| This research project explores the origin of strategy choice in new ventures. Although strategy choice has a critical effect on a new venture's survival, evolution, and long-term performance, comparatively little research has explored why founders select different strategies for their organizations. Drawing on theories from cognitive and social psychology, this research examines how an entrepreneur's prior knowledge affects his/her strategy choices. This research also examines how the founding team influences the entrepreneur's decision-making processes. Several hypotheses were developed for empirical analysis.; The sample for the empirical analysis consisted of 120 prospective new ventures in the air transportation industry, during the period 1995-2005. The hypotheses were tested using a conditional logit model, which allows for the examination of data where discrete choices are the dependent variables. The results from the empirical analysis revealed several important insights regarding the origin of strategy in new ventures. First, the founder's prior knowledge significantly constrains his/her decision-making. Second, the effects of prior knowledge on strategy choice were significantly greater than the effects of mimetic behavior. Third, some features of knowledge were much more influential than others. For instance, knowledge accumulated through practice repetition was significantly less influential than knowledge acquired through practice variation. Lastly, the founding team's knowledge had significant effects on the founder's decision process. In particular, unique knowledge held by founding team members, as opposed to shared knowledge, strongly influenced the founder's decision outcomes.; This research project presents several implications for researchers and practitioners. From a research perspective, this project illuminates the critical role of knowledge in strategic decision-making, intra-industry variation, and the new venture formation process. Furthermore, this project suggests that key theoretical and empirical evidence from cognitive and social psychology can be generalized to the context of strategic decision-making during new venture formation, with several important caveats. From a practitioner perspective, this project has important implications for the evaluation of new venture founders and teams, employee recruitment, and competitive intelligence. Lastly, this project has implications for public policy, specifically in the area of cultivating entrepreneurship in emerging market economies and inner-cities. |
