Resources of the Firm, Russian High-technology Startups, And Firm Growth
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Transcript of Resources of the Firm, Russian High-technology Startups, And Firm Growth
Resources of the firm, Russian high-technology startups,
and firm growth
Garry D. Brutona,*, Yuri Rubanikb
aDepartment of Management, M.J. Neeley School of Business, Texas Christian University,
Fort Worth, TX 76129, USAbQuality Laboratory, Moscow Federal Institute of Electronic Technology, Moscow, Russia
Received 1 November 1998; third revision received 1 February 2001; accepted 1 February 2001
Abstract
Russia possessed many world-class technologies prior to the break up of the Soviet Union.
Entrepreneurial endeavors resulted from this technological ability as market forces encouraged
individuals to leave the large state enterprises that produced those technologies. Founding
characteristics of the firm impact the resources that are available to the startup firm. This study
investigates the extent to which founding factors in Russia help high-technology firms to prosper. It
was found that the team establishing the business mitigated the liability of newness. However, in
contrast to the US, the culture of Russia does not produce negative results if the founding team grows
very large. Additionally, it was shown that firms that pursued more technological products and enter
the market later performed best.
D 2002 Elsevier Science Inc. All rights reserved.
Keywords: Russia; High-technology entrepreneurship; Liability of newness; Emerging markets; Resource theory
1. Executive summary
Firms can be viewed as composites of various resources. In stable economies, it has been
argued that young firms do not do as well as more mature firms. The underlying reason for
such a liability of newness is the limited resources available to young firms. This emphasis on
0883-9026/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved.
PII: S0883 -9026 (01 )00079 -9
* Corresponding author. Tel.: +1-817-257-7421; fax: +1-817-257-7227.
E-mail address: [email protected] (G.D. Bruton).
Journal of Business Venturing 17 (2002) 553–576
resources is supported in the entrepreneurship literature, which records that a principal cause
of high-technology firm failure is a lack of financial resources. However, Eisenhardt and
Schoonhoven (1990) argued that liability of newness of young high-technology firms could
be mitigated by the nature of the firm’s founding characteristics. Particularly, the character-
istics of the founding team, the innovativeness of the firm’s product(s), and the firm’s position
as a first mover can mitigate the liability of newness since these characteristics impact the
accessibility of resources.
Prior to its economic transition, Russia produced many world-class technological products.
Many of those individuals who left the technology-based state companies and research
laboratories have gone on to found their own high-technology-based new ventures. But, in
general, Russia’s transition to a market economy has been tumultuous. For example, the
monetary system of the country reflected an exchange rate for the ruble of 35 per US dollar in
April 1991 and this expanded to upwards of 26,000 per US dollar during November 1999 (in
nonredenominated terms). Additionally, the industrial output of the country has been
continuously falling since economic liberalization began. If Russia is to be a constructive
member of the world economy, it is critical that its high-technology entrepreneurs succeed.
This research found that the size of the team establishing the business can mitigate the
liability of newness in Russia. The larger the team, the greater the financial resources that can
be generated and the easier it is to accomplish the myriad administrative tasks associated with
starting a high-technology venture since there are more individuals available to do the work.
Additionally, it was found that the greater the technological innovativeness, the better the
performance of the startup. However, due to the limited resources available to high-
technology startups in a transitional economy such as Russia, later entrants perform better
than do earlier entrants. In a transitional economy, many resources that first movers can
obtain, such as dominance of distribution channels, can be illusionary and disappear over
time. Thus, before moving into a market in such settings, it is important that firms ensure that
the role and strength of various resources have been established before entrepreneurial firms
seek to control them.
The implications for Russian high-technology policymakers and entrepreneurs from these
findings are significant. Entrepreneurship in Russia offers a significant means for the
economy to reverse its decline. The mean increase in employment among the 45 firms
examined was 239%. Thus, the evidence presented here is that entrepreneurial startups have
the potential to provide significant employment opportunities for the nation. Additionally, for
entrepreneurs, it clearly signals that they can increase their chances of success by ensuring
certain characteristics are present as they establish their firm. High-technology entrepreneurs
in Russia would be well served by focusing their resources on building large founding teams,
seeking to ensure they have an innovative product, and building their competitive resources.
2. Introduction
The resource theory of the firm has gained increasing usage in the management literature
(Hoskisson et al., 1999). However, there has been only limited investigation of the theory in
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576554
transitional economies (Javenpaa and Leidner, 1998). There is an increasing recognition that
research from nations with stable economic environments does not necessarily generalize to
those whose economies are transitioning from command to free market orientation (Boya-
cigiller and Adler, 1991). That nations with transitional economies are characterized by a high
degree of change and turbulence can be seen through the frequent legal and regulatory
changes, the level of currency-exchange fluctuations, and the uncertain position of private
enterprise in the political framework (Ahlstrom and Bruton, 2000). These environmental
characteristics may change which resources are valuable to a firm or how such resources are
gathered and employed.
Additionally, to date, the explicit usage of resource theory of the firm in the entrepreneurship
literature has also been limited. Its implicit usage is evident in the recognition of the ‘‘liability of
newness’’ or the fact that young firms have a greater propensity not to prosper (Stinchecombe,
1965). Such young firms have an absence of established relationships, roles, and routines, such
external and internal interconnections being critical resources of the firm (Pfeffer and Salancik,
1978). The absence of relationships, roles, and routines increase the financial pressure at a time
when new businesses have limited resources available (Eisenhardt and Schoonhoven, 1990).
The liability of newness has received support from the examination of a wide variety of or-
ganizations in stable economies (i.e., Freeman et al., 1983; Li and Guisinger, 1991).
Therefore, there is a need to investigate the resource theory of the firm as it relates to both
transitional economies and entrepreneurship. The role of resources in entrepreneurial firm
success is expected to be clearest in entrepreneurial ventures, which have high growth
potential as compared to small business ventures that require fewer resources. High-
technology ventures are prime examples of such high growth potential ventures and will
be the focus of this research. The Russian economy, prior to economic liberalization, was
particularly strong in high-technology domains (Machlis, 1994). Therefore, this research will
focus on high-technology firms in Russia.
Eisenhardt and Schoonhoven (1990) argued that the success (growth) of young high-
technology firms could be increased by the nature of the founding characteristics of the firm.
Thus, this research focuses on high-technology startups in Russia and the ability of founding
characteristics to mitigate the liability of newness (encourage firms to prosper or grow). The
ability to better understand the role of resources in such settings will not only aid in the
development of the theory but also aid in the understanding of how to help high-growth firms
prosper in such environments.
3. Conceptual foundations
3.1. Background on startup firms in Russia
Since 1990, economic changes in Russia have resulted in the development of a large
number of entrepreneurial firms as individuals leave large state enterprises to start their
own businesses (Ageev et al., 1995; McCarthy et al., 1993). While there is no estimate
of how many of these firms are high-technology firms, it is known that prior to its
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 555
economic transition, Russia was a producer of many world-class technological products
(Machlis, 1994; The Economist, 1997). Many of those individuals who left the
technology-based state businesses and research labs have gone on to found their own
technology-based ventures.
Russia’s transition to a market economy has resulted in a tumultuous environment for
business (Snavely et al., 1998; Kuznetsov et al., 2000). For example, the monetary system
of the country reflected an exchange rate for the ruble of 35 per US dollar in April 1991
and this expanded to the equivalent of 26,000 per US dollar by 1999.1 During this same
time, the industrial output of the country has fallen an estimated 45% (The Economist,
1999). The laws of the country remain in a continual state of flux. Frequent changes in
the laws drive many Western firms to limit their exposure in Russia. For example, in
1996, IBM exited one of the only high-technology alliances between a Russian firm and a
major international high-technology firm due to unexpected changes in the tax laws of the
country (Bruton and Samiee, 1998). Similarly, the protection of technological ideas
through patent protection remain of limited practicality for Russian firms (Bruton and
Rubanik, 1997a).
The environment for a startup business is even more difficult than for an established firm
such as IBM. Financial constraints often limit the growth of new firms in mature economies
(Eisenhardt and Schoonhoven, 1990). In Russia, such financial constraints, particularly for
high-technology firms, are heightened since the funding mechanisms for new firms are at best
rudimentary and at worst nonexistent (Bruton and Rubanik, 1997a; Kuznetsov et al., 2000).
For example, for practical purposes, the venture capital industry does not exist within Russia
at present (Barton and Shaheen, 1995; Kuznetsov et al., 2000). Similarly, the banking
segment of Russia remains in great fluctuation and its lending to new startup businesses is
very limited (Shleifer, 1997; Kontorovich, 1999). The interest rate for the best (prime) short-
term lending relationships in Russia is 28% (The Economist, 2000) and the rate for high-risk,
high-technology startups is even higher when funding is available. The result of these
difficulties is that Russian firms often use trade credit as an alternative to bank loans (Cook,
1999). But, even such trade credits, while available to small firms, are very limited for new
startup firms.
Thus, the environment of a transitional nation, particularly for a young high-technology
startup firm, is different from that of a stable environment such as the US. It has been
argued that firms in very turbulent environments have different strategic needs from that
of firms in stable environments (Ansoff and Sullivan, 1993). It is reasonable to question
whether theoretical predictions based on the findings from a stable environment like the
US are applicable to this environment. The impact of such environmental differences have
been recognized by resource-based theorists who have argued that if ‘‘opportunities and
threats of a firm change in a rapid and unpredictable manner’’ (typical of a transitional
economy), firms may not be able to maintain a resource-based competitive advantage
(Barney, 1997).
1 The Russian government redenominated money in 1998, removing three 0’s from the end of all bills. So,
what were 26,000 rubles in 1997 were 26 rubles in 1998.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576556
3.2. Resource theory and liability of newness
In new firms, Penrose (1959) recognized that the absence of given resources could limit
the growth of that firm while the presence of given resources could promote growth in such
firms. Particular focus has been given to the role of financial resources in the success of the
startup firm. For example, Martin and Justis (1993) argued that access to capital was one of
the most critical resources for the success of new firms. More specifically, Bruno et al. (1986)
argued that the principal cause of high-technology firm failure was the lack of financial
resources. Thus, resource theory recognizes that the configuration of a startup firm’s
resources can have a critical impact on the firm’s ability to prosper with financial resources
being particularly important; financial resources reflect the firm’s tangible resources (Wer-
nerfelt, 1984).
Stinchecombe (1965) also recognized that resources for new firms were critical but from a
sociological point of view. He argued that young firms have a greater propensity to fail than
do more mature organizations principally because they have not established relationships
with suppliers and customers or established roles and routines within the firm. The absence of
these items places the firm’s financial resources under pressure (Eisenhardt and Schoon-
hoven, 1990). This leads to a ‘‘liability of newness’’ for startup firms. There has been strong
support for the liability of newness theory in stable environments (i.e., Freeman et al., 1983;
Li and Guisinger, 1991).2
The liability of newness has often been connected with firm failure. However, it should be
noted the term today is typically associated with a broader meaning that more accurately
implies the inability of a new firm to prosper. For example, Eisenhardt and Schoonhoven
(1990) studied the ‘‘growth’’ of new firms when examining the liability of newness. Thus,
both resource theory and the literature on the liability of newness recognize that resources are
critical to firm growth.
The question that arises naturally from the recognition that resources are critical to the
firm’s ability to prosper is how firms can mitigate the negative effect of their absence.
Resource theory of the firm has not examined this issue extensively. However, in the literature
on liability of newness, Eisenhardt and Schoonhoven (1990) discovered that the nature of the
founding team and the nature of the market in which the firm competed could mitigate the
liability of newness. Their findings are built on the rationale that these given founding
characteristics help the new firm overcome shortages in resources that might be present.
3.3. Transitional environments
The application of resource theory of the firm to settings outside of the US has received
only limited investigation (Javenpaa and Leidner, 1998). Such research has focused on how
knowledge-based resources are developed through the firm’s past history and current
2 There have been some studies that have called into question the efficacy of the liability of newness. For
example, Carroll and Huo (1986), Singh et al. (1986), and Staber (1989) did not find support for the liability of
newness. But, each of these findings were based on nonprofit activities and did not examine for-profit businesses.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 557
market position to develop dynamic resources (Teece et al., 1997). However, for startup
firms in general and high-technology firms in transitional economies in particular, financial
constraints are the most pressing resource concern and prior research has yet to investigate
this concern.
The literature argues that the pressures associated with the liability of newness are
particularly severe in situations where an industry is in a formative period (Aldrich and
Fiol, 1994). The transitional nature of the Russian environment results in entrepreneurial
firms being a new form of business, which is not widely understood or supported in Russia.
This absence of understanding is demonstrated in the punitive registration documentation and
taxes required of even the smallest new venture in Russia (Kontorovich, 1999). The
registration documentation and taxes are often more severe than those required of large
mature businesses in Russia. This lack of understanding and support for new ventures
supports the belief that all entrepreneurial firms in Russia are in a formative stage and thus
under pressures that will make the liability of newness particularly severe. But, whether such
severity can then be mitigated by the nature of the founding team is unclear.
Prior efforts to examine the liability of newness outside the US have been limited. But, one
of the few studies that did, in an environment only slightly less stable than the US, raised
questions about the universal applicability of the theory (Bruderl and Schussler, 1990).
However, the results do bring into question, as Hofstede (1993) argues, whether management
theories are culturally and situationally bound.
3.4. Founding characteristics
Prior research on the liability of newness found that in a stable environment such as the
US, the liability of newness can be mitigated by the characteristics of the firm at its founding
(Eisenhardt and Schoonhoven, 1990). These resources act to mitigate the impact of the drain
on firm financial resources, which come from the firm’s newness. Specifically, three
characteristics at the startup at founding are of concern here: nature of the founding team,
the technological innovativeness of the firm’s product, and timing of entry into market.
3.4.1. Team size
There is empirical support for the research founding team idea that is able to mitigate the
impact of the liability of newness in the West (i.e., Eisenhardt and Bourgeois, 1988;
Eisenhardt and Schoonhoven, 1990). The benefits of larger teams include shared prior work
experience or shared common industry background that can overcome part of the costs that
arise due to the difficulties in building a new social structure. Larger teams also bring greater
resources to the new firm, which can offset the lack of access to financial resources (Roberts,
1991). Larger numbers of people in founding teams also ensure that organizational resources
are available to accomplish the numerous necessary activities associated with a high-
technology firm startup (Roberts, 1991). Most studies have discovered that firms founded
by larger teams do better due to the extra resources they bring to the founding (Cooper and
Gimeno-Gascon, 1992). However, it has also been shown that large founding teams can also
increase the complications in communication and decision-making (Kamm et al., 1989).
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576558
In Russia, there are fewer potential negatives associated with making the founding team
too large. The founding of almost all high-technology startup firms occurs in Russia when a
group of researchers leave an established research facility (Bruton and Rubanik, 1997a).
These individuals leave the facility as a team and found the business after working together
for a number of years. There is a strong emphasis in the Russian culture on relationships
developed when conducting business (Holt et al., 1994; Puffer, 1994). Thus, the founding
team, no matter how large, has worked closely with each other for years. This familiarity
and heterogeneity of experiences lead to improved communication and understanding
among participants.
Additionally, the term ‘‘team’’ often implies group decision-making in the US, but this is
not what typically occurs in Russia. Instead, while the nation’s collectivist culture results in
individuals clearly identifying themselves with the group, decision making remains hier-
archical (Elenkov, 1997, 1998; McCarthy et al., 1997). The result is that the lead
entrepreneur typically makes all of the key decisions (Elenkov, 1997). Similar results have
been found in other transitional economies with collectivist cultures (Yates and Lee, 1996).
Thus, the potential negatives that might arise from a larger team in the West would not be
expected in Russia.
However, larger teams do impact the financial resources available to the high-technology
startup in a transitional economy. As discussed previously, the ability of a new high-
technology startup business to prosper is closely tied to financial resources (Bruno et al.,
1986). In Russia, there are virtually no funds available to a high-technology startup firm
except those that are internally generated. The more individuals involved in the founding
team, the greater the capital resources that can be gathered.
Hypothesis 1: A positive relationship is expected between the number of founding team
members and the growth of high-technology startups in Russia.
3.4.2. Product innovativeness
Eisenhardt and Schoonhoven (1990) argue that the most relevant characteristic of a startup
firm when evaluating the liability of newness is the firm’s technical innovativeness. Technical
innovativeness is important since it impacts the resources of the firm including financial
resources (Romanelli, 1989). Innovative products can provide a competitive advantage to a
firm, but the greater the innovativeness of the technology, the greater the consumption of
resources since it requires high levels of competence in basic science and resources to
promote the new technology (Maidique and Patch, 1982). The resources to promote the
product are important since they ensure that the product’s innovativeness is accurately
perceived (Link, 1987).
Eisenhardt and Schoonhoven (1990) proposed that moderate levels of technological
innovativeness would be the most successful in promoting the growth of a high-technology
firm. However, they found no initial support for this hypothesis. Rather, they found that
less innovative strategies were beneficial in promoting the early growth of high-technology
firm. As stressed previously, the critical factor for a high-technology firm in a transitional
economy such as Russia’s is financial resources. Because a strategy that employs a unique
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 559
or differentiated technology is more expensive to develop and promote, this strategy will be
less successful for Russian entrepreneurs to pursue. While the startup firm may produce an
excellent technological breakthrough product, resources may not be available to fully
develop and promote the product. Therefore, in a manner consistent with Eisenhardt and
Schoonhoven’s (1990) findings in a stable environment, it is expected that the most
successful means to mitigate the impact of firm newness in Russia is not to emphasize
technological innovativeness.
Hypothesis 2: A negative relationship is expected between a high-technology startup
firm’s technological innovativeness and its growth in Russia.
3.4.3. Market entry
Firms also have the ability to make the strategic choice on whether they wish to enter the
market first, follow quickly after those firms first into the market have begun to establish the
market and its rules of competition, or enter the market once the market and its rules of
competition are clearly established; these respective strategic approaches to the market are
commonly referred to as first mover, early followers, and late followers. There are well-
recognized benefits to being a first mover in a new product market for high-technology firms
(Li and Guisinger, 1991). For example, the recent evidence from stable economies is that the
earlier the market entry, the more positive the impact on firm performance (Manu and Sriram,
1996; Szymanski et al., 1995). First movers have the benefit of preempting the acquisition of
resources (Lieberman and Montgomery, 1988). These resources can include geographic
resources (locations), technological resources (patents), or customer perceptions (Lieberman
and Montgomery, 1998). Firms can use such resources to build market share as they seek to
gain economies of scale and gain customer loyalty (Lieberman and Montgomery, 1988;
Szymanski et al., 1995).
However, first movers may miss the best opportunities and focus on obtaining the wrong
resources (Lieberman and Montgomery, 1998). Followers, either early or late, can capitalize
on the mistakes of the first mover firm (Golder and Tellis, 1993). Later entrants to the market
could perform better since they require fewer resources to educate consumers about the
product or to develop the market potential for the product. In general, most research supports
the belief that for technology-based firms, the earlier the firm enters the market, the more
successful they will be (Li and Guisinger, 1991). However, Eisenhardt and Schoonhoven
(1990) found that the number of competitors in the market (indicating in part when the firm
entered the market) did not impact firm growth.
To date, the impact of the timing of market entry on firm success in international settings
has yet to be significantly investigated. However, Lieberman and Montgomery (1998) argued
for a greater investigation of the (dis)advantages of first movers in international settings. In
such an exploratory domain, there is conflicting rationale on what to expect. For example, the
impact of being a first mover may be even more substantial in transitional Russia than in
stable environments (Lieberman and Montgomery, 1998). The benefits of capturing resources
in a transitional economy like Russia’s are even greater since resources may be even scarcer
than in an economy such as the US (Mascarenhas, 1992a,b). For example, obtaining
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576560
dominance of a resource such as distribution channels may have a greater impact since
distribution channels are more limited internationally. Thus, the benefit to early entrants is
even more dynamic in international settings.
However, firms may not benefit from being early movers in a transitional economy, which
is fragmented (such as Russia), because resources that could be obtained by a first mover are
not stable (Nakata and Sivakumar, 1997). Thus, obtaining first mover advantage in resources
such as distribution channel can be illusionary because the distribution channels are under-
going so much change that those obtained now may be replaced soon. Additionally, if the
startup does obtain the wrong resources in its first mover efforts, the effects will be more
serious in a resource-limited environment such as Russia.
Hypothesis 3: A positive relationship is expected between high-technology startup
firms, which enter a market early, and their growth in the Russian market.
4. Research method
4.1. Data collection
Data collection in Russia presents many unique and challenging problems. Most prevalent
is the desire of business people for secrecy. Several issues feed a concern about releasing
data. The tax rate for businesses in Russia can approach 70% (Khartukov, 1996). Tax
officials are paid a bonus for finding business people who have not fully paid their tax
assessment, whether underpayment occurred intentionally or not. Thus, releasing any data
that somehow shows that the business should be reporting more income than it does can
place the business person in a difficult situation. Combined with the concerns about taxes are
concerns about the Mafia. The Russian Mafia is already active in the general business
community (Zimmerman and Cooperman, 1995). It is common for an established business to
pay part of its income to the Mafia. However, a startup business may not have come to the
attention of the Mafia, and as a result, high-technology Russian business people are hesitant
to release any data to outside sources.
The gathering of data is further limited by the fact that many traditional means of data
collection are unfamiliar to Russian business people. Methods such as mail or telephone
surveys are largely unknown in Russia and are not well received. This resulted in the
most effective means of data collection for this research being structured interviews
(Filafotchev et al., 1996; Issac and Michael, 1984; Buckley et al., 1976). However, this
methodology requires that access and cooperation be granted to the interviewer. Thus, in
Russia, unless some sort of connection previously exists or an introduction can be made
by someone who has such a connection, it is very unlikely that business people in Russia
will consent to an interview.
For this study, an individual associated with the Moscow Federal Institute of Electronic
Technology (MIET) was utilized to gather the survey data through personal interviews with
participants. This institute was the leading university in the Soviet Union for microelectronic
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 561
technology. MIET graduates are historically the leaders and researchers at the nation’s
premier semiconductor, computer, and electronics firms. Thus, an interviewer associated with
the university brings recognized credibility. In addition, this research occurred in Zelenograd,
Russia, the once top-secret center of the Soviet Union’s microelectronic effort and home of
MIET (Port and Galuszka, 1996). Prior to the breakup of the Soviet Union, the economic
focus of the entire city of approximately 200,000 people was high technology.3 There is
a significant relationship between the University and most high-technology business activity
in the city.
The survey was initially formulated jointly in English by the American and Russian
authors. This survey was then translated into Russian by an individual not associated with the
research. The translation was then reexamined for accuracy by the Russian researcher and
then back translated to verify the translation by one other individual not associated with the
research. This survey instrument was pretested on a single high-technology startup firm and
appropriate changes were made in the instrument by the authors.
The individual from MIET who conducted the interviews to gather the survey data was
well known in the technological community. This individual was trained to conduct the
interviews through both verbal instruction and sample interview training sessions to ensure
that valid and reliable information was obtained.
4.2. Sample
The definition of what constitutes a high-technology firm has proven difficult for
researchers (McCarthy et al., 1987). Some researchers have defined a high-technology firm
in a quantitative manner by selecting firms spending some specified level of their budget on
research and development (Maidique and Hayes, 1984). Others have utilized a qualitative
measure such as the sophistication of the firm’s product (Riche et al., 1983). The reluctance of
Russian business people to provide financial data precludes the first option; therefore, this
research utilizes a variation of the latter method.
MIET has established an entity referred to as a ‘‘technological park’’ or ‘‘technopark.’’ The
use of the term ‘‘park’’ should not be confused with an incubator or research park in the US at
which all firms are in a given location. Rather, it is an organization, which provides services
to high-technology startup firms throughout Zelenograd. Some of the services are free, but
most services are provided for a fee. Items, which can be very hard for a startup firm in
Russia to gain access to such as fax machines, photocopying, legal services, strategic
planning, and design assistance, are provided. Due to the tremendous resource shortage in
Russia, particularly for startup firms, there are numerous applications to join the technopark.
However, the management of the technopark (which came from the academic staff of MIET)
focuses its efforts solely on high-technology firms; it is estimated that 75% have a micro-
3 Three of the six electronics firms in Russia chosen as ‘‘base enterprises’’ by the government on
which the national semiconductor industry is to be maintained were in Zelenograd (Andreyev, 1995) The
only microelectronics firm in Russia outside of Zelenograd of substantial size is the Svetlana Electronics
in St. Petersburg.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576562
electronic focus (Zelenograd Scientific and Technological Park Report, 1995). Thus, they
supervise very closely which firms may join. As a result, it is believed that almost all high-
technology startup firms that are thought to exist in the area have chosen to participate with
the technological park in some manner. Additionally, while the chaos of the Russian economy
does not allow exact statistics on firms and their products to be available, it is believed by
government officials that these firms represent all of the known high-technology entrepren-
eurial startups with a microelectronic base in the Zelenograd area and a very high percentage
of such firms within Russia.
The 45 participants in the technopark with a microelectronic basis to their product were
utilized for the sample (see Bruton, 1997 for an in-depth review of technopark). The
participants had already been identified by the technopark’s management as high-technology
firms on the basis of their product. The researchers validated this designation by reviewing
the technological sophistication of each of the products of the park’s participating firms. This
review, particularly by the Russian coauthor whose academic training is on semiconductor
development and production quality, validated their designation as a high-technology firm in
each case. All 45 firms classified as high-technology startups through this process agreed to
participate in the research.
The principal founder of each firm was interviewed for this research. Such key informants
have proven to be accurate sources of data in the US (Brush and VanderWerf, 1992; Dess and
Robinson, 1984) and such single respondents have been utilized in prior US research
evaluating strategic concerns (Shortell and Zajac, 1990; Snow and Hrebiniak, 1980). The
use of such a single respondent would particularly be appropriate in Russia due to the
hierarchical nature of the decision-making process in a Russian firm (Elenkov, 1998). In such
situations, the principal founder of the firm is responsible for all key decisions, in much the
same way as Andrews (1971) described CEOs as the prime strategists in a business who
would have the most realistic understanding of their business.
The average age of the entrepreneurs interviewed was 41 years old, while the average
of the other founders of the firm was estimated by the principal founder to be 40 years
old. The principal founder and the other individuals in the founding team were
discovered to typically possess graduate technical degrees. The principal founder’s
education level was typically slightly higher than the other members of the team, with
a large number of the principal founders possessing the Russian equivalent of a PhD.
Prior to starting the firm, as expected, almost all members of the founding teams of the
high-technology firms worked together either immediately prior to starting the new firm
or in close proximity to founding the firm. In most cases, the lead founder of the high-
technology firm served a similar lead function at the prior employer, supervising the
other members of the founding team. The technology being produced by the startup firm
was reported as very similar to the prior employer’s technology. Additionally, as
expected, the principal founders almost always had no prior experience in areas such
as marketing and finance. Their employment and their experience prior to founding the
firm were focused on research and development and working in a large government-
related research institute. They estimated the average size of the government research
institutes they worked for to be 2600 employees. Prior to economic liberalization, of the
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200,000 individuals living in Zelenograd, approximately one-quarter would have been
employed in such research institutions.
4.3. Variable definition
4.3.1. Performance
Russian entrepreneurs typically refuse to release accurate direct financial data, as do all
business people in Russia (Puffer and McCarthy, 1995). Thus, measures such as profit, value
of products shipped, or sales could not accurately be determined for a large sample of firms.
Instead, a commonly used measure of new venture performance, growth in firm employment,
was used (McDougall and Oviatt, 1996). Growth was also used by Eisenhardt and
Schoonhoven (1990) when they examined the liability of newness in high-technology firms
in the Silicon Valley.
Growth in employment indicates that a new venture’s sales are increasing (Brush and
VanderWerf, 1992). A similar impact can be assumed in Russia. Once a firm employs an
individual in Russia, the individual has certain protection under the law, and dismissal at will
is typically not possible even in an economic downturn. Additionally, the firm must begin to
contribute to various government funds for certain items including the employee’s retirement.
Thus, firms are unwilling to hire an individual unless they have a strong need for the person
and can generate the cash flow to support the person’s employment. This is particularly true
for the startup new venture, which has very limited resources. Therefore, the growth in
employment of the Russian startup firm is an indication that the firm’s sales are also growing;
sales growth has previously been used to determine the impact of mitigating factors of the
liability of newness (Eisenhardt and Schoonhoven, 1990).
The dependent variable in this study is the annual percentage growth in employment for
the firm. All of the firms interviewed were started since 1990 and are at least 1 year old. The
annual percentage growth in employment was determined by calculating total percentage
growth in firm employment over the life of the new venture divided by the number of years
the firm had been in existence. The correlation between the performance measure and the age
of the firm was examined and found to be nonsignificant.4
4.3.2. Independent variable: founding team
Previous research has defined the founding team in various ways with some researchers
not even clearly defining, apparently assuming it is self-evident (Doutriaux, 1992). Others
have defined the founding team as individuals who occupied an executive position in the firm
when it began (Eisenhardt and Schoonhoven, 1990). Alternatively, some have defined it as
4 To validate this measure, the researchers met with five of the entrepreneurs who were willing to discuss their
financial performance to a greater extent, although they still would not give exact numbers. These individuals were
asked initially to answer two qualitative questions based on Dess and Robinson (1984), which previously had been
shown to have a high degree of correlation with quantitative measures. The two researchers then discussed with
the entrepreneurs indications of their employee growth and financial results. Both the qualitative questions and the
verbal interactions supported employee growth as an appropriate indicator of the firm’s performance.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576564
those individuals who work to some degree in the firm, invest in the firm, and can expect to
obtain the proceeds of any profits from the firm (by the implication from the discussion of
Cooper and Bruno, 1977). Our concern in examining startups by Russian high-technology
entrepreneurs are the factors that mitigate the liability of newness. Therefore, it is this last
definition of the founding team, which will be utilized in this study since it focuses on the
input of resources into the firm.
4.3.3. Independent variable: innovativeness
To measure the next two independent variables, secondary data would be available in a
manner similar to Eisenhardt and Schoonhoven (1990). In their research, they examine a
single industry, semiconductors. They were able to obtain secondary data on a single data
item, which allowed uniform comparisons on issues such as product sophistication (micron
line length) to classify product innovativeness. However, no such secondary information is
available in a transitional economy such as Russia’s.5
Thus, qualitative measures must be utilized. Such measures are not without their
drawbacks. However, in this exploratory research within the confines of what information
could be obtained, such information could provide the greatest insight from the largest
number of respondents. The accurate evaluation of the innovativeness of a product can be
difficult to obtain. Therefore, multiple questions were asked of the principal founder to
obtain a more accurate perspective on the issue. To date, no widely established multi-
dimensional qualitative measure of product innovativeness has been established. Therefore,
in a manner similar to Zahra and Covin (1993), a scale was created based on different
dimensions of the innovativeness of the firm’s product. The questions on these dimensions
were based on prior research and writings on innovativeness. The firm’s score on the
innovativeness scale was determined by summing the responses to these three questions.
The first question used in the scale employed a Likert type scale (1–5) and asked the
respondents to rate the technological uniqueness of their product in the marketplace
(1 = unique and 5 = copy). The second question was a dichotomous question, which asked
the respondents whether they choose to principally compete based on (1) better product or
(2) better price. Those entrepreneurs with the more innovative product were expected to
compete on the basis of better product while those with a less innovative product were
expected to compete on the basis of price (Porter, 1980). Finally, innovativeness should be
based not only on how the firm compares to other Russian firms but also to how it
compares to other worldwide competitors since technology is so mobile across borders.
Thus, the founding entrepreneurs were asked if there were international competitors in the
Russian market whose products were based on similar technology. If there were no
international competitors with similar technology, the firm’s product should be more
technologically innovative, while if there were international competitors with similar
technology, they were less technologically innovative. The dichotomous question was
5 Even if such information was available, it is unlikely that a researcher from the US could obtain it. Security
concerns reminiscent of the Cold War are still common in high-technology firms. The fact that an estimated 75%
of high-technology funding in the Soviet Union was military-related increases this tendency towards secrecy.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 565
scaled 1 = no international competitors with similar technology and 2 = international compet-
itors with the same technology. Summing the three questions, a score of 3 was the lowest score
possible for an innovative product and 9 the highest score for a less innovative product.6
4.3.4. Independent variable: market entry
The expectation is that since most interaction with customers in the Russian market would
be conducted by the principal founder, they would be aware of other products against which
they were competing. Additionally, the limited size of the Russian market for high-
technology products makes it unlikely that the entrepreneur would be unaware of any similar
products. Therefore, the research instrument solicited along a continuum a response regarding
the firm’s market when they entered. A score of 1 on the scale indicated that the firm was first
in the market, a pioneer. If the firm entered a market where they were one of the lasts to enter,
they would be considered a late follower (5 on the Likert scale). The date was treated as
ordinal data since the relationship between each of the variables may be exact, but one
response does reflect a greater or lesser response than the other. Hypothesis 3 proposed an
inverse relationship: the earlier the entry into the market, the higher the growth. Thus, it
would be expected, based on the hypothesis, that the lower the score on the Likert scale, the
higher the growth.
4.3.5. Analysis
In constructing the regression, the measure of market entry was examined using
dummy coding in a manner consistent with Cohen and Cohen (1983); such a tradeoff
in this exploratory examination is appropriate. Such an analysis allows the impact of the
different responses to market entry to be evaluated while holding the other independent
variables constant.
The measures of the independent variables were validated by a pretest from an in-depth
interview with one of the respondent firms prior to the general survey. In the pretest,
responses to these questions were discussed in detail and supported the use of the measures
as a means of obtaining information on these aspects of the research. The analysis
performed was regression with the dependent variable Growth in Employees. The
independent variables included Founding Team Number, which was the number of
individuals who invested in the firm with the expectation of obtaining the proceeds of
any profits, and Product Innovativeness, which was a composite measure composed of
Product Uniqueness (Likert scale measured 1 = unique, 5 = copy), International Competitive
Products (international firms with similar products 0 =No, 1 =Yes), and Price or Product
Differentiation (0 =Differentiation, 1 = Price). Three categories of the Market Entry were
created. The first category of earlier entrants (1 on the Likert scale) was assigned the
intercept term. A second dummy variable was for the respondents who indicated that they
were one of the first few firms in a market (2 on the Likert scale) and those firms that
6 The higher the innovativeness score, the lower the innovativeness of the firm, while the lower the
innovativeness, the higher the innovativeness of the firm.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576566
indicated they were neither one of the first nor one of the last, a later follower (3 on the
Likert scale). One firm indicated that it was a ‘‘4,’’ one of the later firms to enter the
market, and was assigned to category 2. The third category of firms, latter entrants (5 on
the Likert scale), was assigned to the second dummy variable.
5. Results
5.1. Variable means, standard deviation, and correlation
Table 1 provides the means for the variables. The average number of five founders in
Russian firms is large by the standards of established economies; prior research showed that
in the US, high-technology firms typically had three founders (Eisenhardt and Schoonhoven,
1990), while in Canada, three were two founders (Doutriaux, 1992). However, in examining
the standard deviation for the variable, it is quite clear that the range for the size of these
teams can be considerable. In fact, in the sample, the number of founders ranged from 1 to 20.
Table 1 also presents the correlation of the variables and demonstrates that multi-
collinearity should not be a concern with this sample. Additionally, the variance inflation
factors (VIF) were run to test for multicollinearity. The results for the variables were
approximately 1.0. Neter et al. (1989) argue that multicollinearity is not a concern if VIF
values are less than 10.0.
5.2. Regression results
Table 2 presents the results of the regression. The total regression was significant at 0.002
with a r2 of .36. Thus, the regression model accounted for a meaningful amount of variance in
new firm growth. Hypothesis 1 proposed that the larger the founding team, the greater the
firm growth. This variable was significant at .05. Thus, Hypothesis 1 was supported. The
regression estimate for the Technological Innovativeness variable was � 1.7 and significantly
different from zero, reflecting that less innovative startups will experience higher growth. The
negative sign denotes an inverse relationship; performance improved as technological
innovation increased.7 This result indicates that as firms sought to decrease technological
innovativeness, performance declined; thus, Hypothesis 2 was rejected. Hypothesis 3 argued
that earlier entry would lead to greater performance. Each of the variables was significant.
However, the variance explained by the ‘‘Later Followers’’ was twice the level of ‘‘First
Movers.’’ Thus, Hypothesis 3 was rejected; later followers were more likely to have greater
growth in employment.
To validate the importance of team size in obtaining resources for the firm, during the
interview, participants were questioned about the financial sources of their financing. Most
7 Normally, a hypothesized inverse relationship would yield a negative coefficient. However, since a low value
for the firm indicates high innovativeness, our hypothesis translates to an expectation of a positive coefficient.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 567
Table 1
Mean, standard deviation, and correlation for dependent and independent variables (P values noted in parentheses)
Variable Number
of firms
Mean Standard
deviation
Founding
team
Product
innovativeness
First
mover
Early
follower
Late
follower
Product
uniqueness
International
competitive
products
Price or product
differentiation
focus
Growth 45 2.3 5.8 .32 (.04) � .36 (.01) � .201 (.18) � .11 (.46) .26 (.08) � .31 (.04) � .12 (.43) .26 (.08)
Founding team 42 5.2 4.0 � .10 (.55) � .18 (.25) .21 (.18) � .08 (.59) � .11 (.50) � .05 (.76) .01 (.96)
Product
innovativeness
45 5.3 1.5 � .26 (.09) .01 (.94) .17 (.26) .90 (.000) .35 (.02) .62 (.000)
First movers 45 0.13 0.34 � .29 (.05) � .40 (.01) .22 (.15) .07 (.64) � .35 (.01)
Early followers 45 0.51 0.50 � .76 (.00) � .05 (.76) � .03 (.87) .16 (.30)
Late followers 45 0.35 0.48 � .20 (.18) � .02 (.88) .08 (.58)
Product
uniqueness
42 2.3 1.1 .04 (.77) .40 (.01)
International
competitive
products
45 1.6 0.5 � .05 (.74)
Price or product
differential focus
45 1.4 0.5
Growth: percentage growth in started firm’s employees. Founding Team Number: number of individuals who invest in the firm and expect to obtain the
proceeds of any profits. Product Innovativeness: measure composed of composite of Product Uniqueness, International Competitive Products, and Price
Product Differentiation measures; most innovative firm product score 3, least innovative firm score 9. First Mover: ranking of firm on a five-point scale as a
first mover = 1, 0 if not. Early Follower: ranking of firm on a five-point scale as a 2 (not first but soon after) = 1, 0 if not. Late Follower: ranking of firm on a
five-point scale as either 3, 4 (either neither one of first nor last or as one of later entrants) = 1, 0 if not. Product Uniqueness: rating of technological
innovativeness of firm’s product: 1 = unique, 5 = copy. International Competitive Products: evaluation of whether there are products from international firms
with similar technological features: 1 = no, 2 = yes. Price or Product Differentiation Focus: evaluation of whether positioned firm against competitors based
on product differentiation or price of product: 1 = differentiation, 2 = price.
G.D.Bruton,Y.Rubanik
/JournalofBusin
essVenturin
g17(2002)553–576
568
refused to provide any information, but of those that did, none reported any venture capital,
bank, or government financing. Beyond the original founding team, the other source of
financing available to these firms were family members of the founding team.
6. Discussion
The results presented here are noteworthy in providing the first evidence that high-
technology firms and entrepreneurs in a transitional economy, such as Russia’s, have
similarities and unique differences, with high-technology entrepreneurs in more stable
economies. Specifically, this study provides evidence to support the predictions for the
size of the founding team (Hypothesis 1). In light of the severe resource shortage facing
Russian entrepreneurs, it is perhaps not surprising that the ability to integrate as many
individuals as possible into the operation of the firm mitigates the liability of newness
(Hypothesis 1). The larger team allowed the startup to generate more financial resources
internally. Additionally, the larger team limits the need for financial resources since
more individuals are available to do the myriad tasks necessary in a startup firm
(Roberts, 1991).
This study did not examine the manner in which the team members interact with each
other. In the US, it is typically believed that large teams can bring difficulties in management
and decision making (Kamm et al., 1989). However, the evidence here is that this is not the
principal concern in Russia but rather that resource access is the focus. This difference can, in
part, be explained by the nature of how the Russian teams are formed which is different from
those of the US. Typically, Russian founding teams involve individuals with a long history of
work with each other. This long history of working together can act to mitigate many of the
difficulties, which plague founding teams in the US whose members know each other far less
well. As the economic transition matures in Russia, it is likely that the situation, with respect
to founding teams, will change significantly. Increasingly, founding teams may not have such
a long common work history since, ultimately, most research teams leaving large state
businesses and research laboratories will have done so during this transitional period. One of
Table 2
Regression results (dependent variable: annual percentage growth in employment)
Independent variable Unstandardized regression coefficients; probability >F Standard error
Founding team number 0.4** 0.21
Product innovativeness � 1.7*** 0.58
First mover 5.28* 1.55
Early follower 8.26** 1.99
Later follower 11.897*** 2.83
Model r2 .36
Regression F value (df = 4,41) 5.16***
* P=.10.
** P=.05.
*** P=.01.
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 569
the longitudinal issues that merits future investigation in Russia is how such founding teams
change and impact firm success. Additionally, such longitudinal studies should examine the
ideal size for such teams. The larger team may aid in the initial growth of the firm; however,
as this large number of individuals must be supported, such large teams may not be ideal for
the survival of the firm.
Hypothesis 2 was significant but in the opposite direction predicted; thus, the more
innovative the product, the more the firm grew. Hypothesis 2 was consistent with evidence
from the West that innovativeness did not produce the best initial results in mitigating the
liability of newness. However, it was also previously noted that there is evidence from other
domains that support the benefit of technological innovativeness to firms in stable
environments (Doutriaux, 1992; Sandberg and Hofer, 1987). Thus, while the evidence
presented here is counter to that predicted, it is consistent with many findings in the broader
domain of entrepreneurship.
Many of the established high-technology firms in Russia that grew out of the old state
businesses have found a competitive niche by producing low cost, undifferentiated products
(Port and Galuszka, 1996). For example, one semiconductor firm located in Zelenograd,
Mikron now controls 20% of the world market for microchips used in watches while the
other large semiconductor manufacturer in the city, Angstrom, is a dominant provider in the
market for microchips used in handheld calculators. The production costs in Russia of
many large high-technology firms, like Micron and Angstrom, are such that they can
generate significant cash flow by becoming the lowest cost producer in a given market.
However, the pursuit of strategies relying on such a low cost strategy provides these large
firms with revenue without generating significant profits. Additionally, both of these large
high-technology firms have also pursued massive layoffs of workers during this time; for
example, Micron eliminated over half of its staff between 1992 and 1995 (Bruton and
Rubanik, 1997b). Thus, on neither the measure typically used for established firms’ profits
nor on that used here for entrepreneurial firms’ employee growth do the established
technology firms perform well.
The results of the research conducted here indicate that those firms, which can be most
technologically innovative or unique, will be the most successful. Therefore, rather than
replicate the difficulties of the large state firms (from where many of these entrepreneurs
came), they are seeking new strategic approaches. However, the firm’s expansion efforts are
still largely focused on Russia. The interviews disclosed a few firms that have attempted to
pursue international business beyond Russia. However, most of the firms that have attempted
such activities have quickly abandoned them. The resources to support wide geographically
spread entrepreneurial efforts simply are not available. Instead, Russian firms have sought to
target their products inside Russia where language barriers and cultural differences are
minimal and costs are lower.
Future research should expand the understanding of the role of technology in Russian
startups. For example, the evidence here is that greater technological innovation leads to
greater firm performance as measured by employee growth. But, the interaction may be more
complex. The level of capital requirements may interact with the nature of the technology of
the product and the economies of scale required for the product. A larger sample of high-
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576570
technology firms drawn from across Russia would allow greater investigation of such issues.
The Soviet Union historically established areas of concentration for its high-technology
businesses. Thus, under state planning, cities similar to Zelenograd include: Chernolgolovka,
which concentrated on laser technology; Rushkino, which concentrated on biology-related
areas; Monina, which concentrated on aviation; and Mitechi, which concentrated on space-
related areas. All these cities were closed cities prior to 1991 but now are open to Western
researchers. Therefore, future research should also investigate high-technology startups in
these cities to see if similar results are found.
The evidence from Hypothesis 3 is that the firms also lower the risk of their focus on
innovative products by moving into the market later rather than earlier. It has been recognized
that in emerging markets that are fragmented, there may be limits to advantages from being a
first mover (Nakata and Sivakumar, 1997). In a resource-limited environment such as Russia,
being the first mover has significant risks because choosing the wrong resources on which to
focus can be particularly damaging to a startup firm with limited resources. The fact that
transitional economies are so turbulent means that the potential for picking the wrong
resources is particularly high.
Focusing the research on Zelenograd startups resulted in an industry concentrated in
microelectronics. Study of a single industry provides better control over confounding
industry-related variables. For example, differing industry growth rates and industry struc-
tures may impact the research results in a sample from several industries but should not be a
factor in this study. However, future research should examine whether similar results
concerning technology are found in startups in other industries. Additionally, the addition
of other industries will allow bigger sample size, which will allow better testing of the impact
of the timing of market entry. Specifically, the sample size of six firms of the first entrants cell
in the analysis was relatively small. Therefore, the increase in sample size with firms from
other industries will allow greater certainty in the analysis that later entrants into a market
perform better.
7. Public policy implications
This research has significant implications for Russia. The nation’s gross domestic product
continued on a downward slide until this year when rising oil prices resulted in some relief for
the country. However, large-scale unemployment and underemployment remains chronic and
the nation’s industrial infrastructure continues to decline. The nation desperately needs to
invigorate itself if it is to become a world citizen whose economic power is comparable with
other world leaders. The mean increase in employment among the 45 firms examined was
239%. The evidence presented here is that entrepreneurial startups have the potential to
provide significant employment opportunities for the nation. However, the government will
need to promote entrepreneurial firms if they are to reach their full potential.
To date, the government has not actively sought to encourage small businesses or high-
technology ventures. Almost none of the high-technology startups examined here reported
preparing a business plan before beginning their business. Additionally, since the founding
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576 571
team members came from the large research facilities where their sole focus was
technological issues, they had little preparation on topics such as financing the firm while
budgeting and marketing. Thus, helping entrepreneurs develop the necessary skills are
relatively simple activities that the government could encourage that could have significant
results for the nation.
8. Conclusion
This research, for the first time, examined resource theory in transitional economies and
high-technology firms. The research provided general support for the use of the theory.
Hypothesis 1 was supported: larger teams were likely produce greater resources and in turn
lead to greater firm success. Hypothesis 3 was not supported but, as noted in the development
of the theoretical rationale for Hypothesis 3, there has been a disagreement about what
resource theory would predict about first mover advantage in a transitional economy. The
authors’ rationale was consistent with the dominant Western logic but the evidence presented
here is that an alternative view of first mover advantage and resource theory in transitional
economic settings is more appropriate. The risk in identifying inappropriate resources to
focus plus the risk that resources such as distribution channels may even disappear is too high
for financially constrained firms.
Three specific founding firm variables were examined in this research. The exploratory
nature of this research in a single city where Russia’s microelectronic industry dominates
results in the use of a nonrandom sample. Future research should further our understanding
by examining a broader sample of firms with more numerous variables and richer multiple
scales. The variables examined here can provide a basis for the investigation of high-
technology firms in transitional economies. There will always likely be significant restraints
on the questions that can be asked of entrepreneurs in Russia. For example, due to
excessive taxation and a very active Mafia presence, financial data are almost never
released nor considered reliable when it is released. Thus, issues such as funding sources
and levels of startup capitalization cannot typically be investigated. However, future
research in startups should expand the variables examined to include topics such as the
relationship between planning and performance, the nature of the firm’s asset makeup, and
the firm’s international posture.
The research, also for the first time, identifies the means by which Russians can encourage
high-technology entrepreneurial ventures in their own environment. Russia continues to face
tremendous difficulties in its transition to a market economy. However, entrepreneurship
offers the potential for the nation to solve many of its economic problems (Hisrich and
Gratchev, 1993, 1995). The evidence presented here is that there are similarities between
high-technology firms in stable economies like the US and those in transitional economies
such as Russia. However, as detailed throughout this manuscript, there are also unique
differences, which cannot be overlooked. Future research should continue to expand the
investigation of this critical area not only by examining the similarities but also by seeking
differences. The findings not only will have a significant impact on the economic success of
G.D. Bruton, Y. Rubanik / Journal of Business Venturing 17 (2002) 553–576572
Russia but will also ensure that future efforts between Russia and the world focus on
economic cooperation and not military competition.
Acknowledgements
Appreciation is expressed to Chuck Bamford, Gary Castrogiovanni, Karen Cravens, Vance
Fried, Benjamin Oviatt, George Vozikis, Margaret White, and Stuart Youngblood for their
comments on earlier versions of this manuscript.
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