Entrepreneurial Orientation: What Is It and Why Might It Be a Hidden Strategy for Building Long-Term Enterprise Value?

Abstract

The private equity industry is constantly looking for new ways to build enterprise value. Success in this regard generates differentiated returns for general partners (GPs) and commensurate demand by limited partners (LPs) hoping to participate in the resulting gains in a subsequent fund. This study confirms that a new method to building long-term value is available by searching for companies that either already possess an entrepreneurial orientation (EO) or demonstrate dynamics where an EO can be created. Building such an EO culture is not easy, and it takes time and considerable effort to properly establish. Similarly, finding companies that already possess or have components of EO demands considerable focus, attention, and special due diligence foresight. The rewards of effectively finding or building an EO have been shown to yield competitive advantages that translate into performance gains that can last well into the long term.

TOPICS: Private equity, analysis of individual factors/risk premia, in portfolio management, portfolio construction