New ventures: Uncovering start-up sequences for innovative and non-innovative new ventures

Abstract

The venture creation process of 24 ventures in the Information and Communication Technology industry and Environmental Technology industry was examined by means of questionnaire guided interviews. The premise of this study is that innovative and non-innovative venture creation processes differ. The venture creation stage is identified as the period between the nascence of a business idea until the moment of sustainable profits. We segregated the ventures along the lines of non-innovative, incrementally innovative and radically innovative. The venture creation processes were examined along the core variables of people, finance, product development and also the venture creation process as a whole. The time of occurrence for the core activities was mapped for each venture during a telephonic interview, thereby making it possible to identify an order of activities instead of only the occurrence. The order of activities provided input for the creation of ideal-typical sequences.

The results show significant differences between innovative and non-innovative ventures on every measured aspect. The overall venture creation length does reveal a statistically significant difference, however the period towards registration of the venture and the period towards sustainable profits show a longer duration. Innovative ventures, especially radical innovative ventures, employ more people during the venture creation phase. The higher the level of innovativeness the more founders are involved, the more people are employed directly and also more external advisors are being hired.

The general premise that new ventures favor internal- above external financing was also confirmed. The properties of new venture finance differs as well between innovative and non-innovative ventures. Innovative ventures obtain finance earlier during the venture creation process, which is favored in the form of subsidies. Especially the radical innovative ventures rely on subsidies during the venture creation stage, while loan providers are being used less as the innovativeness increases. The most interesting is that the sequence of activities during venture creation does not differ for innovative and non-innovative ventures. Only the presence of activities differs, innovative ventures perform more activities and have longer stages of the activities. However, the activities on which these ventures resemble are performed in the same order. We find that new ventures perform the same order of activities to legitimate the venture, however the process of legitimation takes considerably longer for innovative ventures.