New Venture Performance in China, Japan, and the United States: The Impact of Formalized Market Information Processes

Authors

  • Tomoko Kawakami,

  • Douglas L. MacLachlan,

  • Anne Stringfellow


  • The authors acknowledge financial support provided by MEXT KAKENHI #17330100 Grant-in-aid for Scientific Research (B) by Japan Ministry of Education, Culture, Sports, Science and Technology (2005–2007) received by Professor Tomoko Kawakami as the representative. They also thank Mr. Joon Yup Park for his comments on an earlier draft. This research was jointly designed by Professor Tomoko Kawakami and Professor Michael Song. Partial financial support for data collection was provided by the China National Science Foundation (Award #:70528002) and by the Institute of Entrepreneurship and Innovation, University of Missouri-Kansas City.

Address correspondence to: Tomoko Kawakami, Faculty of Commerce, Kansai University, 3-3-35 Yamate-cho, Suita-shi, Osaka 564-8680. E-mail: ktomoko@kansai-u.ac.jp. Tel: 06-6368-0145. Fax: 06-6339-7704.

Abstract

New venture companies, starting from small entities comprising entrepreneurs and their teams, start to grow in scale by instigating formalized processes to enhance management efficiency. This includes the use of formalized processes for collecting and disseminating market information. Despite the fact that utilizing market information is one of the fundamental factors of market orientation, little is known about the way market information is processed in new venture companies. The first aim of this research was to investigate the impact of formalized market information acquisition and utilization on new venture performance. The second objective was to investigate the effect of organizational formalization on the acquisition and utilization of market information in new venture firms. The final goal was to explore the extent to which these relationships vary in different cultural contexts. Based on an extensive literature review and interviews with managers in China, Japan, and the United States, a conceptual framework is developed that relates formalized market information processes to new venture performance in the three countries. The conceptual model is tested with data collected from 453 new venture companies in these countries. The results suggest that the use of a formalized process of market information utilization has a positive effect on new venture performance regardless of country. The analysis also indicates that the effect of organizational formalization, in general, differs between countries. Organizational formalization is associated with increased formalized utilization of market information only in the United States; the relationship does not apply in the two Asian countries studied. Taken together, these results suggest that in the Asian countries, organizational formalization improves information collection, while in the United States, it also improves the utilization of information throughout the organization. One implication of these results may be the potential of added benefits accruing to organizational formalization in new ventures in countries with high levels of individualism and/or high levels of power distance, where organizational power is concentrated in formal vertical reporting relationships, as opposed to informal horizontal peer-to-peer networks.

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