Academic journal article Entrepreneurship: Theory and Practice

Internal Resources, External Network, and Competitiveness during the Growth Stage: A Study of Taiwanese High-Tech Ventures (1)

Academic journal article Entrepreneurship: Theory and Practice

Internal Resources, External Network, and Competitiveness during the Growth Stage: A Study of Taiwanese High-Tech Ventures (1)

Article excerpt

This study explores the performance implications of internal resources and external networks for entrepreneurial firms. A relationship of trust among network members is essential because of the high risk during the initial start-up stage. However, once high-tech firms initiate mass production and enter the growth stage, whether trust influences competitiveness more than resources becomes uncertain. This study examines Taiwanese firms to elucidate the main influences on firm competitiveness. In conclusion, the result indicates the competitiveness of high-tech firms during the growth stage is determined by firm resources and the willingness of support firms to cooperate--where willingness is determined by the trust of the support firms in the high-tech firm but is unrelated to firm resources.

Introduction

The influence of network ties in entrepreneurial firms recently has received considerable attention (Hite & Hesterly, 2001; Hire, 2005; Jarillo, 1989; Krackhardt, 1995; Larson & Starr, 1993; Larson, 1992). The operating model of Asian firms, with its emphasis on networks, has greatly attracted particular interest from Western scholars (Hamilton & Biggart, 1988). After comparing the market, hierarchy and network transaction models, scholars have concluded that "trust" as the foundation for networks offers another alternative governance structure (Bradach & Eccles, 1989), and can effectively reduce interfirm transaction costs (Gulati, 1998). In the Asian business environment, which is relatively weakly regulated, trust-based transaction methods are particularly important (Khanna & Palepu, 1997).

Besides reducing the cost of interfirm transactions, trust is also considered a form of social capital (Lin, Li, & Chen, 2006). Firms with high trust benefit in various areas, including the acquisition of information, resources, and business opportunities (Nahapiet & Ghoshal, 1998). Trust relationships can also influence organizational learning. For example, Schildt, Maula, and Keil (2005) proposed that different governance modes (simultaneously implying different levels of trust) for conducting external corporate ventures are likely to differ in their degree of support for explorative and exploitative learning. Empirical research also shows that Asian firms can enhance their global competitiveness through strategic alliances and enterprise networks (Killen, Hunt, Ayres, & Janssen, 2002).

Nevertheless, some scholars have argued that an excessive emphasis on trust and relationships neglects the nature of a firm's pursuit of profit. Possibly, in traditional industries, personal networks and social capital are clearly important; but in the highly competitive and rapidly changing high-tech industry, trust and interpersonal relationships are comparatively unimportant during the growth stage. For example, Nesheim (2000) questioned the importance of interpersonal networks, and believes that while Asian enterprise startup models previously depended on relationships, they now depend on know-how. Moreover, Wu (1999) contends that the networks of close connections among firms in traditional industries are largely absent in high-tech industries.

This study examines Taiwanese high-tech firms to better understand the influences on firm competitiveness during the growth stage. The "growth stage" was defined as the first year of operations following the formal start of mass production. (2) Two firm-level theories, the resource-based view of the firm (Wernerfelt, 1984; Barney, 1991; Dierickx & Cool, 1989; Grant, 1991; Rumelt, 1984) and social capital theory (Nahapiet & Ghoshal, 1998; Chung, Singh, & Lee, 2000; Lin et al., 2006), are adopted to explain the variation in competitiveness. While other authors have explored earlier stages (see also Hite & Hesterly, 2001), this study focuses on a later stage, an approach that is necessary to extend the theory and understanding of entrepreneurial networks. …

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