A knowledge‐based view of growth in new ventures

Abstract

PurposeThe establishment and growth of new ventures play a major role in wealth creation in most industrialized economies. Consequently, there is much emphasis these days on how to foster their growth, and on determining the fundamental prerequisites. The purpose of this paper is to propose an evolutionary knowledge‐based framework for understanding and testing the linkage between the nature of the firm's knowledge and its growth.Design/methodology/approachThe empirical analysis is based on an extensive survey of 171 new ventures in the information and communications technology industry.FindingsThe findings indicate the existence of a relationship between some of the proposed knowledge determinants and new venture growth. For example, the ability to scale the firm's knowledge‐based resources in economic terms has an effect on past and future growth as well as on growth orientation.Research limitations/implicationsWhereas there is growing interest in the growth of entrepreneurial new ventures, emerging theories in the area of strategic management, such as the knowledge‐based view (KBV) of the firm, have not often been applied as theoretical bases in studies focusing on this phenomenon. This paper broadens the understanding of new venture growth by scrutinizing the main knowledge determinants, including appropriability (tacitness and patent protection), the threat of opportunism, economies of scale, economies of scope/synergies, and asset specificity.Practical implicationsThe notion that different knowledge is needed in the different phases of the new‐venture life cycle is important for practitioners seeking growth. Managers need to analyze the context and business environment with care, and accordingly to choose the right strategy.Originality/valueThis paper broadens the thinking on new venture growth in analyzing the influence of knowledge inside the firm in terms of various theory‐based determinants.