How new venture strategies promote firm performance: an optimal distinctiveness perspective

Abstract

ABSTRACT New venture strategies are required to deal with the ‘conformity’ needs caused by institutional pressures and the ‘differentiation’ needs led by competitive motivations. However, it is not clear that how the strategies affect firm performance, especially in the entrepreneurial context. Drawing on the optimal distinctiveness perspective, we conceptualised the two dimensions of the new venture strategy (conformity and differentiation). Further, we explored the mechanism of how new venture strategies promote firm performance by analysing a data set that included surveyed new ventures in Chinese high-tech industries. The findings indicate that the relationship between ‘conformity’ strategy and product innovation is inverted U-shaped, while the relationship between ‘conformity’ strategy and market expansion is significantly positive. ‘Differentiation’ strategy has a significantly positive effect both on product innovation and market expansion. Moreover, if new ventures implement both the strategies simultaneously, they should first transcend the legitimacy threshold. Our findings contribute to the literature pertaining to entrepreneurship theories, and offer important implications for entrepreneurship practice.