Effects of strategy and environment on corporate venture success in industrial markets

The literature identifies four important factors¹ 1 See MacMillan (1986) for a more complete review of this literature. that determine the success of a corporate venture: culture, climate, and corporate support (Schon 1966; Kanter 1983; MacMillan, Block, and Subba Narasimha 1984; Fast and Pratt 1981; Roberts 1980; Maidique and Hayes 1984); structure and venturing effort (Burgelman 1983, 1985; Souder 1981; Maidique 1980; Block 1985; MacMillan and George 1985); planning, monitoring and evaluation (Vesper andHolmdahl 1973, Quinn 1979; Fast 1981; Block and MacMillan 1985); and strategy and environment (Cooper 1979, 1983; Hobson and Morrison 1983; Biggadike 1979). This paper focuses on the last of the above issues. It seeks to explore the importance of environment and strategy for corporate venture success. At the broadest level, two theoretical perspectives have dominated the organization-environment-strategy literature in recent years: population ecology and strategic adaptation. The population ecology perspective argues that organizational survival is determined by environmental selection (Hannan and Freeman 1979,1984; Aldrich 1979; Greenfield and Strickon 1986). Technological and demographic change results in "new resource sets" that provide opportunities for the expansion of existing, or the founding of new, organizations (Brittain and Freeman 1980). A shifting network of social linkages, both within and between existing firms, connects aspiring venture managers/entrepreneurs with resources and opportunities (Aldrich and Zimmer 1986). While managers develop and implement strategies, these strategies do not directly determine success. Instead, they are one of many sources of random variation that will be selected for, or against, by the environment. In contrast, the strategic adaptation perspective implies that new venture success is a function of the manager's or entrepreneur's ability to assess internal capabilities and environmental conditions for the purpose of developing and executing effective strategies (Andrews 1980; Porter 1980; Vesper 1980; Timmons 1982). The environment is viewed as a (major) constraint within which strategy is developed. Furthermore, environments are not immutable and are subject to negotiation and manipulation (Child 1972; Miles and Cameron 1982; MacMillan 1983). In recent years it has been acknowledged that both population ecology and strategic adaptation perspectives provides valuable insight. A new body of literature has emerged that attempts to reconcile these theories (Tushman and Anderson 1986; Van de Ven, Hudson and Schroeder 1984; Singh, House, and Tucker 1986; Aldrich and Auster 1986). This paper follows in this tradition and seeks to explore empirically the relative impact of strategy and environment on new corporate venture performance in industrial markets.