Abstract Innovation strategy is conducive to build a new value chain, and imitation strategy complements the existing value chain. However, most of existing researches focus on innovation strategy and the attention on imitation strategy is insufficient. Many new ventures achieve success by imitation strategy in practice. Especially, as the institutions are less developed, which are the root causes of dysfunctional competition. Dysfunctional competition may restrict innovation strategy and promote imitation strategy. However, both of which have a positive impact on new ventures in practice, so that choosing innovation strategy or imitating strategy is crucial for new ventures. In this paper, it examines the moderating effects of dysfunctional competition in two types of environmental turbulence, including high technological turbulence and low market turbulence versus low technological turbulence and high market turbulence. Using data collected from 153 new ventures in China, it finds that both innovation and imitation strategies have positive effects on new venture competitive advantage, however, the effect is different: as typical Chinese context, the moderating effect of dysfunctional competition on imitation strategy has no relation with technological and market characteristics, and the moderating effect on innovation strategy is based on technological and market characteristics.
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