Hybrid Strategies, Dysfunctional Competition, and New Venture Performance in Transition Economies

Conventional wisdom suggests that new ventures can employ a combination of two general strategies to confront the challenges of operating in transition economies or regions known for their weak institutional conditions: These ventures may succeed by enacting a market-orientation strategy, which focuses on providing value to customers and implementing rapid responses to competitive situations. They can also engage in a more traditional political-networking strategy that engages government officials, which may yield public resources and enhance their organizational legitimacy. However, research results are inconclusive regarding the effectiveness of these strategies when they are combined in a hybrid form. We argue that the advantages of a hybrid strategy are contingent on the perception of a specific condition: dysfunctional competition. In our analysis of new venture performance in China, we show that political networking indeed amplifies the positive influence of market-orientation strategies on performance, but only in contexts where dysfunctional competition is perceived to be low. When such competition is high, political networking becomes counterproductive, diverting attention away from swift responses to market demands. By addressing how multiple strategies work together, we offer insights into the extent to which the effectiveness of hybrid strategies – incorporating both market-orientation and political-networking – depend on the context in which they are implemented.