What makes international new ventures grow and survive?: the interplay of social capital and dynamic capabilitiesin achieving evolutionary fitness

Abstract



Setting up a new business that can successfully cater to international markets is a dream of many entrepreneurs. In the search for guidelines that would help potential entrepreneurs to grow and survive in global markets, research on international new ventures has been developing extensively in the last fifteen years. Social networks and unique knowledge resources spurring from them have been recognized as essential to the development of new ventures. However, our knowledge is still fairly limited as to how international new ventures make use of their social capital on the path to success. The concept of dynamic capabilities that make network-originated resource acquisition and transformation possible has mostly been absent from the international entrepreneurship research.

This study is based on the assumption that it is not the access to unique knowledge resources provided by social networks that makes new ventures competitive and market-fit. It is rather how international new ventures assimilate and leverage these resources into evolutionary fitness, or growth and survival. The two distinctive roles are fulfilled by a hierarchy of classes of dynamic capabilities. A new research framework in the international entrepreneurship field, based on dynamic capability and on social capital theories, is introduced to uncover the influence and interaction effects of classes of capabilities in assimilating and leveraging knowledge originating from firms’ social capital.

This dissertation is an attempt to provide an explanation of complementary, substitutive, and joint roles that social capital and dynamic capabilities play in achieving evolutionary fitness and sustainability in international new ventures. A very distinctive pattern of structural, cognitive, and relational social capital is identified as enhancing the chances of survival of international new ventures. Accounting for differences in growth, firms achieving higher evolutionary fitness are found to benefit from the joint role of two classes of dynamic capabilities and from the simultaneous pursuit of multiple paths to success. On the other hand, firms with lower evolutionary fitness are limited by their extensive deployment of assimilative capabilities and use fewer paths to evolutionary fitness. In consequence, the study also discusses the negative impact of dynamic capabilities that is related to the diminishing returns from their deployment in the pursuit of evolutionary fitness.

A multi-method and multi-stage approach that combines retrospective and real-time investigations of international new ventures from the low-tech industry was used to evaluate 3 propositions and an additional observation. The empirical analysis involved 6 in-depth longitudinal case studies, social network data, survey and electronic communication data. The findings provide strong support and a significant extension to the propositions in addition to offering theoretical and managerial implications.