A Resource-Based Perspective on the Dynamic Strategy-Performance Relationship: An Empirical Examination of the Focus and Differentiation Strategies in Entrepreneurial Firms

Abstract

This research applies a resource-based perspective, which emphusizes a firm’s specialized or unique resources, to the question of how the focus and differentiation strategies affect the economic performance of entrepreneurial firms. We develop dynamic models that separate the period of creating or acquiring these resources from subsequent periods. With longitudinal data on entrepreneurial software firms, we examine the dynamic effects of multiple forms of these strategies on a firm’s performance. The results generally support the hypotheses that, when the focus and differentiation strategies are established, performance is higher than for other firms. The results fail to support the hypothesis that firm performance will decrease when these strategies are adopted.