Essays on new venture experimentation in nascent industries

Lee, Hyeonsuh

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https://hdl.handle.net/2142/115697 Copy

Description

Title

Essays on new venture experimentation in nascent industries

Author(s)

Lee, Hyeonsuh

Issue Date

2022-04-15

Director of Research (if dissertation) or Advisor (if thesis)

• Mahoney, Joseph T
• Shah, Sonali K

Doctoral Committee Chair(s)

• Mahoney, Joseph T
• Shah, Sonali K

Committee Member(s)

• Schijven, Mario
• Agarwal, Rajshree

Department of Study

Business Administration

Discipline

Business Administration

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Experimentation
• Entrepreneurship
• Nascent Industry

Abstract

This dissertation uncovers distinct experimentation and information gathering approaches that new ventures pursue to combat uncertainties in a nascent industry. Experimentation enables new ventures to generate new knowledge and systematically address manifold uncertainties. Despite a large body of research on experimentation documenting its benefits, how experimentation and its underpinning organizational processes might differ amongst new ventures has received little scrutiny. My dissertation thus seeks to address this gap by examining how new ventures experiment in a nascent industry and the effects of using different processes on firm performance. The first essay titled, “Lighting the Way: Illuminating How New Ventures in Nascent Industries Experiment” (Chapter 2), seeks to illuminate the process of experimentation and how it develops and unfolds differently amongst new ventures in a nascent industry. By using an inductive theory-building approach based on rich data collected from founders of the smart lighting ventures, this research finds that new ventures follow one of two distinct experimentation models: “generative” and “focused.” In addition, this research uncovers different dimensions that constitute each experimentation model including how the new venture works with external actors, the new venture’s internal organizational design choices, and the knowledge domains and loci investigated by the experiments themselves. Lastly, this research uncovers various antecedent conditions and outcomes associated with each model. The second essay titled, “Many Hands Make Light Work: Why New Ventures Engage in Collaborative Experimentation” (Chapter 3), investigates how new ventures gain survival benefits from engaging in collaborative experimentation in a nascent industry. This research adopts a mixed-method approach using survival analysis and grounded theory building. Findings are grounded in a comprehensive, quantitative and qualitative data set on the population of new ventures in the global commercial smart lighting industry. Findings show that engaging in collaborative experimentation is positively associated with new venture survival. Qualitative analyses suggest possible mechanisms to explain this relationship which include vetting possible applications of technologies, building full-fledged joint prototypes based on complementary technologies, mitigating relational uncertainties thereby facilitating subsequent larger-scale alliances, and collectively building a market architecture. The third essay titled, “Firm-level Experimentation: Joining Adjustment Costs and Real Options Theory” (Chapter 4), develops a theoretical framework to explain how experimentation enables firms to achieve superior economic performance under high uncertainty. In doing so, this essay joins the literature on adjustment costs and real options theory. A general theoretical framework suggests that firms with comparatively lower adjustment costs—which are comprised of cognitive, organizational, political, and economic factors—have higher accumulated firm-level experimentation. Firm-level experimentation can be regarded as an initiation of growth options, which opens up the potential for business expansion. Furthermore, this research proposes a positive feedback loop linking real options and adjustment costs, where exercising a portfolio of real options can enhance a firm’s capability to adjust at lower costs, facilitating subsequent experiments. Then this essay provides a comparative assessment between established firms vis-à-vis new ventures along various sources of adjustment costs, discussing differential strategic implications on how each type of firm can purposefully build an experimenting organization.

Graduation Semester

2022-05

Type of Resource

Thesis

Copyright and License Information

Copyright 2022 Hyeonsuh Lee

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