Entrepreneurial Strategies 147rents can be protected. Sustainable competitive advantage depends on the firm’s ability
to move first and create isolating mechanisms. First-mover advantages and isolating
mechanisms prevent other firms from copying and crowding the firm’s profit. The
entrepreneur should ask: Do isolating mechanisms exist for the firm? Which ones should
be used to protect our resource advantages?
Any rent that the firm can collect may be eroded. Physical resources may be deplet-
ed, depreciated, or replicated, or become obsolete. The probability of appropriation is
high, too. The environment will seek to get a share of the rents through taxation (gov-
ernment), increased wage demands (employees), rising input costs (suppliers), or litiga-
tion (competitors and lawyers). The new venture’s founders and leaders must be sensi-
tive and alert to these pressures. It may serve the new venture well to create hybrid
strategies that combine elements of each type of rent and use more than one kind of iso-
lating mechanism.
Stage 4: Strategy
The next stage translates the assessment of competitive advantage into strategy. The firm
requires two related strategies: one to protect and manage its resources, the other a
product and market strategy. The first strategy has already been discussed in terms of
isolating mechanisms and first-mover advantages. The second set of strategies entails
dealing with the macroenvironment and the competitive environment described in
Chapter 3.
Stage 5: Feedback
In stage 5, the entrepreneur should focus on feedback, that is, evaluating and reassess-
ing the continuous process of new venture creation. Through the first four stages, re-
source gaps may have appeared and requirements for resources that are neither con-
trolled nor controllable may become apparent. Recycling through the process after hav-
ing identified the gaps is recommended. Gap-reducing and gap-eliminating strategies
can be the focus of the next round. Also, resource bases are inevitably depleted and
depreciated. In the next cycle, the entrepreneur must account for these erosions and
make plans for investments to maintain resources and replenish stocks and assets.
As we have seen throughout this chapter, no one strategy is best for all new ventures.
Because choice is crucial and many paths can lead to success, we need a way to evaluate
the strategy after it is chosen but before it is implemented. If we can do this, we can
weigh various alternatives against one another and make a better choice without having
to incur the consequences of choosing poorly. The following four criteria may be used
to evaluate proposals.^60 Each can be viewed as a test; if the strategy passes the tests, it is
superior to strategies that fail the tests.
- Goal consistency test. Does the strategy help the firm to accomplish its goals?
Are the strategy’s outcomes predicted to be consistent with those of previous strate-
gies and decisions? Will the strategy enable the firm to maintain its posture? - Frame test. Is the firm working on the right issues? Does the strategy address