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The Role of Operational Capabilities in Enhancing New Venture Survival: A Longitudinal Study
Author(s) -
Tatikonda Mohan V.,
Terjesen Siri A.,
Patel Pankaj C.,
Parida Vinit
Publication year - 2013
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.12038
Subject(s) - entrepreneurship , business , contingency theory , productivity , venture capital , new ventures , industrial organization , adaptability , marketing , operations management , economics , finance , management , economic growth
We investigate relationships between operational capabilities and new venture survival. On the basis of operations management and entrepreneurship literature, we develop a contingency framework of operational capabilities especially appropriate at different life phases of a new venture's evolution. We expect that in the first years of a new venture's life, entrepreneurs should emphasize high inventory turnover to preserve working capital, support customer responsiveness, and aid firm adaptability. As new ventures grow, entrepreneurs should emphasize internal working capital generation via larger gross margins to support production ramp‐up. Later, new venture entrepreneurs should emphasize employee productivity to buttress sustainable volume production. We analyze a 6‐year longitudinal sample of 812 Swedish manufacturing new ventures using a gamma frailty‐based Cox regression. The findings show that specific operational capabilities, while always supporting new venture survival, have exceptional influence in specific new venture life phases. The three hypotheses are confirmed, suggesting that higher inventory turnover , gross margin , and employee productivity further increase new venture survival likelihoods, respectively, in the venture's start‐up , growth , and stability phases. This suggests a phased‐capabilities approach to new venture survival. This study contributes to operations management and entrepreneurship theory and practice, and sets a foundation for future research on operations strategy for new ventures.