Revisiting the relationship between product and international diversification in new ventures: The moderating effect of effectuation processes |
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Affiliation: | 1. University of Queensland, 39 Blair Dr, St Lucia, QLD 4067, Australia;2. University of Sydney, Abercrombie Building H70, Corner Abercrombie Street and Codrington St, Darlington, NSW 2006, Australia;3. Trinity Business School, Trinity College Dublin, 182 Pearse St, Dublin D02F6N2, Ireland |
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Abstract: | This study examines the relationship between product and international diversification in new ventures, suggesting effectuation processes to be key moderators of this relationship. Effectuation processes allow young firms to attenuate constraints imposed by the liabilities of newness, the uncertainty and the lack of prior diversification experience these firms face and which may significantly restrict the number of growth opportunities they can jointly exploit in the short run. Specifically, the findings indicate that reliance on experimentation, maintenance of flexibility and securement of pre-commitments positively moderate the relationship between product and international diversification in new ventures. From all effectuation processes, only the adoption of the affordable loss principle lacks a significant effect on the link between the two growth strategies. Theoretical and empirical implications are further discussed. |
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Keywords: | Product diversification International diversification Effectuation New ventures Growth |
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