Reconsidering the niche prescription for new ventures: A study of initial strategy and growth

Abstract

While extant entry theory has long prescribed a niche approach for new ventures, a preponderance of empirical research has found that broad strategies may be the key to new venture success. This study examines the difference between entry theory and empirical evidence by considering the moderating impact of initial financial resources on the effectiveness of venture strategy. Examining new, independent firms at the point of inception, we find that initial financial resources moderate the relationship between strategic breadth and performance, implying that the returns to a broad initial strategy increase with the level of initial capital. Contrary to popular niche prescriptions for new ventures, we did not find support for the belief that firms with low initial financial resources should pursue niche strategies and suggest that it may be time to re-examine theory on the nature of the relationship between entry strategies and performance.

Citation

Bamford, C.E., Dean, T.J. and McDougall, P.P. (2009), "Reconsidering the niche prescription for new ventures: A study of initial strategy and growth", Lumpkin, G.T. and Katz, J.A. (Ed.) Entrepreneurial Strategic Content (Advances in Entrepreneurship, Firm Emergence and Growth, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. 9-39. https://doi.org/10.1108/S1074-7540(2009)0000011003