Abstract

Resource-based theory contends that the manner in which firms are organized plays a critical role in determining whether resources can be leveraged to create wealth. Although numerous factors influence organizing decisions, prior research in the heterogeneous resource approach contends that individual resources are the causal driver in the process of establishing competitive advantages. In this study, we test this assumption by examining the impact of novel business models on resource-based weaknesses. Our analyses find that novel business models attenuate the potential limitations of two critical resource-based weaknesses—radical technologies and capital constraints—thereby increasing the performance of new firms.

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