Theoretical Framework

This study is anchored on the Entrepreneurial Value Creation Theory which

explains the entrepreneurial value creation and its realization via a venture. 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 competence is formulated, the process of which is explained by

the Theory of Entrepreneurial Competence . 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 competence 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.

The theory of entrepreneurship, namely the entrepreneurial value creation

theory, explains the entrepreneurial experience in its fullest form, from the

entrepreneurial intention and the discovery of an entrepreneurial opportunity, to the

development of the entrepreneurial competence, and the appropriation of the

entrepreneurial reward (Mishra and Zachary 2014). The theory of entrepreneurship

provides in sufficient detail the interiors of the entrepreneurial process using a two-

stage value creation framework. In the first stage of venture formulation, the

entrepreneur driven by a desire for entrepreneurial reward (i.e., entrepreneurial

intention) leverages the entrepreneurial resources at hand to sense an external

opportunity (cue stimulus) and effectuate the entrepreneurial competence that is

sufficient to move to the second stage. Several ventures fail at this stage. In the

second stage of venture monetization, the entrepreneur may acquire external

resources such as venture capital or strategic alliance to effect growth. Investors

face an adverse selection problem when entrepreneurial ability and venture quality

are difficult to ascertain. Entrepreneurs may use incentive signals to secure a higher

valuation offer from the investors. A business model design with embedded dynamic

capabilities can reconfigure the entrepreneurial competence to create sustained

value and appropriate the entrepreneurial reward.