Disentangling the performance implications of new venture status: competitive vulnerability, resource scarcity or strategic flexibility?
International Journal of Entrepreneurial Behavior & Research
ISSN: 1355-2554
Article publication date: 20 December 2022
Issue publication date: 31 March 2023
Abstract
Purpose
New venture status is the most prominent feature of entrepreneurial startups, but its performance implications have remained under-studied. This study aims to bridge this knowledge void and offer precise guidelines for startup managers in boosting performance.
Design/methodology/approach
The study develops and tests a multi-perspective model on the linkage between new venture status and firm performance by integrating I/O economics, resource-based view and dynamic capability perspective. The arguments from the first two perspectives point to an adverse effect of new venture status, which is contingent, respectively, on business differentiation and resource endowments. The third perspective grounds a positive relationship between new venture status and performance, which is more pronounced for firms with weaker dynamic capabilities.
Findings
Quantitative evidence from a sample of new and established firms in China shows that the direct effect of new venture status is negative but insignificant. Neither business differentiation nor dynamic capabilities moderate the relationship. Low resource endowments, however, reinforce the negative influence of new venture status. New venture status, thus, shapes firm performance through resource scarcity from resource-based view rather than competitive vulnerability from I/O economics or strategic flexibility from dynamic capability perspective.
Originality/value
Newness and new venture performance have both been extensively examined in literature. But the relationship between them has remained largely omitted. The multi-perspective model and the findings in this study help clarify the confusion as to whether newness is good or bad in the context of an emerging market and reveals the subtle mechanism the effect of newness unfolds.
Keywords
Acknowledgements
The authors would like to thank the editor Martina Battisti and the three anonymous reviewers for their insightful guidance and help. This paper was presented at the Academy of Management Annual Conference 2022 and thus benefited from the feedback from the session participants. The authors are also grateful for the assistance from Xiaru Li and Yujie Guo during the whole research process. The significant amount of work for this paper was done while the first author was working at the University of Nottingham, Ningbo, China. The institutional and financial support from this university is acknowledged.
Citation
Wang, L.L., Dai, Q. and Gao, Y. (2023), "Disentangling the performance implications of new venture status: competitive vulnerability, resource scarcity or strategic flexibility?", International Journal of Entrepreneurial Behavior & Research, Vol. 29 No. 3, pp. 738-762. https://doi.org/10.1108/IJEBR-12-2021-1055
Publisher
:Emerald Publishing Limited
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