Escaping the Prior Knowledge Corridor: What Shapes the Number and Variety of Market Opportunities Identified Before Market Entry of Technology Start-ups?

Abstract

The choice of the firm's market environment is one of the fundamental decisions of firm founders. We study the pre-entry generation of founders' market choice sets by investigating their search for market opportunities in which the firm's technological resources, as embodied in a product or service, can be commercialized. Analyzing data collected through personal interviews with founders of 496 technology ventures, we find that founding teams with more diverse industry experience and more diverse external knowledge sourcing relationships identify not only a larger number of but, in particular, more varied (distant) market opportunities. However, the extent to which strategic variety of such opportunities is identified depends on the founders' technological expertise, whereas technological expertise is less relevant in identification of the number of opportunities. Furthermore, by showing that the extent and nature of the firm's pre-entry opportunity set has a significant effect on the likelihood of subsequent firm diversification, we document how initial constraints in founders' choice sets can have a lasting impact on the growth potential that the new firm exploits over time. We discuss the implications of our findings for the literatures on organizational learning and innovation, entrepreneurship, as well as the strategy literature examining firm growth, diversification, and value creation.

Maneuvering in Poor Visibility: How Firms Play the Ecosystem Game when Uncertainty is High

“…Based on real-option logics, several authors have highlighted the importance of generating multiple alternatives (see, e.g., Gruber et al, 2008Gruber et al, , 2013 and have advised managers to keep their options open over time instead of committing prematurely to wild bets (McGrath & MacMillan, 2000). Our findings extend these recommendations to settings previously characterized as "stepping stones" (McGrath & MacMillan, 2000: 168-171;2009: 61-62).…”

“…Specifically, they need to draw on influencing, monitoring, and updating strategies to ensure that the emerging value proposition will evolve in such a way that control points through which the firm hopes to capture some of the created value can actually ever apply. Finally, we highlight how our insights may hold the potential to provide a fresh view toward combining more goal-oriented (Gruber et al, 2008(Gruber et al, , 2013McGrath & MacMillan, 2000) and more process-oriented (Baker & Nelson, 2005;Sarasvathy, 2001;Sarasvathy, Dew, Read, & Wiltbank, 2008) perspectives of entrepreneurship.…”

Are researchers deliberately bypassing the technology transfer office? An analysis of TTO awareness

“…Several entrepreneurship scholars have built on the knowledge corridor thesis to explain how prior experiences lead to differences in the likelihood of identification and exploitation of opportunities for the commercialization of new products and services (Ardichvili et al 2003;Gruber et al 2013;Shane 2000) as well as opportunities for innovation (Cliff et al 2006;Shepherd and DeTienne 2005). It is well acknowledged that individuals are more capable of navigating aspects of the venture creation process when they have relevant knowledge (Davidsson and Honig 2003;Shane 2000).…”

Entrepreneurs, Strategy, Venturing Process and Industry Environment: A Configurational Approach to New Venture Emergence

“…Entrepreneurs' prior knowledge and experiences are critical factors for venture emergence (Gruber, MacMillan, & Thompson, 2013). Some knowledge necessary to firm establishment generally is obtained from personal past experience.…”