Selling to “the man”: How dependence on sales to the government affects new venture performance

ABSTRACT

How does dependence on sales to the government affect new venture performance and survival? And what can new ventures do to improve performance when they increasingly sell more to the government? Responding to these questions, we challenge longstanding but still untested theoretical assumptions that suggest new ventures who increasingly sell more to the government impede their performance and survival. Specifically, we utilize the Kauffman firm survey panel data, integrating resource dependence and stakeholder theories to argue and find support for a curvilinear relationship between new venture sales to the government and venture performance. Then, in efforts to help mitigate negative effects of government dependence, we suggest how offering high-tech products and government financial support can moderate this curvilinear relationship, helping strengthen performance the more that new ventures sell to the government. Finally, we find a linear relationship between new ventures that sell more to the government and survival.

KEYWORDS:

• New ventures
• resource dependence
• stakeholder theory
• government policy/regulation

Acknowledgments

The authors would like to thank Managing Editor Eric Liguori and our two anonymous reviewers, as well as David Williams, Chad Navis, and Franz Kellermanns for their valuable feedback throughout the review process. An earlier version of this paper won the 2014 Babson College Entrepreneurship Research Conference Journal of Small Business Management Award for Excellence in Research on the General Topic of Public Policy.

Disclosure statement

No potential conflict of interest was reported by the authors.