Academic journal article Academy of Entrepreneurship Journal

Matching Strategic Resources with Strategy and Industry Structure

Academic journal article Academy of Entrepreneurship Journal

Matching Strategic Resources with Strategy and Industry Structure

Article excerpt

ABSTRACT

Although new ventures have provided many benefits to society, the failure rate for new ventures has been extremely high. Entrepreneurship theorists have suggested that strategic resources are a possible determinant of new venture success and that strategic resources should be matched to business strategy and environmental situations. However, few empirical studies have considered strategic resources. Therefore, this exploratory study empirically examined the influence of resources on new venture performance in the presence of certain strategic and industry structure conditions. This study found a significant relationship between distinctive competencies and new venture performance when matched to low-cost strategies and between intellectual resources and new venture performance for firms in industries in the shakeout stage. T h e s e results imply that entrepreneurs should match their strategic resources to the situation. New ventures adopting a low-cost approach should develop administration competencies in order to establish a competitive advantage over rivals. It is possible that adding better and more administrative personnel could pay for itself in a higher return to stockholders.

Furthermore, when new ventures are in industries in the shakeout stage, intellectual property such as patents and copyrights become more important. This effect may be particularly important in high-growth industries considered in this study. Possessing intellectual property may enable firms to differentiate their goods and services from their competition or may provide a means of limiting direct competition.

INTRODUCTION

Research on the determinants of new venture performance has focused on three possible factors: the entrepreneur, industry structure, and strategy. Of these, studies have identified strategy and industry structure, and the interaction between strategy and industry structure as important determinants of new venture success.

Other than strategy, industry structure, and the entrepreneur, resources have also been identified as a possible determinant of new venture performance. Resources are instrumental in developing new products and services in existing markets and in preparing ventures for entry into new markets (Azzone, Bertele, & Rangone, 1995; Brush, Greene, & Hart, 2001). Resources are particularly important in turbulent environments in which long-term competitiveness depends upon the venture's ability to identify, develop, and exploit critical resources (Azzone, et al., 1995). Additionally, resources such as knowledge and technical skills are directly linked to technical entrepreneurship and innovation (Klavans, 1994) that are vital to high-growth ventures.

Resource-based theory proposes that resources determine a firm's strategic advantages and firm performance (Wernerfelt, 1984; Mahoney & Pandian, 1992; Barney, 1991). In this view, the concept of resources includes attributes of firms that affect the formulation and implementation of strategy (Barney, 1991; 2001). There is a progression of value creation, starting with Generic Resources, and passing through Capabilities, Distinctive Competencies, Strategic Resources, and finally to Strategic Advantage (Brush, et al., 2001). Because resources are critical to the firm's success, the type, amount, and timing of resources accumulated are vital.

Resource-based theory rests on three major assumptions. The first major assumption is that firms seek to earn above-average returns (Wernerfelt, 1984; Conner, 1991; Robinson, 1998). Viewing firms as seekers of above-average returns is important because it suggests behaviors which might be different if firms were seeking average returns. For example, firms seeking average returns may be willing to adopt strategies that imitate an average firm while firms seeking above-average returns are forced to consider innovative strategies that may involve more risks. …

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