New venture creation: innovativeness, speed-to-breakeven, and revenue tradeoffs

Estrin, Saul ORCID: 0000-0002-3447-8593, Herrmann, Andrea, Levesque, Moren, Mickiewicz, Tomasz and Sanders, Mark (2025) New venture creation: innovativeness, speed-to-breakeven, and revenue tradeoffs. Small Business Economics. ISSN 0921-898X (In Press)

Text (Estrin et al Productivity Frontier 2025 09 05) - Accepted Version Pending embargo until 1 January 2100. Available under License Creative Commons Attribution. Download (1MB)

Abstract

We present a Schumpeterian model of new venture creation, under uncertainty, which explains the tradeoff between speed-to-breakeven and revenue-at-breakeven and relates this to the level of innovation. We then explore the tradeoffs between these outcomes empirically in a sample of 331 information and communication technology (ICT) ventures using a multi-input, multi-output stochastic frontier model. We estimate the contribution of financial capital and labor to the outcomes and the tradeoffs between them, as well as address heterogeneity across ventures. We find that more innovative (and therefore more uncertain) ventures have lower speed-to-breakeven and/or lower revenue-at-breakeven. Moreover, for all innovativeness levels, new ventures face a tradeoff between speed-to-breakeven and revenue-at-breakeven. Our results suggest that it is the availability of proprietary resources (founder equity and founder labor) that helps ventures overcome bottlenecks in the venture creation process, and we propose a line of research to explain the variation in venture creation efficiency.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Management
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HB Economic Theory
JEL classification:	O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L29 - Other
Date Deposited:	09 May 2025 20:10
Last Modified:	09 May 2025 20:10
URI:	http://eprints.lse.ac.uk/id/eprint/128098

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