Adaptation and Performance in New Businesses: Understanding the Moderating Effects of Independence and Industry

Adaptation and Performance in New Businesses: Understanding the Moderating Effects of... New ventures as well as new business units experience significant difficulties in finding a viable business model. They often need to adapt their initial business model due to the presence of uncertainty and ambiguity. Technology-based companies are confronted with particularly high degrees of uncertainty and ambiguity. We hypothesize that adaptation is crucial for the performance (measured as survival) of these businesses, but that this effect is moderated by the (in)dependence of the new technology-based business and by the industry in which it is active. We test the adaptation-performance hypothesis through a survival analysis of a sample of 117 independent new ventures and business units. Our findings suggest that adaptation is beneficial in less mature, capital-intensive and high-velocity industries but not so in more mature, stable industries. Also, adaptation reduces failure rates in dependent business units as compared to independent ventures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Adaptation and Performance in New Businesses: Understanding the Moderating Effects of Independence and Industry

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Publisher
Kluwer Academic Publishers-Plenum Publishers
Copyright
Copyright © 2006 by Springer
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-005-5640-2
Publisher site
See Article on Publisher Site

Abstract

New ventures as well as new business units experience significant difficulties in finding a viable business model. They often need to adapt their initial business model due to the presence of uncertainty and ambiguity. Technology-based companies are confronted with particularly high degrees of uncertainty and ambiguity. We hypothesize that adaptation is crucial for the performance (measured as survival) of these businesses, but that this effect is moderated by the (in)dependence of the new technology-based business and by the industry in which it is active. We test the adaptation-performance hypothesis through a survival analysis of a sample of 117 independent new ventures and business units. Our findings suggest that adaptation is beneficial in less mature, capital-intensive and high-velocity industries but not so in more mature, stable industries. Also, adaptation reduces failure rates in dependent business units as compared to independent ventures.

Journal

Small Business EconomicsSpringer Journals

Published: Nov 1, 2006

References

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