Challenge accepted - Why some entrepreneurs succeed where others do not: An exploratory study on context and challenge perception and the choice of strategic activities of entrepreneurs in Dutch high-technology and clean-technology start-ups

Challenge accepted - Why some entrepreneurs succeed where others do not: An exploratory study on context and challenge perception and the choice of strategic activities of entrepreneurs in Dutch high-technology and clean-technology start-ups

Bauer, C.

Hartmann, L. (mentor)
Bouwman, W.A.G.A. (mentor)

Technology, Policy and Management

Innovation Management & Entrepreneurship

Management of Technology

2013-09-02

Wealth, prosperity and sustainable economic growth for future generations are topics which today’s policy makers and society have to deal with on an everyday basis. Radical technologies, disrupting incumbent technological and societal regimes play an important role in realizing these advances. Entrepreneurial innovation has been identified as the main vehicle in bringing these technologies to the market. Entrepreneurs in start-ups do so by searching for repeatable and scalable business models in markets with high growth potential and under extreme uncertainty. However, the complex environment of a start-up confronts them with a wide variety of challenges which they have to overcome by choosing suitable strategic activities in order to be successful. The entrepreneurs are the decision makers who select these strategic activities dependent on how they perceive this environment which is ever-changing over the life-cycle of the start-up. The decisions of the entrepreneur directly influence the performance of the new venture and lead to path dependencies in its further development. The exploratory research conducted in this thesis aims to draw a picture of this environment – the context of a start-up. It investigates what the context of high-technology and particularly clean-technology start-ups looks like, what challenges entrepreneurs in these start-ups face and perceive and whether or not these challenges are similar across different sectors and kinds of start-ups. Understanding and identifying critical shared perceptions of challenges in different start-ups makes it easier for policy makers and incubators to provide suitable support measures to entrepreneurs in order to make their start-ups more successful and contribute to a sustainable future. Two research questions are the focus of the thesis: Q1: What are common challenges that entrepreneurs in high-technology and clean-technology start-ups face? Q2: Is there a difference in perception and prioritization of challenges between entrepreneurs in different high-technology start-ups and specifically clean-technology start-ups? By employing Q-methodology, the research conducted in this thesis reveals shared viewpoints of 30 Dutch high-technology and clean-technology entrepreneurs on how they perceive certain challenges. 43 statements describing challenges of technology start-ups were derived from literature and exploratory interviews. The respondents were asked to rank these statements according to their subjective opinions and personal perceptions, resulting in a holistic picture of how their context moderates the challenges they face and the decisions they take. Two common challenges entrepreneurs in all start-ups shared were identified: ‘High pressure from incumbent industry‘ makes it important for start-ups to carefully choose a market niche in which they can communicate their value proposition with the biggest effect. ‘Long sales cycles’ lead to problems in cash-flow as access to working capital is limited. Additionally, clean-technology start-ups were often found to suffer from a dependence on commodity prices and regulatory frameworks. Contextual elements influencing challenge perceptions were observed to be more complex than only on an industry level. Thus, no significant differences in challenge perception and prioritization were found between entrepreneurs in hardware, software and service start-ups. However, four distinct profiles, describing shared viewpoints of entrepreneurs in four groups of start-ups emerged. Profile one, ‘clean technology behemoths’ describes entrepreneurs in start-ups relying on complex clean-technologies. They successfully developed a minimal viable product, sold it to launching customers in a strategically chosen niche and are currently aiming to enter mainstream markets. Their main challenge is to scale up their capacities in a sustainable way and they need capital to do so. Entrepreneurs in start-ups associated with profile two, ‘raw diamonds’ were identified to being in a phase in which they iterate between product development and analyzing market feedback. This group of young entrepreneurs is, even though inexperienced, well aware of their lack of commercial skills and market knowledge. They acknowledge that they need to acquire this knowledge before being able to move forward. Profile three, ‘innovators eager to grow’ describes young entrepreneurs in start-ups which rapidly developed a first minimal viable product and now aim to grow aggressively. However, by focusing too much on entering the market, they overlook an offset between actual market needs and their value propositions which hampers their diffusion and ability to expand. Entrepreneurs in start-ups associated with profile four, start-ups ‘in the valley of death’ did not acknowledge the need to adapt their value proposition to their customers’ needs by constantly asking for and implementing market feedback. A lack of communication with the market place leads to long product development cycles and a lack of launching customers, manifested in perceived difficulties to convince investors and to raise funding. The results found in this thesis contribute to academia by acknowledging the thus far commonly neglected link between process and environment and go one step further towards the contextualisation of entrepreneurship. It was found that not only perceived challenges lead to the choice of certain strategic activities but also previously chosen activities might introduce new challenges by influencing the context of the firm. The four identified profiles describe start-ups on different levels of maturity and showcase that decisions on strategic activities the entrepreneurs took in the past are linked to their present position and induce path dependencies. The findings of this exploratory research provide a base for further research. By identifying specific challenges and shortcomings entrepreneurs in high-technology and clean-technology start-ups face, a foundation is laid from which causal relations between perceived and actual challenges and specific strategic activities can be investigated in the future. Moreover, the observed path dependencies in entrepreneurial decision making represent a new perspective on strategic decision making theory and a basis for further research. The findings also allow for practical application and give implications on how to overcome the identified challenges. Policy makers are able to tackle challenges like funding gaps or coherence of innovation networks and practice transition management on a policy level. Incubators are able to analyze their start-ups following the identified characteristics and provide suitable support measures. Entrepreneurs are able to critically assess their current situation to prevent misinterpretation of challenges and missing out on valuable opportunities.

start-up
entrepreneurship
strategy
high-tech
clean-tech

http://resolver.tudelft.nl/uuid:1629ad61-fdb9-478f-96eb-ec01f5a0dd19

Student theses

master thesis

(c) 2013 Bauer, C.