We aim to bridge this knowledge gap by exploring the fit between growth strategy and governance structure of Chinese entrepreneurial firms (see Figure 1). First, we provide literature with some different observations of governance structure and growth behavior of entrepreneurial firms, where ownership structure and board structure facilitate hypercompetitive strategies (D'Aveni, 1994) to gain market growth momentum.
In doing so, the study enriches the Prospector type of strategy with new features (Miles & Snow, 1978).
Besides these two strategies, foreign-invested firms have been observed to adopt the Analyzer type of strategy with characteristics between Prospector and Defender.
Chinese entrepreneurial firms are thus likely to adopt the Prospector type of strategy.
These studies address strategies adopted by Chinese entrepreneurial firms such as the Prospector type of strategy according to the classification by Miles and Snow (1978).
Prospector strategies are aggressive, focusing on a broad market domain, innovation and change.
SOEs, in sharp contrast to Chinese entrepreneurial firms, prefer the Defender type of strategy, which is less aggressive, less innovative, and more focused on a developed market.Business strategy deals with how firms gain competitive advantages in a selected industry (Quinn, Mintzberg, and Manes, 1988), and it is characterized as a realized strategy based on observed strategic patterns, either intended or emergent (Mintzberg, Ahlstrand & Lampel, 1998: 9-15).We specifically deal with the of Chinese entrepreneurial firms from their start to their IPO.For example, board leadership structure affects board strategy involvement in small firms (Machold, et al., 2011), and governance structure, such as ownership, influences debt financing strategy in privately-owned businesses in the U. (Schulze, Lubatkin & Kino, 2003), the CEO compensation strategy in family firms (Gomez-Mejia, Larraza-Kintana & Makri, 2003), the CEO selection strategy (Zajac, 1990), and the corporate R&D investment strategy (Baysinger, Kosnik, & Turk, 1991), which varies from American to Japanese culture (Lee & O'Neill, 2003).Most studies of ownership in the Chinese context still remain on a general level, which shows that the classifications of firm ownership-state-owned enterprises (SOE), privately-owned firms, and foreign-invested firms-are linked to distinctive types of business strategies (Peng, 2000; Peng, Tan & Tong, 2004; Tan, 2002). The current literature, however, tells us little about how governance structure and selected strategies in Chinese entrepreneurial firms fit together to promote growth momentum resulting in a leading position in the market.
In this paper, we continue this line of research in a specific context: Chinese privately-owned small firms, also termed Chinese entrepreneurial firms as they are often privately owned.