Market Size Expectations and Early-Stage Venture Profitability – The Unexpected Role of Product Novelty
Type
conference paper
Date Issued
2023-06-10
Author(s)
Abstract
Our work was motivated by the empirical observation that there is a negative relationship between the number of targeted customers and early-stage venture profitability. Following an abductive research approach and using longitudinal data from a representative sample of nascent entrepreneurs, our analyses suggest that this negative association applies to ventures with a low degree of product novelty but not to innovative ones, which is again unexpected. We theorize that even if new ventures offer imitative products only, they still have to overcome the liability of newness and achieve legitimacy in the market which might at the outset be easier when targeting few rather than many customers. Previous research might have overestimated the growth potential of targeting a large market while underestimating the challenges of acquiring customers for new ventures with limited resources.
Language
English
Event Title
DRUID23
Event Location
Lisbon, Nova School of Business and Economics
Event Date
10 - 12 June 2023
Official URL
Division(s)