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Antecedents and consequences of new venture growth strategy: An empirical study in China

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Abstract

Although current literature on new venture growth has focused on why new ventures grow, relatively less attention has been paid to how that growth is occurring. This article adopts the resource-based view to investigate the antecedents and consequences of new venture growth strategy in an emerging economy context. We identify three generic growth patterns of Chinese high-tech new ventures—organic growth, partnership growth and acquisition growth, based on 252 completed questionnaires. Consideration has been given to identify respective resources and capabilities associated with different growth strategies. Technological capabilities, strong and weak network ties, marketing capabilities and financial resources are found to have different effects on different new venture growth strategies. In addition, the growth strategies show differentiated effects on performance in terms of survival, competitive advantages and profits. Research and practical implications of new venture growth strategies and performance in China are also discussed in the paper.

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Authors and Affiliations

  1. Business School, Loughborough University, Leicestershire, LE11 3TU, UK

    Huan Zou

  2. Faculty of Business Administration, University of Macau, Macau, China

    Xiaoyun Chen

  3. Department of Management, King’s College London, London, SE1 9NH, UK

    Pervez Ghauri

Authors
  1. Huan Zou
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  2. Xiaoyun Chen
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  3. Pervez Ghauri
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Corresponding author

Correspondence to Xiaoyun Chen.

Additional information

The authors would like to thank the anonymous APJM reviewers, Professor Johngseok Bae and the Senior Editor, Professor David Ahlstrom for their constructive and valuable comments and suggestions on earlier drafts of this paper, and Professor Feixiang Chen and his research students at Tongji University, China, for collecting the data. This paper draws on a portion of a paper presented by the authors at the APJM Special Issue Conference on Managing in Ethnic Chinese Communities at Kaohsiung, Taiwan, December 2008.

Appendix

Appendix

Items

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Technological capability

 

In regard to the establishment and utilization of technology in product development, to what extent do you agree with the following statements?

  1. Internal research and development is greatly emphasized

0.62

  2. We have our own product or process patents/copyright

0.97

  3. We have a large number of financial investments in R&D and product development

1.00a

  4. We look for new employees with desirable capabilities through internal recommendations

0.84

Marketing capability

In regard to the marketing planning and practices of your firm, to what extent do you agree with the following statements?

  1. We provide differentiated and customized products/services

0.89

  2. We provide extensive customer services/support

1.00a

  3. We provide a broad range of products to a large customer base

0.90

  4. We have a wide range of marketing expertise within the firm

0.99

Networks

 Strong ties

 

  1. We establish our business partnership through previous relationships with friends, family members and schoolmates

0.93

  2. We establish our political partnership through previous relationships with friends, family members and schoolmates

1.00a

 Weak ties

 

  1. We get to know our business partners through professional associations/events

0.63

  2. We get to know our political partners through professional associations/events

1.00a

Financial resources

 In regard to the planning, exploration and utilization of financial capitals, to what extent do you agree with the following statements?

 Internal financial strategy

  1. We use internally generated funds

1.00a

  2. We use bank loans/debts

0.72

 IPO fund raising

 

  1. We use public equity offerings to raise funds

*b

Growth strategies

 To what extent is the following growth strategy currently pursued by your firm?

 Internal organic growth

  1. Internal venturing via innovation and R&D

*b

 Growing through partnership

 

  1. Licensing technology to/from other firms

0.81

  2. Partnering with other firms

1.00a

 Growing through acquisition

 

  1. Acquiring firms in related businesses

0.98

  2. Acquiring firms in unrelated businesses

1.00a

Firm performance

 To what extent have the following objectives of your firm been achieved?

 Survival

  1. Long term survival of our firm in the market

*b

 Competitive advantages (CA = 0.55; CR = 0.34; AVE = 0.15)

  1. Advantages in the customization of performance over our competitors

0.60

  2. Advantages in the creation of know-how

1.00 a

  3. Advantages in the value-added products and services

0.91

 Profit

  1. Increase in profit level

*b

Model fit: χ(181) = 296.408, p = 0.000; CFI = 0.91, IFI = 0.92, GFI = 0.91; RMSEA = 0.050

  1. aFixed factor loading.
  2. bSingle scale.
  3. CA Cronbach’s alpha, CR composite reliability, AVE average variance extracted.

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Zou, H., Chen, X. & Ghauri, P. Antecedents and consequences of new venture growth strategy: An empirical study in China. Asia Pac J Manag 27, 393–421 (2010). https://doi.org/10.1007/s10490-009-9157-0

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