Several aspects of the Oviatt and McDougall paper are used as fundamental in the Zahra paper foremost being the recognition of age in analyzing INV’s significance and growth in the market place. Vitally, Zahra agrees that gestation time greatly influences the resources obtainable and builds on the realization age creates an impediment in properly categorizing INV’s since some are generated by parent companies (Zahra, 2005). The implication is they have both tangible and intangible resources to dispense toward growth and penetration. The author further propounds the fact entrepreneurships are not required to own resources they use to launch out. This supports the earlier ideology by Oviatt and McDougall that entrepreneurships are characterized by their actions more less what they own. This implies there is agreement on the importance of entrepreneurship on the success and definition of new firms. The various notions that grant new firms competitive advantage according to Oviatt and McDougall have been supported and expounded such as managerial cognition.
The primary distinction allowing new firms to have a competitive edge is perception and managerial cognition. New firms seem to have a different approach to gauging risk and a keener eye in spotting economic opportunities on the global arena. Additionally, it is suggested the flexible nature of their small structure allows them to be dynamic and seize profit as well growth opportunities faster. New firms are able to make crucial changes with more ease due to the less complex nature of their systems as compared to older firms whose structures are marred by complex systems. The ability to capitalize on more advanced and updated internal processes is another imperative competitive advantage newer firms have over their rivals.
Moreover, an example is given of virtual companies that heavily if not entirely rely on the internet for exposure and value creation. Inevitably, the issue of research comes in where new firms are deemed to operate on more recent information as compared to older rivals due to the date and mode of research. Consequently, there is stance stating newness confers a learning advantage on new firms boosting their competitive advantage on the global forum since its high fluidity and dynamism. Since markets are ever-changing, there is a need to equip the workforce with updated working resources that ensure that the competitiveness of their output is at its optimum.
Some of the factors credited with the competitive edge of the new firms are valid. For instance, the flexibility of internal structure contributes to increased competitiveness since processes such as strategic evaluation take less time and posses greater clarity as opposed to big corporations (Kautz, 2004). This means less time is taken to asses risk to the firm, consequently launching out is relatively simpler. Another viable contributor to a new firm’s competitive advantage on the international market is the placement of more advanced systems and methodologies in its internal operations as compared to established firms. This is explained more efficient internal processes whether manufacture or communication possessed by startups (McGregor, 2008). This translates to efficiency and effectiveness that sharpens the competitive edge of newer firms.
However, factors such as newness conferring learning advantage are arguable and less viable in creating a competitive edge for newer firms. This can be explained by the limited resources and underdeveloped organizational structure characterizing new firms having the less ability to assimilate, incorporate and eventually apply new information. Additionally, managerial cognition in new firms cannot surpass managerial experience and networking garnered from prolonged duration of business operations by the older firms. This negates largely the competitive advantage associated with different managerial cognition in new firms.
Kautz, G. (2004). Take your business global: How to develop international markets. Irvine, CA: Entrepreneur Press.
McGregor, H. (2008). Globalization. London, UK: Wayland publishers.
Oviatt, B.M. and McDougall, P.P. (1994). Toward a theory of international new ventures. Journal of International Business Studies, 25(1), 45-64.
Zahra S. A. (2005). A Theory of International New Ventures: A Decade of Research. Journal of International Business Studies, 36, (1), 20-28.