How young companies can effectively manage their slack resources over time to ensure sales growth: the contingent role of value-based selling

Ad De Jong,Nicolas A Zacharias,Edwin J Nijssen

doi:10.1007/s11747-020-00746-y

Abstract

This research aims to bridge the entrepreneurship and marketing/sales literature streams by studying how young firms enable their resource endowments using value-based selling. Drawing on effectuation logic, the authors examine how young firms can achieve sales growth by using human and financial resource slack during the early years of their existence and accounting for the impact of the variability of these resources over time. The integrated framework and hypotheses are tested using unique, multisource (survey and objective archival) longitudinal panel data from 71 young firms covering a seven-year period. As anticipated, the findings show that both financial and human resource slack are negatively related to young firms’ sales growth over time and that financial resource slack variability exerts a positive impact and human resource slack variability exerts a (nonsignificant) negative impact. The results also confirm the importance of value-based selling as a guiding mechanism that significantly alters the effects of both types of resource slack and their variability over time. While value-based selling can help a young firm use slack to grow more effectively, it also has a dark side in that it can stand in the way of risk taking.

Highlights

As the opening quote illustrates, marketing and sales researchers have paid surprisingly scant attention to the development of entrepreneurial firms’ commercial capabilities
To create relevant new knowledge within the outlined research gaps, the aim of this article is to bridge the entrepreneurship/slack resources and marketing/sales literature streams by addressing the following research questions: How can young firms optimally manage human and financial resource slack during the early years of their existence to foster sales growth using value-based selling (VBS)? What role does the variability of these slack resources play over time?
We add to a small but increasing number of studies on young firms in marketing (e.g., Chen et al 2009; Coviello and Joseph 2012; Rao et al 2008; Yli-Renko and Janakiraman 2008). We extend this important work by focusing on how young firms can best capitalize on their slack resources—in particular, financial and human resource slack as key unabsorbed and absorbed forms of slack, respectively

Summary

Introduction

As the opening quote illustrates, marketing and sales researchers have paid surprisingly scant attention to the development of entrepreneurial firms’ commercial capabilities. Young, nascent firms typically aim to expand and achieve maximal growth in the market using experimentation to discover customers. In addition to having to overcome a lack of reputation and prospective customers’ mistrust (DeKinder and Kohli 2008; Read et al 2009), young companies generally have limited human and financial resources to accomplish their goals. Effectively managing these scarce resources is pivotal to young companies’ commercial growth

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