Entry Barriers and New Venture Performance: A Longitudinal Investigation of Direct and Moderated Effects
Department
Management and Entrepreneurship
Document Type
Article
Publication Date
1999
Abstract
This longitudinal study utilized a sample of 115 independent new manufacturing ventures to empirically investigate the (1) direct (independent) effects of entry barriers on business performance, and (2) the moderating (contingent) effects of other theoretically justified variables on the relationship between entry barriers and business performance. The results of this research suggest why prior management research has failed to provide conclusive findings vis-a-vis the effects of entry barriers on business performance. The relationship between alternative measures of entry barriers and business performance is complex, and prior studies have not examined the complex moderating effects of other theoretically justified variables on the relationship between entry barriers and divergent measures of business performance. Consistent with prior studies utilizing the universal approach, this study found limited support for the direct effects of entry barriers upon performance. Conversely, the results of this study provide support for prior theory which suggests that the relationship between alternative measures of entry barriers and business performance is moderated by (contingent upon): (1) other measures of entry barriers; (2) venture age; and (3) life cycle stage. In sum, this study provides strong support for utilizing the contingency approach to investigate the effects of entry barriers upon performance, as models based on the contingency approach explained 45 percent of the variance in profitability and 50 percent of the variance in sales growth. Additionally, this research provides evidence that venture profitability and sales growth represent different dimensions of business performance, and that trade-offs exist among these measures.