New Ventures

by

Haiyang Li

• LAST REVIEWED: 26 February 2020
• LAST MODIFIED: 26 February 2020
• DOI: 10.1093/obo/9780199846740-0187

Introduction

The growth of new ventures plays a significant role in job creation and economic development. New ventures, or entrepreneurial ventures, are broadly defined as those firms that are in their early stages of development and growth. Often they are in the process of bringing their initial products or services to the market and of developing their customer base. Relative to established firms, new ventures tend to have a higher propensity to fail because they often have limited resources and lack a “track record” with outside buyers and suppliers. This phenomenon, the “liability of newness,” has inspired scholars from many disciplines such as economics, sociology, psychology, and management to examine how to manage new ventures and improve their performance. Empirically, an eight-year time frame is often considered as a cutoff for being a new venture because it has been found that new ventures, on average, need eight years to reach profitability and twelve years to resemble established firms. However, there is disagreement on the year cutoffs. Some studies relaxed the time constraint by using ten years old as the cutoff point, while others used six years old as the cutoff point. Entrepreneurship is often defined as the creation of a new organization. In this sense, there are many overlaps between the domain of entrepreneurship and that of new ventures.

Reference Books

Research on new ventures is a relatively new field. Earlier work in this field, including Sandberg 1986 and Vesper 1990, tended to focus on the determinants of new venture performance including firm strategies and industry structure or founding conditions. Recent books such as Wasserman 2012, Barringer and Ireland 2018, and Kuratko and Hornsby 2018 have offered a more comprehensive view of the management issues related to the growth of new ventures.

• Barringer, Bruce R., and R. Duane Ireland. Entrepreneurship: Successfully Launching New Ventures. 6th ed. New York: Pearson Education, 2018.

  This textbook explores how to successfully launch and grow new business ventures. It provides a framework of the four steps of entrepreneurship, including making a decision to become an entrepreneur, developing successful business ideas, moving from an idea to an entrepreneurial firm, and managing and growing an entrepreneurial firm.

• Kuratko, Donald F., and Jeffrey S. Hornsby. New Venture Management: The Entrepreneur’s Roadmap. 2d ed. New York and London: Routledge, 2018.

  The book provides the fundamentals of effective new venture management including activities such as planning, marketing, financing, and growth.

• Sandberg, William R. New Venture Performance: The Role of Strategy and Industry Structure. Lexington, MA: Lexington Books, 1986.

  Based on case studies, interviews, and literature review, this is one of the first books that have provided a comprehensive study of new venture performance. It emphasizes that a new venture’s success may depend largely on its strategy and on the structure of the industry rather than on the entrepreneur’s personal characteristics, experience, and education.

• Vesper, Karl H. New Venture Strategies. Englewood Cliffs, NJ: Prentice Hall, 1990.

  This best-selling book offers an array of entrepreneurial strategies and examines business entry in startup and acquisition.

• Wasserman, Noam. The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press, 2012.

  This is a seminal book. Drawing upon a decade of research, including quantitative data on almost ten thousand founders as well as inside stories of founders, the book reveals the common pitfalls that many founders face and how to avoid them.