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Do market information processes improve new venture performance?

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  • Song, Michael
  • Wang, Tang
  • Parry, Mark E.
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    Abstract

    Does market information improve new venture performance? While some researchers argue that entrepreneurs do not need formal processes to collect and use market information, others suggest that the use of formal market information processes is positively related to firm performance. In this paper, we hypothesize that new venture performance is an increasing function of (1) the firm's level of customer interaction and (2) the use of formal processes for collecting and utilizing market information. We also hypothesize that these linkages will be stronger among new ventures serving emerging markets (i.e., markets in which customer needs and segments are evolving). We test these hypotheses using data collected from 224 new ventures located in the United States. Our findings indicate that, regardless of market condition, formal processes for the collection of market information are positively associated with the use of formal processes for market information utilization and this relationship is stronger among firms serving established markets. In addition, new venture performance is positively associated with the use of formal processes for utilizing market information and this relationship is also stronger in established markets. We also find that, in emerging markets, new venture performance is a positive function of the use of formal processes for collecting market information. Contrary to expectations, we find that, regardless of market condition, the level of customer interaction has a negative relationship with the use of formal processes for market information utilization and no significant relationship with performance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 25 (2010)
    Issue (Month): 6 (November)
    Pages: 556-568

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    Handle: RePEc:eee:jbvent:v:25:y:2010:i:6:p:556-568

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    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: New ventures Innovation Customer knowledge Market information;

    References

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    1. Chrisman, James J. & McMullan, Ed & Hall, Jeremy, 2005. "The influence of guided preparation on the long-term performance of new ventures," Journal of Business Venturing, Elsevier, Elsevier, vol. 20(6), pages 769-791, November.
    2. Cochrane, John, 2000. "The Risk and Return of Venture Capital," University of California at Los Angeles, Anderson Graduate School of Management, Anderson Graduate School of Management, UCLA qt7qm9h594, Anderson Graduate School of Management, UCLA.
    3. Shepherd, Dean A. & Douglas, Evan J. & Shanley, Mark, 2000. "New venture survival: Ignorance, external shocks, and risk reduction strategies," Journal of Business Venturing, Elsevier, Elsevier, vol. 15(5-6), pages 393-410.
    4. Ozgen, Eren & Baron, Robert A., 2007. "Social sources of information in opportunity recognition: Effects of mentors, industry networks, and professional forums," Journal of Business Venturing, Elsevier, Elsevier, vol. 22(2), pages 174-192, March.
    5. Gruber, Marc, 2007. "Uncovering the value of planning in new venture creation: A process and contingency perspective," Journal of Business Venturing, Elsevier, Elsevier, vol. 22(6), pages 782-807, November.
    6. Coviello, Nicole E. & Brodie, Roderick J. & Munro, Hugh J., 2000. "An investigation of marketing practice by firm size," Journal of Business Venturing, Elsevier, Elsevier, vol. 15(5-6), pages 523-545.
    7. Soh, Pek-Hooi, 2003. "The role of networking alliances in information acquisition and its implications for new product performance," Journal of Business Venturing, Elsevier, Elsevier, vol. 18(6), pages 727-744, November.
    8. Kaish, Stanley & Gilad, Benjamin, 1991. "Characteristics of opportunities search of entrepreneurs versus executives: Sources, interests, general alertness," Journal of Business Venturing, Elsevier, Elsevier, vol. 6(1), pages 45-61, January.
    9. Paul Gompers & Josh Lerner & David Scharfstein, 2005. "Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999," Journal of Finance, American Finance Association, American Finance Association, vol. 60(2), pages 577-614, 04.
    10. Abbie Griffin & John R. Hauser, 1993. "The Voice of the Customer," Marketing Science, INFORMS, INFORMS, vol. 12(1), pages 1-27.
    11. Keh, Hean Tat & Nguyen, Thi Tuyet Mai & Ng, Hwei Ping, 2007. "The effects of entrepreneurial orientation and marketing information on the performance of SMEs," Journal of Business Venturing, Elsevier, Elsevier, vol. 22(4), pages 592-611, July.
    12. Gompers, Paul & Lerner, Josh, 2000. "Money chasing deals? The impact of fund inflows on private equity valuation," Journal of Financial Economics, Elsevier, Elsevier, vol. 55(2), pages 281-325, February.
    13. Parker, Simon C., 2006. "Learning about the unknown: How fast do entrepreneurs adjust their beliefs?," Journal of Business Venturing, Elsevier, Elsevier, vol. 21(1), pages 1-26, January.
    14. Shane, Scott & Delmar, Frederic, 2004. "Planning for the market: business planning before marketing and the continuation of organizing efforts," Journal of Business Venturing, Elsevier, Elsevier, vol. 19(6), pages 767-785, November.
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    Cited by:
    1. Tischler, Joachim, 2014. "Characteristics of technological base, pace of technological development, and growth of young technology-based firms," EconStor Preprints, ZBW - German National Library of Economics 96156, ZBW - German National Library of Economics.
    2. Boso, Nathaniel & Story, Vicky M. & Cadogan, John W., 2013. "Entrepreneurial orientation, market orientation, network ties, and performance: Study of entrepreneurial firms in a developing economy," Journal of Business Venturing, Elsevier, Elsevier, vol. 28(6), pages 708-727.
    3. Brettel, Malte & Mauer, René & Engelen, Andreas & Küpper, Daniel, 2012. "Corporate effectuation: Entrepreneurial action and its impact on R&D project performance," Journal of Business Venturing, Elsevier, Elsevier, vol. 27(2), pages 167-184.

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