Study: Hobbyists Make Poor Entrepreneurs

Christopher O'Connor

SALISBURY, Md. -- When does a toy become a commodity? When do a few people in a lab experimenting with a new process or technology develop into an enterprise with several layers of production and communication? And at what rate do those factors determine when an entrepreneur should step aside, selling his or her business for survival's sake?
For years, the conventional wisdom on what is known as "initial succession" sided with the steps of a company's development, that as profits grew and more levels of management were added to a company, its founder would reach crisis points and in desperation would sell it to an outside investor.
"We thought that was rather simplistic," said George C. Rubenson, an associate professor of management at Salisbury State University and the author of a study with an alternative view on corporate succession.
Among his most interesting findings: High-tech companies turned over much more quickly (13 years after being founded) than low-tech ones (25 years after being founded).
Rubenson contends that the nature of change -- alterations to technology and corporate structure -- and how an entrepreneur responds to change are the driving factors in determining the speed of an initial succession.
The successful entrepreneur, Rubenson said, is the one who can differentiate between a business and a hobby. That person can do what's best for the company's future, rather than simply protecting a "toy" that he or she developed.
As an example, he cited the plight of Apple Inc.'s co-founder, Steve Jobs: "He never seemed to be able to get past his hobby" to exploit a product to its fullest.
Rubenson said that this pitfall is one any technology company can run into, given the hours spent and commitment to researching and developing a set of products.