Full article: [[Gruber, M., MacMillan, I.C., Thompson, J.D. 2008. Look before you leap: Market Opportunity Identification in Emerging Technology Firms|/static/files/MBI/Module%206/READINGS_Gruber_MacMillan_Thompson_MSc_2008.pdf]]. Management Science 1652-1665. Summary: It is beneficial to generate a “choice set” of alternative market opportunities before deciding which one to pursue. This benefit is non-linear. Due to limited prior knowledge of markets in which a technological competence may be valued, the identification of multiple market opportunities prior to the first entry appears to be fairly uncommon among nascent entrepreneurs. On a lot of occasions these market opportunities offered highly diverging prospects for value creation. The choice of which market to enter is one of the most profound organizational decisions. Because the nature of the market has strong imprinting effects on a new firm’s: * identity * the capabilities and assets it needs to build * and its organizational structure Knowledge on market opportunities can be acquired by: * Local search (the most commonly used algorithm in technological search) ** Known to the entreprenuer in the past, or ** Closely related to their existing stock of prior knowledge * Distant search ** To conduct a distant search, entrepreneurs need to engage in some form of boundary spanning and bridge disparate knowledge domains ** Above-average firm performance relies more heavily on a firm’s ability to identify a global optimum through a distant search ''//Hypothesis: Founding teams that have members with prior entrepreneurial experience will consider a larger number of market opportunities prior to first market entry than teams without such experience://'' It is the * preexisting knowledge of the founding team that affects the knowledge available to the firm, * the ability of the team to access and use the knowledge, * its information-gathering and information-processing behavior, That determines the number and variety of solutions that will be generated. One ''particularly important type of preexisting knowledge'' is the knowledge that has been ''acquired through prior entrepreneurial experience'', because repeat founders can draw on high levels of task-specific knowledge and may have obtained special insights: # Experienced founders have acquired richer and more refined cognitive representations of business opportunities than novices # Novice entrepreneurs emphasize evaluation criteria such as ## the novelty of the idea, ## the superiority of the product or service, ## and the potential to change the industry # ''Repeat entrepreneurs'' look for business opportunities: ## that will ''quickly generate positive cash flow'' ## have a ''manageable level of risk'' ## and ''solve a customer’s problem'' ## The seek out a larger number of market opportunities prior to first entry ''//Hypothesis: Technology start-ups that consider more than one market opportunity for a technological competence prior to the first market entry will be more successful than those that consider just a single market opportunity.//'' * Availability of alternative solutions will enhance organizational problem-solving outcomes * People who can brainstorm several solutions to a problem have a higher likelihood of finding the most promising solution * Market characteristics are of great importance in entrepreneurship. Market opportunities usually vary along key dimensions such as: ** market size ** lifecycle stage ** demand uncertainty ** entry barriers, and ** competitive rivalry * Market choice defines a core element of a new firm and has a strong imprinting effect, because it forms the basis for other key strategic decisions * Acquire distant search knowledge by hiring new team members, or by creating alliances ''// Hypothesis: The performance benefit of considering more than one market opportunity is subject to decreasing marginal returns.//'' * Founders may identify highly attractive market domains when they explore more distant regions of the market search landscape. * Construction of a larger choice set is also associated with additional search costs and mounting challenges in opportunity evaluation and exploitation * The more distant the identified market opportunities are, the higher the costs of acquiring and integrating the knowledge required to exploit them will be.