Cooperative Strategies in Non-High-Tech New Ventures: An Exploratory Study
Brush, Candida G., Chaganti, Radha, Entrepreneurship: Theory and Practice
Cooperative strategies are of growing interest in entrepreneurship. Current research focuses on high-tech companies, but less is known about cooperative activities in non-high-tech businesses. Differences in distinct competencies based on technology suggest that lessons from high-tech companies may not fully apply to non-high-tech companies. This research explores the nature, extent, and approaches to cooperative strategies in non-high-tech new ventures, utilizing quantitative and qualitative methods. Survey data is analyzed to assess usage and characteristics of cooperative strategies. Results show that few companies used cooperative strategies and these were not central to core operations. Field interviews comparing three non-high-tech and three high-tech new ventures examine motives and approaches to cooperative strategies. For all six cases, resource constraints motivated usage of cooperative strategies and all had cooperative arrangements with competitors. However, goals and approaches to cooperative strategies differed between non-high-tech and high-tech businesses. Findings suggest future research directions.
Cooperative activities, partnerships, and alliances are gaining popularity in new and small businesses. "Resource pooling, sharing of facilities, equipment and personnel" are common among small companies and business incubators (Wall Street Journal, 1992), while high-technology companies often participate in co-marketing, joint research, and distribution agreements (Boston Globe, 1992). Anecdotal evidence suggests small companies in local geographic areas are sharing customer lists, equipment, and information or "teamnetting" to accomplish things they cannot do individually (De Molt, 1994). Venture Economics of Massachusetts counted 14,000 large-small company alliances nationwide, predominantly among high-tech companies (Boston Globe, 1992). Securities Data Co. of Newark, N.J., estimates a 25% increase in small business partnerships over the last decade (Nation's Business, 1996), New ventures can enjoy multiple benefits from cooperative activities, such as sharing scarce resources, conserving costs, gaining access to key distributors, customers, and markets (Jarillo, 1989), or reducing risk and creating legitimacy (Larson, 1991).
Existing research on cooperative arrangements in entrepreneurship focuses primarily on high-tech companies (McGee, 1993, Forrest, 1990, Esposito, loStorto, & Raffa, 1993: Hatfield & Pearce, 1994). This emphasis may be due to the industrial context of some high-tech businesses where cooperation becomes a necessity, For instance, biotech firms encounter certain pressures to share technological know-how as a means of facilitating new product development leading to patent protection or first mover advantage (Barley, Hybels & Freeman, 1992, Deeds & Hill, 1996). Although high-tech new ventures comprise a comparatively small proportion of new firms (Kirchoff & Phillips, 1989), they are an appealing research topic because of their superior growth performance.
Logically, non-high-tech new ventures should have as much to gain from cooperative alliances as high-tech new ventures. If anything, need may be higher among non-high-tech new ventures because many of these firms operate in retail and personal services sectors that are crowded, intensely competitive, and offer limited opportunities for growth (The State of Small Business, 1993). Technological barriers to imitation also may be fewer, making it difficult to create and maintain a competitive advantage. Overall, failure may be more common in nonhigh-tech sectors such as retailing or personal services than in the high-tech sectors such as biotechnology, telecommunication, or software development (Roberts, 1991: Vesper, 1990). Hence, partnerships with stronger players can help non-high-tech new ventures to overcome some of these disadvantages. Putting this in a value chain framework, cooperative strategies enable new ventures to link their value chains to those of stronger partners, and thus provide superior value to their customers. …