The role of supplier relationships in the development of new business ventures

New business ventures have rather limited resources, generally suffer from liabilities of smallness and newness and rely on external business relationships, typically with suppliers, for developing and acquiring necessary resources. Yet, to date, research on how new ventures develop initial relationships with suppliers and how these affect the nascent business has been limited. Taking the business network perspective and relating it to studies of supply chain and supplier involvement in product development, our study contributes to the rather limited body of knowledge on new ventures' supplier relationships. Empirically, we draw on a longitudinal, in-depth single-case study of the first two years of operation of a start-up. Our study shows that the development of the key initial supplier relationships starts from open-ended expectations of mutual future relational benefits and involves a stepwise ‘inter-definition’ of solutions in interaction between the parties. We observe that interdependences arise between the new venture and its key suppliers and these enable but also limit, the development paths of both partners. We argue that the key initial supplier relationships extend a new venture's resource and capability base and are an integral part of a new venture's business model.     

Ways to improve pioneer new ventures' performance in the ICT industry

This paper analyses how marketing capabilities and low cost orientation improve the performance obtained by technology new ventures that enter the market early. In a sample of 104 new ventures of the Information and Communications Technology (ICT) industry, the authors have developed a regression analysis allowing them to demonstrate the direct and indirect effects proposed in the hypotheses. The results obtained show that early entry into the market has a positive influence on new venture performance, as the joint moderator effect of marketing capabilities and low cost orientation is greater than the effect of each variable taken on its own. Furthermore, this study explores if the effects of the analysed factors are different between telecommunications and electronic and computer new ventures. This study shows that marketing capabilities and low cost strategy are complements rather than substitutes in moderating the relationship between entry timing and new venture's performance, especially for the telecommunications new ventures.     

Small fish,big fish: The performance effects of the relative standing in partners' affiliate portfolios

This study examines whether the value a venture derives from an affiliation depends on its relative standing in the portfolio of all affiliations held by its partner. Relative standing refers to how the venture ranks among other ventures in the partner's portfolio with respect to expected returns. The relative standing of a venture in its partner's portfolio influences the venture's access to the partner's resources and the venture's performance. We also argue that a venture's relative standing becomes more important to performance when the partner has a larger portfolio or higher status. In addition to a field study, we test the effect of a venture's relative standing in a venture capital portfolio on its exit likelihood, controlling for endogeneity. We find support for our hypotheses. Copyright © 2014 John Wiley & Sons, Ltd.     

Nonmimetic Knowledge and Innovation Performance: Empirical Evidence from Developing Countries

The knowledge‐based view suggests that the innovative performance of a firm is a function of the utilization and recombination of internal and external knowledge. The process of knowledge utilization and recombination to create new products can occur internally, through research and development activities, as well as externally, by making investments in creating links with suppliers, universities, customers, and a wide range of actors in the innovation system. This study focuses on the impact of unique, nonmimetic external knowledge, which is defined as unique technological knowledge that is not tapped by other firms in the new venture's operating environment, on the new venture's innovative performance. The purpose of the research is to investigate whether firms really benefit from utilizing and recombining unique, nonmimetic knowledge in creating innovative products in a developing country context. Drawing on the knowledge‐based view and institutional theory, this study argues that entrepreneurs in their utilization and recombination of unique, nonmimetic knowledge are not always successful at creating new products. The empirical context is drawn from the Enterprise Survey produced by the Investment Climate Group of the World Bank. The findings based on a large sample of new ventures in developing countries reveal a curvilinear relationship with marginal diminishing returns between the degree of unique, nonmimetic knowledge and innovative performance. The results also show significant moderating effects of strategic product planning and economic and regulatory policy uncertainty. Specifically, strategic product planning helps in converting very unique, nonmimetic knowledge into new products. In addition, policy uncertainty can also positively moderate the process of recombining and converting unique, nonmimetic knowledge into new products. This study provides a more complete account of how unique, nonmimetic external knowledge affects innovative performance of new ventures in developing countries.     

Cooperative strategy and new venture performance: The role of business strategy and management experience

This paper reports the results of a study of new ventures which examine the relationships between performance and the experience of a new venture's management team, its choice of competitive strategy, and its use of various cooperative arrangements. The findings of the moderated regression analysis indicate that cooperative arrangements are most beneficial to those new ventures whose management teams possess the most experience.     

Top Management Support and Initial Strategic Assets: A Dependency Model for Internal Corporate Venture Performance

Internal corporate venturing is frequently used by established companies desiring to innovate and grow. These ventures, however, often fail, and previous research has revealed surprisingly little about the antecedents to performance for this strategically important phenomenon. Using resource dependence theory and the resource‐based view, a model is developed wherein the positive relationship between top management support and the internal corporate venture's (ICV) initial strategic asset endowment is moderated by the amount of the venture's operations autonomy. We then argue how top management support, the venture's initial strategic asset endowment, and parent‐venture product similarity are related to ICV performance. Primary data were collected from 72 firms which furnished data on 145 ICVs. The results suggest that increases in the level of support provided by top management leads to higher levels of initial strategic assets endowed in the corporate venture. This relationship, however, is weakened the more corporate parents give their ICVs operations autonomy. Further, top management's support of the corporate venture, as well as the level of initial strategic assets endowed to the venture, increases the subsequent performance of the ICV. The performance benefit of these initial strategic assets, however, is lower the more there is an overlap between the parent's and the venture's products.     

Interorganizational Imitation and Acquisitions of High‐tech Ventures

Research summary: This article shows that there is a positive association between the changes in the number of prior acquisitions or the changes in the prominence of prior acquirers within the focal venture's subfield and the venture's likelihood to be acquired. Results are in line with the existence of frequency‐ and trait‐based imitation in acquisitions targeting tech ventures. More importantly, these positive associations are more pronounced when (a) exogenous technological uncertainty within the venture's subfield increases and (b) there are significant differences between the focal venture's and acquirer's technological resources. Our findings are in accord with the suggestion that uncertainty in the technology domain is an important boundary condition in moderating the extent of imitation in technology acquisitions. We also discuss alternative explanations and implications. Managerial summary: The findings of this article suggest that when deciding whether or not to acquire a technology venture (i.e., startup company in a high‐tech industry), managers infer information by observing other acquisitions in the venture's subfield to make assessments about the underlying value of the potential targets. We also find that receiving some informational cues from previous acquisitions would be more useful when there is high technological uncertainty in the potential target's subfield about which technologies will be dominant, and when the potential acquirer and the tech venture operate in dissimilar technological areas. This article shows that imitation can be one way to deal with decision‐making under uncertainty when making acquisition decisions in high‐tech environments. Copyright © 2017 John Wiley & Sons, Ltd.     

Strategic Suppliers' Technical Contributions to New Product Advantage: Substitution and Configuration Options

Current theory lacks clarity on how different kinds of resources contribute to new product advantage, or how firms can combine different resources to achieve a new product advantage. While several studies have identified different firm‐specific resources that influence new product advantage, comparatively little research has explored the contribution of strategic supplier resources. Combining resource‐based and relational perspectives, this study develops a theoretical model investigating how a strategic supplier's technical capabilities impact focal firm new product advantage and how firms combine different resources to gain this advantage. The model is tested using detailed survey data collected from 153 interorganizational new product development projects in the United Kingdom within which a strategic supplier had been extensively involved. Empirical results support our research hypotheses. First, supplier technical performance is shown to have a significant positive impact on new product advantage. Next, we show that while supplier technical capabilities have a positive influence on supplier technical performance, the a priori nature of the supplier's task moderates the relationship. Finally, our data support our hypotheses related to the positive relationship between relationship‐specific absorptive capacity and new product advantage, and the proposed negative moderation of supplier technical capabilities on this relationship. Based upon these findings, we encourage managers to recognize that strategic suppliers' with greater technical capabilities perform better regardless of the degree of creativity required by their task; but that strategic suppliers with lower technical capabilities may partially compensate (substitute) for their lack of technical capabilities, if they are able to respond to high problem‐solving task requirements. Furthermore, we suggest that the firm's development of relationship‐specific absorptive capacity is much more important when a strategic supplier is less technically capable. A buying firm's relationship‐specific absorptive capacity can, according to our data, substitute for low supplier technical capabilities. On the other hand, where the supplier has strong technical capabilities, investments in relationship‐specific absorptive capacity have no effect on new product advantage. Our findings reinforce recent calls for research on how firms can combine different resources and capabilities to achieve superior performance.     

Radical innovation in a small firm: a hybrid electric vehicle development project at Volvo Cars

The potential paradigmatic shift in technology from the internal combustion engine to electric propulsion via hybrid electric vehicles (HEVs) has been addressed by most automakers, and has produced very different outcomes. This paper uses the framework of core capabilities to discuss how the small automaker, Volvo Cars, made substantial progress in its HEV development using an approach based on limited resources and a low risk. A comparison with Toyota's successful but very resource‐demanding Prius project reveals some factors contributing towards rapid development in a context of limited resources, including focused project objectives, tight collaboration with suppliers of the new technologies, reuse of existing technologies and an unaggressive, bottom‐up approach to change the firm's values and norms and other core capability dimensions. This paper provides an empirical illustration of how a small company in a mature industry worked with radical innovation in a development project drawing on the combination of organizational slack, entrepreneurial employees and an extensive use of external (knowledge) suppliers.     

Improving Supplier New Product Development Performance: The Role of Supplier Development

Suppliers play an increasingly central role in helping firms achieve their new product development (NPD) goals. The literature implicitly assumes that suppliers are able to meet or exceed the quality standards and technological expectations of the firm, and yet, in practice, suppliers often lack the technological capabilities needed to undertake collaborative NPD. In such situations, a firm may choose to intervene and actively develop the supplier's technological and product development capabilities. We develop a theoretical framework that conceptualizes supplier development activities within interorganizational NPD projects as part of a bilateral knowledge‐sharing process: design recommendations, technical specifications, and new technology flow from supplier to the firm, and in turn, the firm can implement supplier development activities to upgrade the supplier's technological capabilities. Antecedents (supplier responsibility, skills similarity, single sourcing strategy) and consequences of supplier development activities (on supplier, product, and project performance) are examined using a sample of 153 interorganizational NPD projects within UK manufacturers. We find broad support for our hypotheses. In particular, we show that the relational rents (in the form of improved product and project performance) attained from supplier development activities in new product development are not achieved directly, but rather indirectly, via improvements in the supplier's creative and technological capabilities. Our results emphasize the importance of adopting a strategic view of the potential returns available from investing in the NPD capabilities of key suppliers, and provide clues about underlying reasons for the suboptimal experiences of many companies' collaborative NPD projects.     

Market Orientation and Innovativeness in Supply Chains: Supplier's Impact on Customer Satisfaction

As today's firms increasingly outsource their noncore activities, they not only have to manage their own resources and capabilities, but they are ever more dependent on the resources and capabilities of supplying firms to respond to customer needs. This paper explicitly examines whether and how firms and suppliers, who are both oriented to the same customer market, enable innovativeness in their supply chains and deliver value to their joint customer. We will call this customer of the focal firm the “end user.” The authors take a resource‐dependence perspective to hypothesize how suppliers' end‐user orientation and innovativeness influence downstream activities at the focal firm and end‐user satisfaction. The resource dependence theory looks typically beyond the boundaries of an individual firm for explaining firm success: firms need to satisfy customer demands to survive and depend on other parties such as their suppliers to achieve customer satisfaction. Accordingly, the research design focuses on three parties along a supply chain: the focal firm, a supplier, and a customer of the focal firm (end user). The results drawn from a survey of 88 matched chains suggest the following. First, customer satisfaction is driven by focal firms' innovativeness. A focal firm's innovativeness depends, on the one hand, on a focal firm's market orientation and, on the other hand, on its suppliers’ innovativeness. Second, no relationship could be established between a focal firm's market orientation and a supplier's end‐user orientation. Market orientation typically has within‐firm effects, while innovativeness has impact beyond the boundaries of the firm. These results suggest that firms create value for their customer through internal market orientation efforts and external suppliers' innovativeness.     

Connecting IMP and entrepreneurship research: Directions for future research

As a research field, entrepreneurship emerged from an increasing interest in fostering new business ventures. Over the past decade, interest in entrepreneurial phenomena also triggered several studies in the IMP research stream. We examine connections between these two research streams in terms of the phenomena in focus, key concepts, and approaches to identify research areas fruitful for advancing our understanding of entrepreneurial phenomena. In pursuit of this aim, we analyzed 48 IMP-based entrepreneurship studies and the abstracts of the 227 most cited papers in eight main entrepreneurship journals; among the latter, we conducted an in-depth analysis of 30 articles, in which we found connections with IMP studies. Based on our analysis, we identify four directions for future research, where confronting and bridging the key concepts has the potential to contribute to conceptualizing entrepreneurial phenomena and related theory development. The four areas are: variety in the context of new ventures; multiplicity of networks embedding new ventures; connecting the new venture to its context; and the new venture's learning and management.     

The Significance of the New Venture's First Sale: The Impact of Founders' Capabilities and Proactive Sales Orientation

Initial sale success in the market with a new product is a critical milestone for a new venture. Failure at the introduction stage of a new product could have lethal consequences for the venture. In the present study, the authors investigate the role of a new venture company's first successful sale in the venture's future commercial success. The authors develop and test a model of the impact of the founders' entrepreneurial and commercial capabilities and proactive sales orientation on the significance of the first sale and sales growth of a new venture. Using survey data and partial least squares estimation, the results reveal that the founders' commercial capabilities have a positive effect on proactive sales orientation, while their entrepreneurial capabilities positively moderate the effect of commercial capabilities. Further, the results reveal that a proactive sales orientation positively affects the significance of the first sale and that value‐based selling approach positively moderates the effect of proactive sales orientation. Finally, the results reveal that the significance of the first sale is positively related to sales growth. Thus, the authors conclude that combining the founders' commercial and entrepreneurial capabilities strengthens proactive sales orientation and that, in turn, a proactive sales orientation particularly increases the significance of the first sale when new venture companies practice value‐based selling. Research has convincingly demonstrated proactive selling behavior to be one of the most powerful predictors of sales performance. Value‐based selling is a sales approach to identify, quantify, communicate, and verify value of a new product to the customer. Our findings suggest that founders who possess both strong commercial and entrepreneurial capabilities engage considerably more in proactive sales practice as compared with founders that only possess strong commercial capabilities. Hence, rather than hiring specific sales expertise, founders should develop their proactive, value‐selling capabilities.     

Institutional adversity,external knowledge sources,and new ventures' innovation: An institutional polycentrism theory perspective

Why do some new ventures thrive while others fail? In this study, we investigate the unique relationship between external knowledge sourcing of new ventures and its innovative outcomes, and its contextual embeddedness. The investigation is based on the Knowledge-based view and theory of institutional polycentrism across entrepreneurs, nested in different institutional contexts. Our framework generates hypothesis about the negative impact of higher levels of institutional adversity, on new venture's innovation at the national level. We then found the contingent role of adversity in institutions based on the relationship between external knowledge sourcing and new venture innovation. We examine this question using data from 28,660 entrepreneurs from 47 countries. We use Global Entrepreneurship Monitor, Freedom House, IEF, POLCON and Political Risk Services data for 2009–2013. We apply multilevel estimation framework to test our hypotheses. We find the new ventures that have high level of external knowledge sourcing tend to be more innovative: the ones that search widely through different external sources. Further, we find that the benefits to external knowledge sourcing depend on institutional environmental conditions, however new venture innovation should ensure the external knowledge sourcing are used robustly to develop a resource mechanism to deal with the institutional adversity.     

Buyer attractiveness as a catalyst for buyer–supplier relationshipdevelopment

The concept of buyer attractiveness has received increasing scholarly attention in the recent business marketing literature, yet empirical studies of the dynamics between buyer and supplier attractiveness and their implications for relationship development are scarce. The research framework presented in this study suggests that buyer attractiveness is connected, first, to supplier's experienced and expected business outcomes within the focal relationship, and second, to the leverage impact of the focal relationship on supplier's other relationships. A qualitative case study of two buyers and their key suppliers scrutinizes the dimensions of attractiveness associated with relationship development. The findings indicate that attractiveness and adaptations performed by the buyer and the supplier are interlinked in a mutually reinforcing or deteriorating manner, forming a mechanism that catalyzes relationship development. These findings and the resultant empirically grounded framework provide a conceptualization and enhanced understanding of the dynamics between attractiveness, adaptations and relationship development.     

The impact of customer attractiveness and supplier satisfaction on becoming a preferred customer

This paper discusses how a firm can become preferred customer, defined as a particular buying firm to whom the supplier allocates better resources than less preferred buyers. Two concepts play a central role for a firm aiming to become preferred customer: (i) customer attractiveness and (ii) supplier satisfaction. However, the current literature still lacks a clear discussion on the conceptual differences between these constructs and their attributes and is ambiguous with regard to the relationships between the concepts. This study addresses these shortcomings. We examine customer attractiveness and supplier satisfaction as distinct conceptual variables and test how these constructs relate to each other and to preferred customer status. We build upon practitioner input and survey data from 91 suppliers to do so. Our analyses show that the impact of customer attractiveness on preferential resource allocation from suppliers is significantly mediated by supplier satisfaction. These findings expand the current understanding of these concepts. In addition, our findings might help managers better evaluate their relationships with suppliers and align their strategies accordingly to obtain better resources from their suppliers.     

Marketing capability and new venture survival: The role of marketing myopia

Ventures face a duality in developing marketing capabilities—ventures may lack the resources and have a limited understanding of the market to develop marketing capabilities, and yet, capabilities can be a key to venture survival. We ask whether marketing capability helps ventures improve their survival odds and whether myopic marketing investments induce necessary adaptiveness to strengthen the effect of marketing capability on venture survival. Resource-constrained ventures may particularly benefit from myopic marketing investments that help re-evaluate and adapt marketing capability. Using a sample of 47,875 ventures in Portugal and a Cox proportional-hazards model, we obtain several results. First, we find that ventures realize a positive survival benefit from marketing capability. Second, myopic marketing investments have a positive moderating effect on the relationship between marketing capability and venture survival odds. Lastly, although the effect sizes of marketing capability and the interaction between marketing myopia and marketing capability are not large, they are robust to a variety of model specifications and robustness checks.     

The drivers of customer attractiveness,supplier satisfaction and preferred customer status: A literature review

In this paper, we focus on the preferential treatment of buyers by their suppliers. As there is a lack of detailed information regarding the reasons that suppliers serve some buyers better than others, our research addresses a supplier's evaluation of customers and how this evaluation can be influenced by buyers. To give an overview of the drivers of preferential treatment by suppliers, the provided literature review covers three research fields that are considered crucial to this issue: (i) customer attractiveness, (ii) supplier satisfaction and (iii) preferred customer status. By integrating these research topics, we provide a state-of-the-art analysis and overview of the various drivers of preferential treatment, build a preliminary conceptual model and suggest several directions for future research. The identification of the drivers and the resulting conceptual framework can serve as a stepping stone for additional research in this new field.     

The role of managers' political networking and functional experience in new venture performance: Evidence from China's transition economy

Drawing upon the resource‐based view and transaction cost economics, this study aims to examine how various types of managerial resources (i.e., political networking and functional experience) can be beneficial to new ventures in a transition economy. Using survey data from a sample of new ventures in China's high‐technology industries, we demonstrate that managers' political networking and functional experience are positively related to new venture performance. We also find that the positive relationship between functional experience and new venture performance is moderated by the type of ownership of the ventures and the level of dysfunctional competition in their environments. Theoretical and managerial implications are discussed. Copyright © 2007 John Wiley & Sons, Ltd.     

The contingent effects of top management teams on venture performance: Aligning founding team composition with innovation strategy and commercialization environment

How does the relationship between founding team composition and venture performance depend on the venture's strategy and business environment? Using data from a novel survey of 2,067 firms, we show that while diverse founding teams tend to exhibit higher performance, this is not universally true. We find that founding teams that are diverse are likely to achieve high performance in a competitive commercialization environment. On the other hand, technically focused founding teams are aligned with a cooperative commercialization environment and when the enterprise pursues an innovation strategy. These results are robust to corrections for endogenous team formation concerns. The findings suggest that ventures cannot ignore founding team composition and expect to later professionalize their top management teams to align with their strategy and environment. Copyright © 2013 John Wiley & Sons, Ltd.