Edited by Ayala Malach-Pines and Mustafa F. Özbilgin
Chapter 5: Radical Strategic Change in High-technology New Ventures: A Multi-cultural View of Investors’ Perspective
5 Radical strategic change in high-technology new ventures: a multicultural view of investors’ perspective* Eli Gimmon, Eyal Benajmin and Liora Katzenstein Introduction Within the broad discussion about factors and effects on business performance, the role of business strategy is never underestimated, specifically in new ventures. Investments are made based on a series of parameters, where business strategy takes a major role in the decision-making process. Yet, the uncertainties that accompany the high-technology markets, suggest the likelihood of radical changes in the business strategy of hightechnology new venture. On one hand, investors agree to risk their money for a given business plan. On the other, a change in strategy might result in missing a business opportunity and losing their investment. A question then arises: what is the investors’ attitude towards performing a radical strategic change (RSC) in their portfolio company and is it the same in different countries? This chapter looks into the investors’ perspective of RSC in high-technology new ventures. Strategy in high-technology new ventures Business strategy is one of the major factors affecting new venture performance (Vesper, 1980; Gartner et al., 1998; Chrisman et al., 1998; Baum et al., 2001). High-technology new ventures face a broad span of strategic technological alternatives. Since technology markets play a role in strategy formation, this process appears to be more complicated (Arora et al., 2001, Mathews, 2003). Venture capitalists (VCs) have also been found to take strategy as a major investment criterion. Focusing on strategy aspects, Shepherd et al. (2000b) found that the...
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