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BACKGROUND

    How important resources are to the success of the new venture is open to debate. Scholars have posited that resource availability and their access can be important factors in the creation and growth of the new firm (Churchill and Lewis, 1983; Cooper, 1981). How decisions are made regarding the management of those resources are believed critical to survival of the firm (Cooper and Dunkelberg, 1986).

    The resource-based view of the firm sees organizations as composed of an array of resources where decision makers can achieve success through their acquisition, combination, and deployment (Barney, 1991). Firm resources critical to new ventures can be classified as human capital; social capital; physical capital; organizational capital; and financial capital (Greene and Brown, 1996). But Barney (1991) notes that "not all resources are strategically relevant," and can be expected to effect organizational performance. To be strategic, assets must be difficult to trade and imitate, specialized, scarce and appropriate. In other words, strategically relevant competencies are capabilities the organization possesses that set it apart from competitors (Hall, 1991). The shrewd management of resources may be one of these competencies. Prahalad and Hamel (1990) argue that collective learning in the organization reflects the ways in which diverse skills are coordinated and integrated with multiple technologies. This learning imparts a core competence that reflects the specialized expertise of the organization. When used to successfully adapt to changing market and environmental conditions, knowledge competencies can offer a competitive advantage. For example, how effectively managers of new firms recognize resource problems, formulate a strategy for solving the resource problem, and implement a strategy that successfully leads to the solution of the problem can differentiate the firm from its competitors and enhance its probability of success. It is recognized that one contributor to the "liability of newness" (Stinchcombe, 1965) is the lack of experience in problem solving that many founders of entrepreneurial firms have.

    In this paper we examine one set of resource problems that we believe to be critical to the success of a new firm: managerial resources. Managerial resources are the funds from sources used to start, operate and grow the business (Bygrave, 1992). It is hypothesized that firms who effectively solve problems associated with managerial resources develop core competencies that increase their survival rate than either firms that never had managerial problems, or those firms that do not effectively solve managerial resource problems

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