The influence of strategic control and operational control on new venture performance

Abstract

PurposeThe purpose of this paper is to investigate the impacts of strategic control and operational control on new venture performance in the China context.Design/methodology/approachThis study tests the hypotheses in a sample of 83 new ventures that have equity investment by established firms and are founded between 1993 and 2007 that issued initial public offerings while not more than eight years old.FindingsThe results of this study show that: strategic control has a significantly negative relationship with new venture performance; operational control has a significantly positive relationship with new venture performance; industry relatedness between the corporate investor and the new venture and the new venture’s political ties moderate the relationships between the two types of control and new venture performance. The results are robust to alternative measurements of new venture performance.Practical implicationsThe management control that the corporate investor exercises over the new venture is a significant determinant of the new venture success. Managers have to distinguish between strategic control and operational control and understand their impacts on new ventures.Originality/valueThis study highlights the issue of management of corporate venturing capital relationships from the new venture’s perspective. In addition, this study separates strategic and operational control within management control and examines how they influence new venture performance.