Resource orchestration in start‐ups: Synchronizing human capital investment, leveraging strategy, and founder start‐up experience

• DOI: http://doi.org/10.1002/sej.1269
• Author: Noni Symeonidou,Nicos Nicolaou
• Published date: 01 June 2018
• Date: 01 June 2018

RESEARCH ARTICLE

Resource orchestration in start-ups: Synchronizing

human capital investment, leveraging strategy,

and founder start-up experience

Noni Symeonidou

1

| Nicos Nicolaou

1,2

1

Entrepreneurship and Innovation Group,

Warwick Business School, University of

Warwick, Coventry, U.K.

2

Department of Business and Public

Administration, University of Cyprus, Nicosia,

Cyprus

Correspondence

Noni Symeonidou, Associate Professor,

Entrepreneurship and Innovation group,

Warwick Business School, University of

Warwick, Coventry, U.K.

Email: noni.symeonidou@wbs.ac.uk

Research Summary: We examine the performance effects of

resource orchestration in start-ups by investigating three key con-

tingencies of resource orchestration: human capital (HC)investment

relative to rivals, leveraging strategy, and founder start-up experi-

ence. We find that deviating from rivals' resource investments

(either above or belowthe industry mean) negatively affects perfor-

mance, while conformingto the norms set by rivals positivelyaffects

performance. However,we also find that a higher investment in HC

relative to rivals is less detrimental when aligned with a leveraging

strategy focused on innovation. In addition, we find evidence that

this relationship is conditioned by the entrepreneurial experience of

the founders themselves.

Managerial Summary: To create value, entrepreneurs need to

assemble and manage various resources and capabilities. We

explain how entrepreneurs can manage their resources to achieve

higher performance. Using a sample of U.S. start-ups, we find that

deviations in human capital (HC) investments relative to rivals

(either below or above) harm the performance of start-ups. How-

ever, we also find that a higher investment in HC relative to rivals

is less detrimental when the start-up is focused on innovation. In

addition, we find that experienced founders benefit from actively

orchestrating HC investments relative to rivals with a strategy

focused on innovation.

KEYWORDS

dynamic managerial capabilities, human capital investment, new

ventures, resource orchestration, strategic entrepreneurship

Received: 11 November 2015 Revised: 4 July 2017 Accepted: 12 July 2017 Published on: 16 November 2017

DOI: 10.1002/sej.1269

Copyright © 2017 Strategic Management Society

194 wileyonlinelibrary.com/journal/sej Strategic Entrepreneurship Journal. 2018;12:194–218.

1|INTRODUCTION

Combining various resources and capabilities to achieve superior performance is a key managerial activity (Helfat

et al., 2007; Sirmon, Hitt, & Ireland, 2007; Teece, Pisano, & Shuen, 1997). Although the resource-based view (RBV)

highlights the value of strategic resources for organizational performance (Barney, 1991; Barney, Ketchen, & Wright,

2011; Crook, Ketchen, Combs, & Todd, 2008), it has been less able to address how managers use these resources

to create value (Priem & Butler, 2001; Sirmon et al., 2007). Recent work on dynamic managerial capabilities (Helfat

et al., 2007; Teece et al., 1997) and resource management (Sirmon et al., 2007) highlights the critical role of man-

agers in the conversion of firms' resources into firm capabilities. Managers need to evaluate, integrate, combine, and

exploit bundles of resources in order to achieve a resource-based advantage (Augier & Teece, 2009). As Helfat

et al. (2007: 23) argue, “the process of assembling and orchestrating particular constellations of assets for economic

gain is a fundamental function of management.”

Central to these frameworks is the notion of fit between resources and deployment decisions. As Sirmon

et al. (2007) note, developing a fit between a firm's resource investments and its leveraging strategy is important for

value creation. Leveraging is the process by which firms apply their capabilities to augment the value proposition

offered to customers. Despite the theoretical and practical importance of aligning resources with leveraging strategy

(Sirmon et al., 2007), testing of this relationship has been limited. Investigation of the contingencies that affect

“resource orchestration”is warranted, as a recent meta-analysis of the resource-performance relationship suggests

that contingencies within managers’resource choices are poorly understood (Crook et al., 2008) and that such work

may prove valuable to both resource management and dynamic managerial capabilities perspectives (Baert, Meule-

man, Debruyne, & Wright, 2016; Helfat et al., 2007; Sirmon, Gove, & Hitt, 2008).

In addition, while much work has been undertaken on the entrepreneur's characteristics as drivers of entrepre-

neurial performance (Shane and Stuart, 2002; Wright, Hmieleski, Siegel, & Ensley, 2007), the linkages with asset

orchestration have not yet been explicated. While scholars have recently offered theoretical insights on how

resources are orchestrated across a portfolio of start-ups (Baert et al., 2016), studies have largely overlooked the

role of the founder’s experience in orchestrating resources and leveraging capabilities. As a result, although the role

of the individual founders and their imprints is heightened during those early years (Autio, George, & Alexy, 2011),

little is known about the micro-foundations of resource orchestration.

In this study, we examine the performance effects (revenue growth) of resource orchestration in start-ups by

investigating three key contingencies: human capital (HC) investment relative to rivals, leveraging strategy focused

on innovation, and founder start-up experience. Building on research on imitation (Deephouse, 1999; Lieberman &

Asaba, 2006; Sirmon & Hitt, 2009) and industry norms (Spender, 1989), we examine how management of resources

in entrepreneurial start-ups creates value. We find that deviating from rivals' resource investments (either above or

below the industry mean) negatively affects revenue growth, while conforming to the norms set by rivals positively

affects revenue growth. However, we also find that a higher investment in HC relative to rivals is less detrimental

when aligned with a leveraging strategy focused on innovation. In addition, we find evidence that this relationship is

conditioned by the entrepreneurial experience of the founders themselves.

This study makes three contributions to theory. First, we contribute to the literature on the microfoundations

of resource orchestration by highlighting the critical role of founder start-up experience in the orchestration of

the various elements of the business to create value. Although the past few years have witnessed the emergence

of efforts to examine the microfoundations of the RBV (Barney et al., 2011; Coff & Kryscynski, 2011; Foss,

2011), there is a dearth of research examining the “microfoundations of resource orchestration,”i.e., the individual-

level characteristics, actions, and interactions that grant firms unique capabilities in structuring, bundling, and

leveraging resources. While Baert et al. (2016) identify the subprocesses by which entrepreneurs obtain and lever-

age resources across a portfolio of ventures, we still lack an understanding of the micro-level enablers of orches-

trating resources.

SYMEONIDOU AND NICOLAOU 195