«STRATEGIC MANAGEMENT IN NEW VENTURES: THE ROLE OF TECHNOLOGICAL, ORGANIZATIONAL AND ENVIRONMENTAL FACTORS Ehsan Shahidifar Islamic Azad University, ...»
Journal of Entrepreneurship, Business and Economics
2016, 4(2): 130–149
STRATEGIC MANAGEMENT IN NEW VENTURES: THE ROLE OF
TECHNOLOGICAL, ORGANIZATIONAL AND ENVIRONMENTAL
Islamic Azad University, Iran
Received October 2015; accepted March 2016
Today, as firms become more competitive in their fields, the use of strategic insights and management practices are becoming an integral part of the firms' activities- especially for new ventures which are in the early phases of their lifecycle. Indeed, they cannot improve their performance if they do not take advantage of such tools and mechanisms. On the other hand, nascent firms are facing lots of problems due to the lack of appropriate use of strategic insights. One of the main problems is the acceptance of strategic management practices in such companies. Then, in this paper, the authors try to investigate the elements which affect their acceptance. Authors use technology-organizationenvironment (TOE) framework to examine the hypotheses. Findings reveal that all the factors were influential, other than complexity, vendors' support, firm size, and industry type.
Research paper Keywords: Strategic management, New ventures, Acceptance, Technological factors, Organizational factors, Environmental factors Reference to this paper should be made as follows: Shahidifar, E. (2016). ―Strategic management in new ventures: the role of technological, organizational and environmental factors‖, Journal of Entrepreneurship, Business and Economics, Vol. 4, No. 2, pp. 130–149.
Copyright © 2015 Scientificia www.scientificia.com Journal of Entrepreneurship, Business, and Economics, 2016, 4(2): 130–149 Introduction Large, medium, and small firms and new ventures around the world utilize strategic management practices and tools to guide their activities (Salamzadeh, 2015). In fact, strategic management practices are becoming an inevitable issue for the companies to run their daily affairs. On the other hand, the literature provides an extensive list of incentives and obstacles to adoption and use of strategic management tools and techniques by SMEs (Wymer & Regan, 2005; Al‐Qirim, 2007). Indeed, despite advances in strategic management and the acceptance by large organizations of such practices, the same level of adoption is not prevalent among SMEs. This also suggests that SMEs face significant and unique challenges in adopting strategic management tools (Farsi et al., 2014). This low level of adoption particularly impedes new ventures in developing countries. Moreover, for instance, cultural barriers in some countries may also exist to deter the acceptance of strategic insights as a way of guiding any business (Kapurubandara & Lawson, 2006).
Among SMEs, new ventures, which are established based on knowledge and new technologies (Tanha et al., 2011), are to a great deal, exposed to different elements which affect their degree of acceptance. Moreover, many scholars have been trying to ﬁnd factors that inﬂuence the firms' acceptance of strategic management practices, thereby ultimately enhancing its usage (Schepers & Wetzels, 2007). Therefore, in this research the authors try to investigate the elements which affect their acceptance. Authors use technology-organization-environment (TOE) framework to examine the hypotheses. The main theoretical/practical contributions of this research are as follows: (i) to investigate the acceptance of strategic management in Iranian Shahidifar, E. 2016. Strategic management in new ventures: the role of technological, organizational and environmental factors new ventures, (ii) to elaborate the affecting elements and the degree to which they might need to be considered, and (iii) to help researchers, policy-makers and officials in taking required actions for helping these new ventures in eliminating the obstacles. In this paper, the authors provide a brief and exact review of the literature. Then, the theoretical model is proposed. Methodological issues are discussed next; and the authors discuss the findings. Finally, the paper concludes with some main findings and future directions for research.
Literature Review New ventures vary substantially in their resource positions, the goals of their founders and their potential to grow (Cooper, 1981). He examined strategic management separately in the start-up stage, and highlights its importance. Some scholars report that only about 25 percent of new ventures survive their first five years, and one of the main reasons for their failure is their lack of attention to strategic issues (Ireland et al., 2001). On the other hand, these firms face comparable challenges with regard to accepting and implementing such insights. The extensive acceptance of these tools enacted an opportunity for new organizational forms to emerge in new markets and possibly transform established markets. Yet, these new organizational entities that exploited the capabilities of strategic management techniques had no organizational edifice upon which to pattern their own nascent structure (Salamzadeh and Kawamorita, 2015).
In fact, the main task of strategic management is to maintain an appropriate balance between these fundamentally different processes (Burgelman, 1983). Like entrepreneurship, strategic management is also concerned with
Journal of Entrepreneurship, Business, and Economics, 2016, 4(2): 130–149
―the exploitation of profitable opportunities‖. Many entrepreneurial efforts succeed and lead, in turn, to the formation of new ventures and wealth creation for both the entrepreneurs and investors, while some fail due to lack of strategic insights (Zahra & Dess, 2001). However, if risk, uncertainty, threats, opportunities, etc., as variables or areas of study critical to understanding strategic management, are ignored simply because these are too complex to be understood easily, the field of strategic management may be left floundering in its attempt to understand, predict, and influence firms’ future, if such variables remain undefined (Baird & Thomas, 1985).
With the growing reliance on changing systems and increasing rapidity of the introduction of new technologies, firms’ acceptance of strategic issues continues to be an important issue (Zarea and Salamzadeh, 2012). The literature generally reviews potential readiness, adoption and diffusion factors which SMEs perceived as important to influence their decision. To some extent, the studies propose some models as a basis of considering firm readiness and adoption to embrace strategic management applications. Such studies concern the pre-adoption and adoption stages issue by addressing the potential motivations and barriers of its acceptance (Tanha et al., 2011).
Moreover, the integration of knowledge about entrepreneurship and strategic management is important for advancing our understanding of how wealth is created in new ventures and established firms (Ireland et al., 2003).
Strategic management is an entrepreneurial task, and the owner/operator of the small business firm therefore is the master strategist for the organization (Dollinger, 1984). The identification and exploitation of opportunities is the essence of entrepreneurship- whereas the essence of strategic management Shahidifar, E. 2016. Strategic management in new ventures: the role of technological, organizational and environmental factors is in how these opportunities can be transformed into sustainable competitive advantages (Kraus & Kauranen, 2009). Typically, avoidance of strategic management is justified on the basis of everyday operational and administrative decisions, which by their nature may be complex and demanding and often leave little time for anything else (Beaver, 2002). The field of strategic management is currently facing a number of fresh and somewhat unexpected challenges rooted in the restless dynamics of environment (Dagnino & Padula, 2009).
Yet, there are some controversial issues in the emerging domain of strategic entrepreneurship in new ventures. For instance, strategic management is, by definition, focused on strategic actions, whereas entrepreneurship is concerned with many nonstrategic activities, such as firm organizing, resource assembly, and the establishment of legal entities (Shane, 2012). To some scholars, at the heart of the intersection between entrepreneurship and strategic management is corporate entrepreneurship, that is, entrepreneurship inside a firm (Ren & Guo, 2011). Central to the relational view of strategic management is the notion that firms enter inter-organizational relationships to gain competitive advantage, for instance, by accessing unique resources of a partner, which is an integral part of any success in running a new venture (Keil et al., 2010).
Different authors use different terms to show acceptance. Kwon and Zmud (1987) have proposed a phased model consisting of six stages: (i) initiation (organizations find the match between solutions and its application in organization); (ii) adoption (decision is reached to invest resources); (iii) adaptation (applications are available for use); (iv) acceptance (applications are employed in organizational use); (v) routinization (organization’s govern
Journal of Entrepreneurship, Business, and Economics, 2016, 4(2): 130–149
ance systems are adjusted to account for the application); and (vi) infusion (applications are used within the organization to its fullest potential) (Dholakia & Kshetri, 2004). This model implies that strategic management is controlled through deliberate planning processes and employee management systems (Paarlberg & Bielefeld, 2009).
In sum, though some researchers suggest that entrepreneurship is about venture creation, strategic management is about how an advantage is maintained from what is already established and created (Zahra, 2008). However, strategic management is an organization-wide activity in which each level has to contribute in its own way (Kraus et al., 2007). Using strategic management might seem to be unattractive for new ventures, because most new ventures are both asset poor and cash poor during their early years (Venkataraman, 1997). To build profitable market positions, new ventures have to address multiple challenges on several fronts. These ventures can compete by being simple (focused) or applying varied ways to compete. The likelihood of these ventures remaining competitive depends on their use of strategic insights (Larrañeta et al., 2012).
Theoretical Framework As mentioned earlier, the objective of this study is to develop and test an integrated conceptual model of the strategic management acceptance in new ventures. Several scales adapted from the literature on strategic management acceptance, measuring the constructs (Markovic and Salamzadeh, 2012). As Oliveira and Martins (2011) argue, there are many theories to study strategic
managemnt acceptance at firm level. The most used theories are as follows:
(i) technology acceptance model (TAM) (Davis 1986), (ii) theory of planned Shahidifar, E. 2016. Strategic management in new ventures: the role of technological, organizational and environmental factors behavior (TPB) (Ajzen, 1985), (iii) unified theory of acceptance (Markovic and Salamzadeh, 2012), (iv) DOI (Rogers, 2004), and (v) the technologyorganization-environment (TOE) framework (Tornatzky and Fleischer 1990). In this study, the authors follow the TOE framework. The TOE framework posits that the adoption of strategic management practices depends on organizational, environmental, and technological factors. Then the research hypotheses are categorized under these three factors (see Figure 1).
Table 1 shows the operational definition of the variables.
Figure 1. Conceptual framework (Source: Self-elaborated)
Shahidifar, E. 2016. Strategic management in new ventures: the role of technological, organizational and environmental factors Technological Factors Recent research has recognized that technological factors are not the only key to the effectiveness of strategic management acceptance. However, their role is highlighted in the extant literature. The more knowledge an organization has about strategic management, the more likely it will be to accept and then to adopt strategic insights (see Tanha et al., 2012). Technological factors are also referred to as innovation characteristics in some studies of organizational adoption (Brown & Russell, 2007). In this study, the following factors were identified: (i) Perceived benefit, (ii) Relative advantage, (iii) Compatibility, and (iv) Complexity.
Organizational Factors Some recent studies have indicated that various organizational factors are likely to have a significant influence on strategic management acceptance (see Salamzadeh et al., 2014). Organizational factors could be defined as all of the hardware, knowledge, attitudes, and skills that exist within the organization in which the strategic insights are to be followed. Based on an extensive literature review and considering the unique context of this study, the following organizational factors are deemed important: (i) management support, and (ii) competence.
Environmental Factors Environmental factors are those changes in the business environment that create threats as well as opportunities for an organization and are normally out of the control of the managerial staff (Teo et al., 1998). Based on the prior studies and the existing literature, the following environmental factors Journal of Entrepreneurship, Business, and Economics, 2016, 4(2): 130–149 were identified: (i) Vendors' support, (ii) Financial resources availability, and (iii) External pressure.
A pilot test was initially conducted to enhance the study’s content validity.