Digital Technology Search and New Venture Performance in Dynamic Environments: The Mediating Role of Competitive Advantage

Digital Technology Search and New Venture Performance in Dynamic Environments: The Mediating Role of Competitive Advantage

Hongxin Wang, Chundong Zheng, Jiayue Liu, Xin Jiang
Copyright: © 2022 |Pages: 22
DOI: 10.4018/JOEUC.308816
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Abstract

Technology search is crucial to establishing competitive advantage and improving firm performance. However, it is still unclear how different technology search strategies affect competitive advantage and performance at the firm level and how to determine technology search strategies in dynamic environments. Therefore, based on resource-based theory, this study explores the relationship between digital technology search, competitive advantage, and new venture performance (NVP) in dynamic environments with a sample of 267 Chinese new ventures. The results show that the breadth and depth of digital technology search positively affect NVP. Environmental dynamism weakens the positive effect of digital technology search breadth on NVP but strengthens the positive relationship between digital technology search depth and NVP. Moreover, digital technology search breadth affects NVP via differentiated competitive advantage, and digital technology search depth affects NVP through differentiated and cost-leadership competitive advantage. Finally, implications and limitations are discussed.
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Introduction

Faced with the complex and changeable digital economy era, new ventures innovate management, process, and products/services constantly to establish diversified competitive advantages, achieving survival and sustainable development in the face of fierce competition (Duan et al., 2021). More and more entrepreneurs have realized that relying only on the internal technological knowledge of new ventures is far from satisfying the innovation and growth needs of new ventures (Rosenkopf & Nerkar, 2001), and could cause path dependence and a capability trap (Swift, 2016). To overcome these limitations, new ventures need to cross organizational boundaries and conduct digital technology searches through external channels (e.g., suppliers, customers, competitors, and research institutes) to acquire new technological knowledge and information (Tan et al., 2020).

Digital technology search includes search breadth and depth. The former reflects the search scope of digital technology knowledge and information, while the latter reflects the enterprise's degree of adoption of digital technology knowledge and information from specific sources (Laursen & Salter, 2006; Li-Ying et al., 2014). Heterogeneous technology knowledge and information obtained through an extensive and in-depth technology search can help firms generate new ideas and technologies in the process of creative collision and improve the overall cognition and ability of firms (Dong & Netten, 2017). This also further promotes new ventures to better carry out innovation activities and establish competitive advantages, thus improving firm performance. However, as far as we know, scholars mainly pay attention to the effect of a technology search on innovation capability and innovation performance (e.g., Li-Ying et al., 2014; Zhang et al., 2019), but they rarely empirically explore the impact of different digital technology search strategies on the overall performance of new ventures in the context of the digital economy.

According to existing research, the specific process by which a technology search affects firm performance has been ignored (Ferreras-Méndez et al., 2015), so the understanding of how a technology search affects firm performance is defective. An external knowledge search has gradually become an important way for firms to obtain and maintain competitive advantages (Foss et al., 2011). Previous studies have found that by investing a large amount of time, capital, and other relevant resources in technology search activities, firms can improve their ability to integrate existing knowledge and technology and respond to market changes, and effectively enhance their strategic decision-making ability and market competitive advantage (Fabrizio, 2009; Laursen & Salter, 2006). Based on Porter (1985), competitive advantage includes differentiated and cost-leadership competitive advantage. However, it is unknown whether technology search strategies have different effects on the establishment of distinct competitive advantages. As is known to all, the establishment of competitive advantages is critical for new ventures to achieve superior performance (Anwar et al., 2018). Thus, the technology search strategies of new ventures may influence new venture performance (NVP) through competitive advantage in theory, but this needs to be further empirically tested.

In addition, new ventures in emerging economies usually face highly dynamic environments with rapid technological changes and unclear market trends (Cai et al., 2016). Some studies have focused on the influence of technological dynamism on the relationship between different external search strategies and firm performance (Cruz-González et al., 2015). However, existing research mainly focuses on the impact of external dynamism on the relationship between search strategies and the performance of established enterprises, while ignoring new ventures, which have the “liability of newness.” Therefore, the research on guiding the digital technology search strategies of new ventures under dynamic environments is still very limited.

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