LAUSR

Abstract Drawing on a sample of 288 new ventures from three disperse locations in China, we examine how dysfunctional competition impacts the innovation strategy of new ventures as they mature. Our results show that: 1) innovation strategy has a positive effect on new venture competitive advantage; 2) the impact of dysfunctional competition positively moderates this relationship in the early stages of the venture; 3) dysfunctional competition negatively moderates it as the venture matures. Thus, dysfunctional competition forces new ventures to focus on their resource shortages through innovation strategy. However, as these ventures mature, they accumulate greater resources, and dysfunctional competition acts to limit the firm's competitive advantage. With these findings, we contribute to the theoretical understanding of innovation strategy in a dysfunctional competition environment and how new ventures strive for competitive advantage in such a setting.