IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/126789.html
   My bibliography  Save this paper

New venture creation: innovativeness, speed-to-breakeven and revenue tradeoffs

Author

Listed:
  • Estrin, Saul
  • Herrmann, Andrea
  • Levesque, Moren
  • Mickiewicz, Tomasz
  • Sanders, Mark

Abstract

We present a Schumpeterian growth model with new venture creation, under uncertainty, which explains the tradeoff between speed-to-breakeven, revenue-at-breakeven and relates this to the level of innovation. We then explore the tradeoffs between these outcomes empirically in a unique sample of 331 information and communication technology (ICT) ventures using a multi-input, multi-output stochastic frontier model. We estimate the contribution of financial capital and labor input to the outcomes and the tradeoffs between them, as well as address heterogeneity across ventures. We find that more innovative (and therefore more uncertain) ventures have lower speed-to-breakeven and/or lower revenue-at-breakeven. Moreover, for all innovativeness levels, new ventures face a tradeoff between speed-to-breakeven and revenue-at-breakeven. Our results suggest that it is the availability of proprietary resources (founder equity and labor) that helps ventures overcome bottlenecks in the innovation process, and we propose a line of research to explain the (large) unexplained variation in venture creation efficiency.

Suggested Citation

  • Estrin, Saul & Herrmann, Andrea & Levesque, Moren & Mickiewicz, Tomasz & Sanders, Mark, 2024. "New venture creation: innovativeness, speed-to-breakeven and revenue tradeoffs," LSE Research Online Documents on Economics 126789, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:126789
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/126789/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    entrepreneurship; innovation; new venture creation; proprietary resources; stochastic frontier analysis; schumpeterian growth model;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:126789. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.