The effects of industry growth and strategic breadth on new venture performance and strategy content (original) (raw)
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Corporate versus independent new ventures: Resource, strategy, and performance differences
Journal of Business Venturing, 1997
This study examines differences between independent ventures (IVs), which are established by individual entrepreneurs, and corporate ventures (CVs), which are controlled by larger companies. It focuses on differences between these ventures related to the resources, strategies, and performance of firms in the computer and communications equipment manufacturing industries. Thus, the findings increase the understanding of the different challenges faced by each venture type and provide insight into how each venture type should be managed.The study finds that managers of CVs and IVs emphasized different resources and strategies. Specifically, CVs emphasized the following resources: internal capital sources, proprietary knowledge, and marketing expertise. IVs emphasized external capital sources, technical expertise, and development of brand identification. They also differed in their strategies; IVs pursued greater strategic breadth, more customer service, and focused more on specialty products. The findings that CVs had less strategic breadth was surprising in that CVs emphasized resources, such as internal capital sources, which could make pursuing broad strategies more feasible for CVs. It is possible that some CVs do not pursue broad strategies because they may be “infringing upon someone else's turf” within the corporation and thus may be discouraged.In spite of finding significant strategy and resource differences, the study found that IVs and CVs did not differ in performance and that resources were not directly related to performance. Based on the concept of equifinality, it follows that both venture types can be equally successful, even if they follow different roads to success. Success may be less a function of the different resources IVs and CVs have and more a function of what strategies the firms choose based upon their resources.Strategy variables did relate to performance: a low cost strategy lowered performance regardless of venture type and the influence of an aggressive strategy (i.e., wide strategic breadth) on performance depended upon venture origin. Managers pursuing a low cost strategy may have had lower performance if they became penny wise and pound foolish, missing opportunities in their efforts to lower costs. This suggests that regardless of venture type, managers of new ventures in these industries and perhaps in other volatile industries may need to be opportunistic.This study indicates that pursuing broad strategies increased the performance of IVs and decreased the performance of CVs. This finding was surprising in that CVs had greater resources, which one might think would lead to successful implementation of aggressive strategies. In securing enough resources to pursue aggressive strategies from their parents, CVs may lose the freedom of action they need to cope with the dynamism of high technology industries. This suggests that managers of CVs within the computer and communications equipment manufacturing industries should either not pursue broad strategies, or if pursuing broad strategy, they should maintain their flexibility. In contrast, IVs that pursued broad strategies achieved higher performance, indicating that perhaps IVs, unencumbered by the bureaucracy that characterizes CVs, may be able to pursue aggressive strategies while simultaneously maintaining flexibility.Thus, this study offers IV and CV managers several valuable insights. First, it argues that managers of each type of venture may need to pursue different strategies to increase venture performance and make optimal use of their unique resources. Furthermore, it suggests that CV managers encounter difficulties in applying resources to strategies and not in accessing resources. Whereas political obstacles may occur, CV managers may primarily encounter these difficulties when trying to implement strategies rather than when accumulating resources from the parent, suggesting a pitfall that managers of CVs and their parents need to avoid. Although this study has indicated that both venture types can be equally successful, it suggests that they may face different obstacles and follow different roads to success.
Entry barriers and new venture performance: a comparison of universal and contingency approaches
Strategic Management Journal, 2001
This study utilized universal and contingency approaches to empirically investigate the effects of entry barriers on new venture performance. Consistent with prior research utilizing the universal approach, this study found only limited support for the direct independent effects of entry barriers on performance. Conversely, this study provides strong support for utilizing the contingency approach to examine the complex effects of entry barriers on divergent performance measures. Overall, contingency models incorporating the theoretically justified moderating effects of industry life cycle stage and venture strategy explained 31, 61, and 45 percent of the variance in profitability, shareholder wealth creation, and sales growth respectively. Copyright
Entrepreneurship Theory and Practice, 2007
Although there is a weak direct link between team experience and venture performance, the findings strongly suggest that the fit between strategy and team experience is a key determinant of the long-term performance of high-tech entrepreneurial ventures. For small, technology-based new ventures, the team's technological experience appears to be the most important determinant of the success of a differentiation strategy.
Strategic Management Journal, 1990
Previous literature on competitive strategies for new ventures diffrs significantly on the appropriate domain breadth for new ventures, niche versus aggressive coverage. While this study does not address normatively the appropriateness of either approach, it reveals eight distinct 'archetypes' of competitive strategy for entry with both niche and broad strategies represented. In this study 247 new venture CEOs from the information processing industry were asked to describe their venture's competitive strategy for entry using twenpsix competitive methods. Factor and subsequent cluster analysis uncovered these eight different 'archetypes': ( I ) aggressive growth via commodity type products to numerous markets with small customer orders; (2) aggressive growth via price competitive new products to large customers;
Exploring the Role of Industry Structure in New Venture Internationalization
Entrepreneurship Theory and Practice, 2007
While we have gained considerable knowledge since the late 1980s regarding the phenomena of international new ventures, less is known about the influence of industry structure on these ventures. In the present paper, we draw on literature from industrial economics, international business and entrepreneurship to identify industry structure variables that fit within the theoretical framework of international new ventures. We then offer propositions as to how the identified industry structure variables individually and jointly influence the likelihood of new venture internationalization.
New firm survival: Industry, strategy, and location
Journal of Business Venturing, 1995
How important is the physical location of a new firm for its chances of EXECUTIVE survival? Location of a new firm, whether in urban, metro, or rural S~RY vicinities, can have important impacts on performance outcomes. Urban locations often contain a wealth of diverse resources but may also have a greater number of competitors. Rural locations may lack diversity but can enable the firm to exploit a niche with limited competition. We suggest that a simple examination of new firm location will not adequately predict survival chances. Rather the impact on location of the new firm will be influenced by the industry in which the new firm operates and by the strategy the new firm pursues.
New ventures (companies eight years or younger) face an important choice in attempting to achieve growth: Should they follow "strategic simplicity" by relying on a few similar competitive actions, or emphasize "strategic variety" by implementing multiple different competitive actions? Data from 140 new ventures in Spain suggest that new ventures benefit from pursuing strategic variety, especially when their industries are highly dynamic. Further, although new ventures in general gain from strategic variety in highly dynamic industries, independently owned ventures achieve higher growth rates than their corporate counterparts.
New venture strategic posture, structure, and performance: An industry life cycle analysis
Journal of Business Venturing, 1990
SUMMARY emerging, growing, and mature industries. Strategic posture was conceptualized as a firm's placement along the conservative-entrepreneurial continuum. Structural form was conceptualized as a firm's placement along the organic-mechanistic continuum. Managers' ratings on severaljnancial per$ormance criteria were used to assess new venture petiormance.