Effectuation,Exploratory Learning and New Venture Performance: Evidence from China

This paper examines the effect of effectuation on new venture performance in the context of Chinese transitional economy. To determine how new ventures benefit from effectuation, we examine the role of exploratory learning as a key mediator. Using data from 266 Chinese new ventures, our results show that effectuation has a positive effect on new venture performance. Exploratory learning plays a fully mediating role in the relationship between effectuation and new venture performance. This empirical evidence contributes to the development of the theory of effectuation and also provides managerial guidelines for new ventures facing uncertain business environments like transitional economies.     

Networking Ability and the Financial Performance of New Ventures: Moderating Effects of Venture Size,Institutional Environment,and Their Interaction

Building on prior research, this study provides insights on the complex interaction between individual, organizational, and environmental factors in the field of new venture success. Specifically, we develop and test hypotheses on how venture size, institutional context, and their interaction moderate the effect of entrepreneurs' networking ability on the financial performance of new ventures. Based on a sample of 283 new ventures in Germany and Brazil—two countries that differ significantly in terms of their institutional frameworks—our analyses reveal moderating effects of venture size and the interaction between venture size and institutional environment.     

How do new ventures grow? Firm capabilities, growth strategies and performance

While new venture growth performance has been studied extensively, little work has been done to examine the complex strategic choices through which growth is pursued and attained. Building on the resource-based view and social capital perspective, this study develops a conceptual framework that links combinations of ventures' (1) technological, (2) financial, and (3) networking capabilities to different growth strategies in terms of organic growth, partnership, and acquisition. We further assess the mechanisms through which a new venture's growth choices affect firm performance. Using data from 238 new high-tech ventures in China, we find that new ventures with different resource combinations follow different growth strategies. While partnership growth leads to greater product diversity, and acquisition is more effective in realizing firm internationalization, both lead to a better chance of survival of new ventures. In addition, the study explicates the role of technological capability in moderating the relationship between growth strategies and new venture performance.     

The moderating effect of environmental dynamism on the relationship between entrepreneur leadership behavior and new venture performance

This article outlines a model of when, why, and how the influence of entrepreneur leadership behavior on new venture performance is likely to be moderated by the level of environmental dynamism. The model is tested using a sample of 66 new ventures. The results indicate that environmental dynamism has a significant positive moderating effect on the relationship between transformational leadership and new venture performance, and a significant negative moderating effect on the relationship between transactional leadership and new venture performance. Implications for theory and practice are discussed.     

New venture internationalization: The role of venture capital types and reputation

This study examines how different types of venture capital relate to new venture internationalization. Using a sample of 646 U.S. new ventures that executed IPOs between 1995 and 2010, we find that ventures with foreign or corporate venture capital have higher levels of international intensity. We also investigate the moderating role of VC reputation on the relationship between foreign venture capital and international intensity and corporate venture capital and international intensity. Our results suggest that VC reputation weakens the positive relationship between corporate VC and international intensity.     

Contingent effects of managerial guanxi on new product development success

A survey of new product development (NPD) managers finds both a linear, positive relationship between managerial guanxi and new product speed to market and an inverted U-shaped relationship between managerial guanxi and new product innovativeness. In addition, both transaction-specific investments (TSIs) and relationship commitment have a positive moderating impact on the relationship between managerial guanxi and new product speed to market. However, TSIs increase the damaging effect of managerial guanxi on new product innovativeness, whereas relationship commitment reduces such an effect. The results from this study can help business practitioners use guanxi to improve NPD performance under different contexts of inter-firm relationships.     

创业网络与新企业绩效:组织合法性的中介作用及其启示

基于整合制度理论与社会网络视角,从政治网络、投资者网络和顾客关系网络三个方面提出并检验组织合法性在创业网络与新企业绩效关系间的中介效应。基于209份新企业数据,通过多元回归方法对研究假设进行检验,结果显示:政治网络、投资者网络、顾客关系网络与组织合法性正相关;政治网络与新企业绩效关系不显著,投资者网络、顾客关系网络与新企业绩效正相关;组织合法性在顾客关系网络与新企业绩效关系间存在部分中介效应,在投资者网络与新企业绩效关系间存在完全中介效应。     

Performance factors of small tourism ventures: The interface of tourism,entrepreneurship and the environment

Performance factors of small Israeli tourism ventures were examined using an integrated model that combines four theoretical approaches, each focusing on a different central facet: environmental milieu, institutional support, entrepreneurial human capital, and the venture's bundle of services. The current research developed an operational instrument for assessing environmental attractiveness components of tourism ventures and their relationship to performance. A factor analysis, based on this instrument, revealed three environmental factors: tourist-related infrastructure, options for excursions and scenery, including climate. An attractive environment contributed to higher revenues in tourism ventures; however, it did not assure profitability. The results indicate the dual nature of the impact of institutional support upon the tourism venture's performance. Regardless of the size and age of ventures, those obtaining the advisory type of assistance from the governmental tourism incubator performed less well than those ventures that did not obtain such support. By contrast, those tourism ventures that were financially supported by external sources performed better than those that were not financially supported. The explanation for this curious and seemingly contradictory finding may lie in the different criteria for receiving financial and advisory assistance. Success in persuading external sources to provide financial support would seem to be evidence of the soundness of the venture's planning and its economic viability. By contrast, insofar as virtually any venture in the area may apply for and obtain advisory assistance from the governmental tourism incubator, with no requirement to meet financial criteria of any kind, it could be that precisely the weaker ventures are being carried along by this form of assistance.Among the various entrepreneur's attributes examined, managerial skills provided the strongest association with the performance measures. The managerial skills were also found to be the most significant variable explaining performance relatively to the variables derived from the other three approaches. These results have implications regarding the nature of the support to be given by a governmental tourism incubator to entrepreneurs operating in the region. Given that lack of managerial skills is one of the main barriers to a venture's success, particularly in small businesses where the owners have to be involved in all areas of activity, the incubator needs to provide entrepreneurs with tailored regional business and management training tools to promote tourism venture development and success.The study also reveals that the number of services offered by a tourism venture made only a minor contribution in the revenues regression, which may indicate that providing a bundle of services for the tourist customer does not necessarily guarantee profitability. A noteworthy finding is the similarity in the differential association between the number of services offered and the performance measures, on the one hand, and attractiveness features with performance on the other. In both cases, these factors positively contribute to the revenues regression, but neither contributes to the profitability or income regression. This means that an attractive environment does contribute to higher revenues, in that more tourists choose to visit the tourist attractions; however, this does not assure profitability. Similarly, providing many services to the visitors may also contribute to higher revenues, but does not necessarily assure profitable business outcomes. The current findings indicate that small tourism venture profitability is contingent on human capital, especially the skills of the entrepreneurs running the venture. In accordance with our findings that managerial skills are so crucial for venture success, the main objective of advisory incubators should be to promote managerial competencies.     

Networking and growth of young technology-intensive ventures in China

More often than not, new ventures lack established products, known technologies, longstanding customer relations, experienced managerial teams, sufficient capital, and strong reputations. Almost by definition, small, new firms lack the resources of many larger, established firms. The task of an infant firm, and a measure of its success, is to make a transition from being resource weak to being resource strong.How can resources that are critical for profitable growth be acquired for the resource weak new venture? Researchers have found that entrepreneurs can gain access to valuable resources and they can seek to achieve competitive advantage through “networking activities.” Forming and utilizing available relationships with external organizations can allow entrepreneurs to build credibility, gain advice, financing, and customer access, build a positive image and obtain resources at below-market prices, and obtain channel access, information, and innovations. Business relationships with other organizations allow an entrepreneur to achieve desired business results through “asset parsimony.”A favorable view toward networking for new ventures leaves a number of unanswered questions, however. Relevant research questions might include, who should the entrepreneur seek as a business partner? Are all inter-organizational relationships equal, or are some types more valuable to new ventures than other relationships? Do firms relying on high levels of networking activities actually outperform firms that less actively seek resources through external organizational relationships?The present study provides a specific understanding of the concept of networking for entrepreneurs. We propose that networking can be understood in terms of “range,” the number of external relationships to obtain resources, and of “intensity,” the frequency of contact of and amount of resource obtained from these relationships. This research project evaluates the range and intensity of networking among high-growth and low-growth entrepreneurial ventures.Extensive interviewing with managers of six young technology-oriented firms in the People's Republic of China (PRC) affirmed the importance of entrepreneurial networking. Managers in the three high-growth firms reported greater range and intensity of business networking than did managers of three low-growth firms, matched by industry and age. Moreover, the relationship between networking activities and growth transcended the stage of firm development.Where networking range and intensity are deemed important in the growth process, new venture success may call for entrepreneurs to reach out deliberately to external organizations to capture needed resources. To a certain extent, such networking activities run counter to important entrepreneurial motivations of independence and autonomy. The concept of networking, and the results of this study, imply that entrepreneurs need to combine the spirit of independence with the reality of resource dependence, and they need to balance personal autonomy with strategic business relationships.This study also contributes to the understanding of entrepreneurship in our increasingly global economy, particularly in the PRC. Business relationships between the United States and the PRC have been expanding rapidly in the last decade. Many foreign businesses seek license agreements, joint venture partners, equity participation, or channel relationships with young ventures in that country. Do the same rules of networking apply in the PRC as the literature suggests apply in the United States? New ventures in this study were found to engage in processes of networking activities consistent with those in the West. Although networking activities may have different cultural roots, firm success appeared influenced by the same principles of networking.     

New Venture Performance in Transition Economies from Different Institutional Perspectives

Building on institutional theory, this study examines the effects of dysfunctional competition and government ties on new venture performance in transition economies. And, it goes deeper to investigate how these effects are contingent on a new venture's entrepreneurial orientation (EO). It finds that EO weakens the negative relationship between dysfunctional competition and new venture performance but exacerbates the negative linkage of government ties to new venture performance. The findings not only illustrate how government impacts new venture performance in transition economies, but also indicate that new ventures can leverage entrepreneurship to cope with the effects of government‐related factors.     

Who benefits most? The effects of managerial assistance on high- versus low-performing small businesses

This study investigates the relationship between outside managerial assistance and small business performance using a conditional quantile regression approach. The model was tested using a sample of 902 ventures that received managerial or technical assistance from the U.S. Small Business Administration's Entrepreneurial Development Resource Partners. Results show that outside assistance for primary business functions, such as marketing strategy, promotional strategy, financial management and general management, is more effective for firms with lower levels of financial performance. Outside assistance for secondary business functions, such as human resources and obtaining capital, is likely to have a greater impact on firms in the middle- to upper-quantile levels. Based on the results, we propose that managerial outside assistance providers should employ different approaches for firms with lower versus higher levels of financial performance.     

Technology commercialization, incubator and venture capital, and new venture performance

This study examines the effects of technology commercialization, incubator and venture capital supports on new venture performance from the resource-based view. This study uses regression analysis to test the hypotheses in a sample of 122 new ventures. The findings highlight the role of technology commercialization as a mediator between organizational resources, innovative capabilities, and new venture performance. Also, the empirical evidence indicates that incubator and venture capital supports moderate the effects of technology commercialization on the performance of new ventures. Finally, this study discusses managerial implications and highlights future research directions.     

Home country institutions,social value orientation,and the internationalization of ventures

We examined how home country formal institutions and the venture’s value orientation influenced the venture’s likelihood of internationalization based on a data set that was adapted from the Global Entrepreneurship Monitor (GEM) data in the year 2009, covering 7668 individual ventures in 25 countries. Better-developed home country formal institutions are found to have a supportive impact on the venture’s likelihood of internationalization. The supportive impact is also found to be weaker for socially oriented ventures than for profit-oriented ventures. The venture’s social value orientation negatively moderates the home country formal institutions–likelihood of internationalization relationship. The negative moderating effects can be explained as follows: Socially oriented ventures in the better-developed home country institutional environment are less likely to develop coping skills against uncertain and risky institutional environments, which are common in their host countries. Besides the theoretical contributions, this paper also highlights the implications for both business researchers and policy makers.     

Studying resource and capability effects on export venture performance

While extant research has welcomed the resource and capability perspectives as valuable lenses to study international business phenomena, there have been scant attempts to study the role of comprehensive sets of firm resources and capabilities on different aspects of export venture performance and even less the role of their interactions. This study examines the impact of experience, scale of operation and financial resources as well as informational, customer relationship and product development capabilities on dimensions of export venture performance. The results suggest an interesting role of knowledge factors. Each one of experience and informational capabilities has a U-shaped effect on export venture performance, while their interaction negatively impacts the same, denoting that the two factors are antagonistic. Scale of operation and financial resources have a U-shaped and a negative effect respectively on adaptability only, while neither customer relationship nor product development capabilities directly influence export venture performance. Finally, the interaction of product development with informational capabilities has a positive impact only on efficiency. Practitioners are offered specific suggestions as to where they should place emphasis when pursuing particular performance objectives.     

Moderating Effects of Entrepreneurial Orientation on Market Orientation‐Performance Linkage: Evidence from Chinese Small Firms*

Literature revealed that an appropriate alignment between firm strategic orientation and market positioning is critical because of its impact on firm performance. The alignment is especially crucial for small businesses as a result of their limited resource base. However, studies have not adequately accounted for the joint effect of entrepreneurial orientation (EO) and market orientation (MO) on firm performance in different institutional environments, such as transitional economies. In this study, we examine the moderating effect of EO on the linkage between MO and firm performance among small enterprises in China. We have found that MO, alone and in conjunction with certain EO dimensions, is positively related to firm performance. More specifically, innovativeness and proactiveness have positively moderated the relationship between MO and performance. We discuss managerial implications and offer suggestions for future research.     

Relationships among Strategic Capabilities and the Performance of Women-Owned Small Ventures

This study of small, life-style ventures owned by women focuses on the strategic, firm-level factors related to business performance. A theoretical model drawing on the resource-based theory is developed and tested empirically. The model includes strategic capabilities, management styles, and their relation to performance. It is tested empirically on a sample of 220 Israeli female business owners. Analysis reveals that life-style venture performance is highly correlated with certain aspects of the business owner's skills as well as the venture&apops;s resources. Paradoxically, the owner/managers in the sample rate their skills and their venture's resources as being weak in precisely those areas that correlate positively with business performance. These findings suggest that performance of life-style ventures owned by women depends more on marketing, financial, and managerial skills than on innovation.     

Entrepreneurial Orientation and Firm Performance in New Ventures and Established Firms

Lots of studies suggest a positive relationship between entrepreneurial orientation (EO) and firm performance; however, the empirical findings are inconclusive. There are two explanations for the contradictory results: the performance implication of EO is context‐specific and the relationship between EO and performance may be curvilinear. Consulted on the perspective of the liability of newness and taken together these explanations, this paper probes into the difference in the EO‐performance linkage between new ventures and established firms. We find that the relationship between EO and performance is inverse U‐shaped in new ventures but positive in established firms. Finally, we discuss our contributions, implications, and possible future extensions.     

New venture internationalization,strategic change,and performance: A follow-up study

Although many scholars, business experts, and government agencies enthusiastically advise all firms, including new and small ventures, to internationalize, such advice does not appear to be based on empirical evidence. Few researchers have empirically examined the link between new venture performance and the internationalization of new ventures. At best, the evidence suggests that there is no significant relationship.We used a sample of 62 U.S. new venture manufacturers in the computer and communications equipment industries during the late 1980s. These industries were purportedly globalizing and may have been leading other industries into increased international operations. We found that higher levels of internationalization (percentage of foreign sales to total venture sales) were associated with higher relative market share two years later. However, there was no significant direct relationship between percentage of international sales and subsequent return on investment (ROI). Perhaps international operations simply cost more than expected. Or perhaps, as MacMillan and Day (1987) found in their study of corporate ventures over a 4-year time period, increases in market share may be a prelude to higher ROI as scale benefits translate into higher profitability. However, the 2-year time period of our study may simply not be long enough for investments in higher market shares to produce improved profits.During the 2-year study period, many of the ventures changed their level of internationalization. Of the 36 ventures who were domestic (no international sales) in the prior study, 10 expanded into international markets over the 2 years. Of the 26 originally international ventures (international sales of at least 5%), half increased their percentage of international sales, nine reduced it, and four stayed the same. Whereas the average change in international sales percentage of the ventures was only 2.9 percentage points, the large standard deviation of 13.0 percentage points, and the leptokurtic distribution (9.2) reflected the dramatic changes made by some of the ventures. Using subgroup analysis we examined these changes in percentage of international sales in conjunction with changes in strategies and performance. Ventures that had increased international sales, relative to those that had not, exhibited more positive associations between the degree of strategic change and performance as measured in terms of both relative market share and ROI. Increased international sales in technology-based new ventures seems to require simultaneous strategic changes in order to positively impact venture performance.This study is a follow-up to McDougall's (1989) finding that technology-based new ventures that had sales in foreign markets had significantly different strategies than similar ventures that sold their products only domestically. The current study enriches the previous findings by adding consideration of (1) changes in degree of internationalization, (2) changes in strategy, and (3) venture performance.Although we found no performance penalty associated with increasing international sales alone, indiscriminant advice for new ventures to sell in foreign markets without other supporting strategic actions is inconsistent with our findings. Internationalization, alone, did not lead to increased profitability.Entrepreneurs of young technology-based firms who are considering internationalization should take heed of our results. Internationalization of sales does not appear to be a simple matter of applying established strategies and procedures developed for a domestic arena. Successful internationalization appears to require changes in the venture's strategy as well.     

Joint Ventures in Russia

There is an extensive literature on the role of joint ventures in international business. Most of this has focused on the involvement of multinational enterprises (MNEs) in establishing joint ventures in developing countries. Recent political and economic reforms in Eastern Europe have focused attention on joint venture opportunities in ex-centrally planned economies, including opportunities for small and medium-sized enterprises. This paper examines the experiences of two small, family owned Scottish companies in establishing joint ventures in the largest of the East European countries, the Russian Federation. The cases highlight the important strategic and managerial issues involved in planning, negotiating and implementing joint ventures with Russian partners. Sensitivity to the business development needs of the host organization, the establishment of good personal relationships and flexibility are crucial to the joint venture process.