Radical changes in strategy of high technology new ventures

Business strategy occupies a significant place in the business literature, being one of the main pillars of business design and implementation. Scholars and practitioners agree that a strategy well designed and implemented should secure an organization a sustainable competitive advantage within a market. The Resource-Based View (Barney 1991) demonstrated the role of strategy in aligning resources and competences of organizations with their environments. Strategy literature addressed issues of strategy change, noting the cost and risk involved, frequently associating change with poor performance and/or reaction to an anticipated decline. Later research (Lumpkin & Dess 1995) focused on entrepreneurial strategizing, effectual or causal behavior of entrepreneurs (Sarasvathy 2001a) and their ability to aggregate a bricolage of resources in order to 'create something from nothing' (Baker & Nelson 2005). Nevertheless, most of the available literature has not related to fastmoving environments, such as the high technology industry; an industry involving venture capital investors, characterized mainly by its agility and hyperdynamics. New ventures operating in this arena are challenged to realign their strategic orientation, sometimes in an extreme and radical manner. Research to date has not covered in full the issue of Radical Strategic Changes (RSC) of those ventures. The frequency of RSC, and investors‘ perspective on this type of change in their portfolio companies, are at the focus of this study. This research proposes that RSC in high technology new ventures is more frequent than observed in established organizations. It further suggests a linkage between the resources of a new venture and the ignition of a radical change in its strategy. The thesis seeks to evaluate the factors and effects of RSC in high technology new ventures by testing the frequency of the RSC phenomena, followed by the exploration of the factors igniting RSC. Results indicate that the appearance of RSC in high technology new ventures is more frequent than in established organizations and as derived from the literature. It further suggests that internal unfavorable events, as opposed to entrepreneurial opportunities, are more likely to drive radical strategic changes. The investors‘ perspective and implications are discussed as well, demonstrating the importance of the investor-investee relationship in the process of strategy formation in general and for radical strategic change events in particular. As stated by one of the venture capital investors: 'I can hardly think of a successful company that did not change its strategy. It must be a necessity for success.'