© 2019 The Ethnography Atelier

Siobhan O'Mahony

Feld Family Professor in Innovation and Entrepreneurship; Professor, Strategy and Innovation

Boston University Questrom School of Business

What Kind of Village Fosters Entrepreneurial New Venture Development?

Abstract

Scholars have defined entrepreneurship as the process of transforming novel ideas into innovative fully scaled ventures. Yet, research has focused primarily on the beginning or end of this process without attending to the “messy” middle, where innovations are developed, but the market for them is not. To gain market traction, entrepreneurial firms often engage in on-going market search, information gathering activities that probe whether an innovation can meet the need of a specific market. When entrepreneurial firms have already generated and developed their innovations, market search can strain limited resources. How does the way entrepreneurial firms engage and learn from market search influence the process of new venture development? We explore how a cohort of 28 entrepreneurial firms in a digital health accelerator conducted and learned from market search by examining their search approach, search breadth and learning behaviors over time. We show how entrepreneurial firms’ market search process varied in three ways (transactional, confirmatory and diagnostic) which produced different types of venture development progress. Firms that engaged in diagnostic search by pursuing joint-problem solving, searching broadly and leveraging ambiguous feedback were more likely to make progress as indicated by expansion of market scope and revenue than entrepreneurial firms conducting either confirmatory or transactional search. Drawing on theories of search and learning, we contribute a grounded theoretical explanation of how entrepreneurial firms’ vary in how they conduct and learn from market search to advance new venture development.