TECHNOLOGICAL RESOURCES
younger) benefit from using a different set of technological resources in achieving growth than those of adolescent firms (6–8 years old). These differences persist in low vs. high technology industries, reflecting the maturation of these ventures.
New ventures firms 5 years or younger play an important role in developing and commercializing new technologies that create new industries, improve productivity, create wealth, and enhance the growth of national economies.
Yet, the odds of new ventures’ survival are low and many of those ventures that survive may not achieve their growth goals. Given the social, economic and political consequences of new firm growth, researchers have shown considerable attention to the factors that influence this growth.
Earlier research has discussed the processes by which new ventures evolve (Aldrich 2000) and achieve growth (Cooper 1986;Davidsson and Wiklund 2000;Davidsson, Delmar and Wiklund 2002) as well as the effect of found- ers’ aspirations and environmental factors on a firm’s growth (Cooper and Bruno 1977). Researchers have also tracked the various stages of the firm’s evolution and related them to the challenges associated with maintaining and nurturing growth. While disagreements continue to persist regarding the definition and measures of growth (Delmar, Davidsson and Gartner 2003; Wiklund, Davidsson and Delmar 2003; Weinzimmer, Nystrom and Freeman 1998), recent studies have begun to recognize the importance of a firm’s resource endowments for its ability to achieve and sustain growth in domestic and international markets.
Several researchers have proposed that resources significantly influence the direction and pace of NVG (Davidsson and Wiklund 2000; Penrose 1959; Wiklund 1998). These researchers noted that resources of different types could be bundled creatively to give competitive advantages to new ventures that allow them to capture viable market positions and achieve superior rates of growth. Technological resources, in particular, can be an important source of such a competitive advantage and growth (Cooper and Folta 2000). Technological resources are usually embedded in the firm’s knowledge base and therefore it might be difficult for competitors and other outsiders to observe or imitate, giving the new venture an opportunity to develop unique and innovative products that create value for the founders and owners. It also takes time for competitors to build or acquire these technological resources and combine them in ways that create value, further protecting the competitive advantage of those ventures that already have
these resources. These factors have led some (Penrose 1959;Roberts 1968, 1991) to highlight the contributions of technological resources to the cre- ation and subsequent growth of new firms. Studies of knowledge-based industries have also shown that technological resources spur NVG (e.g.
Deeds, DeCarolis and Coombs 1998).
Prior research on the effect of technological resources on new venture growth had three shortcomings. Firstly, with the exception ofSingh (1992), past research has failed to recognize that companies over time learn to deploy their technological resources differently. Companies learn by doing and by interacting with customers and the market, in general. This learning could be multifaceted, covering the way the resources could be bundled together; how they are integrated into innovative products as well as when and how the products are taken to the market (Zahra, Ireland and Hitt 2000). This learning can change the way new ventures build and commer- cialize their technologies and, as a result, influence the associations between technological resources and NVG. Start-ups, those firms five years or younger, usually do not have the same expertise as adolescent firms (6 to 8 years) (Bantel, 1998). The evolutionary theory of the firm suggests that experience matters in deploying technological resources (Nelson and Winter 1982). Therefore, we need to empirically document the major differences between new ventures’ various technological resources and growth among start-ups and adolescent firms.
Secondly, new ventures compete in environments that vary in their tech- nological sophistication, defined as the skills and capabilities firms have, and how they are employed in exploiting their technological resources. These differences reflect new ventures’ unique organizational histories, track records and innovativeness. Differences in these skills can influence the potential gains achieved by new ventures from their various technological resources (Zahra 1996b). Some ventures are better skilled and equipped to exploit these resources than others and as a result are apt to gain differential competitive advantages. However, past researchers appear to have ignored the effect of technological resources on NVG in low vs. high technology industries. This gap in the literature is surprising because technological re- sources may not generate growth within particular environments but the same resources fuel sales and employment growth in other environments (Porter 1980; Zahra and Covin 1993). Demand and supply conditions as well as competitive rivalry might augment, neutralize or even decrease the payoff from these technological resources. Appreciating the differences that might exist between technological resources and new firm growth in low vs.
high technology industries could be informative. Public policy makers have
Technological Resources and New Firm Growth 103
encouraged the creation of technology-based new ventures in different in- dustries to improve employment and quality of life. Public policy makers have also encouraged new ventures to apply new technologies in their op- erations, hoping to improve their competitiveness and the odds of their survival. If significant technological resources influence the success (e.g., growth) of new ventures differently in different environments, we need to document the sources of these differences and then use this information in shaping and crafting public policy choices.
Thirdly, researchers often ignore geographic sources of new firm growth.
In particular, we do not know if technological resources would influence growth in domestic vs. international markets differently. Evidence suggests that new firms are important players in global markets (Autio, Sapienza and Almeida 2000;OECD 2002). Indeed, many new firms are born international and, from inception, target markets in several countries (Bloodgood, Sap- ienza and Almeida 1996;Zahra, Ireland and Hitt 2000). Given that different variables (e.g., technological resources) might influence domestic and inter- national markets differently, it is important to separate domestic from in- ternational sales growth.
This study examines the association between various technological re- sources and sales growth in start-up vs. adolescent firms. It also explores these associations in low vs. high technology industries, seeking to clarify the financial effects of technological resources on NVG in different com- petitive settings. High technology industries are usually important arenas for growth; technological change creates opportunities for product differ- entiation and innovation. Radical innovation, both in products and proc- esses, also thrive in these industries. Thus, identifying those technological resources that enhance sales growth can be useful in developing effective managerial strategies that exploit new firms’ technological resources. Un- derstanding these differences can also improve our knowledge of how new firms gain a competitive advantage at different stages of their life cycles, which is a research gap in technological entrepreneurship (Deeds, DeCarolis and Combs 1998;Zahra and Hayton 2004).