Capabilities and Resources of Participation Firms within the Private Health Care Sector in the Netherlands

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Capabilities and Resources of

Participation Firms within the Private Health

Care Sector in the Netherlands

Master Thesis, MSc BA specialization Small Business & Entrepreneurship University of Groningen, Faculty of Economics and Businesses

Name: Niek Jansema

Student Number: S1831194

Date: August 16, 2011

Address: Prunusstraat 58

9741 LE Groningen (Netherlands)

Phone: +316-‐24195540

Email: niek_jansema@live.nl

Supervisor: C.H.M. Lutz

Co-‐supervisor: L.J.W. van Limburg

Supervisor Omale: M. Dorst

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Preface

This master thesis will be the finishing part in the master program of Business Administration with specialization in Small Business & Entrepreneurship at the University of Groningen. The subject of this thesis is based on the resources and capabilities of participation firms within the private health care sector in the

Netherlands. An internship within a participation firm in the private health care sector was seen as useful. Omale B.V., (further mentioned as Omale), offered this chance.

The private health care sector in the Netherlands is continuously changing and growing and is quit poorly studied. I hope that this study has made a contribution to the existing research in this area.

I want to express my special thanks to Mike Dorst, director Care Infrastructure at Omale, and Erik Bretveld, co-‐owner of Omale. They accompanied and helped me with the research and interviews. Mike Dorst was my supervisor during the thesis project. I also want to thank all the interviewees who have given me valuable data for my research. And last but not least, I want to thank my supervisors C.H.M. Lutz and L.J.W. van Limburg for their time, feedback, tips and tricks.

I hope that this thesis will contribute to the knowledge about resources and capabilities of participation companies like Omale, in the private health care sector.

Niek Jansema

Groningen, 16th of August 2011

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Executive Summary

This executive summary is divided into two parts. The main research question that has to be addressed in this study is: Which resources and capabilities stipulate the success and attractiveness of a participation firm, like Omale, in the private health care sector in the Netherlands?

Omale B.V. (Omale) wants to know which resources and capabilities are essential for success and for sustainable competitive advantage. The knowledge of the demanded resources in the sector that can provide sustainable competitive advantage is currently not available. This executive summary will give a brief overview of the most important findings. The answers on the main research question and the sub-‐questions can be found in Chapter 5: Conclusion.

Key issues and results from literature

The leading theory to answer the main research question is the Resource-‐based View of Barney (1991). This approach will be the red line in this thesis and will address the strategic resources and basic capabilities in the private health care sector. The following conclusions are taken from the literature.

It seems that the Dutch health care sector is changing dramatically (Schepers, 2009). The privatization of the health care sector in the Netherlands is an effect of the policy of the Dutch government and provides opportunities for firms like Omale. This

privatization forces and motivates the (private) health care organizations to focus on efficiency, effectiveness and quality. Privatization of the private health care sector is seen as the act of reducing the role of the government or increasing the role of private organizations of society in satisfying people’s needs (Savas, 2000).

Participation firms can be divided into two types of investors, namely venture capitalists and business angels. Omale itself invests various resources in their joint ventures and is in the literature seen as business angel (Avdeitchikova et al., 2008). They do contribute other resources than just finance. They also invest organizational and structural capital, human capital, relational capital, and their network. Further, Omale has a hands-‐on mentality and are actively involved in the management of the joint venture. The role of business angels is seen as very important for the economy (Avdeitchikova et al., 2008). The following definition is used in this study: “business angels invest their own money, make their own investment decisions, consider commercial aspects, are not involved with family investments and take an active role in the firm in which they invest”.

There are many studies about resources and capabilities of (private) health care firms. These studies reveal large amount of different resources and capabilities. As a result, an overlap was created and a filtering was necessary. Due to this filtering, the most

important capabilities and resources remained and became part of this research. The capabilities (production and market management capability) are important for Omale to play an essential and valuable role to increase the performance of the joint venture. The resources are important elements for these capabilities and ensure Omale to be able to create strategic options to achieve competitive advantage. The resources of Omale that are discussed in this research are; organizational and structural capital, human capital, relational capital, and network.

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This role is seen as most appropriate for firms like Omale because of the lack of strategic knowledge within the (private) health care sector that is assumed by Herder (2010). The second role is the supervising and monitor role. This role involves supervising and monitoring the behaviour of medical entrepreneurs so that they work in the best interests of the company and the owners. The third role is the resources acquisition role. The personal networks of firms like Omale can support the participations to create a valuable and vulnerable network. The last role is the mentoring role. This role can be appropriate because of the lack of non-‐medical related knowledge of medics in the private health care sector. However, the medics have to accept the mentor role of external firms like Omale. This mentor role is intensive and consists of parts of the other roles.

Key issues and results from the interviews

The sample consists of three respondent groups: the first group consists the owners and managers of Omale, the second of external experts, and the third of owners and

managers of joint ventures of Omale. All these three groups have a different viewpoint on the resources and capabilities of Omale. The brief findings will be first discussed.

All respondents acknowledged the importance of the resources and capabilities for Omale. The combination of resources and capabilities will become more important in the future. Omale can differentiate by bundling those resources and this can be seen as the basis for the capabilities. Another important finding is the difference between the private and public health care sector. Entrepreneurship is far more important within the private health care than the public health care. The competition within the private sector can be seen as reason for this difference. The investments of Omale have to be accompanied by capabilities (with support of the roles). Therefore, these roles are seen as important. The strategic role is currently seen as the most important for Omale. This role is based on the market management capability. The strategic role is that important because it contains the necessary strategic know-‐how and advice. However, the

supervising and monitor role is of growing importance because on-‐time adjustment of Omale will increase the performance of the joint venture. This role appears to be the most important during running projects and processes because quick adjustment is then essential to continue the process.

The interviews with the respondents reveal the strategic resources and basic capabilities of Omale. These do have influence on the success and attractiveness of Omale and its joint ventures. The interviews consist four resources that are all important for Omale. The filtering of the large amount of resources can be seen as successful because all remained resources do have a high strategic value (critical or strategic resources). The network is seen as most important strategic resource because of its extremely high strategic value. The network consists of relationships with

competitors, firms in other sectors, and external experts. The competitive superiority and irreplaceable character of this resource are the most important elements for this strategic value. Because of the novelty of the sector, exchange of knowledge is seen as important and the network can support this. The usability and variety of the network are seen as important strengths of Omale. The right connections with valuable strategic partners can create interesting strategic options. The structural and organizational capital is seen as second most important strategic resource because the organizational structure is seen as important determinant of success. This resource contains

interesting opportunities in the future and Omale has to invest more to increase the usability of it. The human capital is third most important for Omale and contains the knowledge and experience of the employees/owners. The human capital can

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The relational capital consists of relationships with strategic partners, joint ventures, and insurance companies. This resource is different from the network because the relationships are closer. Large support within the related firm is essential to increase the duration. This decreases the dependency on organizational changes within the related firm. The inimitability, competitive superiority, and non-‐substitutability of all resources ensure the high strategic value.

Both the capabilities are seen as important for the success of Omale and therefore can be qualified as basic capability. The production capability enables the joint ventures to increase effectiveness and efficiency in their production process. Omale can fill in gaps to improve the productivity of the joint ventures. The strategic knowledge of Omale is essential for this capability. However, the market management capability is seen as most important capability. The ability of Omale to manage the joint venture as efficient and effective possible is seen as important added value. The market management capability, for example, can facilitate the joint ventures to increase the production and quality of the product (health care). The marketing aspect appears to be an important element of this capability. Omale can support the joint venture to increase the effect of marketing. These capabilities are influencing the performance of the joint ventures in a positive way. It increases the performance of these firms.

The investments of Omale can be supported by several roles. These roles are close related to the capabilities and this relationship, or overlap, is discussed earlier. The strategic role is seen as most important role because most of the private health care firms lack strategic knowledge. By playing this role, Omale is able to complement the medical knowledge within the joint venture with strategic knowledge. Due to this, the cooperation appears to be vulnerable and increases the performance of the joint ventures. This strategic role is based on the human capital and the structural and organizational capital of Omale. The supervising and monitor role is seen as second most important role for Omale. Due to this role, Omale can overcome the internal blindness problem of firms because Omale has an external viewpoint to be able to evaluate and adjust the organizational processes. This means that Omale is not dependent or influenced by internal forces (employees) within the joint venture. The resources acquisition role is the third most important role and it enables joint ventures to build their own relational capital and network. The relational capital and network of Omale can be seen as the most important elements of this role. The importance of this role is increasing because of the increase in amount of starting firms without a network or relational capital. The mentor role is currently not appropriate for Omale because of the lack of acceptance in the sector. The medics do not accept Omale to fulfil the mentor role because they want to stay partly independent.

This research revealed four recommendations for Omale. The red line within these recommendations is the expertise of Omale. Omale has the expertise that the strategic partners do not have. Therefore, Omale has to exploit this expertise to increase both the importance of Omale as well the performance of the joint venture (or strategic partner).

The first is based on a strategic resource; structural and organizational capital. However, investment in the development of this resource is seen as essential to exploit the

benefits in the future. Strategic partners of Omale can support during the

implementation process of this recommendation. The potential of this resource is undisputed and it can have a positive influence on the stability and usability of the organizational structure of the joint venture. Omale has to invest in knowledge that is related to this resource. The experience and knowledge of the human capital can be used to increase the current value of this resource.

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The second recommendation is based on the supervision and monitor role of Omale. Omale has to be aware that they remain objective to be able to support their joint ventures with this role. If Omale is too involved in their joint ventures, they are not able to make objective evaluations and conclusions anymore and this will decrease the performance of the joint ventures. The communication between Omale and external parties like their joint ventures can be seen as third recommendation. This

communication is currently a weakness of Omale and they are therefore not able to manage and motivate the joint ventures. The communication has to be improved to increase success and attractiveness of Omale. If Omale is able to increase the level of communication, the relationships with external parties will become more valuable and vulnerable because these external relations notice that their opinion is important.

The last recommendation has a relationship with the relational capital. Omale has to invest in support within the related firms to increase duration and to decrease dependency on organizational changes within the related firm. If the ‘contactperson’, within the related firm, exits the firm, the relationship is often over. This dependency on organizational changes within the related firm has to be minimized. The duration of this resource will increase.

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1. Introduction and Problem Statement

1.1 Case-‐firm Omale

The principal of this research is Omale B.V (further mentioned Omale) and founded in 2002 in order to invest in demand driven private health care in the Netherlands. At this moment, Omale is able to do five or six participations or joint ventures at the same time and has the ability of 100% self-‐funding. Omale participates in all kind of care

organizations, institutions and clinics. These participations differ from dietetics to headache clinics. For instance the well known dialyze clinic in Beilen, ‘Dialysekliniek

Noord’, is a participation firm of Omale.

Due to the shifts in the health care sector from public to more private organizations, entrepreneurship became even more important. The Dutch health care sector is liberalizing and more freedom is given to health care entrepreneurs (Schepers, 2009). There is now more space for entrepreneurial activities than before and there are more challenges in the sector, which attracts entrepreneurial companies like Omale. The client is the central factor in the whole process of private health care firms. The shift from public to more private health care organizations is mostly because of the fact that the traditional ban on commercial health care organizations are lifted. This is an under-‐ researched upcoming sector that creates a gap for this research.

1.2 Current literature

The sector of private health care is quite young and research within this sector in the Netherlands is scarce. The topic is seen as under exposed but very important for the economy of each country (Zaborowski, 2009). A review of the literature revealed that only a few empirical studies on the importance of resources and capabilities had been conducted in the health care industry. According to Schepers (2009) an increasing number of private equity firms are investing in the health care sector. Zigan et al. (2009) show that the current research literature on the understanding and use of resources in the (private) health care is not satisfying. During the past years strategic management researchers have devoted an increasing attention to the influence of strategic resources on the organizational competitive advantage of firms in the (private) health care (Schepers, 2009).

1.3 Research objective

Omale participates for about ten years in the private health care sector and wants to know what kind of capabilities and resources are essential to provide success, strategic options, and sustainable competitive advantage. The relationship with their partners is important for Omale. These partners are the businesses that are (in potential) co-‐owner of the joint ventures. Omale expects that the results of this study will help them to sustain their competitive advantage and to create strategic options. The competitive advantage will contribute to their profit, and of its joint ventures, to become even more successful in the future. When Omale is informed about the demanded capabilities and resources, they can focus on the improvement of them and become even a more attractive partner in participations and joint ventures.

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1.4 Research question and sub-‐questions

The research question is developed to investigate the resources and capabilities of Omale. The current literature and the research objective, the following research questions are developed.

The research question is:

Which resources and capabilities stipulate the success and attractiveness of a participation firm, like Omale, in the private health care sector in the Netherlands?

To answer this research question, the following sub-‐questions are addressed.

Sub-‐question 1

Which resources and capabilities may determine the success and attractiveness of Omale according to the existing literature?

The first sub-‐question is developed to identify the private health care sector and is completely based on literature. An overview of the common resources and capabilities that determine the success and attractiveness of a participation firm like Omale will be discussed and explained. The results of this question are the basis of the further study.

Sub-‐question 2

Which resources and capabilities of Omale contribute to their success? In other words, what are the strategic resources and basic capabilities?

The second sub-‐question addresses the important resources and capabilities of Omale. The strategic resources and basic capabilities are important to identify because they determine the (sustainable) success and competitive advantage of a firm.

Sub-‐question 3

How do the strategic resources of Omale complement the resources of the joint venture, and what roles does Omale play in a partner-‐relationship?

This sub-‐question is about the success of the combination between Omale and their joint ventures. What combination or mix of capabilities and resources is successful and why is this leading to a success? This sub-‐question is developed to explain the relation between Omale and the joint ventures (i.e. medical experts). How is Omale able to complement the knowledge of these medical experts and can they even reinforce each other? The roles to play for Omale can have a large influence on the level of success of the participation relationship. Omale has to support the participation by playing a role and has to make efficient and effective use of the invested resources. Those roles are based on the resources and capabilities of Omale.

1.5 Overview of the study

The scientific literature is the fundament for this thesis and is also the basis for the interviews. The first group is the owners and managers of Omale. The other interview groups are the external experts and the employees or owners of joint ventures of Omale. Those groups are also extensively interviewed. The literature and the output of the interviews and conversations with the managers of Omale, private health care experts and joint ventures will be confronted and compared. The findings and results will be discussed to verify the literature with the reality.

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2. Theoretical Background

This chapter will focus on the theoretical background of this thesis. The literature review is essential for this study because it creates a fundament and body. The leading theory (Resource-‐base view, further mentioned as: RBV) will be explained and

described. Also the definitions and characterizations used in this thesis will be

mentioned. The most important definitions are the resources and capabilities. Various definitions and classifications of capabilities and resources have been proposed in the literature.

2.1 Introduction of the private health care sector

The Dutch health care sector is changing dramatically (Schepers, 2009). Last years there have been many changes in this sector. The privatization of the health care sector in the Netherlands is stimulated by the policy of the Dutch government. This change is

expected to improve the competition between health care organizations. The

privatization forces and motivates health care organizations to provide the best quality of health care in combination with a good price (Ministerie VWS, 2009). According to Schepers (2009) the change in the health care sector makes sure that there are more possibilities for entrepreneurs. On the other side, the start-‐up of a firm in the private health care is very capital intensive and it is difficult for an entrepreneur to finance their start-‐up. Due to the financial crisis, banks are less able to provide financial resources to entrepreneurs. This makes it possible for private equity firms like Omale to do

investments in health care entities. Schepers (2009) mentions in his study that the investment in health care is very interesting for several reasons. The aging baby boomers population will increase the need for health care in the upcoming years. Another reason is that health care has typically performed well as an asset class, and such businesses generally have a predictable earnings stream.

Privatization

The definition of privatization differs between experts. The mainly used definition in existing literature is “any shift from public to private” or “the act of reducing the role of the government or increasing the role of private organizations of society in satisfying people’s needs” (Savas, 2000). The last definition is used in this thesis. Public is seen as a government related element and is associated with a non-‐commercial or non-‐profit market. On the other side, private is associated with commercialization where profit is essential to survive.

Europe

The history of health care in Europe during the nineteenth and twentieth centuries can be depicted in terms of an ever-‐extending state involvement (Flora, 1986). There are also other studies known on this topic. For instance, Øvretveit compared the private with the public health care in Scandinavia in 2001 and concluded that there are more private elements in these systems than is often assumed (Maarse, 2006). Tuohy et al. (2004) investigated the impact of private financing on publicly funded health care systems in five countries (including the Netherlands) that exemplify different ways of drawing the public/private boundary.

Netherlands

The main type of privatization in the Netherlands is when the ownership of a provider organization is shifted from a public to a private ‘agent’. The term ‘agent’ is commonly used in the literature for a private (co-‐) owner of a health care firm. Omale can be seen as agent. The policy in the Netherlands at this moment is that the client has to be the central factor and the government want to achieve this by more privatization of the health care sector. An advantage of private health care organizations over public ones is greater flexibility due to fewer political and bureaucratic constraints.

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According to Maarse (2006), some countries are now witnessing the emergence of private investors in the health care like Omale. They are supplying, for instance, capital resources for building private clinics or residential services for the elderly. The main sector for their investment activity so far consists of health services that are not funded under social health insurance, but the intent is to invest in health services that are not excluded from public funding. The government and their policies are a very important determinant of success of a participation firm like Omale.

Advantages and disadvantages

Many politicians reject the privatization because of the private failures (Maarse, 2006). Privatization is further expected to have adverse consequences for cost control and the accessibility of health services. The advocates of the privatization, on the other hand, contend that private health care organizations perform better than public ones (Maarse, 2006). Their claim is underlined by the modern public choice and property rights perspectives in neo-‐institutional economics (Villalonga, 2000). Because of the success of the private health care sector, it can be assumed that the privatization do perform on a higher level than public ones. During conversations with experts on this topic, the decrease of market share of public health care firms is striking. Therefore, the advantages are seen as more important than the disadvantages.

Developments in the sector

The introduction of sector competition in the heath care sector has a profound impact on the (public) health care organizations. It requires them to transform themselves from bureaucratic task organizations into sector driven and client focussed (entrepreneurial) firms to survive. A general conclusion is that the health care in Europe has become more private. This is also the case in the Netherlands.

2.2 Participation and investment firms

According to Herder (2010), informal investors experience problems to search the right companies and to know how to judge the quality of entrepreneurs and business plans. Therefore the network of those informal investors is of great importance to pick the right firms to invest in or to start a joint venture partnership. Informal investors support small, growing, and attractive firms with venture capital (Herder, 2010). Venture capital can be defined as external finance that is provided on a medium-‐ to long-‐term basis in exchange for an equity stake. The investors do have an interest in the performance of the joint venture because they will lose their invested money when the firm fails. Therefore investors will only invest in high growing and high potential firms to get a return on their investments (Carter & Jones Evans, 2006). Omale has two investment options. The first one is to invest resources in attractive firms to become co-‐owner and to attract a part of the equity stakes. These investments make Omale a participation partner of the firm in which they invest. The second investment option is more common. This option consists of starting a joint venture with external partners like medics or co-‐ investors like hospitals.

Equity gap

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Investor definitions

There are four groups of investors to distinguish. Herder (2010) has made investor definitions on the theory of Avdeitchikova et al. (2008). The first group is called the institutional venture capitalists. Those are investors who carry out professional

investments of long-‐term, unquoted risk equity finance in new firms, where the primary reward is eventual capital gains supplemented by dividends. These investors are not active in the firm in which they participate or invest and they mostly operate on the background. The second group are the business angels. A business angel consists mostly of a couple of investors. These high net worth individuals invest a proportion of their assets in high risk, high-‐return entrepreneurial ventures. They differ from other investors because they also invest other resources than finance. Business angels

contribute their commercial skills, experience, network, knowledge and know-‐how, and they play a hands-‐on role in the firm and they are active inside the firm. The third group are the informal investors. This group consists of private individuals who invest risk capital directly in unquoted firms to which they have no family connection. Informal investors include private investors but they contribute relatively small amounts of money and do not take an active part in the object of investment. The last group are the so-‐called all non-‐institutional venture capitalists. These are investors who make

investments in start-‐ups not founded by the investor him/herself, including family investments, investments by friend and colleagues etc., but excluding investments in stocks and mutual funds.

Omale as business angel

The difference between the business angels and the informal investors is important in this thesis because of the character of the private health care sector. These two groups are most common in this sector (Janssens, 2010). Avdeitchikova et al. (2008) clarifies that business angels contribute their skills and play a hands-‐on role in the company in which they invest. On the contrary, informal investors are not actively involved in the companies in which they invest. Therefore Omale is seen as a business angel. They do contribute other resources than just finance. They also invest for example knowledge, experience, organizational knowledge, commercial skills and their network. Besides these investments, they are also playing a hands-‐on active role in the firm in which they invest like their joint ventures. Because of this ‘business angel type’ of investment of Omale, they are really participating in the joint venture.

2.3 Business angels

William Wetzel (1987) was a pioneer on research of the informal capital market. In 1987 he concluded that business angels were the most likely source of funds for small technology-‐based companies looking for start-‐up and growth capital. He stated that the informal capital market was invisible, heterogeneous, inefficient and often

misunderstood. This was the case because no research in this area was done. According to Wetzel (1987), business angels share some common traits:

• Wealthy individuals; • Self-‐made and man; • Highly active investors;

• Investing in close geographical proximity to their home;

• Relying heavily on their network of friends and business associates.

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Currently Omale is indeed only investing in close geographical proximity to their home base. Omale is only operating in the Netherlands and internationalization is not a priority at this moment. An important strength of Omale is their extensive network and this is seen as one of the most important resources in the sector. The managers and owners of Omale do have their own specialism and matching network. Due to their experience in different sectors, they can use their extensive network to make Omale into a success.

After the work of Wetzel, more research on business angels is provided. Lerner (2000) describes business angels as follow: “wealthy individuals who invest in entrepreneurial firms”. An important point can be taken from this definition because business angels invest rather their own capital over the capital of institutional or other individual investors. Prowse (1998) has provided another ‘business angel definition’. He defines a business angel as a provider of risk capital to small, private firms. He also states that a business angel has the following characteristics. He is a wealthy individual, that has often entrepreneurial backgrounds and who tends to invest in small start-‐ups. This is in line with Omale because the owners are entrepreneurs and they prefer to invest in small start-‐ups or small medical institutions or clinics. There is made another difference between ‘active angels’ and ‘passive angels’ (Herder, 2010). Active angels are angels who actively monitor the firm in which they invest, they sit on the board and advise the firm. The passive angels only contribute money to the firm and rarely monitor the firm. They belong to an informal network where active angels perform the deals for them and manage their investments (Prowse, 1998). Omale is seen as an ‘active angel’ because of their hand-‐on mentality and involvement in the joint ventures.

According to various studies (i.e. Avdeitchikova, 2008) the role of business angels in the economy is very important. In many countries the business angels constitutes the largest source of external funding, after family and friends, in newly established

ventures. This has made business angels the centre of attention for policy-‐makers, who acknowledge their increasing importance in providing risk capital as well as

contributing to economic growth and technological advances (Murray, 2007). This is also the case in the Netherlands where the policy is pushing health care firms to

competition. However, business angel investment activities are not a new phenomenon. Avdeitchikova (2008) states that private individuals have always had a tendency to invest in high-‐risk projects.

Because of the large amount of definitions of the business angel, Mason and Harrison (2008) have found robust key features of business angels that distinguish them from other informal investors:

• Business angels invest their own money; • They make their own investment decisions;

• Financial rewards dominate the investment decision; • Excludes within family investments;

• Business angels have hands-‐on involvement in the investee firm.

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Author Definition

Wetzel (1983) Business Angels are wealth individuals, self-‐made and man, highly active investors, who invest in close geographical proximity to their home and rely heavily on their network. Mason & Harrison (1994) Business angels invest their own money, make their own

investment decisions, consider commercial aspects, are not involved with family investments and take an active role in the firm in which they invest.

Prowse (1998) A business angel is a provider of risk capital to small, private firms. There is made a distinction between ‘active angels’ and ‘passive angels’.

Lerner (2000) A business angel is a wealthy individual who invests in

entrepreneurial firms. They invest their own capital rather than that of other informal investors.

Carter & Jones Evans (2006)

Business angels are high net worth individuals who invest their own money directly in unquoted companies in which they have no family connection in the hope of financial gain and typically play a hands-‐on role in the business in which they invest. Mason & Harrison (2008) Because of the many different definitions they have found

robust key features of business angels. Table 1: Overview of definitions of business angels

The key features of business angels of Mason and Harrison (2008) are used in this thesis because this contains all the important aspects of a business angel like Omale. Most definitions acknowledge that business angels are wealthy individuals and that they invest their own capital into the investee firm. The definitions of Mason and Harrison (1994) and Carter and Jones Evans (2006) are very appropriate for Omale because they acknowledge that business angels play an active role in the investee firm. The other authors do not mention this active role in their definition and this is truly remarkable.

Paul et al. (2003) presented another typology of business angels. Their typology is based on the number of investments made by the business angel. The first group is the nascent angels. Those are angels who yet have to make their first investment and are very serious about doing so. The second group is the novice angels who are inexperienced and at the start of their angel career. They have participated already in one investment. The third group contains the portfolio angels who are experienced and have made two till five investments already. The last group contains the super angels who have made more than five investments. Omale is typed as a so-‐called super angel because of the large amount of investments and participations they have made.

Venture capital investors and business angels

Avdeitchikova (2008) states that it isn’t a easy job to provide a generally accepted definition of institutional venture capital, institutional venture capitalists act as

intermediaries between financial institutions and unquoted companies, raising finance from the former to invest in the latter. Wright and Robbie (1998) defined institutional venture capital as professional investors of long-‐term, unquoted, risk equity finance in new firms where the primary reward is eventual capital gain supplemented by

dividends. The main distinctions between the institutional and business angel

investment are summarized in the following table on the next page that is summarized by Avdeitchikova (2008).

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Key features Institutional venture capitalists Business angels Source of funds Primarily institutional investors who act

as limited partners invest others’ money Private individuals that invest their own money Responsibility Limited personal financial responsibility

but responsibility to management and owners

Significant personal financial responsibility

Investment experience and capacity

Considerable investment experience and

investment capacity Little investment experience and limited investment capacity

Time for due

diligence Extensive time or due diligence Limited time for due diligence Table 2: Institutional venture capital compared to business angels

Omale is for the vast majority self-‐funding instead of investing other partners’ money. They are personal responsible for their actions and they will have meetings to give the project a go or no-‐go. Omale do have a great experience with investments and particular in the private health care sector. This key feature is more linked to institutional venture capitalists than to business angels. Besides this key feature, the investment capacity is limited due to the limited financial resources of the small firm Omale. Due diligence is important to make the right choices for investments and participations. Omale have to act quickly to attract interesting participations. These key features ensure that Omale is a business angel instead of institutional venture capitalist.

Conclusion of the section

It can be concluded that Omale is a business angel that invests more than just financial resources. Omale is also investing, for example, their contacts, commercial skills, and know-‐how into the joint venture. Besides these investments Omale has a hands-‐on active approach and has great involvement in the joint venture. They really participate in the daily business and the dealing with management issues. Omale also has a high investment activity and a high competence and they add value to the joint venture. To find out which resources in the private health care sector are important for a

participation firm like Omale, further research has to be done. The chosen instrument for this research is the Resource-‐based View (RBV). This leading theory will be the red line in this thesis and will address the strategic resources and basic capabilities in the private health care sector. Section 2.6 The resource-‐based view will describe this leading theory.

2.4 Roles of Omale

The role of Omale during a participation project is essential to achieve the return on investment. Politis (2008) has presented an excellent overview of the literature on this topic. He identified four types of roles of business angels. Politis (2008) did an extensive literature research about the value added delivery by business angels only in the post-‐ investment phase. He identified fourteen empirical studies between 1992 and 2005. The roles are based and close related to the capabilities. This finding is explained in detail in section 2.8 Capabilities. The four value adding roles of Politis are:

Strategic role/sounding board

According to Herder (2010) the most important role that business angels play is to act as a sounding board. The private health care firms are often mainly based on the knowledge of the medical expert. This expert may not have, for example, the know-‐how of organizational structures and commercialization. The business angel is therefore providing a strategic advice for the medical expert based on his business know-‐how and management expertise. Herder (2010) states that the business know-‐how and

Capabilities and Resources of Participation Firms within the Private Health Care Sector in the Netherlands