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BACKGROUND

The resource-based view of the firm (Penrose, 1959; Barney, 1991; Connor, 1991) provides a theoretical foundation for understanding the role of resources and distinctions among these. This view posits that organizations are comprised of heterogeneous bundles of resources (Penrose, 1959; Connor, 1991), defined as "all tangible and intangible assets that are tied to the firm in a relatively permanent fashion" (Caves, 1980; Werenerfelt, 1984; Penrose, 1959). Resources and their combinations provide the firm’s strengths, and optimally are a source of competitive advantage (Penrose, 1959; Barney, 1991; Wernerfelt, 1984). An organization emerges when the entrepreneur expends resources and establishes procedures for their use (Becker & Gordon, 1966), and over time, some resources are re-organized, new ones are acquired, some become specialized and others may become idle (Penrose, 1959). Besides heterogeneity and uniqueness, resources cn be classified into distinct types.

Early authors classified these into three simple categories such as physical (inventory, plant), monetary (money, credit) and human (labor, management) (Ansoff, 1965), but these evolved into more detailed descriptions of organizational resources (integrations of skills and knowledge, and technology (technical know-how) (Hofer & Schendel, 1978) and reputational resources (Dollinger, 1995). While there is no consensus on how resources should be sorted, some appear consistently; financial, physical and human resources. Yet, these conceptualizations do not reflect the important role of the owner/founder in whose mind the possibilities for the new venture idea first come together (Shaver & Scott, 1991). A typology appropriate to new ventures is proposed by Greene, Brush and Hart (1997) that recognizes the important role of the founder, the social resources (networks, and relationships), and unique features of organizational and physical resources (See Table #1).

In contrast to these specific articulations of types of resources, references to resources in the literature on organizational life cycles is less specific. Early models identify crises (Grenier, 1972), characteristics and problems (Churchill & Lewis, 1983), and risks (Lippitt & Schmidt, 1967) that distinguish phases of development of a new or small business. (See Table #2 for summary of frequently cited phase models.) Most phase models recognize an initial point at which the entrepreneur launches the venture and it comes into existence through assembly of people and facilities (Lippitt & Schmidt, 1967; Churchill & Lewis, 1983). At this point certain problems arise that must be resolved by the leader of the organization for it to move to the next phase. Phases often are referred to in terms of management tasks; i. e. direction, delegation, coordination, collaboration (Grenier, 1967) or live or die, being a manager, making it (Steinmetz, 1969). In nearly all conceptualizations, references to particular resources are made, however, they are treated as descriptive of a particular phase (i.e. organizational systems are "simple" in the early phases, Churchill & Lewis, 1983, p. 42), or a condition that must be resolved (i.e. more money is needed Grenier, 1972).

TABLE 1

Capital Framework for New Ventures

Capital Type Definition Associated Authors
 
Human Capital achieved attributes Becker, 1964
  education and experience Cooper, 1981
  reputation Dollinger, 1995
 
Social Capital relationships and networks Bordieu, 1983
  family Liebenstein, 1968
  race and ethnicity Glade, 1967
  political connections Glade, 1967
 
Physical Capital tangible assets necessary for business operations Hofer & Schendel, 1978
  facilities and equipment Hofer & Schendel, 1978
  technology Dollinger, 1995
 
Organizational Capital organizational relationships, structures Tomer, 1987
  routines, culture Hofer & Schendel, 1978
  knowledge Dollinger, 1995
 
Financial Capital funds used to start & grow business Bygrave, 1992

References to resources are quite explicit at the "launch" phase, most importantly obtaining cash (Scott & Bruce, 1987); developing financial procedures and organizational leadership (Lippitt & Schmidt, 1967); establishing systems, hiring personnel and gaining product/market acceptance (Churchill & Lewis, 1973; Grenier, 1972). Following the "launch" authors will note between three and six more phases that are characterized by different problems or issues. Post-launch, it is posited that survival is the major concern, and the business focuses on inventory systems and setting direction (Grenier, 1972), financial accounting, and training personnel (Lippitt & Schmidt, 1967; Churchill & Lewis, 1983), while obtaining capital and cash management are also crucial (Scott & Bruce, 1987).

From the point of survival on, there are different conceptualizations of stages, but generally these address delegation of authority and technology development (Grenier, 1972); development of personnel motivation and management systems (Lippitt & Schmidt, 1967; Churchill & Lewis, 1983). Also in this phase there is a concern for acquiring new capital for expansion as well as new property/plant and equipment (Churchill & Lewis, 1983) and the management role is more of a coordinator (Grenier, 1972).

The last stages are characterized by formalized systems of budgets and technology processes (Grenier, 1972) concern for contributions to society (Lippitt & Schmidt, 1967); formal structures and established organizational policies (Churchill & Lewis, 1983); as well as institutionalization of culture and the informal organization (Steinmetz, 1969). At this stage, the founder may not be present, and management responsibilities require vision, motivation and future directed responsibilities (Eggers, Leahy & Churchill, 1994). Often new infusions of capital are needed to expand geographically or diversify (Churchill & Lewis, 1983; Grenier, 1972).

While there is little agreement on the number of phases, or the exact conditions encountered, these do assume growth is an objective and that size will increase. The main criteria in identifying the phases revolves around problems, crises or risks (Grenier, 1972; Churchill & Lewis, 1983; Scott & Bruce, 1987; Lippitt & Schmidt, 1967). Furthermore, the phases are described as sequential in succession, one following one another. It is implicit in these models that resources play a role helping the organization transition from one phase to the other, with particular emphasis placed on obtaining cash or financial resources, personnel, managerial or leadership talent (Churchill & Lewis, 1983; Lippitt & Schmidt; 1967; Steinmetz, 1969) and in developing organizational systems, procedures or policies in a more formalized manner (Grenier, 1972; Churchill & Lewis, 1983). Each of these discussions does refer to different types of resources as important for resolving problems.

However, the extent to which specific phases can be identified based on problems, risks, or crises has been criticized because empirical studies examining the existence of phases have produced mixed results (Gartner, 1985; Miller & Friesen, 1988). It is argued that different ventures encounter different problems at different times (Kazanjian, 1988). Recently McCann (1991) studied strategic choice patterns as a basis for distinguishing among phases. This work investigated the scope and breadth of strategy in technology ventures, and found that internal venture aspects (scale, experience, research and development) influenced choices. Other empirical work provides evidence that a relationship between resources, strategies and performance exist. Chandler and Hanks (1994) examined the fit between strategies and resource capabilities, finding that different types of resources influenced growth. In particular, manufacturing companies with broader capabilities, grew faster than those with narrower capabilities. Relatedly, Mosakowski (1993) posited that certain types of resources vis a vis strategies (low cost, differentiation, focus) would lead to above average performance over the life cycle. While she did not measure resources directly, she argued that resources are an integral part of understanding growth over the life cycle, and that unique combinations are associated with different strategies.

In summary, we concluded that current life-cycle models of organizations refer to resources as important or conditional to moving the organization from one phase to the next, and the role of management in leading and deciding about resources is essential. However, the relative importance of different types of resources depending on the stage can only be inferred. On the other hand, the resource based view of organizations begins with resources as a foundation upon which strategies and growth are based, positing that resources can be categorized and that they will develop and change over time. We draw from existing life cycle models that identify different phases of business development and suggest that different combinations of resources might be characteristic of businesses at different ages.

Our exploratory study investigated three questions:

  1. Do resource configurations of new ventures vary by age of the venture?
  2. Are owner/founder(s) characteristics associated with the mix of resource types based on age of venture?
  3. Are organizational characteristics associated with the mix of resource types based on age of venture?

TABLE 2

Life Cycle Models

Author/date Stages Resources Mentioned
 
Lippitt & Schmidt, 1967 Launch risk capital, technology, organizational leadership, reputation
  Survival debt financing, people, accounting systems
  Stability technology, personnel systems, outside alliances
  Pride/Reputation community alliances, image, management
  Developing Uniqueness operations systems, money, institutional knowledge
  Contribution to Society community relations
 
Grenier, 1972 Growth informal systems, new capital, employees, leadership
  Direction inventory, accounting systems, organizational structure, knowledge of management
  Delegation money, technology, manpower, control systems
  Coordination planning, technology, capital, staff, information systems
  Collaboration coordination, organizational systems
 
Churchill & Lewis, 1983 Existence owner’s ideas, skills and expertise, organizational systems, supplies of raw materials, cash
  Survival employees, planning systems, technology information
  Success organizational systems, cash, management abilities, planning systems
  Take-off money, personnel
  Maturity organizational structure, capabilities of management, systems
 
Scott & Bruce, 1987 Inception cash, founder skills, structure, employees
  Survival money, administrative systems, management, property, plant equipment
  Growth money, managerial systems, expertise
  Expansion leadership, property plant and equipment, personnel, external relations
  Maturity management of systems, working capital, management
 
Steinmetz, 1969 Live or Die management skills, money, personnel, organizational systems
  Being a Manager financial management, operating capital, norms, culture and informal organization, property, plant, and equipment
  Making it institutionalization

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