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Journal of Small Business & Entrepreneurship

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A Conceptual Framework for Describing Online


Entrepreneurship

Prakash L Dheeriya

To cite this article: Prakash L Dheeriya (2009) A Conceptual Framework for Describing
Online Entrepreneurship, Journal of Small Business & Entrepreneurship, 22:3, 275-283, DOI:
10.1080/08276331.2009.10593456

To link to this article: https://doi.org/10.1080/08276331.2009.10593456

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A Conceptual Framework for Describing Online
Entrepreneurship
Prakash L Dheeriya, Department of Finance, California State
University-Dominguez Hills, Carson
ABSTRACT. Most of the literature on entrepreneurship relates to the traditional “brick-and-mortar” type. A
review of contemporary research in entrepreneurship literature suggests that online entrepreneurs are different
from regular, or “brick-and-mortar” entrepreneurs. This paper attempts to collate all variables used in prior
research to describe entrepreneurs and their ventures into a comprehensive framework. This framework consid-
ers four major aspects of entrepreneurship: characteristics of individuals starting the venture; technology used in
the venture; the environment in which the venture operates and the process by which the venture is created. Such
a framework can provide useful insights into the process of online entrepreneurship by showing it to be a com-
plex, multi-factor phenomenon.
RÉSUMÉ. La majeure partie de la littérature au sujet de l’entrepreneuriat se rapporte aux entreprises tradition-
nelles. Une revue de la recherche contemporaine sur l’entrepreneuriat semble indiquer que les entrepreneurs
ayant une entreprise en ligne diffèrent de ceux ayant des entreprises traditionnelles. Cette étude tente de réunir
toutes les variables qui ont été utilisées dans les recherches antérieures pour décrire les entrepreneurs et leur
entreprise au sein d’un cadre complet. Ce cadre tient compte de quatre aspects majeurs de l’entrepreneuriat : les
caractéristiques des individus qui démarrent l’entreprise ; la technologie utilisée au sein de l’entreprise ; et
l’environnement dans lequel l’entreprise fait affaires et le processus par lequel elle est établie. Ce genre de cadre
peut fournir des indications utiles au sujet du processus de l’entrepreneuriat en ligne en le démontrant comme
étant un phénomène complexe à multiples facettes.

Introduction
Current research in entrepreneurship tends to focus on or prove the notion that entrepre-
neurs are different from non-entrepreneurs1 or that entrepreneurial firms are different from
non-entrepreneurial firms.2 In these studies, the basic assumption is that all entrepreneurs
and their new ventures are homogenous. The focus of this paper is on differences between
brick-and-mortar entrepreneurs and entrepreneurs who conduct ventures completely
online. Differences between these two may be greater than the differences between entre-
preneurs and non-entrepreneurs and those between entrepreneurial firms and non-entre-
preneurial firms, as discovered in the studies mentioned earlier. Once we identify and rec-
ognize that online entrepreneurs are different from regular entrepreneurs, it becomes nec-
essary to find a way to classify those online ventures.
The meaning of entrepreneurship and its measurement has been discussed in several
studies.3 Determinants of entrepreneurship have been the focus of several studies cover-
ing a wide range of theories and explanations (Brock and Evans, 1989; Gavron, Cowling,
Holtham and Westall, 1998; OECD, 1998; Blanchflower, 2000, 2004; Verheul, Wennekers
_________________________
1. See Brockhaus, 1980; Carland et al., 1984; Collins and Moore, 1964; DeCarlo and Lyons, 1979; Hornaday
and Aboud, 1971; Howell, 1972; Komives, 1972; Litzinger, 1965; McClelland, 1961; McClelland and Winter,
1969; Palmer, 1971; Schrier, 1975; Shapiro, 1975.
2. See Collins and Moore, 1970; Cooper, 1979; Smith, 1967; Thorne and Ball, 1981.
3. See Hébert and Link, 1982; Bull and Willard, 1993; Lumpkin and Dess, 1996; OECD, 1998; Praag, 1999.

Journal of Small Business and Entrepreneurship 22, no. 3 (2009): pp. 275–284 275
276 DHEERIYA

and Thurik, 2002; Arenius and Minniti, 2005). Entrepreneurship has been found to be a
significant factor in economic development of countries ((Baumol, 1990; Wennekers and
Thurik, 1999; Carree and Thurik, 2003, 2006; Acs et al., 2005). The extent of entrepre-
neurship has been found to vary systematically across countries and across time (Rees and
Shah, 1986; Wit and Van Winden, 1989; Blanchflower and Meyer, 1994; Blanchflower,
2000, 2004). However, similar research on “online entrepreneurship” is sparse, even
though the coverage of “online” entrepreneurship is truly global.
Interest in international entrepreneurship has increased rapidly over the past decade
(Brush, 1993, 1995; Hitt and Bartkus, 1997; Hisrich et al., 1995). Scholars have observed
the close theoretical link between entrepreneurship and international business (IB) research
(Hisrich et al., 1994; McDougall and Oviatt, 2000). However, a conceptual framework for
analyzing “online entrepreneurship” has yet to be developed formally in the field of online
entrepreneurship. It is this gap that this paper purports to fill.
The conceptual framework that is developed in this paper will provide a way of ana-
lyzing past research studies. Each study can be broken down into types of individuals,
organizations, environment of internet and processes that were studied. This paper will not
seek to answer questions such as how online ventures are started or provide theoretical
models of online entrepreneurship. Instead, it will provide a different perspective on the
online entrepreneur; a shift that will emphasize the complexities and variations involved
in online entrepreneurship.
The goal of coming up with a framework is not to smooth differences between entre-
preneurship and online entrepreneurship and come up with typical properties of a typical
entrepreneur. The goal is to identify specific variables that describe how online entre-
preneurship is created, in order that meaningful contrasts and comparisons among new
ventures can be made.
Growth of Online Entrepreneurship
The internet-based commerce has been stealing billions of dollars away from traditional
retail outlets, and is becoming a significant component of global sales of a growing enter-
prise. Once we acknowledge that online entrepreneurship is becoming more and more sig-
nificant in today’s business world, it then becomes necessary to find a framework for sys-
tematically discovering and evaluating the similarities and differences among new online
ventures. The population of entrepreneurs may be homogenous but the subset of “online”
entrepreneurs within the entrepreneurial universe must be further analyzed so that entre-
preneurial research can produce meaningful results. A primary value of such a framework
for describing online entrepreneurship presented here is that it provides a systematic
means of comparing and contrasting brick-and-mortar ventures with online ventures. In
addition, it provides a way to conceptualize variation and complexity in entrepreneurship
(Gartner, 1985).
Existing frameworks of entrepreneurship consider variables such as country effects,
role of government intervention, supply of resources and willingness of entrepreneurs.
One such framework was developed by Verheul et al. (2002) (see Figure 1) in which they
compared levels of motivation of entrepreneurs between the U.S. and European countries.
They empirically tested this framework and discovered that factors such as lack of finan-
cial support and perceived administrative bureaucracies at government levels did not
influence levels of motivation.
Another conceptual framework of entrepreneurship went deeper by distinguishing itself
from domestic entrepreneurship (e.g. see Zahra and George (2002)). In this framework,
A CONCEPTUAL FRAMEWORK FOR DESCRIBING ONLINE ENTREPRENEURSHIP 277

country G

DEMAND Opportunities Risk-reward G


profile

entry / exit
Resources E
Abilities / traits E-
SUPPLY
Preferences E

G
G
G
G

administrative burden, financial support, risk

gender, age,

Figure 1. Source: Verheul et al. (2002).

An Integrated Model of International Entrepreneurship


Environmental Factors
‘’‡–‹–‹˜‡ ‘”…‡•

”‘™–Š
’’‘”–—‹–‹‡•
ƒ–‹‘ƒŽ—Ž–—”‡
†—•–”›”‘ˆ‹–ƒ„‹Ž‹–›
•–‹–—–‹‘ƒŽ
˜‹”‘‡–
…‘‘‹‡•‘ˆ…ƒŽ‡
Organizational Factors Intl. Entrep. Competitive Advantage

Top Management Extent Financial Outcomes


Team Characteristics Speed Non-financial Outcomes
Firm Resources Scope
Firm Variables
Age, Size, Financial
Strength,
Location, Origin etc.

Strategic Factors
Competencies
Differentials/Proximity
Generic Strategies
Functional Strategies
Entry Strategy

Figure 2. Source: Zahra and George (2002).


278 DHEERIYA

international entrepreneurship is explained by environmental, organizational and strategic


factors (Figure 2).
The organizational factors include the top management team and other assets available
to the organization. In this framework, strategic and environmental factors are considered as
moderators of the relationship between organizational factors and international entrepre-
neurship dimensions. The benefits of going international by an entrepreneur are described
under competitive advantages in the form of financial and non-financial outcomes.
The two frameworks of entrepreneurship described above consider entrepreneurship
as a culmination of several forces. They distinguish between domestic and international
entrepreneurship. These frameworks are woefully inadequate in explaining factors that
lead entrepreneurs to go online, as opposed to going international.
To illustrate how these two frameworks are inadequate, consider the case of an online
business such as eharmony.com. Dr. Neil Clark Warren, a renowned relationship expert
and author of several books, started this firm in 1999. Within two years of its formation,
this firm was profitable and, in 2003, the chairman received the Entrepreneur of the Year
Award from Ernst and Young. Existing frameworks on entrepreneurship would focus on
factors such as government influences, management characteristics and strategic factors,
but would minimize or ignore the use of technology in the success of the entrepreneurship
venture. In the case of eharmony.com, it was the convenience, anonymity and provision
of a unique matchmaking service that led to its success. Other cases where traditional
frameworks of entrepreneurship fall short include yahoo.com, google.com and many suc-
cessful dot-coms with a unique business model. It is in this light that we develop a frame-
work for explaining online entrepreneurship.
A Conceptual Framework
The word “entrepreneur” has been defined in various ways and it has been a semantic
problem in the study of entrepreneurship ((Brockhaus (1980); Komives (1969); Long
(1983)). It is necessary to define “online entrepreneur” clearly so that the complexity and
variation of that concept is clearly identified. For our purposes, we will define online
entrepreneurship to mean any venture conducted solely on the internet or the world wide
web. It encompasses activities of a regular entrepreneur, but the mode of operation is tech-
nologically based. It recognizes that online entrepreneurship has distinct characteristics
than typical entrepreneurship. These distinct characteristics themselves lead to different
and complex problems faced by an online entrepreneur. For example, the problem of secu-
rity within an online transaction is very different from that in a regular, brick-and-mortar
retail operation. The concept of taking a “test drive” of a product may be completely
absent when dealing with an online site, unless that site is offering a “demo” version of a
piece of software that can be easily downloaded and used.
The classification of entrepreneurs for the purpose of understanding the concept of
entrepreneurship has been extensively researched (e.g. see Danhoff (1949), Cole (1959),
Daily (1971), Smith (1967), Filley and Aldag (1980), Vesper (1979, 1980), Cooper
(1979), Cooper and Dunkelberg (1981)).
A framework for describing the concept of online entrepreneurship is provided in
Figure 3. It is similar to Gartner’s (1985) framework of understanding new venture cre-
ation, but has been modified to include the “online” nature of the venture. The “individ-
ual” is the entrepreneur who started this venture and the “organization” is the form of the
venture. The World Wide Web is the environment in which the entrepreneur operates and
the process is the detailed steps the entrepreneur undertakes to perform in the venture.
A CONCEPTUAL FRAMEWORK FOR DESCRIBING ONLINE ENTREPRENEURSHIP 279

Individuals
Tech-Savvy
Location, age, work
experience not as
relevant

World Wide Web Online Organization


Online Order initiation Entrepreneurship Typically sole
Minimal barriers to
entry/exit prop/partnership
Domain name, virtual Need for asset
storefront, creativity protection
important, SEO
Exit Strategy of
founders

Process
Domain name
registration,
Security, Marketing,
Regulatory
concerns,
Infrastructure

Figure 3. Framework for Describing Online Entrepreneurship.

Individual
The characteristics of an individual who starts a new venture have been extensively stud-
ied in traditional entrepreneurship literature.4 Those characteristics typically apply to an
entrepreneur starting a venture in the real world, as opposed to an online world. For an
online venture, an individual needs to possess different skills. The requirement of being a
team player, as mentioned in Cooper (1979), may not be relevant for a one-man-based
online business that is selling items on, for example, eBay. Other requirements—propen-
sity to take risk, age, previous work experience, entrepreneurial parents, etc.—that are
extensively studied in entrepreneurship literature may not be appropriate to be successful
in an online environment. A good knowledge of basic HTML language, or electronic pay-
ments, or shopping cart software may be more appropriate for an individual undertaking
an online venture, though such technical knowledge may not be relevant nowadays con-
sidering one can buy or download off-the-shelf software solutions. In the framework that
has been developed, we consider the desire to use technology as a primary driver of
_________________________
For a good reference to qualities that make up an entrepreneur, please see Gartner (1985), Carland et al. (1984)
and Collins and Moore (1984).
280 DHEERIYA

business or “tech-savvyness” to be an important variable influencing the success of an


online venture. Other factors such as interpersonal skills, presence of a foreign accent, and
location of the venture may lose importance in an online setting where the sole proprietor-
entrepreneur is the only key player, though such factors could be very important in a tra-
ditional business setting. However, these factors do become more important as organiza-
tion structures become more complex, such as partnerships, corporations and other forms.
In such cases of complex organization structures, we can replace the “individual” with
“management personnel.”
World Wide Web
Most transactions in an online business venture occur through the internet (in our study,
it is synonymous with the World Wide Web or cyberspace). Payment and delivery may
occur through traditional means, such as use of delivery services, checks and money
orders, but orders are typically initiated on the venture’s website. Information about prod-
ucts and services are made available through the site, which acts as a storefront for the
business. The barriers to entry and exit are minimal in the online world, thereby making
it easy for competitors to step in and take customers of an online business away. It also
forces an online entrepreneur to be creative in how he or she sets up the storefront, what
terms are offered, how to select a domain name, and what kind of advertising medium to
use. In the arena of online entrepreneurship, there is a scarcity of research on environ-
mental variables, though there are several studies (Bruno and Tyabjee (1982); Williamson
(1975), etc.) detailing environmental variables that stimulate entrepreneurship.
Organization
Most studies in entrepreneurship focus on manufacturing firms (Smith (1967); Cooper
(1970), Collins and Moore (1977)). Litzinger (1965) used motel firms in his sample.
Researchers in these studies made no distinction between the type of entrepreneurial firms
in their studies, thereby making it difficult to apply their conclusions across all industries
and for online firms. Many online businesses are set up as sole proprietorships or part-
nerships, though the larger online firms are set up as corporations. The evolution of the
online firm depends heavily on factors such as “eyeballs attracted” or “revenues generat-
ed.” The exit strategy for successful online firms is either to offer capital to the general
investing public in an Initial Public Offering (IPO) or to be sold to an existing corpora-
tion, with the founders of the business continuing to work for the venture they founded.
In this respect, an online entrepreneur may choose to have a professional team of
managers installed in his organization or to just operate the firm as a sole proprietor.
Process
The “process” portion of traditional entrepreneurship studies relates a series of steps that
an entrepreneur needs to perform to be successful. In the online setup, the process aspect
of entrepreneurship involves performing a different series of steps. Gartner (1985) sum-
marizes the process of entrepreneurship into six common behaviors: deciding on a loca-
tion, accumulation of resources, marketing of products, production activities, setting up of
an organization and responding to government and society. Some of the behaviors are
applicable to an online entrepreneur (accumulation of resources, marketing, organizing
and responding to external environment). However, one can add the following new behav-
iors to this list for an online entrepreneur: securing the online transaction process,
indulging in search engine optimization, safeguarding privacy, and protecting online
assets. The process of online entrepreneurship is closely tied to the hardware and software
A CONCEPTUAL FRAMEWORK FOR DESCRIBING ONLINE ENTREPRENEURSHIP 281

used in the venture. Constant updating and upgrading of these tools is key in an online set-
ting, although assets like land and building are not upgraded as often in the traditional
business environment.
Conclusions
Separately listing key variables involved in a successful online venture under the appro-
priate dimension of the conceptual framework demonstrates the complexity of the online
entrepreneurship. These key variables are very different from those used in studies of tra-
ditional entrepreneurship models. Earlier studies on entrepreneurship fail to differentiate
the needs of the online entrepreneur from those of regular entrepreneurs or even non-
entrepreneurs. An online entrepreneur selling, for example, coffee operates in a very dif-
ferent environment when compared with the environment of a coffee shop owner. By
lumping these two entrepreneurs together in traditional entrepreneurship studies, we fail
to see that generalizations about entrepreneurs cannot easily be carried over to online
entrepreneurs. The conceptual framework presented in this paper provides a way of ana-
lyzing entrepreneurship in the online environment by clearly identifying relevant vari-
ables. Any new research in online entrepreneurship can then be designed to account for
the unique traits of online entrepreneurship. Another benefit of using the conceptual
framework pertains to resolution of conflicts noticed in earlier entrepreneurship studies.
For instance, Collins and Moore (1970) and Cooper (1970) come up with different traits
that are required for a successful entrepreneur, but these studies failed to look at the qual-
ity of their data. Collins and Moore (1970) looked at manufacturing firms whereas Cooper
(1970) studies high technology firms.
The framework developed in this paper can be used as a basis for future research in
online entrepreneurship and for reporting results from such studies. Assuming the sample
will consist of only online entrepreneurial firms, the researcher can study each of the four
dimensions and compare results with other researchers on the same dimensions. For
instance, a researcher may ask: Is there any difference in age, work experience and edu-
cational backgrounds between entrepreneurs who have storefronts on Amazon versus
Yahoo? Are business-to-business (B2B) stores different from business-to-government
(B2G) stores on any of the four dimensions of the framework? Is the process of starting
an online retail site different from an online dating site? Online ventures that share mean-
ingful similarities across the four dimensions can be classified and described together,
resulting in useful generalizations.
The paper does not seek to answer or provide steps on creating an online venture, nor
does it exhaustively list all variables relevant to an online venture. The paper does provide
a new focus on online ventures, far more distinct from typical ventures. It does this by
destroying the assumption that all entrepreneurs are alike, that all entrepreneurs share
common traits, and that online entrepreneurs are no different from regular entrepreneurs.
In this respect, the framework recognizes and appreciates the complexity and multi-
dimensionality of online entrepreneurship.
Contact Information
For further information on this article, contact:

Dr. Prakash L. Dheeriya, Department of Finance, California State University-Dominguez Hills,


1000 E. Victoria St, Carson, CA 90747, USA

Tel.: 310-243-3350/310-217-6964 (Fax)


Email: pdheeriya@csudh.edu
282 DHEERIYA

Acknowledgements
I would like to thank the College of Business and Public Policy Summer Entrepreneurship Grant
Program for providing financial support for this project.

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