Competitive Advantages in the First Product of New Ventures

Abstract

The new venture launching its first product faces substantial risks and is typically resource-poor. Moreover, failure with the first product is closely related to failure of the new venture itself, as investors seek alternate investments with better track records. While much guidance appears in the literature for large, established firms developing and launching new products, little research has examined the specific challenges faced by entrepreneurial startups launching first products. We develop a model of competitive advantage for studying the development of the new venture's first product. We identify and investigate the skills, resources, and knowledge needed for achieving positional advantage and, ultimately, developing a successful first product. We collect data from 694 first products launched by new ventures in China to test our model. While most of our hypotheses are supported, we obtain some interesting findings regarding the stage in the development process when technology resources and skills, and marketing resources and skills have the greatest effects on product performance. Our research makes several contributions to engineering management, innovation, and entrepreneurship literatures. Finally, we provide managerial insights on how the entrepreneur should acquire resources and knowledge in order to improve the performance of the first product.