The contributions of new and small firms to the economic development of regions and countries are undeniable. The importance of these firms for job and wealth creation has led public policy makers and researchers to search for factors that predict firms' success and survival. Traditional studies of new venture performance have focused on characteristics of the entrepreneur. Only recently, have researchers broadened their search to include aspects of the industry and the strategy of the venture.
This thesis is focused on the strategy and performance of new ventures, and the main research questions are as follows:
i) What are the strategic dimensions and strategic archetypes which are pursued by new ventures in Korea?
ii) Are there differences in new venture performance among strategic archetypes?
iii) Do environment and strategy influence the new venture performance? If so, what are the most favorable environmental conditions and strategies?
iv) Does the relationship between environment, strategy and performance vary according to product innovativeness.
Throughout this research, a new venture is defined as being a new technology-based firm which is less than 8 years old. The unit of analysis of this research is an individual firm.
This thesis consists of two parts. One is to explore the strategic archetypes of new ventures. The other is to test the relationships between strategy, environment (industry growth, competitive strength) and new venture performance when product innovativeness is considered as a contingency variable.
To find the strategic archetypes, 114 new venture CEOs from various industries were asked to describe their venture's competitive strategy through 19 questionnaire items on competitive methods. Using factor analysis and subsequent cluster analysis, the four archetypes were identified such as (i) versatile type, (ii) technology-driven type, (iii) market-oriented type and (iv) cost advantage type. The results show the differences in performance among strategic archetypes; market-oriented type, and versatile type are better than cost reduction type in terms of growth rate and profitability.
To test the relationships between venture strategy, environment, product innovativeness and performance, as the second part of the study, the data collected by questionnaire from 57 new ventures. In addition, in-depth case studies on four new ventures were carried out.
The main results of this research are as follows. Firstly, industry growth rate and venture strategy are major determinants of the venture performance rather than demographics of entrepreneurs. New ventures in the high growth market performed better than those in the low growth market, and the performance increases as the new ventures emphasize technology innovation and market sensitivity.
Secondly, industry growth and competitive strength influence the new venture strategy. New ventures in high growth market emphasize the entrepreneurial strategic posture, technology innovation and market sensitivity, while new ventures in high competitive market emphasize the broad business scope.
Thirdly, the fitness of environment and strategy influence the new venture performance. The positive correlation between strategic posture and performance is higher in the low growth industry, rather than the high growth industry. When the competitive strength is high, focus strategy is better than broad strategy in terms of business domain.
Fourthly, the determinants of new venture performance are different according to new venture type classified by product innovativeness. Industry growth is more positively related to innovative type than noninnovative type, and the positive correlation between strategic posture and performance is higher in noninnovative type 2 than in innovative type. Therefore, the model of new venture performance should include the new venture type which is unduly neglected in the previous studies.
Throughout this study, strategic archetypes of new ventures and determinants of venture performance were identified based on empirical analysis. The results can not be necessary generalized in the other countries and comparative analysis with other countries are required in the future research.
