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ORGANIZATIONAL GROWTH PATTERNS

    In contrast to the more static perspective of the industry-structure model which views the entrepreneur's job as engineering a "fit" with the environment, the resource-based view adopts a dynamic approach to "resource fit" (Itami, 1987). It is not enough to "situate" the firm appropriately in the industry. To keep an established competitive position requires organizations adopt a dynamic approach to organizational learning. Organizations must continually enhance their core competence. This "learning-by-doing" perspective (Prahalad and Hamel, 1990) seems particularly amenable to explaining how new ventures acquire knowledge competencies.

    The creation of an organization is a dynamic process and there is no one pattern of activities that entrepreneurs undertake in creating the business (Carter, Gartner, and Reynolds, 1996). In response to variation in the acquisition, processing, storage and retrieval of resources and knowledge, new ventures will develop distinctive organizational routines (Nelson and Winter, 1982). These routines are likely shaped by the dynamics of the organization's growth trajectory. new ventures that experience a high volume of sales during the initial months of operation likely encounter different problem solving situations than firms that have a slow steady growth of sales volume. the organizational learning, or development of routines, is apt to vary considerably in these two contexts. We hypothesize that the relationship between problem solving and organizational survival will depend on the sales growth pattern of the new venture during its startup stage. In summary, we hypothesize:
                                           H1: Problem solving effectiveness increases the probability of new firm survival.

                                           H2: The extent to which problem solving effectiveness impacts new firm survival
                                           depends on the sales growth pattern of the venture during the start-up stage.
 

METHODS

    Sample. Data for assessing new firm survival as an outcome of managerial problems, industry, and sales growth were collected in a survey of new firms in Pennsylvania and Minnesota in 1986 (Reynolds and Miller, 1988). Firms selected in the sample reflect a subset of the population distribution of new firms founded between 1979 and 1985 in the states of Minnesota and Pennsylvania. A new firm was defined as an autonomous business founded to produce a good or service and having initiated sales between 1979 and 1984. None are branches or subsidiaries of established business firms.

    All regions of the two states and all industry sectors were represented in the sample except for agricultural production. Agricultural services, however, were included. The sample was based on firms listed in the Dun's Marketing Identifier files as between one to six years old just prior to the survey. Phone call verification excluded all listings that were not new, autonomous, and active. About one-half of the listings qualified. Each eligible new firm was sent a mail questionnaire three times, with a reminder post-card between the first and second mailings. Phone interviews were completed with about half of those not returning the mail questionnaire. Final response rate was 69 percent in Pennsylvania and 75 percent in Minnesota.

    Subsequent phone interviews were completed in 1991 to verify status of the respondents business. Five categories of responses were noted: (1) firms that were still in operation; (2) firms that we could confirm were out of business; (3) firms that were "dormant" at the time of 1991 survey; (4) firms that had been "sold or merged"; and (5) firms, that despite multiple follow-ups using phone directories (four to six calls) and site visits, could not be contacted. Since it is difficult to judge whether firms that are dormant or those that are sold or merged can be classified as surviving for the present analysis, we disregarded firms in these two categories from the analysis. Furthermore, our persistence in contacting the firms in the sample gave us confidence to categorizing the "unable to contact" as discontinued firms.

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