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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : The Journal of High Technology Management Research, Volume 16, Issue 1, September 2005, Pages 37–57
In this study we examine the contingency value of entrepreneurial strategy making with a sample of technology-based new ventures in China's emerging economy. Our results show that the relationship between entrepreneurial strategy making and performance is moderated by both environmental factors and firm competences. Specifically, entrepreneurial strategy making has a positive relationship with performance when the environment is highly uncertain and when the firm has strong marketing competences.
It is widely recognized that today's managers face an environment characterized by rapid technological changes and customer demand changes. To cope with such challenges, both academic scholars and the popular press have suggested that entrepreneurial strategy making will be critical for organizational success (Business Week, 2002, Covin & Slevin, 1989 and Dess et al., 1997). Entrepreneurial strategy making, also referred to as entrepreneurial orientation (Lumpkin & Dess, 1996) or entrepreneurial posture (Covin & Slevin, 1989), is an extension of the concept of entrepreneurship from the individual level to the organizational level (Lee, Lee, & Pennings, 2001). It reflects the extent to which a firm is committed to risk-taking, innovation, and proactiveness in developing and implementing its strategies (Miller, 1983). Despite its appealing nature, the extant literature has consistently revealed that the proposed positive relationship between entrepreneurial strategy making and performance does not exist (Covin & Slevin, 1989 and Dess et al., 1997) or at best is very weak (Lee et al., 2001). Instead, scholars have found that this relationship is contingent on contextual variables including environmental hostility (Covin & Slevin, 1989), firm performance (Covin & Slevin, 1991), and competitive strategies (Dess et al., 1997). To extend this line of research, in this study we draw upon the contingency theory (Burns & Stalker, 1961, Lawrence & Lorsch, 1967 and Venkatraman & Prescott, 1990) and test the contingency value of entrepreneurial strategy making by examining both external environments (i.e., environmental uncertainty and industry growth) and internal firm competences (i.e., technology and marketing competences) as contingency variables. This represents a response to the call by Lumpkin and Dess (1996) which suggests to examine both environmental and organizational factors as contextual variables in studying the performance implication of entrepreneurial strategy making. Our key argument is that, as entrepreneurial strategy making reflects a firm's risk-taking, innovation, and proactiveness (Miller, 1983), its value on firm performance should depend on the extent to which external environments provide potential opportunities for the firm to explore via this type of strategy making, as well as the extent to which internal competences enable the firm to capture opportunities when implementing this type of strategy making. In addition, previous studies in this area are mainly limited to firms operating in Western developed markets. There is a paucity of research of the contingency value of entrepreneurial strategy making in other institutional settings. In this study, we will examine this issue in the context of new technology ventures in China, the largest and the fastest growing emerging economy in the world. Emerging economies refer to “low-income, rapid-growth countries using economic liberalization as their primary engine of growth” (Hoskisson, Eden, Lau, & Wright, 2000: 249). China's emerging economy involves significant institutional transitions and is characterized with highly uncertain and dynamic markets. Reforms in the direction of liberalization and marketization in China introduce fundamental and comprehensive changes to “the formal and informal rules of the game that affect organizations as players” (Peng, 2003: 275), which encourage entrepreneurial behavior. For example, during China's economic transition, over 20,000 technology-based new ventures have been founded across the nation in the past 15 years. Although it can be argued that the establishment of new ventures itself is entrepreneurial, new ventures differ in their levels of entrepreneurial strategy making (Lee et al., 2001). More important, how new ventures can benefit from entrepreneurial strategy making is an important yet unexplored issue. Compared with established firms in China, new ventures have little heritage from the traditional planning system. Instead, they were founded after China's economic transition started about two decades ago. In addition, these ventures are relatively more vulnerable to environmental conditions and they tend to have relatively limited resources including both marketing and technological competences (Li & Atuahene-Gima, 2001 and Stinchcombe, 1965). Also, it has been argued that the complex and regulatory nature of China's transition environment is characterized with discouraging future-oriented and risk-related decisions (Luo & Park, 2001 and Tan & Litschert, 1994). Therefore, technology-based new ventures provide a unique context to test the contingency value of entrepreneurial strategy making in China's emerging economy. The remainder of this paper is organized as the follows. First, after reviewing the literature on the relationship between entrepreneurial strategy making and firm performance, we develop our theory and research hypotheses. Then, we describe the method used to test these hypotheses. Finally, we present the results of the study and discuss their implications.
نتیجه گیری انگلیسی
The important role of entrepreneurial strategy making in firm performance has been extensively studied in the literature. Our review of the literature reveals that there are two major findings: first, the direct relationship between entrepreneurial strategy making and firm performance is not significant or at best is weak. Second, this relationship is contingent on several contextual factors including environment, performance and competitive strategies. In this study we add to this stream of research by examining simultaneously the roles of external environment and internal firm competences in the relationship between entrepreneurial strategy making and firm performance in the context of new technology ventures in China's emerging economy. We argue that the value of entrepreneurial strategy making on firm performance depends on the extent to which external environments provide opportunities for new ventures to explore via their entrepreneurial strategy making, as well as the extent to which internal competences enable the ventures to capture opportunities when implementing entrepreneurial strategy making. With a sample of technology-based new ventures in China, our results support the contingency view and suggest that entrepreneurial strategy making may not have a direct relationship with firm performance. Instead, entrepreneurial strategy making has a positive relationship with performance when environmental uncertainty is high and when new ventures have strong marketing competences. Our results that there is no direct relationship between entrepreneurial strategy making and new venture performance are consistent with the findings of other works on this topic. For example, Covin and Slevin (1989) show that there is no significant direct relationship between entrepreneurial strategic posture and performance of small firms. With a sample of firms competing in a wide variety of industries, Dess et al. (1997) also find that the direct linkage between entrepreneurial strategy making and performance is not significant. In a recent study, Lee et al. (2001) demonstrate that entrepreneurial orientation has a very weak positive relationship with performance in technology-based startups in Korea. Given these consistent findings across different industrial and institutional contexts, we believe that the positive impact of entrepreneurial strategy making on firm performance, which has been widely claimed in the literature, is at most marginal. Our findings, coupled with others, suggest that even entrepreneurial strategy making as reflected in the organizational processes and decision-making style of a firm, can be a source of competitive advantage (Lee et al., 2001 and Lumpkin & Dess, 1996), its value largely depends on the context in which it occurs. This is consistent with the contingent resource-based view which posits that a firm's resource or capability to provide sustainable competitive advantage often lies in its combination with other organizational skills and capabilities and deployment in the appropriate environment (Eisenhardt & Martin, 2000 and Teece et al., 1997). Prior research has noted that in China's emering economy characterized with market distortion and limited demands for new and innovative products, firms are more defensive in strategic decision making rather than risk-taking and innovative (Luo & Park, 2001 and Tan & Litschert, 1994). However, our study tells a different story. Our findings imply that Chinese firms, particularly new technology ventures, can get paid off by entrepreneurial strategy making. Specifically, our results show that when the level of environmental uncertainty is perceived high and when the firm has strong marketing competencies, it is more likely to benefit from its entrepreneurial strategy making. Our study sends a clear message to practitioners that even the Chinese transitional environment is characterized with discouraging risk-related decisions (Tan & Litschert, 1994), firms can benefit from entrepreneurial strategy making depending on what they perceive from the environment and what they are able to do. We examine the moderating role of two environmental dimensions: environmental uncertainty and industry growth. As expected, our findings indicate that entrepreneurial strategy making has a significantly positive relationship with new venture performance when the level of environmental uncertainty is high. Contrary to our hypothesis, however, we find that industry growth does not play a moderating role in this relationship. These findings suggest that environmental uncertainty and industry growth have differential impacts on the effectiveness of entrepreneurial strategy making in Chinese new ventures. It appears that high growth industries provide tremendous opportunities for new ventures competing in the industries. In such an environment, new ventures achieve better performance by taking the external opportunities rather than making entrepreneurial strategy. As Covin and Slevin (1989) argued, in benign environments (characterized by munificence and richness in investment and marketing opportunities), the relationship between entrepreneurial strategy making and firm performance may be weaker and possibly negative because in such environments firms “are not typically forced to engage in uncertain, resource-consuming endeavors in order to maintain viability” (Covin & Slevin, 1989: 77). In contrast, environmental uncertainty provides both opportunities and threats to new ventures. The extent to which new ventures can benefit from the opportunities and attenuate the threats depends significantly on their entrepreneurial strategy making. It is likely that new ventures with a high level of entrepreneurial strategy making can take advantage of the opportunities in an uncertain environment through its innovativeness, risk-taking and proactiveness, while those with a low level of entrepreneurial strategy making cannot. Using the metaphor of the theory of Darwinian evolution, most ventures (as species) can survive and succeed in “good” environments (e.g., high growth environments), while in “bad” environments (e.g., high uncertain environments), only those who can adapt to the environments can survive and succeed. Clearly, entrepreneurial strategy making is an important way for new ventures to adapt to the uncertain environment and pursue opportunities. These findings contribute to our understanding of the role of environmental conditions in the relationship between entrepreneurial strategy making and firm performance. Covin and Slevin (1989), for example, show that environmental hostility is an important environmental factor which may moderate the linkage between entrepreneurial strategy making and firm performance. They conceptualized environmental hostility based on a hostile–benign continuum. They defined hostile environments as those “characterized by precarious industry settings, intense competition, harsh, overwhelming business climates, and the relative lack of exploitable opportunities. Non-hostile or benign environments, on the other hand, provide a safe setting for business operations due to the overall level of munificence and richness in investment and marketing opportunities” (p. 75). Clearly, this definition of hostility includes elements of both uncertainty and munificence. Our study has advanced the literature by examining environmental uncertainty and industry growth (as an indicator of environmental munificence) separately. Our findings suggest that these two dimensions of environmental conditions play different roles in this relationship. Our study extends the literature by examining internal firm competences as important contingency variables. The results suggest that entrepreneurial strategy making has a positive relationship with new venture performance when marketing competences are high. However, our results suggest that technological competences do not moderate this relationship. These results suggest that marketing competences are complementary assets for entrepreneurial strategy making. As noted earlier, marketing competences represent a venture's abilities to generate and disseminate information related to current and future customer needs and competitive situations. As new ventures have better knowledge about customer demands and competitive situations, they are more able to identify and capture new business opportunities through their innovative, risk-taking, and proactive behaviors. Note that marketing resources and skills are relatively less available in China. Thus, those new ventures with marketing competencies are more likely to develop a differential advantage in enabling them to proficiently carrying out their entrepreneurial strategy making. These findings, therefore, highlight the importance of firm competences in enhancing the effectiveness of entrepreneurial strategy making. The results of this study urge managers to pay special attention to the context requirements of successful entrepreneurial strategy making. Our findings suggest that the effectiveness of entrepreneurial strategy making is context specific and depends on the level of environmental uncertainty and/or on the firm's marketing competences. Therefore, when making entrepreneurial strategy decisions, managers should consider the contextual variables which may limit or enhance the effectiveness of this strategy making mode. In other words, managers who ignore the contextual situations may suffer rather than benefit from entrepreneurial strategy making.