Start-up ventures: Towards the prediction of initial success

Abstract There are numerous studies on new product activities that try to measure the relative impact of different factors on success or failure. The research on new ventures is less comprehensive, and often only a few items are considered. This article reports on the early results from a research program that is combining the research on both new products and new ventures, to come up with a more comprehensive evaluation of relative success factors. The literature was reviewed to determine the most significant factors found in prior work. A 68-item questionnaire was developed and used with the chief executives of 24 new technical ventures, all associated with the RPI Incubator or Technology Park. Ten of the 17 factors investigated yielded reliable measurements, which were then subjected to siepwise regression analysis to determine the relative impact of each factor on the two success measurements used: Initial Quantified Success and Initial Subjective Success. It should be recognized that Initial Success does not necessarily predict ultimate success, an area to be investigated in continuing studies.) The two success measurements were not correlated and the correlations with the independent variables were therefore different. Initial Quantified Success showed a strong negative correlation with market attractiveness. Companies entering smaller or more slowly growing markets were doing better than those in the larger, faster-growing markets. Initial Quantified Success was positively correlated with the level of Entrepreneurial Characteristics exhibited by the leader(s). These were the only two variables exhibiting significant relationships with quantified success. Initial Subjective Success was negatively correlated with Market Dynamism rather than Market Attractiveness. Negative correlation was also measured with both R&D Intensity and the Organic Nature of the firm. This latter finding is contrary to much of the new product literature, which emphasizes the need for individual independence and initiative. Such may be the case with new products or ventures within large organizations, but in small independent ventures the entrepreneur should provide strong control and guidance. A positive correlation was observed with the Entrepreneurial Characteristics and also with the degree of match between the firm's experience and the new business requirements. No significant correlation was observed with 1) Product or Service Uniqueness, 2) Gross Margin, or 3) Strategic Aggressiveness. The lack of correlation with these variables is surprising, but it may be due to the small size of the sample. The research confirmed two items that are understood by most scholars and experienced practitioners: the importance of the entrepreneur and the importance of pursuing new ventures that match the technical and market experience of the team. The less obvious results are those that suggest that success is favored by strong review and control by the entrepreneur rather than the development of employee initiative and independence. Also, the initial success appears to be coming more readily to firms in more slowly growing or less dynamic markets. It will take an expanded sample and a longer time horizon to determine if these initial trends continue to ultimate success.