CHAPTER 10

THE ENTREPRENEURIAL VALUE

CREATION THEORY

Introduction
The Entrepreneurial Value Creation Theory explains the entrepreneur-
ial value creation and its realization via a venture (see figure 10.1). The
entrepreneurial value creation process consists of two iterative stages, the
venture formulation (Stage 1) and the venture monetization (Stage 2).
In Stage 1, the entrepreneur begins with either the entrepreneurial
opportunity or the entrepreneurial intention to found a new venture to
realize the entrepreneurial reward. In Stage 1, the entrepreneurial com-
petence is formulated, the process of which is explained by the Theory of
Entrepreneurial Competence (see chapter 5). Many ventures fail during
Stage 1. If a venture transitions to Stage 2, further investments are required
to build dynamic complementary capabilities, which are then embedded
in the business model design. If the venture is unable to procure further
investments, the venture returns to Stage 1 and the entrepreneurial com-
petence is reformulated, before the venture may return to Stage 2. In
Stage 2, the Business Model Theory, within the Entrepreneurial Value
Creation Theory, explains the elements of the business model design, the
venture value drivers.
Each stage is iterative. In Stage 1, the feedback link connects the
effectuation multiplier to the feasibility modulator (see figure 10.1). This
feedback link carries the entrepreneurial competence output from the
effectuation multiplier to the feasibility modulator. The feasibility mod-
ulator checks whether the entrepreneurial competence is sufficiently
developed and then determines if there is enough entrepreneurial inten-
tion to move forward; if not, the venture fails. We posit the Theory of
C. S. Mishra et al., The Theory of Entrepreneurship
© Chandra S. Mishra and Ramona K. Zachary 2014
 Stage 1—Formulation :e[i
j^[
[djh[fh[d[kh_Wb
^Wl[
ik\\_Y_[dj
Yecf[j[dY[5

;djh[fh[d[kh_Wb
?dj[dj_ed Feasibility
Effectuation ;djh[fh[d[kh_Wb

:[i_h[
\eh
H[mWhZ Modulator
;djh[fh[d[kh_Wb Multiplier Effehjkd_jo

H[iekhY[i Ij_ckbki

;djh[fh[d[kh_Wb
9ecf[j[dY[

Stage 2—Monetization 9Wf_jWb

9edijhW_dj

Due Business
L[djkh[
;djh[fh[d[kh_Wb

Diligence Model
?dl[ijc[dj H[mWhZ
Modulator Multiplier
:odWc_Y
9ecfb[c[djWho

9WfWX_b_j_[i

?i
j^[
h[mWhZ
mehj^m^_b[5

Key
Feasibility Modulator
cWjY^[i
;djh[fh[d[kh_Wb
?dj[dj_ed
m_j^
j^[
\[[ZXWYa
e\
m^[j^[h
j^[
[djh[fh[d[kh
^Wi
ik\\_Y_[dj
Yecf[j[dY[
WdZ
WZ`kiji
j^[
b[l[b
e\
;djh[fh[d[kh_Wb
H[iekhY[i$
Effectuation Multiplier
Z[fbeoi
;djh[fh[d[kh_Wb
H[iekhY[i
je
h[Yed\_]kh[
;djh[fh[d[kh_Wb
Effehjkd_jo
_dje
;djh[fh[d[kh_Wb
9ecf[j[dY[$
Due Diligence Modulator
cWjY^[i
;djh[fh[d[kh_Wb
9ecf[j[dY[
m_j^
j^[
\[[ZXWYa
e\
m^[j^[h
j^[
h[mWhZ
_i
mehj^m^_b[
WdZ
WZ`kiji
j^[
b[l[b
e\
:odWc_Y
9ecfb[c[djWho
9WfWX_b_j_[i1

eh
_\
j^[
l[djkh[
_i
dej
l_WXb[
eh
\kdZWXb["
j^[
9Wf_jWb
9edijhW_dj
fhel_Z[i
\[[ZXWYa
je
j^[
<[Wi_X_b_jo
CeZkbWjeh
_d
IjW][
'
WdZ
h[ijWhji
j^[
\ehckbWj_ed
fheY[ii$
Business Model Multiplier
Z[fbeoi
9ecfb[c[djWho
9WfWX_b_j_[i
je
h[Yed\_]kh[
;djh[fh[d[kh_Wb
9ecf[j[dY[
_dje
;djh[fh[d[kh_Wb
H[mWhZ$

Figure 10.1 The entrepreneurial value creation theory: Venture formulation and monetization.