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Summary statistics and the correlation matrix are presented in Table 1.  Average sales (Deposits) in the fifth year of operation were $ 47,992,000 and the breadth measure was a standardized factor score. Also worth noting was the fact that these new banks began operations with an average of $ 3,392,000 in initial capital.  Please see Table 1 presented at the end of the paper.

Table 2 presents the results of the regression equations utilizing sales growth as the dependent variable. Model 1 includes only the direct-effect variables while model 2 includes those with the interaction term. Hypothesis 1 suggested that the breadth of the firm would be positively associated with new venture growth. As can be seen in model 1, the beta for this variable is .11 and is significant, therefore this hypothesis is supported. As expected from prior research, in isolation the level of breadth is associated with growth.  Please see Table 2 presented at the end of the paper.

Hypothesis 2 suggested that initial capital would be positively associated with new venture growth. As presented in model 1 and furthermore, as expected, this is strongly supported both positively and significantly (p<.001). Hypothesis 3 stated that the interaction of aggressiveness and initial capital would be positively associated with new venture growth. Model 2 suggests that this hypothesis is supported as the beta was positive and significant (p<.05). The suggestion in the literature that a broad approach is universally associated with new venture growth could be tempered by the size of the initial financial resources of the venture. The effect of product breadth on sales growth is stronger for higher levels of initial capital than for lower levels.

Amongst the control variables, the munificence of the environment was positively and significantly (p<.05) associated with new venture growth. Dynamism, competitive intensity, and date of opening were not significantly associated with new venture sales.


We began this study by observing a disconnect between the theory of entry (focusing limited resources with narrow market approaches) and the available empirical research (aggressive, broad-minded approaches are a key to success). We suggested that this dissonance may be made clearer with a more precise empirical test that: 1) directly addresses the potential impact of initial capital on the effectiveness of the breadth of approach to the market; 2) examines
 only independent ventures; 3) directly assesses the amount of capital available at start-up; and 4) examines the breadth strategy of the venture very close to its inception.   The results of this study points out the importance of initial financial resources in explaining the effectiveness of the strategic approach utilized. While support was found for each of the three hypotheses, it is clear that the size of the initial financial resources available to the venture was paramount in explaining new venture growth. Clearly the strategic option of choosing a broad breadth market approach was more effective as initial capital increased, however, the findings suggest that a broad breadth market approach is beneficial to those firms with limited financial resources

New ventures who enter with limited initial resources do not have the luxury of pursuing only the most profitable or highest growth areas, but instead must pursue all avenues for income (Diomande, 1990). This appears to give those ventures with high initial financial resources the option to pursue either a broad or narrow approach to the market with success being more assured. However, new ventures with limited resources  "...forces an entrepreneur to generate revenues as rapidly as possible" (Diomande, 1990: 197). As suggested by Biggadike (1979), a narrow approach to the market leaves the resource-poor new venture vulnerable and perhaps preordained to limited sales. This research also portends some suggestions for resource-rich new ventures. Clearly the effect of a broader breadth on sales growth is stronger for higher levels of initial capital.

Given the theory supporting narrow breadth strategies for new ventures, it has been difficult to understand the conflicting findings of the empirical literature. It is clear that the underlying market theory assumed a resource poor and easily shocked entrant while most of the extant research has examined internal corporate ventures (often from the PIMS start-up database) or firms sometime after firm birth (the typical criteria is that they are less than eight years old). This is clearly not an effective test of the theory and provides little in the way of prescriptive advice to independent new ventures. Corporate-sponsored ventures typically have greater access to resource endowments such that they are not comparable with independent firms (Biggadike, 1979; Shrader & Simon, 1997). In addition, independent firms that are examined years after firm birth may have gone through dramatic changes in their strategies and these changed strategies may not be the ones that lead them through the early years (Romanelli, 1989).

Examining independent, new firms very near the point of inception and including the initial capitalization of the new venture, we found that the effectiveness of new venture strategy was very much dependent upon the financial resources of the firm. In contrast to the theoretical underpinnings of entry strategy, this research suggests that independent new ventures with lower levels of initial capitalization should pursue a broad breadth strategy in order to maximize their growth. On the other hand, independent new ventures with a high level of initial financial resources need not be as concerned with trying to compete broadly across the market spectrum and in fact, can concentrate of those product areas in which they can maximize their long-term profitability and growth. That is, while the observed effect of the interaction of initial capitalization and breadth is in fact statistically significant, the increment in R2 attributable to the interaction term is approximately 1%. While there is an interaction effect, the noteworthy finding of this study is how important initial capitalization appears to be as a predictor of growth.  Recognizing the general difficulty in new venture research when gathering data at the point of inception,  we   believe  that  accounting  for  these resources at the point of founding provides an interesting interpretation of initial performance strategies.
This research has provided a unique window into initial strategic approaches and resource capabilities. Seldom are researchers able to examine new firms with data gathered at the time of formation, but more importantly it is truly rare for a study utilizing this rich secondary data to be able to include privately-held firms. The quality of secondary performance data available for new ventures in the banking industry is particularly noteworthy. As new venture and small firm researchers (e.g. Chandler & Hanks, 1993; Fiorito & LaForge, 1986;  Sapienza, Smith and Gannon, 1988)  have noted, objective performance data is often unavailable as it is quite common for entrepreneurs to refuse to divulge it to researchers. Furthermore, even when entrepreneurs are willing to share performance data, the accuracy of the data can be questionable. It is likely that there are few means by which researchers can investigate new ventures at the point of actual formation and that the insights gained can be critical in the development of the entrepreneurship stream of literature.
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