From start to stardom: The impact of resource allocation strategies on new venture survival and growth

An enduring question in the survival and growth of new ventures literature is why some start-ups secure survival while others fail, and why certain nascent firms achieve rapid growth in the ensuing years while many stagnate. This study investigates how conservative and aggressive resource allocation strategies impact these outcomes. By analyzing 44,559 firm-year observations in Italy from 2011 to 2019, we find that the more aggressive the resource allocation strategies-i. e., allocating a larger share of total assets to non-financial resources-the greater the likelihood of survival in the early phase. The same holds true during the growth phase, where ventures that continue adopting aggressive resource allocation strategies significantly increase their chances of becoming high-growth firms. Additional analysis highlights the critical role of plant, property, and equipment in influencing these outcomes. We also demonstrate that past resource allocation strategies exert a path-dependence effect. This underscores the importance of early-stage decisions in shaping a venture's long-term growth trajectory, as the more aggressive the resource allocation during the survival phase, the higher the likelihood of transitioning into a high-growth firm in later stages.