Academic journal article Academy of Entrepreneurship Journal

Dynamics of Fast Market Entrance for Young Entrepreneurial Firms Providing Products in Markets: Innovation, Organization and Entrepreneurs

Academic journal article Academy of Entrepreneurship Journal

Dynamics of Fast Market Entrance for Young Entrepreneurial Firms Providing Products in Markets: Innovation, Organization and Entrepreneurs

Article excerpt

INTRODUCTION

How do young firms speed up the market entrance? For young firms extensively pursuing fast growth, fast market entrance is a significant milestone in their success. Slow market entrance, which means the delay of first revenue, is also one of the reasons for the high mortality rate of young entrepreneurial firms. Literatures of entrepreneurship found that there are other reasons fast market entrance is important for young firms. First, early cash flow generation is critical to gaining financial independence (Schoonhoven, Eisenhardt, & Lyman, 1990). For new technology-based firms (NTBF), they often experience a shortage of cash flow at the stage of research and development thus; their survival depends on an external source of financing during this time. Second, early entrance means faster visibility in the market. Therefore, a firm's brand reputation depends upon early entrance. Not to mention that the legitimacy of an organization appeals to investors, customers get to know the product and organization that enters the market at the beginning of an industry. Third, fast-moving organizations get to secure a large installed base. Impressing customers is critical, especially where direct network externality is crucial for the success of innovation. Therefore, early entrance to market increases the likelihood of a firm's survival (Schoonhoven et al., 1990). In short, accelerated commercialization is a critical basis of competition where rivals and competitors strive toward seeking new sources of knowledge to differentiate products and services (Porter, 1980).

To address the issue, literature of entrepreneurship research studies strategies to speed up market entrance with an aim to provide strategic implications for young firms at their early stages. One of the trends is to extend insights developed from the literature of new product development (NPD), which studies the speed of innovation (Nelson, 1991). NPD literatures have dedicated to research strategies to speed up NPD processes of high-tech businesses because fast innovation is a favorable harbinger especially for innovative organizations (Schoonhoven et al., 1990), since it indicates satisfaction of the initial milestone. Focusing on speed of innovation of a project, rather than speed of market entrance of a business, the NPD literature found that shorter development times are positively associated with increasing economic value for innovative organizations (Gilman, 1982). Moreover, keeping a fast pace is critical, especially for firms in the high-technology industries, where the industrial trend changes instantaneously (Brittain & Freeman, 1980; Eisenhardt, 1989).

Concerned with providing implications for innovation managers in large established firms (Heirman & Clarysse, 2007), most of NPD literatures were mainly contributes to understanding the dynamic process of innovation management. In this case, unit of analysis is a project, rather than a firm's stage. From a portfolio perspective, literature provides insights on how to allocate resources for internal and external R&D projects and programs (Gold, 1987; Wheelwright & Clark, 1992). Literatures approached the subject matter from the projectmanagements' viewpoints primarily concerns to provide different innovation steps and managerial tools to reduce time of the NPD (R. G. Cooper & Kleinschmidt, 1987; Hise, O'Neal, McNeal, & Parasuraman, 1989). From the communications perspective, the literatures highlight importance of team work and the role of communication to facilitate collaboration among different units of a firm, such as R&D and marketing. The implications of the existing literature are therefore beneficial for managers of large established organizations, who seek to find guidelines for optimized management of handling multiple projects simultaneously. One the contrary, entrepreneurs usually face less complicated processes of innovation due to their small and simple organizational structure in which less communication complexity is allowed due to relatively less people involved (Heirman & Clarysse, 2007). …

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