Founding Context, Entrepreneurial Strategy and Performance Evolution of New Ventures in Emerging Economy – A Longitudinal Study

Abstract

In a dynamic environment the role of the entrepreneur lies not only in founding the venture, but also in negotiating the new venture through the changing environmental contingencies. This secondary data based longitudinal multi-industry study of a sample of 1911 Indian private sector ventures for seven years, investigates the effects of two types of founding contexts: specific eras after economic liberalization in India, and affiliation of ventures to business groups; on the performance and business model. The study reveals: the diversity of founding contexts result in variation in both firm performance and business models, but the strategic choices exercised by entrepreneurs tend to overcome these variations by dynamically moderating these effects. This leads to convergence of the firm performance over a period of time. The study validates the organizational imprinting hypothesis for broad macroeconomic founding contexts specific to emerging economies, extends the theory to illustrate how entrepreneurial strategies dynamically moderates the effect of organizational imprints on firm performance. Findings emphasize the role of the entrepreneur in not only in establishing relationship with the environment at the time of founding, but also reestablishing the relationship when the environment has undergone considerable change.