Growth Strategies for New Technology-Based Firms

Abstract

Over the past few decades, new technology-based firms (NTBFs) have been considered an important engine of economic development. Consequently, a better understanding of the characteristics and attributes of these firms has become a primary goal for researchers and policy makers. While numerous studies found evidence of the relation between growth performance and strategy, clear methods and strategy formulation tools for NTBF managers are lacking. The main objective of this research is to offer guidance in formulating growth strategies for NTBFs, while considering their specific characteristics and environment.
This research designs a solution for a large and complex contemporary socio-technical problem. In this, several contributions to technology entrepreneurship literature are made. Firstly, internal and external variables are identified that influence strategy making for NTBFs. Secondly, strategies and tactics that are applicable for NTBFs in specific situations and environments are defined. Thirdly, a conceptual framework that enables to select growth strategies for NTBFs by using an extensive “matchmaking” process is build and validated. This conceptual framework was built around three strategy management theories: Transaction Cost Economics (TCE), the Resource-Based View (RBV) and Contingency. Accordingly, this research investigates and reveals some theoretical implications for applying these theories to NTBFs specifically.
The designed framework suggests that a strategy is subject to the internal and external environment, where the interpretation of this environment and the final decision is made by the management team of a NTBF. Feasible growth strategies for NTBFs are built around four regimes: Vertical Integration, Inter-firm Cooperation, Technology Transfer and System Integration. Two important clusters divide NTBFs and their suitable growth strategies; the ones with a strong financial position and the ones with a suitable situation for collaboration. When having a strong financial position, NTBFs can choose to vertically integrate or become a system integrator. Collaborative strategies can be subdivided in backward and/or forward strategic alliances, exclusivity agreements, equity strategic alliances, joint ventures and an IP-based technology transfer. NTBF founders use similar strategic tactics to deal with shared challenges.
This research did not strive for prediction and certainty but strived to reduce the complexity for managers of NTBFs in choosing their growth strategy. Empirical findings and theoretical knowledge were bundled to understand the phenomenon, where this understanding is located on a higher level than the empirics itself. Especially since there will always be exceptions. Accordingly, the complexity of the research problem was reduced by using abstraction instead of generalisation. Generalisation was minimised where it is assumed that generalisation in NTBF growth strategies has significant shortcomings where too many variables interact. The art is within the clustering of variables, where these clusters are matched with a specific, optimal growth strategy on an abstract level.
The multi-disciplinary abstraction approach of this research enabled to bridge the gap between research and practical execution. The designed conceptual framework is based on flexible conceptual terms rather than rigid theoretical variables and causal relations and aims to help to understand phenomena rather than to predict them. The input for the conceptual framework was holistic, using interviews and theory. In-depth interviews with founders of NTBFs were used to review the object of study from different, practical perspectives. Moreover, four theoretical viewpoints were used complementary: contingency, strategy, transactions (TCE) and resources (RBV). No attempt was made for theoretical integration or synthesis of theories. Rather, theories were combined in such a way as to enhance the qualities of each other. TCE theory was used for the identification of strategies, where RBV theory was used for the identification (or a lack) of resources, for which specific strategies and tactics can be executed. Contingency theory served as the overarching theme of the framework, where strategy forms the common thread in this research. An in-depth case study could be used to validate the conceptual framework by reflecting on a real-life case. A single case study was used, while context-dependent knowledge was assumed to be more valuable than predictive theories.
The framework as designed in this research can be used for NTBFs when selecting their growth strategy. Further research is needed to examine the suitability of the framework for different NTBFs, where this research only validated the framework with a single case study. This can be done by executing several in-depth single case studies that lead to a more complete and usable framework. Data should not only be gathered from NTBFs but should also be gathered from researchers when it comes to the critical assessment of the used theories (RBV and TCE) and possible extensions of the conceptual framework.