New venture's product innovativeness strategy, institutional environment and new product performance

Abstract

New ventures have to develop innovative new products with substantial advantages over existing products to gain a market foothold. Building on the institution-based view, we examine how institutional environments in emerging markets (legal inadequacy and environmental turbulence) differentially moderate the innovativeness-new product performance links in new ventures. Using a sample of 136 new high-tech ventures in China, we find that technological innovativeness and market innovativeness both are associated with perceived new product performance, and the effect of market innovativeness is significantly greater than that of technological innovativeness. The relationship between technological innovativeness and perceived new product performance is strengthened by high levels of environmental turbulence but weakened by high levels of legal inadequacy. On the contrary, the link between market innovativeness and perceived new product performance is enhanced when legal inadequacy is high but mitigated when environmental turbulence is high. As such, our research enriches the new product development literature by differentiating the effects of technological innovativeness and market innovativeness in new ventures, and specifying the distinctive roles played by external institutional factors in facilitating or hindering the efficacy of product innovativeness. Our study provides new venture managers with practical implications on how to choose and implement an appropriate product innovativeness strategy in the emerging Chinese market.