Alliance diversity, environmental context and the value of manufacturing capabilities among new high technology ventures

Abstract

Manufacturing capabilities have often been shown to predict various indicators of firm performance. However, the association between manufacturing capabilities and firm performance has seldom been studied in the context of high technology new ventures. Using a sample of 167 UK-based, high technology manufacturing ventures, the current study examines the relationship between manufacturing capabilities (in particular, those contributing to low operating costs and product quality) and venture performance. Additionally, the moderating effects of the ventures’ alliance portfolios and environmental contexts on the capability–performance relationships are explored. Results indicate that venture performance (as reflected in sales growth, return on sales (ROS), and return on assets (ROA)) is significantly predicted by manufacturing capabilities that promote low operating costs and product quality. Further, the data generally support the hypothesized moderating effects of two alliance diversity variables (alliance partner diversity and alliance geographic diversity) and two environmental context variables (environmental dynamism and environmental munificence) on the capability–performance relationships. Overall, the study supports the premise that the value of manufacturing capabilities (i.e., the strength of the capability–performance relationship) among high technology ventures is contingent upon the alliance and environmental contexts within which those ventures operate. Specifically, alliance partner diversity, alliance geographic diversity, and environmental munificence enhance the value of manufacturing capabilities that promote low operating costs. Alliance partner diversity, environmental munificence, and environmental stability enhance the value of manufacturing capabilities that promote product quality. The study's theoretical and practical implications are discussed.