This research examines the relationships among strategic orientation, strategy, and firm performance of high technology ventures in two transition economies – China and Russia. While highlighting the impact of the economy's institutional support of entrepreneurship, we also examine the moderating effects of social networks in the performance of these ventures. This research finds that there is a strong link between strategic orientations and resulting strategies in both transition economies; specifically, the capability building strategies relate to sales and efficiency performance. The entrepreneurial firms’ social network also directly influences sales performance, but does not play significant role in moderating performance. Finally, institutional support has an effect on both strategic orientations and firm strategy.
Entrepreneurs play a critical role in economies transitioning from central control to a market orientation, i.e. transition economies (Peng, 2001). In large measure, this is because the large, old state-owned enterprises that were present when these economies were centrally planned still exist as these nations transit to a market economy. However, these state businesses are difficult to reform and may in fact produce products that are often still not marketable in today's economy. As a result, it is the new entrepreneurial businesses that provide critical economic viability in transition economies (Li et al., 2005 and Peng, 2001).
One type of entrepreneurial business that governments in transition economies want to encourage is high technology entrepreneurial ventures (Bruton & Rubanik, 2002) since they offer particular benefits to these nations. These benefits include that entrepreneurial firms offer a means for those nations to move from centers of low cost manufacturing to high valued added manufacturing. The high value added manufacturing is associated with higher wages for workers and higher profits for the firms as well as gaining competitiveness in the global economy with high end products. In addition, high technology entrepreneurial ventures promote the employment of highly trained professionals that are often produced in abundance by universities in transition economies. This is particularly the case of the transition economies of China and Russia.
While there are studies on entrepreneurial behaviors and firm performance in high-technology ventures in these two economies (c.f., Bruton and Rubanik, 2002 and Phan and Foo, 2004), the strategic orientations and strategies of these entrepreneurial ventures have not been well examined to date (Lau, Yiu, Yeung, & Lu, 2008). Our central questions are: To what extent are high technology entrepreneurial ventures in the two post-socialist economies – Russia and China – similar and different in strategic cognitions and actions? In addition, does their institutional legacy play an important role in these relationships?
This paper examines the impact of strategic orientations on firm strategic behaviors and how these strategies affect performance of high technology ventures in these two economies. It should not be assumed that the environments of all transition economies are homogeneous (Bruton et al., 2009 and Hitt et al., 2004). For instance, an economy's institutional support for entrepreneurship can vary widely among nations and need to be considered in examining entrepreneurship in transition economies. While China and Russia share similar ideological and economic roots in socialism and central economic planning, in other regards they have very different institutional settings (Puffer & McCarthy, 2007). Thus, here we also examine the impact of the institutional background on strategic orientation and actions for both similarities and differences between the two nations which will help to further validate the results as relevant to a variety of transition economies.
Networking is widely seen as a key element in entrepreneurial success (Jack, 2010) and in implementing new technology ventures (Gupta, Cadeaux, & Dubelaar, 2006), especially in transition economy contexts (Hitt et al., 2002 and Peng and Luo, 2000). As a result, this paper also investigates the role played by social network in the strategies and firm performance relationships.
The paper contributes to the understanding of entrepreneurial ventures in several specific ways. The study enhances the theoretical understanding of the relative effects of institutions, strategic orientations, and firm strategies on performance of high technology ventures in transition economies. Despite the increasing recognition by researchers of the importance of institutional arrangements, there has been only limited investigation focusing on the effects of institutional differences on entrepreneurial systems (Lu et al., 2008, Peng, 2003 and Thomas and Mueller, 2000). The paucity of examining institutions and their effects is especially true of entrepreneurial domains in transition economies (Giamartino, McDougall, & Bird, 1993). Secondly, data from two unique transition economies are examined. Without such validation it is difficult to ensure that the results found have validity for a wide range of transition economies or instead represent the impact of the unique institutional setting of the given country examined. This approach also contributes to a broader understanding of entrepreneurship in transition economies.
