Innovation and Resources: A qualitative study of start-up entrepreneurial ventures through the lens of the Resource-Based View

Abstract

Understanding how young entrepreneurial firms achieve and maintain competitive advantage is of critical importance for entrepreneurs and venture capitalists alike. Although innovation is a well-known source of competitive advantage for firms in general and for entrepreneurial start-up firms in particular, the resource-based view holds that the strategic resources (e.g., assets and capabilities) owned by a firm are determinants of a firm’s competitive advantage and thus its performance. Entrepreneurship involves creating and combining resources in profitable combinations, yet the role of the resource-based view (RBV) in explaining these actions largely remains unexplored. This research examines the relationship between innovation and resources in entrepreneurial start-up firms through the lens of the RBV. Specifically, this research aims to: (i) integrate the literature on innovation and the RBV to investigate their influence on the commercialisation of innovation in entrepreneurial firms; (ii) to identify which resources are most strategic for entrepreneurial firms; and (iii) to study how entrepreneurial firms create and combine resources to generate competitive advantage. Based on the prescriptions of extant innovation literature and the RBV, the study proposed that successful commercialisation of innovation and the performance of entrepreneurial ventures requires key resources, and that intangible resources in particular are highly strategic to entrepreneurial firms.

These propositions were tested through case studies of 12 New Zealand-based entrepreneurial ventures in a wide range of fields, from technology-based to cosmetics firms. Results indicate that superior business execution capability, along with other intangible assets such as brands, patents and alliances, are crucial sources of competitive advantage for entrepreneurial start-up firms. Entrepreneurial firms should therefore focus considerable attention on the development and retention of such intangible assets and capabilities.