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The influence of commercial capabilities and orientations in new technology ventures

by Graaff, Joost Adriaan, MS


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Business
performance
Although in the hypothesized direction, a technology push does not significantly moderate the
relationship between pro-active customer orientation and the business performance in Model 4. No
support can thus be found for H11. No significant influence is found of technology push on the
relationship between a pro-active sales orientation on business performance, thereby rejecting H12.
However, the effect of competitor orientation on business performance interacts with technology
significantly with a positive path coefficient, providing support for H13. Looking at the direct effect of
technology on the business performance, a significant effect can be seen in Model 1 and Model 3.
The relatively high R2 values, ranging from 0.31 to 0.47, indicate the importance of our main effect and
interaction variables in explaining business performance. Moreover, including the interactions increases
the overall model fit R2. The best overall model fit can be seen with Model 3. Among the control
variables, no significant effect on the business performance can be found in any of the models.
To further interpret the results, the significant interaction coefficients are plotted and described.
0.6
0.4
0.2

0
-0.2
-0.4
Low Commercial

capabilities
High Commercial

capabilities

Low Pro-active
customer
orientation
High Pro-active
customer
orientation

-0.6
-0.8

Figure 6 Commercial capabilities X Pro-active customer orientation

The negative interaction effect of Figure 6 demonstrates that commercial capabilities are more
beneficial for a start-up’s performance when the start-up has a low pro-active orientation on the
customer. Moreover, the positive effect of commercial capabilities dissolves with a high pro-active
customer orientation of the organization. It seems that especially in situations where little is known

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Busieness
performance
about the customer, which is not uncommon for start-ups, commercial capabilities are needed to
interpret that little amount of information and transform that information into a competitive advantage.

1
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-0.6
Low Commercial

capabilities
High Commercial

capabilities

Low Competitor
orientation
High Competitor
orientation

Figure 7 Commercial capabilities X competitor orientation

As can be seen in Figure 7, combining founder’s commercial capabilities with a competitor orientation
benefits the performance of the firm. The positive effect of possessing commercial capabilities is
stronger when the organization is highly focused on the competitor. This is a complementary effect
where two variables interact as complements and the marginal benefit of each variable increases as the
level of the other variable increases. When a start-up is in possession of a high level of commercial
capabilities, the information of the competitor can be transformed into a benefit on the performance of
the firm. Apparently, the commercial capabilities are very much useful when interpreting the
information of the competitor.

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Business
performance

0.3
0.25
0.2
0.15
0.1
0.05

0
-0.05
-0.1
-0.15
-0.2
Low Pro-active customerHigh Pro-active customer
orientation orientation

Low Shared
Interpretation
High Shared
Interpretation

Figure 8 Pro-active customer orientation X Shared interpretation

The negative interaction effect in Figure 8 demonstrates that when a start-up has a high level of proactive
customer orientation, the information should not be jointly interpreted by the whole founding
team. It seems that when a start-up is in the process of early customer involvement, meeting frequently
does not benefit this process. What might happen, is that the more traditional marketing and sales
persons will interrupt the process by trying to convince the team with their collected market
information. On the other hand, with little involvement and interaction with the customer, the more
traditional marketing and sales functions can support the start-up by delivering market information and
providing information about the direction of the market.

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Business
performance
Business
performance
0.25
0.2
0.15
0.1
0.05

0
-0.05
-0.1
-0.15
-0.2
-0.25
Low Pro-active sales
orient
High Pro-active sales
orient

Low Shared
Interpretation
High Shared
Interpretation

Figure 9 Pro-active sales orientation X Shared interpretation

In line with the prior section, Figure 9 shows a similar effect of a shared interpretation and pro-active
SO. Meeting frequently and trying to interpret the information jointly seems to affect the customer
involvement process. Only within an organization that has a low focus on their selling activities,
discussing this information frequently can help to overcome the low availability of information.

0.8
0.6
0.4
0.2

Low Technology
push

0
-0.2
-0.4
-0.6
Low Competitor

orientation
High Competitor

orientation

High Technology
push

Figure 10 Competitor orientation X Technology push

Figure 10 shows that when an organization is driven by technology instead of market demands, having a
high competitor orientation benefits the business performance significantly. This is a complementary
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interaction where have a high level of technology push complements the effect of being focused on the
competitor. These start-ups should try to identify why customers are drawn to their competitors and
discover market trends by looking at the direction of the competitor. With no focus on the competitors,
these start-ups can develop the wrong technology and fail on the market.

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6 Discussion

This final chapter discusses the results and provides main conclusions. The first section elaborates on
the theoretical contribution in the field of commercial capabilities of the founder. Next, the managerial
implications are described which discusses how the results relate to the founder of a start-up founders
and Holst Centre. Hereafter, the limitations of this research and directions for future research are
described.

6.1 Discussion of results

The main purpose of this study was to investigate the influence of having commercial capabilities
present within the members of the founding team on the business performance. Second, we asked how
an MO or SO could influence the process of commercializing the innovations of the start-ups. We took
two contingencies into account, namely whether the market information interpreted jointly by the
founding team and how technology driven the start-ups is.
The results show that the presence of commercial capabilities in the founding team are crucial for the
success of a start-up firm, consistent with prior studies (Merrilees et al., 2011; Pitkänen et al., 2012;
Ripollés and Blesa, 2012; Santos-Vijande et al., 2012; Y. L. Zhao et al., 2012). When the founders have
developed skills and knowledge with their work experience and educational background in marketing
and sales, this can be used to recognize valuable market information and transform this information into
customer value.
The positive influence of commercial capabilities on the performance of the start-up is dependent on
the level of competitor and customer orientation. First, being commercially capable seems particularly
important when little information about the customer is available and the start-up has little insights in
the existing or latent needs of the customer. Having the capabilities to provide the start-up with
guidelines regarding the market despite this lack of information can create a competitive advantage for
a start-up. Second, when the start-up has a high focus on the competitor, the competitor information of
the competitor needs to be interpreted with the use of the commercial capabilities of the founders and
transformed into useable information.
No direct effects of having a customer orientation and SO could be found, in contrary to our hypotheses
and findings of prior studies (Blankson and Cheng, 2005; Ruokolainen, 2005). It seems that predicting
customer needs is a more difficult process for start-ups than assumed earlier by researchers. An
explanation could be the false assumption of a predictable and an effectual marketing approach might
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be more suitable for start-ups. As Sarasvathy (2001) states, the more traditional causation marketing
takes a particular effect as given and focuses on means to create that effect and assumes that the
environment can be totally controlled for. Effectuation does not claim to control the environment and
takes a set of means as given and focuses on selecting between possible effects that can be created with
that set of means. Four principles underlie entrepreneurial effectuation. When applied to start-ups, the
entrepreneur should therefore aim at 1) affordable loss rather than expected returns,2) strategic
alliances rather than competitive analyses, 3) exploitation of contingencies rather than exploitation of
pre-existing knowledge, 4) controlling an unpredictable future rather than predicting an uncertain one.
It is empirically proven that the entrepreneurial mind-set is more effectuation based than the mind-set
of managers in established firms (Read et al., 2009). Entrepreneurs are more likely to use analogical
reasoning based on their own experience and more sceptical about the market data available. They tend
to define their market approaches based on their own perception and experience on the market. Having
an organization-wide orientation towards customer and the selling activities might therefore not deliver
a benefit for the business performance of the start-ups.
The result show that start-ups should rather rely on the competitor for their information instead of their
customer or sales activities. Being oriented towards the competitor shows a direct significant and
positive effect on the business performance, in line with the findings of Ledwith and O’Dwyer (2009).
They indicate that start-ups might become over dependent on their customer and lose the beneficial
focus on the competitor. It seems that start-ups should mind the strategy of the competitor in order to
determine the direction of the technology on the market, or certain technology paths. After a period of
incremental innovations, disruptive technology will cause a change of the current technology paradigm
after which a new paradigm arises and demands the companies to adapt. Analyzing these technology
trajectories can identify opportunities for start-ups (Norhashim, 2007). These shifts in paradigms can
cause a change in the required assets and competences of an organization. This results in losing value of
accumulated assets of the organizations. When these assets cannot be used in the new technology
paradigm, an established organization can lose its place on the market to new entrants (Tripsas, 1997).
From a start-up’s point of view, they are able to gain market share by developing technology which
makes the assets and competences of the larger incumbent organizations redundant. This requires
knowing your competitors and their technological developments. This might explain why it is not
uncommon for technology driven firms to have their engineers highly involved in the strategic decision
process (Workman Jr, 1993). Engineers are able to analyze the technology of competitor and thereby
the strategy of the competitor which relates to the technology paths on the market. This is in line with
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the results on the level of technology push of the start-ups which indicate that especially start-ups who
are driven by technology benefit from a focus on the competitor. Especially these start-ups should mind
the technology strategy of the competitor and adapt their innovations accordingly.
How the information is interpreted by the founding team has a significant influence on the benefit of a
commercial orientation. The results reveal that when a start-up has a high focus on the customer and
sales, they should not attempt to jointly interpret the generated information. Apparently, when a startup
is involved in the process of customer involvement, this process should not be interrupted with
frequent meetings that can distort this process. What might happen, is that the more traditional
marketing and sales functions interrupt the process by trying to convince the founding team with their
own collected market information. It is however beneficial to meet frequently and create a shared
interpretation when the start-up has a low focus on the customer and its selling activities. With little
information available, traditional marketing and sales functions can support the start-up by delivering
basic market information and thus provide some insights in the market. As Gupta and Govindarajan
(1991) state, the level of uncertainty of a particular problem or situation determines the frequency of
the communication between the members of the founding team.

6.2 Comparison present study and study of Witte (2012)

The present study extends the data and model of Witte (2012). Appendix C shows a comparison
between both studies. It can be seen that both studies reason according to the RBT regarding the
commercial capabilities of the founding team. Furthermore, an MO and SO is included in the theoretical
basis. The present study however does pay more attention on the process of involving and developing
customers as a start-up and the sales learning aspect along with a lean launch. Another important
difference is the larger sample size of the present study as a result of extending the dataset of Witte
(2012). The present study has furthermore included the level of technology push in the core variables
whereas the study of Witte (2012) only includes this variable as control variable. Also taken account the
core variables of the present study are the separate components of an MO and SO. The results of the
data analysis of the present study show that analysing these components separately is crucial, indicated
by the multiple significant interaction effects in the results section.

6.3 Managerial implications

The results of this study has implications for start-ups and for Holst Centre who aims to successfully
commercialize their technology via new ventures.

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The results indicate the importance for start-ups to possess commercial capabilities in the founding
team at the starting phase. They should therefore either attract human resources who possess these
commercial capabilities when initiating the venture or develop these commercial capabilities within the
existing team members. Important is that these commercial team members should be highly involved
with and affiliated to the technology of the start-up. With a shift towards learning via sales activities,
traditional sales and marketing skills and knowledge is not sufficient and should be accompanied by an
understanding of technology. Outsourcing marketing and sales activities is therefore not the solution,
since these marketing and sales representatives cannot identify themselves with the innovation.
Start-ups should furthermore be aware that the benefit commercial capabilities is strongly related to
whether they create an organization-wide commercial culture, orientation. Particularly creating a
culture focused on the competitor facilitates successful commercialization. This is especially important
for start-up where technology provided the reason to start the venture. Not only should they mind their
organizational culture, but as well take their frequency of meetings into account. Meeting very
frequently and creating a shared understanding within the founding team is not always beneficial. Only
when the start-up has minor details regarding their customer and sales, the team should regularly meet
to determine the direction of the organization.
Implications for Holst Centre
Holst Centre should carefully compose the teams who will be involved in the early stage of the spin-off
companies. Besides technology experts, they should be aware that such a team possess relevant
marketing and sales skills and knowledge as well. They could to do this by offering courses aimed at
integrating sales and marketing in the NPD process or attract commercially capable employees with
sufficient affiliation with the technology. Holst Centre should furthermore create an understanding of
who the competitors of the spin-off company are and discover the technology trajectories of the market
by analysing these competitors. Being aware of these technology trajectories as Holst Centre prevents
developing technology not aligned with the market and thus direct R&D efforts and expenses into the
right direction.

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6.4 Limitations & directions for future research

Every study has its limitations and this thesis is no exception. We will list these limitations in this section
and provide opportunities for future research.
First, causality cannot be predicted due to the lack of longitudinal data which is a common problem in
small business and entrepreneurship studies. The fatality rate of small and start-up firms is relatively
high which makes it hard to investigate the same organizations on different moments in time. This
provides a challenge for future research. Second, we investigated commercial capabilities within the
founding team and did not account for separate business functions and their capabilities. This provides
the opportunity to investigate these capabilities on an individual level in further research. Third, the
predictive power of this research is low due to the small sample size, despite the fact that this research
has extended the data of the research of Witte (2012). Fourth, entrepreneurs might be inclined to
glorify their knowledge and information of their marketing and sales. This self-serving bias might be
occur less easy when collecting data through personal interviews. Fifth, the concepts and constructs
used are mainly developed in marketing and management literature regarding large established
organizations and might therefore not fit the though world of the entrepreneur. Creating new
constructs might solve this problem, but decreases the possibility to compare results. Sixth, the sample
includes Dutch start-ups and spin-offs that are connected to incubators, which hinders generalization.
Finally, entrepreneurs made notice that their business performance fluctuates severely during the startup
and growth phase. Although this research takes this issue into account by considering the past five
years of the organization, it does solve the problem entirely. Future research could identify the several
stages of a start-up and control for these stages in the data analysis.

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