirtual_Entrepreneurship_by_T_de_Roode.pdf (485 kb)

APA (American Psychological Association) Style Reference:
de Roode T. (2009) "Virtual Entrepreneurship, Strategies for Entrepreneurship in a Virtual Organization", Universiteit van Amsterdam, available via Virtual_Entrepreneurship_by_T_de_Roode.pdf.

Questions and comments: Please feel free to contact the author via tim@virtual-entrepreneurship.com

T. de Roode About the author: Timothy (Tim) de Roode, MSc BBA is a young business professional living in Amsterdam, The Netherlands. This master thesis is the result of the research he conducted to achieve his Master degree in Information Science at the University of Amsterdam the Netherlands. He runs Duraserve since 2005. His goal is to make work easier by having the courage to automate critical business tasks to eventually create quality time. The subject of his thesis occured to him when he established his first virtual organization using actors in different countries and building an information system to automatically instruct these actors to fulfill tasks to all make a profit out of it. In the future he would like to found more virtual business and help entrepreneurs to virtualize certain parts of their existing physical, traditional organizations.

Introduction

The increased possibilities and applications of information technologies and communication mechanisms over the past three decades resulted in different organizational structures. The entrepreneurial influence on these new opposing organizational structures seem to be an undiscovered research direction. The use of personal computers, mainframes, databases and different types of software resulted in the automation of office environments and business processes. Organizations started to use networks to connect workplaces to central servers and cooperate with departments sharing the same centrally stored information. Communication mechanisms like modem connections using telephone lines and later the Internet supported organizations to establish computer networks with geographically dispersed departments, subsidiaries or business partners, giving shape to the first notion of networked organizations and raised opportunities for the first “Virtual Organizations”.

The price of transferring and storing information over the years dramatically dropped by broadband connections to the Internet. Innovations in storage solutions made it possible to share and interact information globally at a fraction of the costs. With foreign markets in direct reach the Internet contributed to a global perception and dramatically lowered the required efforts to enter global markets, distribute organizational activities by global outsourcing or opening subsidiaries abroad. In order to remain informed and be able to control activities outside the physical organization information technologies and communication mechanisms are essential. As we will see it are these technologies and mechanisms that give shape to a Virtual Organization. A Virtual Organization can be evolved from a physical institution or build from scratch without any business history or legacies.

Contemporary literature on Virtual Organizations generally focusses on the characteristics, benefits, drawbacks and singular management strategies and pays less attention to the important role of the Entrepreneur responsible for establishing the Virtual Organization as a response to an opposing opportunity. The actual skills, requirements and competences this individual should possess in order to start and finally build a promising virtual business seem to be neglected in theory. On the other hand the focus in a wide range of literature on topic of Entrepreneurship generally assumes an Entrepreneur responds to a recognized opportunity by establishing an traditional institution and seems to disregard a possible consideration the Entrepreneur nowadays has to utilize the opportunity without the need to establish a physical organization, acquire physical resources and start a business. The possibilities of information and communication technologies including the Internet make it more practical to use markets instead of a traditional hierarchical organizational structure and enables an Entrepreneur to virtually “acquire” the required resources to be able to utilize recognized opportunities. This process might entail different personal skills, requirements and competences in contrast to Entrepreneurs operating in a more physical business environment.

In a well cited article in the magazine Business Week of February 1993 Byrne predicted that the real Virtual Organizations – at that point in time, mainly existing in the imaginations of business thinkers and theorists – would emerge in 10 to 20 years. In this thesis, written exactly 16 years later, I will make an attempt to address the dissimilarities derived from both theory and practice of traditional institutions compared to Virtual Organizations and try to make a contribution by addressing the role of the Entrepreneur and the corresponding strategies undertaken to exploit opportunities virtually. Given the relative paucity of research on the combination of Virtual Organizations and Entrepreneurship in the next chapters I will first briefly describe the Virtual Organization – the first of two supporting pillars – in terms of its origin, the process of formation and comparison of the Virtual Organization with traditional physical institutions. In the chapter about Entrepreneurship – the second pillar – I will outline the history and origin of Entrepreneurship, the Entrepreneurial activities, the important role of innovation and opportunity recognition and personal competences of the Entrepreneur. These two pillars will be the foundation for the concept of Virtual Entrepreneurship; enabled, motivated and moderated by different forces. The theoretical insights will be validated and strengthened by two individual selected cases of real-life Entrepreneurs experienced in virtually exploiting recognized opportunities.

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© 2009 T. de Roode, feel free to cite this research when correctly referenced.