Organizational Routines Development and New Venture Performance

Abstract

To better understand how entrepreneurial ventures vary as they evolve, we introduce and develop the concept of an organizational routine in a prototypical state, a protoroutine. Protoroutines allow experienced new ventures (but not inexperienced start-ups) to economize on decision-making and execution time in problem solving by drawing from an inventory of prior solutions to challenges. Protoroutines are not, however, tailored to the challenge at hand. We embed protoroutines into a simulation-based model featuring agents with differing decision-making speeds and abilities of exploring more distant solutions, two parameters influenced by founding team characteristics. Search speed and distance are typically traded off against each other at the team design level. Protoroutines may therefore be particularly helpful in organizational contexts in which it is optimal to have both search speed and distance. We characterize the organizational contextual configurations along the dimensions of environmental turbulence and decision complexity in which protoroutines, search speed, and search distance are associated with elevated (and dampened) organizational performance. One important conclusion is that decision-making speed can be a valuable organizational resource across organizational environments. Overall, our agent-based model and simulation results deepen our understanding of how and with what performance consequence new ventures develop.

Keywords: organizational routine formation; founding team characteristics; new venture performance; agent-based simulation model

JEL Classification: M13, D21