Competitive Advantages in the First Product of New Ventures

Song, Lisa; Benedetto, C. Anthony Di; Song, Michael

doi:10.1109/tem.2009.2013836

Cited by 51 publications

(45 citation statements)

References 80 publications

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“…Although the commercial potential of an investment opportunity-e.g., based on the technology or the marketability of the new offering-is important [15], [16], VCs consider the entrepreneur to be the most important factors that affect firm valuation [10], [17]. Hsu found that prior founding experience, founders' ability to recruit executives through one's own social network, and founding teams with a doctoral degree holder were competences of entrepreneurial teams that received higher valuation for their proposed investment opportunities [11].…”

Section: Literature On Firm Valuation and Gut Feelingmentioning

confidence: 99%

Venture Capital Deals: Beliefs and Ownership

Narayanan

Lévesque

2014

IEEE Trans. Eng. Manage.

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We use a principal-agent model to examine how venture capitalists can determine the ownership division when fund-seeking entrepreneurs possess private information on their disutility of effort. This situation is especially applicable to earlystage first-time entrepreneurs seeking funding, since no history exists on their potential performance. The venture capitalist must thus consider this private information by forming a belief on the entrepreneur's effort level toward the proposed investment opportunity. Formal modeling enables us to describe how the deal process unfolds and to build a simulation. We then identify a unique investor's belief and resulting ownership sharing that maximizes the return to the entrepreneur, one that maximizes the return to the venture capitalist, as well as one that maximizes the deal welfare. We also conjecture an ordering relationship between these critical beliefs and between their resulting ownership allocations. Furthermore, we identify conditions under which the venture capitalist should choose to revise the investment offer if rejected by the entrepreneur. This paper thus moves us closer to a comprehensive theory of venture investment decisions. 1 We interchangeably use "VC" to denote both venture capital and venture capitalist, depending on the context. 0018-9391

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Section: Literature On Firm Valuation and Gut Feelingmentioning

confidence: 99%

Venture Capital Deals: Beliefs and Ownership

Narayanan

Lévesque

2014

IEEE Trans. Eng. Manage.

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“…This construct was operationalised in discrete amounts, scaled as minority (<50%), majority (>50%) and super majority (>75%) of total equity stakeholding. Supplier involvement [SUP] was measured using an established 4-item scale (Song, Di Benedetto, and Song 2010) which assessed (a) the involvement of major suppliers in all stages of the NPD process, (b) the nature of the relationship with major suppliers and (c) the supplier involvement in developing the product concept. Market Orientation [MO] was measured as a second-order construct consisting of two elements: market orientation towards customers [MO_C] and towards competitors [MO_CT] using established scales (Saxe and Weitz 1982;Thomas, Geoffrey, and Maria 2001).…”

Section: Methodsmentioning

confidence: 99%

“…[SUP] Supplier involvement -extent of supplier involvement (0 = strongly disagree, 10 = strongly agree) Song, Di Benedetto, and Song (2010) .733…”

Section: Constructmentioning

confidence: 99%

“…This study focuses on the stand-alone, newly incorporated venture and the resource challenges it faces. NVs -while free of the risk aversion and structural inertia that plague larger organisations' innovation strategies (Bart 1988) -are typically resource-poor (Shrader, Mulford, and Blackburn 1989;Song, Di Benedetto, and Song 2010;Marion, Friar, and Simpson 2012). This creates a problem since innovations like NPD-associated activities depend on resources to develop, refine, launch and to follow up on market successes.…”

Section: Introductionmentioning

confidence: 99%

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New product development in new ventures: the quest for resources

Bolumole

Calantone

Benedetto

et al. 2014

International Journal of Production Research

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Innovation and new product development (NPD) are becoming more important as strategic initiatives. Yet, innovation creates challenges for most existing organisations, thus leading to the emergence of new ventures (NVs) as vehicles to deliver innovation. NVs present owners and management with unique opportunities and challenges. On one hand, the NV can focus its attention on specific innovation(s) without having to compete with other goals and departments for resource access. Resources are critical to the successful development and launch of new products and can come from financial lenders and/or suppliers. However, because they are new and because their only asset of worth is the highly risky innovation, NVs are at a strong disadvantage in securing access to these resources. This study explores the effectiveness of using personal equity investments as a strategy for securing access and for enhancing NPD success. Using signalling theory as the theoretical framework and data from 745 NPD projects representing manufacturing innovations, this study finds that equity investment is particularly successful in its NPD impact although not impactful with suppliers. As a signal, it can be argued that equity is a strong, high-quality signal. Reasons for these findings and directions for future research are provided.

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“…Since significant challenges are faced by entrepreneurial startups launching a first product, and multiple factors influence the creation of a successful product [45], we cannot guarantee the market success of the GFC. However, Table 2 demonstrates that the GFC can be considered innovative, per Saunder's method, by having more than three innovative characteristics compared to competing products.…”

Section: Demonstrating That Reverse Innovation Canmentioning

confidence: 99%

Developing World Users as Lead Users: A Case Study in Engineering Reverse Innovation

Judge

Hölttä‐Otto

Winter

2015

Journal of Mechanical Design

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This paper examines the "reverse innovation" of the leveraged freedom chair (LFC), a high-performance, low-cost, off-road wheelchair originally designed for developing countries. A needs study of 71 developed world wheelchair users was conducted through three different data collection efforts. These data were contrasted with studies of 125 developing world wheelchair users, who were shown to be lead users for their developed world counterparts. The GRIT freedom chair (GFC), the developed world version of the LFC, was designed based on results of the study. By recognizing developing country users as lead users, designers can reveal latent needs and create globally disruptive innovations.

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Competitive Advantages in the First Product of New Ventures

Cited by 51 publications

References 80 publications

Venture Capital Deals: Beliefs and Ownership

Venture Capital Deals: Beliefs and Ownership

New product development in new ventures: the quest for resources

Developing World Users as Lead Users: A Case Study in Engineering Reverse Innovation

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