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CONCEPTUAL FOUNDATION FOR THE STUDY

In the 1990s, many organizations have expended considerable effort to undo the actions taken during the 1980s (Johnson, 1996). Interestingly, research suggests that over 50 percent of the reengineering and total quality management programs have been unsuccessful (Urban, 1995). In part, this lack of success is a product of the NCL. Today, firms must compete in an era of converging, yet rapidly shifting technologies that requires almost instantaneous responses to competitors’ actions (Grimm & Smith, 1997). Furthermore, firms are competing in an environment in which the characteristics of the global economy force them to produce goods and services of still higher quality while incurring still lower manufacturing, distribution, and service costs (Hitt, Ireland & Hoskisson, 1997; Lei, Hitt & Goldhar, 1996).

Even though important insights can be gained from an analysis of failure (McGrath, 1995), researchers concentrate their efforts on understanding the future and the practices that are linked with achievement of desired firm outcomes (Ireland, Hitt & Sexton, 1996; Sexton & Smilor, 1997). Accordingly, the focus of the research described herein is on HGEFs and the strategies that produce successful performance in them. In essence, the high–growth entrepreneurial firm is one that is willing to take risks, to be innovative, and to initiate aggressive competitive actions. These orientations and actions support the high–growth firms’ efforts to identify attractive product market opportunities while pursuing superior financial performance (Zahra & Covin, 1995).

Because small and large firms differ in competitive actions (Chen & Hambrick, 1995), it is important for more research to be conducted that focuses on a successful type of entrepreneurial venture—the high–growth entrepreneurial firm. In recognition of recent calls, this study has been designed and executed to guide to guide the development of future research and the practice of entrepreneurship in HGEFs (Aldrich & Baker, 1997).

Entrepreneurial Firm Growth and Intensity

According to Sexton and Smilor (1997), “Growth is the very essence of entrepreneurship” (p. 97) and is the primary distinguishing factor between small business and entrepreneurship. With continuing growth, entrepreneurs are challenged to find new markets, develop new products, and pursue new business opportunities in order to stimulate their firms to still more growth (Shane, 1996b). As has been echoed in firms of all sizes, if a business does not grow, it will die (Magretta, 1997). For the purposes of this study, entrepreneurship was defined as the gathering and integration of resources to take advantage of identified opportunities (Stearns & Hillis, 1996; Stevenson & Gumpert, 1985). As a process, entrepreneurship is fraught with uncertainty and ambiguity. However, it has been argued that successful entrepreneurship results when firms embrace and even create ambiguity rather than try to deny its existence (Jelinek & Litterer, 1995). Through careful consideration and analysis of ambiguous situations, entrepreneurial firms may be able to isolate new product ideas that can lead to marketplace success. Thus, HGEFs believe that their actions can shape industry conditions in their favor (Kim & Mauborgne, 1997).

According to Sexton and Bowman–Upton (1991), the market constrains the amount of sales growth that can be achieved. In other words, the market niche in which the firm competes denotes the maximum sales volume. However, a firm may use its entrepreneurial capability to expand its market or market niche. Thus, desired growth can be realized through effective managerial skills in developing and managing growth (Covin & Slevin, 1997). These managerial skills include entrepreneurial intensity. Entrepreneurial intensity refers to the ability to take risks and to be innovative and proactive (Morris & Sexton, 1996). Entrepreneurially–intense firms demonstrate competitive aggressiveness—that is, these firms tend to challenge competitors directly and intensely in order to outperform them (Lumpkin & Dess, 1996). Firms with higher entrepreneurial intensity are more likely to achieve greater levels of sales growth (Morris & Sexton, 1996). Thus, firms operating in the NCL must choose appropriate strategies and implement them effectively in order to be high performers. Below, we enumerate some of the more critical strategies and competitive actions through which they can be implemented successfully.

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