Resource Dependence or Innovation Success? On the Survival of Newly Founded Ventures Based on Organizational Imprinting Role

Abstract

The rapid economic growth during last three decades in China gives rise to many entrepreneurs and newly founded ventures. However, newly founded ventures last only a short time and have a small survival rate. Why do some newly founded ventures survive and thrive while others struggle and die? What factors determine the survival of newly founded ventures? Firm growing theory considers internal factors as the sources of growth while entrepreneurs have found in practice that technology is the moat” of a new firm. Under the current background of economic transformation and mass entrepreneurship and innovation”, it is urgent to study the rules of the survival and growth of new firms in order to improve their survival rate. Newly founded ventures struggle to survive because of the liability of newness”. The previous literature focuses on the early stage of the life cycle and analyzes the overcoming of the liability of newness”. The relatively consistent view is that the founding conditions determine the initial survival rate of newly founded ventures, and have a lasting impact on later growth and performance, i.e., the imprinting” role. Previous studies further examine various types of founding conditions, such as external environmental conditions, internal resource endowments, and strategic choices. Resource-based theory considers an enterprise as a collection of various productive resources, and some scholars have discussed the relationship between resource endowments and the survival of new ventures. In recent years, research based on resource bricolage theory deeply discusses how the new ventures cobble together the existing, scattered, and seemingly useless resources on hand to break through the resource constraints due to initial resource shortage. However, because of the difficulties in obtaining data of founding conditions and measuring resource endowments, there are only a few empirical studies on resource endowments and the survival of newly founded ventures in China. Other scholars have studied the impact of innovative activities on the survival of new ventures. Technological innovation can improve a company’s efficiency and reduce the failure risk. However, there are a few studies that distinguish heterogeneous impacts of different types of innovation. In addition, previous studies have generally discussed only a single aspect of the role of resource endowments or innovative activities. Resources and innovation may be intrinsically linked, so the interactive relationship between innovative behavior and resource endowments is worthy of further exploration. Based on the imprinting role of organizational evolution, this paper uses resource endowments and innovative activities as the objects of the investigation of the founding factors of newly founded ventures. It choses manufacturing firms founded from 2004 to 2006 in Jiangsu province as a sample, investigates the survival of these firms in the first 5 years after their establishment, and analyzes the role of their resource endowments and innovative activities in improving the survival of newly founded ventures. In the empirical analysis, innovative activities are divided into four types to investigate heterogeneity in detail. At the same time, the interaction between resource endowments and innovative activities is analyzed through the introduction of cross items. The results show that on the one hand, newly founded ventures employ resource bricolage by consuming resource endowments to gain the ability to survive; and on the other hand, newly founded ventures gain competitive advantages through innovative activities to consolidate their ability to survive. The survival of newly founded venture depends on the resource endowments while the innovation can increase the survival rate. In the meantime, innovative behavior and resource endowments have a substitution relation. In addition, the different types of innovative activities have different impacts, as the effect of supporting process innovation is stronger than that of productive process innovation, which is, in turn, stronger than the total effect of process innovation, but the effect of product innovation is not significant. From the perspective of resources and innovation, this paper deepens the application of organizational imprinting theory to the evolution of enterprises while providing a new theoretical perspective and new empirical evidence for the interpretation of the survival of newly founded ventures in the Chinese context.