A Research on the Cognition-Action Interaction in the Formation of New Venture Business Models: A Cross-Case Study

Abstract

It is a well-accepted argument that the most important strategy for a new venture is to explore and build a viable business model. How to accomplish this task is explicated by two dominant perspectives. The first line of research emphasizes learning actions such as trial-and-error and experimentation while the other stream believes that the viable business model originates from the entrepreneur’s cognitions. Building on an emerging field of research which explores the relationship between cognition and action and across-case approach, we draw several tentative conclusion. First, initial business model cognitions are composed of business concept hypothesis and business logic hypothesis. The former originates from such mental mechanisms as analogical thinking and/or concept combination which is triggered by experience and perception, while the latter comes from prior experience and new information processing. Second, initial business model cognitions provide a starting point for learning actions. Initial business model cognitions, aiming at guiding actions purposefully and improving action effects, can iterate through an entrepreneurship theorizing process. Third, entrepreneurs can use the combination of internal and/or external, immediate and/or indirect methods to validate initial business model hypothesis. Resource differences may influence the way new ventures validate initial hypothesis（resource-constrained new ventures would prefer low cost methods in the short run）. A combination of such methods contributes to a better performance in searching for a viable business model. Finally, the influence of feedbacks from learning actions on business model adaptation decisions is the outcome of an entrepreneurship theorizing process. Evidence shows that business logic hypothesis is subjected to more pivots than business concept hypothesis since the latter is usually supported by long-term prior experiences. This study adds to the knowledge of the following research streams. First, by inquiry into the interaction between cognitions and actions, we provide the dimension of initial cognitions which acts as the starting point for learning actions. We also add to the learning school that the content being learned during the process. Second, we provide an empirical investigation of business model schema research. We provide empirical support for the view of entrepreneurship theorizing, and specify the source and evolution of initial cognitions. We also find four learning actions which serve as major means to validate initial business model hypothesis and provide a better understanding of their effectiveness. Finally, by investigating the source of the cognition inertia of business concept hypothesis, we provide two possible explanations from the perspectives of prior experience and entrepreneurial theorizing, thus shed light on the cognition mechanism of new venture business model adaptation.