Liability of Newness

Abstract

The concept of liability of newness in a start‐up and early stage venture context is reviewed. Key sources of this liability are identified. Approaches to addressing or mitigating the liability of newness are explored.

Contagion Entrepreneurship: Institutional Support, Strategic Incoherence, and the Social Costs of Over-Entry

“…Addressing the practical grounds first, it could be asserted that the failure of new, small abatement firms represents the same failure that most new, small firms experience. The liabilities of smallness and newness are well‐established premises in the strategic management literature (Aldrich and Auster ; Bruderl and Schiissler ; Freeman, Carroll, and Hannan ; Schoonhoven ). In this case, however, all the firms were small at entrance.…”

“…Those that entered solely on the coattails of institutional legitimation did not survive. For this reason, the story is more potent and complex than can be subsumed by reference to the liability of newness (Aldrich and Auster ; Bruderl and Schiissler ; Freeman, Carroll, and Hannan ; Schoonhoven ) or the liability of smallness (Aldrich ; Aldrich and Auster ; Freeman, Carroll, and Hannan ; Hannan and Freeman , ; Singh and Lumsden ).…”

The contingent role of interproject connectedness in cultivating open source software projects

“…How much resources from the interconnected projects can contribute to an OSS project success hinges on the internalization capability of the focal project (Zahra and George 2002). It is recognized that new product teams face the dilemma of limited resources or capital, which restricts their capability to synergize the internal dynamics with external resources (Patel et al 2015;Schoonhoven 2015). Teams at an early phase need to confront the cost of learning new rules, the cost of creating new roles (in the workgroup), the social relationship among internal stakeholders, and the ability to establish robust ties with external stakeholders (Gulati and Higgins 2003;Li et al 2008).…”

“…5 OSS project age is an adjacent measure of maturity. Assuming that organizations accumulate innovation capabilities at the same rate, older organizations should outperform the younger ones (Schoonhoven 2015). However, this assumption has been challenged by several studies because an organization's age may not be a reliable proxy for maturity in terms of innovation capabilities (Coad et al 2016).…”

Equity Crowdfunding: The Influence of Perceived Innovativeness on Campaign Success

“…The first reason for this is related to the risk induced by innovation (Hall, 2005). In early‐stage situations, the entire start‐up is an innovation, which could lead to a situation of liability of newness, making these start‐ups particularly risky and vulnerable and thus potentially less attractive to investors (Schoonhoven, 2015). The second reason is information asymmetry (Cumming, 2007; Kerr, Lerner and Schoar, 2014).…”