This research was motivated by an interest in understanding more about the
extent to which entrepreneurs initiate changes along various dimensions of
strategy, the nature of those changes and their implications for firm perfo
rmance. Our interest in this topic began with the observation that, within
the large body of strategic-change literature, the research effort has focu
sed almost exclusively on large and established firms. Moreover a fundament
al assumption underlying much of this work is that strategic change involve
s movement from one dominant strategic approach to another This premise doe
s little to motivate or contribute to the understanding of change and strat
egy in new ventures, where it is less likely that a dominant approach exist
s. Thus, we drew upon the literature in managerial cognition to develop the
idea of strategic experimentation as the conceptual foundation for studyin
g change and strategic in new ventures. Our basic premise is that in new ve
ntures, changes along dimensions of strategic are reflective of a process o
f trial and error learning whereby the entrepreneur seeks to develop an und
erstanding of the competitive situation and determine how to compete within
that context. Further, we suggest that some aspects of the firm's strategy
are more likely to be the focus of experimentation than others.
Building on these premises we developed a series of research hypotheses whi
ch propose that the greater the level of perceived environmental hostility,
the higher the level of strategic experimentation that will be undertaken.
We also propose that experimentation will always be greater along some dim
ensions of strategy than others, and that the degree of environmental hosti
lity will influence the extent to which there ave performance benefits asso
ciated with strategic experimentation. Our hypotheses are tested ruing data
from a three-year study of over 400 young businesses. Overall, we find sup
port for our assertions.
For entrepreneurs and their advisors, this study has several important impl
ications. First, it suggests that strategic experimentation is a normal par
t of the process by which entrepreneurs seek to position their businesses.
Although the present study does not empirically address the linkage between
formal planning and experimentation,the learning and cognition literature
upon which the construct of strategic experimentation is based suggests tha
t, no matter how much attention to derail is involved in the preparation of
the business plan, the actual formation and development of the business wi
ll involve considerable adjustment to and/or deviation from that plan. This
is because the process of new business development involves iterative chan
ges in the way the entrepreneur positions his/her firm as he/she develops a
n understanding about what does and does nor work. The results of this stud
y further suggest that some dimensions of the firm's strategy are,more like
ly to change than others. Specifically, it appears that peripheral changes
(competitive emphasis and time allocation) are more likely to be the focus
of such learning and adaptation efforts than core feature (product scope an
d partnership status). This, in part, is because the former dimensions are
easier to change than the latter Moreover, our results show that ventures i
n,more hostile environments clearly face difficult dilemmas. Although poor
performance may stimulate experimentation along various dimensions of strat
egy, the complexity of learning within a hostile environment suggests that
entrepreneurs will have a particularly difficult time determining the type
of changes that will make a difference. (C) 2000 Elsevier Science Inc.