Abstract Based on a review of the literature of new technology-based firms, this study developed a strategic management framework for service and market development of entrepreneurial software firms (ESFs) by integrating business with technology strategies. Testing the strategic management framework in a pilot sample in Malaysia showed that vulnerability, market uncertainty, rapid technological change and development, and lack of resources, especially human resources, were constraining the growth and development of these software firms. The study found that for their product development, the Malaysian ESFs lacked a clear strategic focus on developing technological superiority, and accessing multiple sources of technology. Strategies critical for software market development that need to be improved were the speed to market entry, linkage with large customers, and development of appropriate distribution channels. Long term policy, top management commitment, responsiveness to change, and creation of an innovation accepting, entrepreneurship accommodating culture were found to be important facilitators for innovating new software.