How New Ventures Build Industry Knowledge through Collaborative Experimentation

Abstract

In a nascent industry, new ventures engage in experiments to gather feedback and to mitigate manifold uncertainties. Existing studies implicitly regard experimentation as an independent and closed endeavor, whose results are kept proprietary as private knowledge. However, experimentation can be organized, conducted, and interpreted collaboratively with external actors, which is the focus of this study. This study examines how and why new ventures engage in collaborative experimentation and its performance implications in a nascent, converging industry. Also, this study uncovers how new ventures’ heterogeneous pre-entry knowledge shapes their decisions to engage in collaborative experimentation. This mixed-method study uses the census of new ventures in the global smart lighting industry. Findings are grounded in both detailed interview data collected from founders and rich archival data. I find that engaging in collaborative experimentation is positively associated with enhanced performance and higher survival rates. Further, findings show that when new ventures are originated from academic research, or have at least one founder who has prior founding experience in adjacent industries, they are more likely to engage in collaborative experimentation. In contrast, when a founding team is composed of founders that only have employment experience, they are less likely to engage in collaborative experimentation.