Business Model Development and Venture Progress in Nascent Technology Ventures

Abstract

Why do some nascent entrepreneurs have more developed business models than others? And do more developed business models facilitate venture progress? In this study, we examine the effects of rational venture investigation and experience-based heuristics as dual drivers of business model development in nascent technology ventures. Using a unique longitudinal dataset of nascent technology ventures, we find that both venture investigation efforts and prior startup experience have a positive effect on business model development. More developed business models, in turn, facilitate a venture’s progress. The business model not only has a direct impact on venture progress, but also serves as a mediator that translates the founder’s venture investigation efforts and prior startup experience into venture progress. Our study provides unique empirical evidence that rational and heuristics-based approaches positively and independently impact business model development, which significantly contributes to nascent venture progress.