A STAGE-CONTINGENT MODEL OF DESIGN AND GROWTH FOR TECHNOLOGY BASED NEW VENTURES

Stage of growth developmental models have traditionally been used to enhance our understanding of the organizational creation and growth process. Until recently, most of this literature has been primarily conceptual and descriptive. This paper presents a stage of growth model theorized to hold for technology based new ventures. The model consists of four stages (Conception and Development, Commercialization, Growth, and Stability) and views each stage of growth as a reflection of the dominant problems faced over the course of growth by the venture. The model predicts that the organization of a venture will be a function ofthe dominant problems that define a stage of growth. More specifically, it is argued that a technology based venture's rate of growth depends, in part, on the consistency or "fit" between its stage of growth and certain structural features of its organization, including decision-making centralization and formalization, and functional specialization in the areas of marketing and sales, manufacturing, and engineering/ technology. Data were collected from 105 technology based ventures in the electronics, computer, and peripherals industries to test the model. The results were generally consistent with the theory and showed that centralization of decision-making decreased as the firms moved to higher stages, while formalization of decision making increased in higher stages. Specialization of roles in the functional areas of manufacturing and marketing also increased by stage; however, specialization in the engineering and technology functions remained high across all stages. The contingency hypothesis was also supported, indicating that technology based ventures growth is partially attributable to the fit between a venture's stage of growth and aspects of its structure. These findings indicate that different patterns of decision-making and functional specialization are required at each stage if growth is to be achieved. As such, this research validates a long standing but untested belief in the venture management field that performance of new ventures depends upon,. © 1990.