Academic journal article Entrepreneurship: Theory and Practice

Technology-Based Strategic Actions in New Firms: The Influence of Founding Technology Resources

Academic journal article Entrepreneurship: Theory and Practice

Technology-Based Strategic Actions in New Firms: The Influence of Founding Technology Resources

Article excerpt

This research proposes that qualities of founding resources can account for differences in subsequent resource-based actions. Our analysis of 67 computer and telecommunications firms shows that the innovativeness of a firm's founding technology resources is associated with the decision to build patent portfolios, but not the importance of these portfolios, and with the decision to form alliances and the rate of alliance formation. Our findings suggest that initial technologies provide a foundation for a firm's subsequent technology-based actions and, more importantly, that the qualities of these resources play a key role in these actions.

In technology-intensive environments entrepreneurial activity often arises out of technological advances, rather than from recognition of new market opportunities (Roberts, 1991). It is through innovation that a new firm commercializes these technological advances. Innovation refers to the commercialization of new technologies or new technological combinations (Utterback & Abernathy, 1975; Martin, 1984; OECD, 1992). These technologies may or may not have been developed by the innovator (Mueser, 1985; Tushman & Nadler, 1986), but the innovator is first or early to commercialize them (Schmookler, 1966; Hage, 1980; Gobeli & Brown, 1987).

While innovative activity can explain an entrepreneurial firm's founding and initial success, the environment can produce subsequent challenges for the fledgling firm, imposing on it rapid technological change, competitive actions, and continuously evolving and shifting markets. The firm can undertake strategic actions to counter these threats, however. These actions can include accessing and maintaining a relevant foundation of technologies: actions many deem critical to the sustained competitiveness of technology-based firms (Penrose 1969; Cooper, 1987; Itami, 1987; Nelson, 1991), including new small firms (Chan & Heide, 1993; Meyer & Lopez, 1994).

While technology-intensive environments can threaten the viability of all participating firms, new small firms are particularly vulnerable because they lack both internal efficiency and external legitimacy (Stinchcombe, 1965; Singh, Tucker, & House, 1986; Aldrich & Auster, 1986). There is little to guide these firms' efforts to influence their survival because the activities of firms subsequent to founding have remained largely an unexplored research topic (Audretsch & Acs, 1994).

Resource-based and dynamic capabilities perspectives explain differential performance as arising from resources or resource-based actions. This focus on explaining performance, however, leaves a gap in insights about how prior resources, and particularly their qualities, affect a firm's subsequent actions. We address this gap, with a specific emphasis on technology-based resources in new firms. We focus on the quality of 'innovativeness' of a firm's founding technology resources, seeking insights about the relationship between this quality and a new firm's subsequent technology-based strategic actions.

We address the following research question using a combination of secondary data and expert ratings on 67 firms from computer and telecommunications industries:

What is the relationship between the innovativeness of a new firm's founding technology resources and its subsequent technology-based strategic actions?


Innovativeness of Founding Technology Resources

As a firm is founded it accumulates its initial set of resources. These resources encompass a broad set of tangible and intangible assets (Penrose, 1959; Barney, 1991; Collis & Montgomery, 1995). They include technologies, which are equated with knowledge: knowledge applied for human benefit (Itami & Numagami, 1992).

An organization's early advantage may be due to luck, timing, or skill in accumulating initial resources. These resources will eventually depreciate, however, and future competitiveness will depend on managerial actions aimed at growing and renewing this foundation (Venkataraman & Van de Ven, 1998). …

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