The Impact of Technological and Market Uncertainty on Innovative Development Processes

Abstract

Innovations in products, new services and infrastructure have become a necessity for the survival and sustainability of modern organizations. In this study the impact of technological and market uncertainty on the success of new ventures is investigated. The effect of some personal characteristics of entrepreneurs on their choice of the new venture is treated as well. The study uses a two dimensional framework to assess the level of uncertainty new ventures are facing. The novelty dimension that reflects market uncertainty, mainly affects the way information about the customers' needs and desires is collected and incorporated into the product design. The technology dimension, deals mainly with the way the development process should be managed. Higher levels of technological uncertainty require longer development periods, more design cycles and later design freeze. The impact of technological and market uncertainty on the performance of 160 innovations is analyzed. For example, we found that there is no contradiction between high levels of uncertainty and business success. Moreover, high levels of uncertainty may yield business opportunities that may not be available for low level technological uncertainty innovations. We also found that older and more educated entrepreneurs are likely to be engaged in more novel initiatives than younger, less experienced ones.