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DISCUSSION

Our examination of the extent to which the relationship between problem solving capabilities and new firm performance provides preliminary support for the supposition that knowledge based resources can provide new ventures with a differential resource position. Using a resource-based view of the firm we assumed that new businesses that acquire problem solving capabilities can develop a core competence that imparts a competitive advantage. This advantage would increase their probability of success. Our findings offer support for the notion that the relationship between problem solving and organizational survival depends on the sales growth pattern of new ventures. Both problems related to coping with government relations, developing good relations with unions, selecting a lawyer/accountant, developing goals and preparing strategic plans, and finding qualified executives influence new firm survival. Conversely, problems associated with finding qualified executives and minimizing start-up team conflicts had no direct impact on new firm survival.

We also assumed that the organization's learning capabilities may be impacted by the variation in systems dynamics that are established during the creation of the new venture. The creation of an organization is a dynamic process and there is no one pattern of activities that characterizes the establishment of a business. We assumed that the dynamics of an organization's growth trajectory during its developmental years would impact the ways in which learning accumulated and ultimately affect organizational survival. In this regard, we found some support. Firms in a fast start, high growth mode who did not identify a problem in finding qualified executives were prone to fail; yet firms who also did not identify this problem and firms who felt they had solved this problem, but were in a fast start, low growth mode were prone to survive. This suggests that for fast growing firms who fail to understand the need to recruit talented executives may increase their hazard for failure.

A second consideration in the learning capabilities of new firms is in reference to problems associated with the motivation of personnel. New firms that were low start and high growth who indicated that the motivation of personnel was not a problem increased their survival chances. This is also true for firms that were in a fast start, low growth performance mode who
believed they had solved this problem. However, for firms that were low start and low growth who identified no problems with the motivation of personnel increased their chances of failure. This suggests that growth rate influences problems associated with personnel motivation where solving the problem in a low growth mode improves chances of survival as opposed to firms who fail to identify motivation as an important problem for management to be attentive. High growth of the firm, on the other hand, may contribute to its own source of motivation. Hence, it does not directly require management to be attentive in this situation.

Finally, the results identify problems associated with the preparation of goals and strategic plans as important to the mode of performance of the new firm. Firms reporting this to be a continuing problem, having engaged in a fast start, but low growth effort were likely to fail. However, firms in a low start, high growth performance category who identified no problems or continuing problems in the preparation of goals and strategic plans were likely to survive. This suggests that high growth serves as a learning mechanism for managers as they work on the development of their strategic plans. However, the lack of growth may suggest that the strategic plans are viewed as inappropriate and thus in need of continual reworking. As a result, the failure to solve this problem under conditions of low growth may contribute to the demise of the new firm.

This preliminary effort represents a first step in understanding the relationship between organizational learning, core competence, and sustainable competitive advantage. Subsequent research should look more closely at the distinction between problems associated with securing resources and problems with implementing plans. The managerial problems we identified represent both categories. Both types of problems appear critical to survival, yet whether or not skills to resolve one type is more "strategic" than the other is unclear. Furthermore, the key business processes or routines that are developed within the organization to deal with the problem sets may vary.

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