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Look Before You Leap: Market Opportunity Identification in Emerging Technology Firms

  • Marc Gruber


    (College of Management of Technology, Ecole Polytechnique Fédérale de Lausanne, CH-1015 Lausanne, Switzerland)

  • Ian C. MacMillan


    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • James D. Thompson


    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Entrepreneurs play a fundamental role in bringing new technologies to market. Because technologies are often configurable to serve a variety of different markets, it is possible for entrepreneurs to identify multiple market opportunities prior to the first market entry of their emerging firms, and if they elect to do so, to therefore have a choice of which market to enter first. The empirical results presented in this paper offer three new insights regarding this important early-stage choice in new firm creation. First, they reveal that serial entrepreneurs have learned through prior start-up experience to generate a "choice set" of alternative market opportunities before deciding which one to pursue in their new firm creation. Second, the analysis indicates that entrepreneurs who identify a "choice set" of market opportunities prior to first entry derive performance benefits by doing so. Third, the positive relationship between the number of market opportunities identified prior to first entry and new firm performance is nonlinear and subject to decreasing marginal return. The research literature has yet to acknowledge the notion of multiple opportunity identification prior to entry, and the related idea of selecting the most favorable market opportunity for the creation of a new technology firm.

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Article provided by INFORMS in its journal Management Science.

Volume (Year): 54 (2008)
Issue (Month): 9 (September)
Pages: 1652-1665

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Handle: RePEc:inm:ormnsc:v:54:y:2008:i:9:p:1652-1665
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  1. Geroski, Paul A, 1997. "Thinking Creatively About Markets," CEPR Discussion Papers 1694, C.E.P.R. Discussion Papers.
  2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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  5. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-38, July.
  6. Constance E. Helfat & Marvin B. Lieberman, 2002. "The birth of capabilities: market entry and the importance of pre-history," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 725-760, August.
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