Identifying the Inter-Organizational Factors Affecting New Firms Performance

Nowadays, although the role of new firms in creating jobs, innovation and competition has been known during the first years of their establishment, their failure rate is higher. Researches often focus on the external factors causing the failure, while internal factors have been less considered. This article aims to identify the internal factors affecting new firm's performance. To this end, an initial framework is developed to define objectives and design policies in the new firm's performance. Independent variables are classified into four main groups. They include financial resource, absorptive capacity at individual level, absorptive capacity at organizational level and marketing abilities. Financial performance, market performance and customer performance have been taken into account as dependent variables. The role of the mentioned independent variables is examined on the performance of 308 firms in the city of Tehran. Questionnaire is used to collect the data over the period 2007-2008. The findings show that the explanatory variables significantly predict the performance of the new firms. Among internal factors, absorptive capacity at individual level considering some aspects of human capital as well as social network of employees and entrepreneurs have the major determinants of the firm's performance.