Abstract

Growth is a primary objective of many new ventures and is commonly viewed as a one of the best measures of new venture success (e.g. Cooper, Gimeno-Gascon & Woo, 1994; Eisenhardt & Schoonhoven, 1990; McGee & Dowling, 1994; Siegel et al.1993). Furthermore, entrepreneurship researchers have traditionally made a distinction between "income substitution ventures" and "entrepreneurial ventures" based almost entirely on growth aspirations and growth attainment. In fact, numerous entrepreneurship scholars argue that, by definition, an entrepreneurial firm must be growth-oriented. Consequently, some have examined the growth strategies of young and small firms. However, with the exception of McCann (1991), entrepreneurship research has virtually ignored acquisition as a means of new venture growth. Therefore, we have little understanding of factors related to acquisition by new ventures and little understanding of relationships between acquisition and new venture performance. We believe that acquisition as a means of growth represents a powerful strategic option for new ventures, for which growth and the establishment of legitimacy are critical to overcoming liabilities of newness (Stinchcombe, 1965). This study addressed two basic research questions: Under what circumstances do new ventures pursue growth via horizontal acquisitions? and, Does expansion via horizontal acquisition affect firm performance?

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