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Bricolage and type of growth strategy

CHAPTER III: WOMEN-OWNED BUSINESS IN PALESTINE

CHAPTER 5: BRICOLAGE AND GROWTH STRATEGIES

5.2. Literature Review

5.2.4. Bricolage and type of growth strategy

Although bricolage can be the best alternative for obtaining resources in extremely penurious contexts, previous research indicates that the relationship between bricolage and firm performance is reliant on various factors internal and external to the organization (Senyard et al., 2009; Hmieleski et al., 2013; Desa and Basu, 2013). In this section we propose that the type of

growth strategy the entrepreneurs seek to develop affects the relationship between bricolage and performance. We focus here on two common types of strategies firms usually use to grow: new product development (that is: introduce a new product or service, research and develop a new product or service and improve the quality of an existing product or service to make it more profitable or effective) and new market entry (that is: offer products or services in a new area of the city or country, expand an existing location or open a new location).

Salunke et al. (2013) find that seeking out new opportunities for development is positively associated with bricolage behavior and that both of them are positively associated with different types of innovation, which in turn generate competitive advantages in project-oriented firms. However, bricolage only has a significant direct relationship with supportive service innovation, which is defined as those innovative changes not visible to the customer, such as sourcing and production related innovation. The relationship of bricolage with interactive innovation, defined as those innovative changes visible to the customer such as image, delivery and customization, is indirect, through supportive innovation. These results suggest that the capacity of bricolage to sustain the introduction of different types of changes within the organization depends on the type of change itself and the kinds of resources required.

Therefore, all else being equal, we expect bricolage to play different roles, depending on whether the firm seeks to develop new products or enter new markets, given that these strategies require different types of resources, capacities and organizational routines. Nelson and Winter (1982) indicate that firms generally encounter advantages when trying to expand by doing more of the same and face difficulties when trying to expand by doing something else. In this sense, Mishina et al. (2004) find that although the new product development has negative consequences for performance in the short term, the exploitation of new markets improves performance in the short term. Barbero et al. (2011) also find that different growth strategies are associated with the deployment of different types of resources and capacities. For example, the deployment of human resources capacities is associated with new product development, but not with new market entry.

We propose that using bricolage to introduce new product/services or changes in current product/services, be it purposeful or unintentional development with resources at hand, may not systematically improve performance. On the one hand, purposeful product/service development

may require new resources and capacities different from the ones the firm can easily obtain by combining current resources (Mishina et al., 2004). For example, providing a new service or developing a new product might require different types of skills the firm does not possess, as well as deployment of human resources capacities (Barbero et al., 2011). Developing these skills and capacities through self-learning and experimentation can slow down the process, increase the levels of unpredictability and put the firm at disadvantage with competitors (Leonard-Barton, 1995). From this point of view, the interaction between bricolage and product/service-growth opportunities may result in a low firm performance. New product development can be also seen as attempts to introduce more radical innovations. In this sense, Senyard et al. (2009) show that the interaction between innovation and bricolage has negative consequences for firm performance. On the other hand, new products/services that can come out as a result of combinations between the resources at hand might not necessarily respond to market needs;

therefore, applying bricolage to develop new products/services might not systematically enhance performance. Moreover, creating markets for new products/services resulting from bricolage may be too expensive for firms operating in environments with extreme constraints on resources.

Based on these arguments, we propose the following hypothesis:

H2. Bricolage weakens the relationship between product-growth strategy and firm performance.

In turn, entering new markets involves expanding the current product/services to new markets, with firms therefore being able to build on their previous resources, capacities and routines. In this sense Nelson and Winter (1982) indicate that previous success in a given activity increases the chances of being successful with capacities of the same sort. Market expansion is easier to develop with positive outcomes than product expansion because the firm can draw on existing experience, resources, capacities and routines to sell its product/services in a different location. Mishina et al. (2004) indicate that new market entry can be exploited faster than new product development with positive outcomes for short-term performance. Bricolage is consistent with the new market entry because it builds on existing internal and external resources. Barbero et al. (2011) showed that existing market capabilities are positively associated with new market entry. Selling in a different location within the same institutional context is not susceptible to requiring new skills and firms can meet these new requirements by making do with resources at hand. The existing skills, resources and capacities are consistent with the demands that might come from selling the same products/services in a new area or opening a new location.

Therefore, making do with these resources can sustain the new market entry with positive outcomes for performance. Based on these arguments, we propose the following hypothesis:

H3. Bricolage strengthens the relationship between market-growth strategy and firm performance.