Market Place Information Scanning Practices of New Manufacturing Ventures

INTRODUCTION Monitoring the marketing environment has been described as a critical component for new venture success (Timmons 1985, Hills 1987). Normative models of new venture creation suggest that information about the size and growth rate of markets; purchasing characteristics of consumers; competitors' products, prices, and characteristics; and general demographic, economic, and industry trends should be examined before start-up and serve as input to a business plan (Timmons 1985; Stevenson, Roberts, and Grousbeck 1989; Hisrich and Peters 1989). Research in the entrepreneurship area has found that a lack of marketing information (size and characteristics of market) is one of the most serious problems faced by new ventures (Stephenson 1984; Vozikis and Mescon 1987; Hisrich and Peters 1989; Chrisman and Leslie 1989; Kraft and Goodell 1989). Typically, smaller ventures focus on near term conditions (Tesar 1987), which makes it difficult for them to adjust to long term changes. In addition, new ventures often face market and competitive conditions such as rapid growth, fragmented competition, or share domination by large firms (Stasch and Ward 1987), which can potentially exacerbate internal problems in collecting market information. In fact, one of the biggest barriers to new venture creation is the lack of marketplace knowledge (Vesper 1990). Similarly, the U.S. Small Business Administration points out that new and small ventures increasingly will have to be better informed of marketplace changes and develop flexible and creative strategies to survive in the face of advances in computers and communication, changing workforce demographics, increased foreign competition, and deregulation of the marketplace (SBA 1987, 1988). For continued survival, new ventures will have to closely monitor events, trends, and changes occurring outside of their enterprises by scanning the market environment. Environmental scanning is a process of seeking and collecting information about events and relationships in a company's environment (Fahey and King 1977). The information collected in environmental scanning typically includes that which comes from the company's industry environment (suppliers, buyers, or competitors) as well as information about national or global economic, socio-cultural, or technological trends (Fahey and King 1977). The process of data collection may be formal or informal (Daft and Weick 1984). This article will first present a summary of the background literature relevant to marketplace information scanning behaviors; second, report the findings of an exploratory investigation of sources, methods, types, and frequency of marketplace information collection used by a sample of new manufacturing ventures; and third, examine relationships between marketplace information scanning behaviors and performance. BACKGROUND LITERATURE Studies in the field of entrepreneurship related to marketplace information scanning fall into three groups: those investigating business planning behaviors, market research activities, and environmental scanning. Research on business planning in small and new ventures(1) shows somewhat inconsistent results on the value of the activity. Limited time and low formality in planning were found to be typical of new ventures in Sexton and Van Auken's (1985) early research; yet, other researchers found that for high technology companies more formal planning leads to increased sales (Teach and Tarpley 1987). In the area of market planning, most studies have investigated the relationship between time spent on market planning and performance (sales growth). Results show ventures that are larger (Stoner 1983), independent (Rudelis, Hartley, and Gobeli 1989), and high-growth firms (Andrus, Norvell, McIntyre, and Milner 1987; Shuman, Sussman, and Shaw 1985) spend more time on market planning and tend to have higher performance. However, it has been found that the quality of long range planning is more important than the quantity (Shuman and Seeger 1986; Frank, Plaschka, and Roessl 1989), and market planning is perceived to be more important than general business planning (Teach and Tarpley 1987). …