Technology strategy (TS) is one of the most important aspects of any firm's strategic posture especially in dynamic environments such as the computer software industry. Not only do new ventures face the pressures that accompany all young companies (e.g., shortages of capital), but they also have to keep up with a rapid rate of technological change. Consequently TS, the sum of a firm's choices on how to develop and exploit its technological resources, can profoundly affect a venture's performance and survival. This empirical study examines the relationships between TS and new venture performance (NVP). By focusing on TS variables and analyzing their performance outcomes, the study offers insights into the factors that can influence the success of new ventures in a fast-paced environment. This study also examines key environmental moderators, those external environmental forces, which can significantly impact the strength or direction of the relationship between a firm's TS and NVP. The study examines five TSs that can enhance NPV The first is radicality, which means developing and introducing new products ahead of competitors. The second is the intensity of product upgrades, which refers to a venture's commitment to introducing more refinements and extensions of its products than its competition. The third is the level of R&D spending, which indicates a venture's strong investment in internal research and development activities. The fourth is the use of external technology sources (e.g., strategic alliances and licenses) to augment a firm's own R&D efforts. The final dimension is the use of copyrights and other means of protecting the venture's intellectual property. Environmental moderators examined in this paper were: dynamism, price hostility, non-price hostility, and heterogeneity. Dynamism reflects the rate and continuity of change within an industry. Price hostility indicates the intensity of rivalry in an industry based on costs and reduced prices. Non-price hostility indicates an emphasis on product quality and service as the key to success in an industry. Heterogeneity indicates the diversity of the marker segments in the new venture's industry; a heterogeneous environment typically has multiple segments with diverse needs and expectations. To test the impact of environmental moderators on the efficacy of Ts, data were collected from 116 U.S.-based software firms. NVP was measured by return on equity (ROE) and growth of market share (GMS). Overall, the results show that not all of the TS dimensions had a significant effect on NVP, and that the relationships of these dimensions with NVP were moderated by the venture's perceptions of the external environment. Three dimensions of TS were associated with both ROE and GMS: radical new products, frequent product upgrades, and the rise of external technology sources. Further, only frequent product upgrades had a significant impact under all four moderating conditions on both NVP measures. New product radicality enhances both performance variables in dynamic environments; beyond that, it only has a significant negative interaction with price hostility. R&D, however, is generally not associated with strong short-term ROE performance except in heterogeneous environments. Yet, for GMS, R&D is a significant variable except under dynamism. External technology sources also have a strong association with NVP, being insignificant only in the case of GMS in situations of non-price hostility. Finally, the use of copyrights, patents and other means of protecting the company's intellectual capital is generally not associated with NVP under different environmental conditions. In a dynamic environment copyrights (and other means of intellectual property protection) appear to speed lip the diffusion of knowledge to rivals and therefore may not enhance venture performance. The results also suggest that new ventures should pursue a formal technology strategy to achieve successful performance. Those ventures that match their technological choices with their external environments are better positioned to achieve superior performance. (C) 1999 Elsevier Science Inc.
