Academic journal article Journal of Small Business Management

The Impact of Knowledge Resources on New Venture Performance

Academic journal article Journal of Small Business Management

The Impact of Knowledge Resources on New Venture Performance

Article excerpt

A new venture's strategy--and thus its performance--is based upon the knowledge the firm has about its market, its opportunity in that market, and its appropriate conduct to take advantage of that opportunity. Resource-based theory underscores knowledge as a type of resource that confers competitive advantage and the potential for sustainability, two factors that are critical for start-ups. Three types of procedural knowledge are considered to be important at start-up: (1) about the industry in which the venture competes; (2) about the type of business approach the venture is pursuing; and (3) about creating, building, and harvesting new ventures. Knowledge useful to the new venture is developed either through relevant personal experiences or by accessing relevant knowledge possessed by others. Hypotheses are developed regarding the impact on the performance of new ventures as a result of these sources of knowledge, and these relationships are explored in a study of new technology-based firms.

Introduction

In order to be successful, new ventures need various types of resources, including financial, social, technological, physical, and human resources (Brush, Greene, and Hart 2001; Lichtenstein and Brush 2001; Greene and Brown 1997). It has been suggested that local communities can assist start-ups in their provision of such resources (e.g., Malecki 1997). However, the historical context and unique characteristics of communities that actively support entrepreneurship lead to inconsistent findings about the importance of community-assisted resource development. New venture founders must often acquire or develop resources independent of those provided at the community level. This is largely because the resource needs of each new venture are idiosyncratic (Lichtenstein and Brush 2001), even when they are started up in the same geographic location by the same founders (Brush, Greene, and Hart 2001).

According to the resource-based view of the firm, higher performance may result from idiosyncratic resource positions in new firms (Alvarez and Barney 2004; Alvarez and Busenitz 2001; Penrose 1959). Typically, these resource positions are internally developed as opposed to externally procured. The resource view provides the conceptual means to understand how a new venture may insulate itself from competition, but it is not particularly helpful in providing guidance on the proper sequencing or staging of resource development efforts. Thus, a growing body of research seeks to identify ways in which new ventures develop or accumulate resources (Haber and Reichel 2007; Lichetenstein and Brush 2001), which types of resources are relatively more valuable than others, and at what stage of venture development must certain resources be in place (Gilbert, McDougall, and Audretsch 2006; Baker and Nelson 2005).

The present article focuses on a particular type of resource in new ventures--knowledge. Knowledge resources include the understanding of how to start up new organizations, how to manage people and processes, how to attain growth and competitive position, and how to stage technology and new product development (Brush, Greene, and Hart 2001; Wiklund and Shepherd 2003). They are critical in new ventures because they are the first type of resource that any successful new venture accumulates. Both Schumpeter (1934) and Penrose (1959) characterized entrepreneurship, or entrepreneurial management, as the understanding of new possibilities. Before a new venture begins to hire staff, purchase equipment, create alliances, or sell its products or services, the founders must have a rationale or logic in mind for taking these steps. The founders will have developed some understanding of the opportunity space for a competitive position in the marketplace that ultimately leads to such actions. (1) Likewise, before new venture founders begin to seek or develop additional resources that will facilitate going to market or provide competitive insulation, they must have some understanding of the types and configurations of resources that the opportunity calls for. …

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