The Venture Capital Cycle

by Paul A. Gompers and Josh Lerner (MIT Press)

U.S. venture capital firms have grown dramatically over the last two decades, nurturing a host of start-ups -- including Apple Computer, Genentech, Intel, Lotus, Microsoft, and Yahoo! -- that are now giants in the global economy. Yet while annual inflows to venture funds have expanded from virtually zero in the mid-1970s to more than $35 billion in 1999, numerous misconceptions persist about the nature and role of venture capitalists.

In their recent book, The Venture Capital Cycle, HBS associate professor Paul Gompers and professor Josh Lerner draw on their extensive research on venture capital organizations to illuminate the workings of this important industry. In a series of interpretative essays, the book expands on common themes in research they have previously published in finance and economics journals. One of their goals, write the authors, is to correct the mistaken belief among some entrepreneurs, corporations, and academic institutions that "venture capitalists can add little value to young firms aside from money."

After a historical overview, the book analyzes the venture capital process -- from the formation of funds to the investment of the funds in operating companies to the liquidation of those investments. A wide range of topics is considered, including the structure of venture partnerships, how venture capitalists oversee firms, how they are compensated, and how market conditions affect the decision to go public.

As the authors shed light on the structure and operations of venture capital firms, three major themes emerge. First, all venture capitalists confront tremendous incentive and information problems, in part because they work with industries in which there is a great deal of uncertainty and where assets are often difficult to value. Second, because the various stages of the venture capital process are related, the entire function is best viewed as a cycle. Finally, unlike most financial markets, the venture capital industry adjusts very slowly to shifts in the supply of capital and the demand for financing.

The book's final chapter suggests areas for further study. "Much is not yet known about the venture capital industry," write Gompers and Lerner, who note that one open question is the extent to which the U.S. model can be adapted successfully to business overseas. Although it is questionable whether the industry can continue to grow at the same pace as in recent years, the authors predict that venture capital firms will be "an enduring feature on the global economic landscape in the years to come."

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Learning in Action

by David A. Garvin (Harvard Business School Press)

Risk taking is an integral building block in developing organizational learning. IBM founder Thomas J. Watson, Sr., understood the value of creating an environment in which errors -- and even failures -- are accepted and embraced. When a young manager who had lost $10 million in a risky venture told Watson, "I guess you want my resignation," Watson replied, "You can't be serious. We just spent $10 million educating you."

David Garvin, the Robert and Jane Cizik Professor of Business Administration at HBS, uses this example of IBM lore in Learning in Action: A Guide to Putting the Learning Organization to Work. Garvin, the author of numerous books and articles on organizational learning, improvement, and change and creator of the videos Working Smarter and Putting the Organization to Work, believes that most managers understand the value of building an organization where learning is encouraged but are uncertain how to make it a reality. "How do I, as a manager, get started?" Garvin posits. "What tools and techniques must I master? What do I need to do personally to lead the learning process? And how will I know when my company has truly become a learning organization?"

Garvin answers these questions with practical guidelines and a wealth of real-life examples. He uses detailed case studies to illustrate successful learning processes at organizations such as Xerox, L.L. Bean, the U.S. Army, GE, Timken, and Allegheny Ludlum Steel. He also presents brief "snapshots" that single out a particularly effective program or policy or highlight an error at companies such as Boeing, Disney, Microsoft, Nike, Pepsi, and Wal-Mart.

"The book is guided by a simple premise: learning organizations are built from the gritty details of practice," writes Garvin. "It shows managers how they can use that understanding to create learning organizations that work."

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The Origin and Evolution of New Businesses

by Amar V. Bhidé (Oxford University Press)

"Entrepreneurs who start and build new businesses are more celebrated than studied," writes HBS associate professor Amar Bhidé in the introduction to his new book, The Origin and Evolution of New Businesses. Bhidé takes on the task of remedying this situation by setting out to "demystify and organize our thinking about entrepreneurs."

The Origin and Evolution of New Businesses is divided into three sections that cover the nature of promising start-ups, the evolution of fledgling businesses, and the societal implications of new businesses. Using a thorough, analytical approach, Bhidé applies more than ten years of intensive research and modern theories of business and economics toward a better understanding of entrepreneurship. By examining hundreds of successful ventures, he finds that typical businesses have humble and improvised origins and that well-planned, venture capital­funded start-ups are more the exception than the rule.

"Research in this important arena has been held back by a chicken-and-egg problem," writes Bhidé. "Scholars avoid the field because it doesn't have a well-defined theory, but such a theory cannot spontaneously emerge without their efforts. I hope the frameworks and hypotheses suggested here will help break the deadlock and stimulate the careful scholarship the topic deserves."

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The Harvard Business School Guide to Finding Your Next Job

by Robert S. Gardella (Harvard Business School Press)

As fast as the business world is changing, so too are the techniques for searching for the right job. Yet regardless of the reason for a job change -- the outcome of globalization or corporate consolidation, or the personal desire for new opportunities, increased income, or a better work/life balance -- a sound road map is needed to discover the right career path.

"Searching for a job is one of the most important things that professionals do, and they are doing it much more frequently," writes Bob Gardella in the introduction to his book, The Harvard Business School Guide to Finding Your Next Job. "It is also one of the most feared, misunderstood, and mishandled activities, even by otherwise intelligent, accomplished people." Gardella, who is assistant director of Alumni Career Services at HBS and who has a wealth of experience as a consultant, job search counselor, and outplacement specialist, considers the job search to be an art, not a science -- one in which the applicant applies his or her own personality and style to a search process that uses effective methodologies and approaches. Gardella's book provides job seekers with an easy-to-follow road map that not only guides them in the process but offers challenging activities and practical advice along the way. The book's eleven chapters are organized sequentially, beginning with preparing for the job search, selecting references, and creating a résumé, to planning and executing a search campaign, interviewing techniques, and negotiating job offers. An extensive bibliography includes both publications and Web sites that address topics such as the emotional aspects of finding a new job, financial considerations, and using search firms.

Originally created for professionals who had lost their jobs, The Harvard Business School Guide to Finding Your Next Job applies to anyone who is looking for a new job -- from the graduate-to-be to those seeking entirely new careers.

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HBS Press Books in Brief

(Harvard Business School Press)

Common Knowledge: How Companies Thrive by Sharing What They Know, by Nancy M. Dixon, gets to the heart of one of the most difficult questions in knowledge transfer today: What makes a system work effectively in one organization but fail miserably in another?

Mission Critical: Realizing the Promise of Enterprise Systems, by Thomas H. Davenport, presents an authoritative, no-nonsense view of the enterprise system's opportunities and challenges and provides a set of guidelines to help evaluate the benefits and risks for your organization.

Drawing on an in-depth study of 25 carefully selected enterprises -- including Home Depot, Hewlett-Packard, and the U.S. Marine Corps -- Peak Performance: Aligning the Hearts and Minds of Your Employees, by Jon R. Katzenbach, highlights the various sources of emotional energy unique to each organization and the discipline companies need to follow their chosen paths.

The Social Life of Information, by John Seely Brown and Paul Duguid, explains how many of the tools, jobs, and organizations seemingly targeted for future extinction in fact provide useful social resources that people will fight to keep.

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