knowledge acquisition, network reliance, and early-stage technology venture outcomes

Knowledge Acquisition, Network Reliance, andEarly-Stage Technology Venture Outcomesjoms_998 1169..1193

Diane M. Sullivan and Matthew R. MarvelUniversity of Dayton; Western Kentucky University

abstract Knowledge acquisition is central to entrepreneurship when explaining successfulventuring. However, little is known about how knowledge acquisition during early venturedevelopment affects desirable venture outcomes. This study draws on the knowledge-basedview and social network theory to develop and test a conceptual model of knowledgeacquisition using a sample of early-stage technology entrepreneurs operating inuniversity-affiliated incubators. We examine how an entrepreneur’s acquisition of differenttypes of knowledge and reliance on their network for knowledge relate to outcomes ofproduct/service innovativeness and first-year venture sales. Results suggest that acquiringtechnology knowledge positively relates to the innovativeness of products/services developedby entrepreneurs. Moreover, entrepreneurs can enhance this positive relationship by relyingmore on networks for technology knowledge acquisition.

INTRODUCTION

Knowledge acquisition and networks are central to entrepreneurship and of immenseinterest in explaining the achievement of desirable entrepreneurial outcomes (Alvarezand Busenitz, 2001; Yli-Renko et al., 2001). However, research has only recently begunto concomitantly examine how knowledge and networks relate to achieving venturedevelopment outcomes ( Jansen et al., 2005a; Subramaniam and Youndt, 2005; Tsai andGhoshal, 1998; Yli-Renko et al., 2001). In addition, although some research recognizesthat different types of knowledge, like technology and market knowledge, may be impor-tant for explaining firm outcomes (Burgers et al., 2008; Marvel and Lumpkin, 2007),little research has empirically examined the interdependent effects of different knowledgetypes as they relate to venture development outcomes (for exceptions, see Burgers et al.,2008; Danneels, 2002; Marvel and Lumpkin, 2007). This is problematic because knowl-edge is a multifaceted construct (Burgers et al., 2008; Shane, 2000) and research failingto consider multiple knowledge types may be studying underspecified models. Further,because the acquisition and exploitation of knowledge are often social processes (Kogut

Address for reprints: Diane M. Sullivan, Management and Marketing Department, University of Dayton,Dayton, OH 45458-2271, USA ([email protected]).

© 2011 The AuthorsJournal of Management Studies © 2011 Blackwell Publishing Ltd and Society for the Advancement of ManagementStudies. Published by Blackwell Publishing, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street,Malden, MA 02148, USA.

Journal of Management Studies 48:6 September 2011doi: 10.1111/j.1467-6486.2010.00998.x

and Zander, 1992; Yli-Renko et al., 2001), understanding how entrepreneurs’ relianceon networks for different knowledge types relates to venture outcomes stands to make animportant contribution.

Following the premise that knowledge is a strategically important resource that canform the basis for a new venture’s competitive advantage (Conner and Prahalad, 1996;Grant, 1996), this paper examines the acquisition of knowledge during early venturedevelopment. Recent research suggests that two specific types of knowledge – technologyand market knowledge – may have important implications for achieving desirableoutcomes (Agarwal et al., 2004; Marvel and Lumpkin, 2007), particularly for technologyventures. Acquiring technology knowledge has been linked to creating new break-throughs (Baumol, 2002), new business development project success (Burgers et al.,2008), and economic and cost-related advantages (Dixon and Duffy, 1990). Conse-quently, it should be important for technology entrepreneurs to acquire technologyknowledge during early venture development, particularly relative to producing innova-tive offerings and generating early sales. Further, unless entrepreneurs have marketknowledge they cannot create innovations that also meet market needs. Changes inmarkets are a source of opportunity (Shane, 2000) and acquiring knowledge aboutmarket demands is crucial as it increases an entrepreneur’s ability to effectively exploit anopportunity, attract initial customers, and generate outcomes associated with economicvalue (Burgers et al., 2008; Wiklund and Shepherd, 2003). Thus, the first purpose of thispaper is to examine how an entrepreneur’s technology and market knowledge acquisi-tion relates to two early venture development outcomes – product/service innovativenessand first-year venture sales.

In addition, because the acquisition and exploitation of knowledge are often socialprocesses (Kogut and Zander, 1992; Yli-Renko et al., 2001), acquiring knowledge fromexternal sources like one’s network may be critical to achieving desirable outcomes. Theentrepreneur may acquire knowledge through interactions with the external environ-ment via their network partners (Kaish and Gilad, 1991). Alternatively, they may pursuesolo knowledge acquisition like reading industry publications, self-directed tutorials,experimentation, or problem solving. However, there may be differences that exist interms of the accuracy, quality, and interpretability of the knowledge that is acquired vianetwork knowledge acquisition when compared to autonomous knowledge acquisition(Lane and Lubatkin, 1998). Thus, the second purpose of this paper is to examine how anentrepreneur’s reliance on their network for acquiring technology and market knowledge(versus solo knowledge acquisition) may enhance the value of the knowledge an entre-preneur acquires in terms of producing innovative products/services and first-yearventure sales.

By examining the relationships described above, this study contributes in a numberof ways. First, we develop a theoretical model of knowledge acquisition and early-stage technology venture outcomes. In doing so, we do not distinguish between theentrepreneur- and venture-levels because we are interested in early venture phenomena(Kazanjian and Drazin, 1990; Larson and Starr, 1993). Second, to increase our under-standing of the technology entrepreneur, we examine how two different types of knowl-edge – technology and market knowledge – impact early venture development outcomes.Specifically, we examine the relationship between technology knowledge acquisition and

D. M. Sullivan and M. R. Marvel1170

© 2011 The AuthorsJournal of Management Studies © 2011 Blackwell Publishing Ltd andSociety for the Advancement of Management Studies

both the innovativeness of the initial product/service as well as first-year venture sales.We then examine the relationship between market knowledge acquisition and both theinnovativeness of the initial product/service and first-year venture sales. As such, thispaper is one of the first that concurrently takes into account the relative contribution ofboth technology and market knowledge on these outcomes. In addition, we investigateentrepreneurs’ reliance on network sources for their knowledge acquisition as a mod-erator between an entrepreneur’s knowledge and venture outcomes. We contribute bybuilding from and extending current research on the importance of knowledge andnetworks relative to organizational outcomes (Grégoire et al., 2011; Jansen et al., 2005a;Subramaniam and Youndt, 2005; Tsai and Ghoshal, 1998) by examining multipletypes of knowledge and examining these relationships within the context of early-stagetechnology ventures.

In the next section, knowledge acquisition is discussed and a theoretical argument ispresented for why technology and market knowledge should relate to venture outcomes.We then explain how an entrepreneur’s reliance on networks for knowledge acquisitionimpacts the relationship between knowledge and venture outcomes. The methods andresults of our empirical study are then presented. A discussion section follows and thepaper concludes with limitations and implications for future research and practice.

THEORETICAL DEVELOPMENT AND HYPOTHESES

Knowledge Acquisition and New Technology Venture Outcomes

Shane and Venkataraman (2000) define entrepreneurship as ‘the scholarly examinationof how, by whom, and with what effects opportunities to create future goods and servicesare discovered and exploited’ (p. 218). Thus, entrepreneurship involves two phenomena– the presence of worthwhile opportunities and individuals who pursue those opportu-nities (Shane and Venkataraman, 2000). We take this view and assert that individualsdiscover opportunities. Then, based on the amount of knowledge they acquire thatis relevant to the opportunity, they will develop goods or services of varying charac-teristics (Shane, 2000) that allow entrepreneurs to achieve different levels of ventureperformance.

In highlighting the importance of knowledge for entrepreneurship, the resource-basedview (Barney, 1991; Penrose, 1959) and knowledge-based view (Conner and Prahalad,1996; Grant, 1996; Kogut and Zander, 1992) assert that knowledge is a primary resourcefor achieving favourable entrepreneurial outcomes, particularly in early venture devel-opment. This is because ‘. . . privately held knowledge is a basic source of advantage incompetition’ (Conner and Prahalad, 1996, p. 477). Ghoshal and Moran (1996) suggestthat a superior ability in creating and transferring knowledge provides an advantageacross markets and accumulating knowledge can propel entrepreneurs as they developand grow new firms because knowledge enhances their ability to exploit opportunities(Penrose, 1959).

The importance of acquiring knowledge is especially pressing for new technology firms( Yli-Renko et al., 2001) as they are notoriously resource constrained, particularly relativeto knowledge that is critical for venture success (Autio et al., 2000). Exacerbating this,

Knowledge, Networks, and Early Venture Outcomes 1171

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technology firms are also faced with disruptive and dynamic environments (Rasmussenet al., 2011) and an entrepreneur’s ability to successfully develop new firms may bedependent on the knowledge they acquire about these changing environments (Agarwalet al., 2004). Research suggests that both technology and market knowledge have impor-tant implications for achieving desirable outcomes (Agarwal et al., 2004; Marvel andLumpkin, 2007), particularly for new technology ventures. We explore these possibilitiesnext.

Technology Knowledge Acquisition and Venture Outcomes

Technology knowledge is a critical input for technology entrepreneurs during venturedevelopment. Following Burgers et al. (2008), in this study, technology knowledgereflects the extent of knowledge about products, technologies, and/or processes thatan entrepreneur possesses that is relevant to their business. The acquisition and devel-opment of technology knowledge is important because it relates to an entrepreneur’sability to create products that meet market demands (Clarysse et al., 2011), helps themrespond to changing markets via rapid product development (McCann, 1991), andallows them to stay abreast of technical changes related to venture performance (Zahraet al., 2000). Further, an entrepreneur’s ability to acquire and appropriately utilizetechnological knowledge can be the difference between venture success and failure(Nonaka and Takeuchi, 1995) because technology knowledge facilitates the developmentof skills and competencies that help achieve competitive advantages (Dodgson, 1993).

A main basis of competitive advantage for new entrepreneurs is the development ofinnovations (Baumol, 2002; Danneels, 2002). However, technology changes are rapidand constant, requiring continuous technology knowledge acquisition to keep up withnew developments helpful for generating innovative firm offerings (Burgers et al., 2008).Acquiring new technology knowledge can also change what is possible in terms ofproduction processes and the use of new raw materials, which can allow for the creationof new products or services (Shane and Eckhardt, 2003). Because the development ofinnovative firm offerings requires technology knowledge, we assert that once technologyentrepreneurs discover an opportunity, depending upon the amount of technologyknowledge they acquire, the product/service they develop will be more or less innova-tive. Because knowledge acquisition is cumulative (Helfat, 1994), acquiring moretechnology knowledge is important for building competencies (Danneels, 2002)and achieving desired outcomes (Ghoshal, 1987; Zahra et al., 2000), like developinginnovations.

Hypothesis 1a: An entrepreneur’s technology knowledge acquisition during early venturedevelopment is positively related to new venture product/service innovativeness.

In addition to innovative products/services, technology knowledge acquisition isimportant for generating early venture sales. Entrepreneurs who can offset their knowl-edge shortcomings should be better equipped to use technology know-how to effectivelymeet market needs (Shane, 2000) and execute sales early. This is because technologyknowledge can help the entrepreneur identify the most favourable product/service



design that should increase the offering’s functionality, reduce the offering’s costs, andincrease the offering’s reliability (Wiklund and Shepherd, 2003), all of which shouldappeal to customers. Technology knowledge should also allow the entrepreneur to morequickly respond to competitors’ actions (Wiklund and Shepherd, 2003). This increasedspeed should help entrepreneurs protect their positions in the market and facilitate sales.Thus, entrepreneurs who acquire technology knowledge can develop products thatappeal more to customers and they can act more quickly when compared to competitors.This should allow entrepreneurs to generate sales earlier because of their responsivenessto customers, and generate greater sales volumes because of their abilities to thwartcompetitors’ actions. In addition, the greater the technology knowledge acquired, themore quickly and easily entrepreneurs can understand and utilize current and subse-quently acquired knowledge (Dewar and Dutton, 1986). This should, in turn, increasethe likelihood of developing new offerings that can be introduced for sale and increasethe overall potential sales. In sum, once technology entrepreneurs discover an opportu-nity, the success with which they can sell their product/service will depend upon theamount of technology knowledge they acquired.

Hypothesis 1b: An entrepreneur’s technology knowledge acquisition during earlyventure development is positively related to first-year venture sales.

Market Knowledge Acquisition and Venture Outcomes

Market knowledge is important to technology venture development (Shane, 2000) andcreating innovation (Danneels, 2002; Li and Calantone, 1998). Market knowledgereflects the extent of knowledge an entrepreneur possesses about potential customers,distribution channels, and how the market functions that is relevant to their business(Burgers et al., 2008). Technology entrepreneurs face many complexities due in part tothe fast-paced, disruptive, and dynamic market environments within which theyoperate (Agarwal et al., 2004; Burgers et al., 2008). Market complexities make it chal-lenging for technology entrepreneurs to determine what the appropriate responseshould be for entering a given market (Leifer and Mills, 1996) to sell their offerings.Research also suggests that technology firms often overlook the acquisition of marketknowledge, which can negatively affect the successful commercialization of newproducts (Burgers et al., 2008). Compounding these issues, liabilities of newness addto the challenges of attracting initial customers and generating sales (Freeman et al.,1983).

Market knowledge provides entrepreneurs the ability to appropriately serve customersbecause it provides insights into customers’ preferences, effective distribution channels,and effective manufacturing procedures (Danneels, 2002). Acquiring market knowledgeenables entrepreneurs to assess which markets to enter and how technology may best beused to solve problems within it (Shane, 2000). This should facilitate the development ofinnovative products/services because it allows entrepreneurs to put their expertise to usein novel and effective ways (Atuahene-Gima and Ko, 2001). Further, the possession ofmarket knowledge has been thought to help firms explore more innovative opportunities




that are generated due to emerging market demands (Li and Calantone, 1998). Becauseof this, the possession of market knowledge should enhance the innovativeness ofproduct/services new technology firms develop.

Unless entrepreneurs acquire market knowledge during venture development it isdifficult to create products or services that differentiate, or provide advantages, fromthose that may already be available in the market. Some research suggests that marketknowledge allows firms to refine and adapt their products or services such that thoseofferings become more innovative relative to the needs of the market (Atuahene-Gimaand Ko, 2001). We believe this process is likely analogous for early-stage entrepreneurswho discover opportunities of varying levels of innovativeness. Then, based on theamount of market knowledge they acquire, they can develop the product/service thatwill be commercialized such that it becomes more or less innovative. Because researchsuggests that innovation development requires constant knowledge accumulationpertaining not only to technology, but also to the market (Danneels, 2002; Leonard-Barton, 1988), we believe that more market knowledge should increase product/serviceinnovativeness.

Hypothesis 2a: An entrepreneur’s market knowledge acquisition during early venturedevelopment is positively related to new venture product/service innovativeness.

In addition, we believe market knowledge acquisition will relate to early venture sales.This is because as new products or services are being developed unanticipated anomaliesoften emerge that may affect their successful sale. However, the acquisition of marketknowledge may help counter some of these unexpected complexities (Hoskisson andBusenitz, 2002). Research suggests that entrepreneurs who acquire market knowledgecan increase their ability to effectively exploit an opportunity and attract customers(Wiklund and Shepherd, 2003). This is because market knowledge can provide insightsregarding customer preferences for products/services as well as how they can mosteffectively be reached (Burgers et al., 2008). Moreover, acquiring knowledge about howthe market functions and what the market values may provide the knowledge required toeffectively introduce and sell new products or services (Danneels, 2002; Wiklund andShepherd, 2003).

The importance of market knowledge for generating sales may be especially prevalentfor young technology firms. This is because these firms are introducing innovativeofferings for which distribution channels may not be clearly defined and for whichcustomer preferences may be evolving (Leonard-Barton, 1988). Acquiring market knowl-edge, however, can reduce the potential risk of there being a mismatch between marketneeds and the products or services that are developed (Li and Calantone, 1998) and itcan provide insights into the distribution channels that are likely to be most effective(Danneels, 2002). Further, customers may be unfamiliar with the new technologies beingintroduced, which may necessitate training and/or other efforts aimed at informingconsumers about the product/service (Hargadon and Douglas, 2001). The acquisition ofmarket knowledge can help entrepreneurs assess this potential and select the appropriateactions to address these challenges so they can successfully commercialize their newproduct or service.



In sum, we believe that an early-stage technology entrepreneur’s knowledge short-comings and the market complexities with which they are faced reduce the potential forthem to generate sales early in venture development. However, acquiring market knowl-edge should increase their ability to successfully penetrate markets and generate salesearly in the life of the venture.

Hypothesis 2b: An entrepreneur’s market knowledge acquisition during early venturedevelopment is positively related to first-year venture sales.

Above we discuss how different types of acquired knowledge relate to venture devel-opment outcomes. Interestingly, entrepreneurs rely on different sources when engagingin knowledge acquisition activities. For example, when new knowledge is acquired it maybe due to entrepreneurs engaging in individual-level problem solving or from interactingwith others like network partners (Kaish and Gilad, 1991). Consequently, in addition toexamining how an entrepreneur’s knowledge acquisition relates to early technologyventure outcomes, this study also questions how entrepreneurs’ reliance on networksources enhances the value of the knowledge acquired for achieving venture outcomes.

Knowledge Acquisition, Network Reliance, and Venture Outcomes

As discussed, once entrepreneurs pursue venture development knowledge is required todevelop the venture offerings and package them to fit market needs. As entrepreneursdirect their actions to acquire knowledge, they may pursue solo knowledge acquisitionlike reading industry publications, self-directed tutorials, experimentation, and problemsolving, or they may acquire knowledge through interactions with the external environ-ment via their network partners (Kaish and Gilad, 1991). We propose that the value ofthe knowledge, in terms of promoting early venture outcomes, may vary relative to howthe entrepreneur acquired that knowledge. This is because there may be differences thatexist in terms of the accuracy, quality, and/or interpretability of the knowledge that isacquired via social or interactive knowledge acquisition relative to individual knowledgeacquisition (Lane and Lubatkin, 1998).

We propose that autonomous knowledge acquisition may be of limited value in termsof progressing venture development, particularly during early venture developmentwhen entrepreneurs are especially knowledge deficient (Collinson and Gregson, 2003).This is partially due to constraints associated with an entrepreneur’s absorptive capacity(ACAP), which refers to one’s ability to recognize, value, assimilate, and apply knowledgethat is acquired to achieve commercial ends (Cohen and Levinthal, 1990). According toresearch on ACAP, a lack of knowledge in an area may preclude the individual fromeffectively acquiring subsequent knowledge in that area. In such cases, effective knowl-edge acquisition may not occur unless the individual interacts with others who can‘translate’ the knowledge into a form that is understandable to them (Cohen andLevinthal, 1990; Reagans and McEvily, 2003). Because of this, we propose that theextent to which an entrepreneur relies on their networks for acquiring technology andmarket knowledge may impact the relationship between an entrepreneur’s knowledgeacquisition and the achievement of certain early venture outcomes.




Alvarez and Busenitz (2001) suggest that entrepreneurs’ social interactions exposethem to a broader range of people and situations that sharpen their abilities to acquireand apply knowledge in useful ways to new ventures. Networks are also thought to be themost efficient arrangement for sourcing reliable knowledge (Powell, 1990) that is impor-tant for the development of new ventures (Burt, 1992; Burt et al., 2000; Granovetter,1973). Individuals who are members of a network should have a heightened ability toacquire and apply this reliable knowledge because network partners can translate thatknowledge (Cohen and Levinthal, 1990; Reagans and McEvily, 2003) into a formunderstandable and usable to the entrepreneur.

In the next sections, we explore how an entrepreneur’s reliance on networks forknowledge acquisition impacts the strength of the relationship between technology andmarket knowledge acquisition and the achievement of venture development outcomes.In doing so, we are interested in examining the relative focus of the entrepreneur(externally or internally) as they are concurrently acquiring knowledge. Thus, we inten-tionally do not distinguish between specific characteristics of an entrepreneur’s network(e.g. embeddedness, cohesiveness, density, network size, etc.) in our study.

Technology knowledge, network reliance, and product/service innovativeness. The process of tech-nology knowledge acquisition can be challenging as it is often chaotic and can result inknowledge that is fragmented and unfocused (Zahra et al., 2000). Consequently, entre-preneurs need to manage the knowledge acquisition process to allow them to effectivelyinterpret, acquire, integrate, and apply technology knowledge (Kogut and Zander, 1992;Zahra et al., 2000). One way entrepreneurs might manage this process is to rely on theirnetworks for technology knowledge acquisition. Research suggests that networks canenhance entrepreneurs’ responses to changes in technologies and the competitive envi-ronment (Volberda, 1996). Networks have also been found to ease the transfer ofcomplex knowledge, like technology knowledge, via framing or translating it in such away that is understandable to the entrepreneur (Cohen and Levinthal, 1990; Reagansand McEvily, 2003). Because the relative ease and success with which complex knowl-edge is acquired can impact a new venture’s competitive advantage (Zahra and George,2002), we propose that entrepreneurs who rely more on their networks for technologyknowledge acquisition are better equipped to produce more innovative products/services. This is because entrepreneurs who rely more on networks for technologyknowledge acquisition enhance their abilities to interpret and apply knowledge acquiredas they develop innovative firm offerings. Also, because technology changes are rapidand constant, entrepreneurs who are developing their offerings must continuously keepup with new technology developments (Burgers et al., 2008) that may impact the finalform of their product/service. Because of the challenges associated with keeping up withthese rapid changes in technology, network reliance for technology knowledge is likely tobe particularly important when it comes to developing innovations. Overall, a greaterreliance on networks for technology knowledge acquisition should lessen the entrepre-neur’s constraints associated with their ACAP because networks translate the knowledgeinto a form more interpretable and useful to the entrepreneur. Network reliance shouldalso be especially effective in helping entrepreneurs keep up with the changing technolo-gies that will impact the development of their firm’s offerings.



Hypothesis 3a: An entrepreneur’s reliance on networks for acquiring technology knowl-edge moderates the relationship between their technology knowledge acquisition andproduct/service innovativeness – entrepreneurs whose relative reliance on networksfor acquiring technology knowledge is greater will have higher product/serviceinnovativeness.

Market knowledge, network reliance, and first-year venture sales. During venture development,knowledge is required to package a firm’s offerings to fit market needs. Changes inmarkets are continuous, increasing the need for market knowledge to be acquired duringearly venture development. Further, because new ventures face liabilities of newness theyare challenged with regard to attracting initial customers and generating sales (Freemanet al., 1983). Fortunately, the acquisition of market knowledge may counter some ofthese challenges, increasing an entrepreneur’s ability to attract customers, effectivelyreach customers, and generate sales because of better meeting customer preferences(Burgers et al., 2008; Danneels, 2002; Hoskisson and Busenitz, 2002; Wiklund andShepherd, 2003).

However, in line with our previous arguments, entrepreneurs may face constraintsrelative to their market knowledge acquisition and generating early venture sales. Spe-cifically, we propose that during early stages of venture development, network reliancefor market knowledge is likely to be especially important for achieving early sales.Because distribution channels are often equivocal or not known to the public andcustomer preferences are unclear and often evolving (Danneels, 2002; Leonard-Barton,1988; Li and Calantone, 1998; Shane, 2000), the entrepreneur needs up-to-date andwell-rounded knowledge regarding these key factors that are essential for successfulproduct/service commercialization. By sourcing knowledge from customers and/orother external resource providers like suppliers and manufacturers, the entrepreneur isable to develop a more accurate understanding of how customers can effectively bereached. Further, due to ACAP constraints coupled with the dynamic character ofmarkets, entrepreneurs who rely more on external sources, like networks, for marketknowledge acquisition may be better equipped to understand and act on the knowledgeacquired. This is because networks can help communicate market knowledge in such away that is logical and useful to the entrepreneur, which is essential to achievingoutcomes, like sales that are related to firm performance (Zaheer and Bell, 2005; Zahraand George, 2002). Moreover, in conditions of rapid environmental change, the abilityof entrepreneurs to accurately assess the value of knowledge is undermined because ofknowledge constraints given the short periods of time to make decisions. Networkreliance for market knowledge acquisition can provide the entrepreneur with multipleevaluations of the appropriateness of knowledge, thereby increasing a match betweenmarket needs and the supply of technology (Liebeskind et al., 1996). Members of anentrepreneur’s network also act as a bridge to a broad marketplace, connecting themwith potential partners, suppliers, and customers (Burt, 1992). Relying on market par-ticipants like these for market knowledge acquisition should increase the quality andusefulness of market knowledge that is acquired and help execute sales. In essence,network reliance for market knowledge acquisition allows for rapid access to knowledge,more accurate knowledge regarding market preferences, and a higher likelihood of




finding novel ways that market needs may be met. Therefore, while market knowledgeacquisition promotes positive outcomes in terms of first-year venture sales, the entrepre-neurs’ network reliance for market knowledge acquisition strengthens this relationship.

Hypothesis 3b: An entrepreneur’s reliance on networks for acquiring market knowledgemoderates the relationship between their market knowledge acquisition and first-yearventure sales – entrepreneurs whose relative reliance on networks for acquiring marketknowledge is greater will have higher first-year venture sales.

METHODS

Sample and Procedure

To test the hypotheses, we were first tasked with identifying an appropriate sample ofearly-stage technology entrepreneurs. To secure a sample of entrepreneurs who hadrecently founded technology ventures, university-affiliated technology incubators werecontacted. Technology incubators provide physical space and business support to accel-erate the development of technology ventures via an array of resources and services.Founders of young, technology-based, ventures were chosen because of the knowledgeintensive context and to minimize retrospective recall issues associated with knowledgeacquisition (Huber and Power, 1985). The National Business Incubation Associationprovided a list of technology incubators in the USA. Incubators were selected based onproximity to a large research university in the Midwest USA and the number of housedventures. Though all of the incubators were affiliated with universities, not all wereuniversity-owned. In total, 16 incubators participated and afforded individual meetingswith venture founders. Surveys were completed during these meetings. In total, n = 166surveys were completed. Due to minor missing data the sample size for testing thehypotheses was n = 151. Of the respondents, 92 per cent were male and 8 per centfemale. The average level of professional experience was 20 years and the averagenumber of past employers was four. For participant education, 36 per cent held doctoraldegrees, about 33 per cent held bachelor’s degrees, 26 per cent held master’s degrees,about 2 per cent held associate’s degrees, and about 3 per cent had only a high schooldiploma.

For the data collection procedure, incubator managers were first identified and thencontacted via telephone. The manager was given an overview of the research initiativeand asked to provide contact information for founders of new technology-based ventures,where ventures were considered new if they were five years old or younger (Hansen andBird, 1997; Reynolds and Miller, 1992). In all cases, the manager provided the namesand contact information as requested.

The entrepreneurs were then contacted and asked to participate in the researchproject. The contacted entrepreneur was questioned to ensure they were the individualresponsible for the venture idea. Only entrepreneurs who reported responsibility for theventure idea were included and a 30-minute meeting was scheduled with them. Of thosecontacted, one elected not to participate and ten were unable to meet due to unavoidableintervening events.



Measures

Knowledge acquisition. To operationalize an entrepreneur’s technology and market knowl-edge acquisition, two measures were developed. Both the technology and market knowl-edge measures were composed of five items employing a five-point Likert-type scale.Standard procedures were observed for developing and assessing the psychometricproperties of the scale (Hinkin, 1995). First, a series of items were developed concerningthe different knowledge constructs identified by Shane (2000) as being relevant to earlyventure development. The items were then examined and assessed for content validity byeight business school faculty members and doctoral students. The task involved sortingeach item into different knowledge construct categories, including an ‘other’ category.The knowledge acquisition items that were correctly sorted into the technology andmarket categories with an average hit rate of 85 per cent or higher were retained.

A principal components factor analysis was conducted that included both the tech-nology and market knowledge acquisition items to assess factor structure. Both thetechnology knowledge and market knowledge acquisition items obtained loadingsexceeding 0.50 and were retained in the respective scales (Hinkin, 1995). Factor analysisresults are reported in Table I. Both the technology (a = 0.90) and market knowledgeacquisition (a = 0.90) scales were found reliable (Nunnally, 1978).

Network reliance for acquiring technology and market knowledge. To measure the entrepreneur’sreliance on networks for technology and market knowledge acquisition, entrepreneurs

Table I. Factor analysis for market and technology knowledge acquisition items

Items Market knowledge

acquisition factor

Technology knowledge

acquisition factor

1. Gained new knowledge of different technologies important formy forthcoming business.

0.344 0.752

2. Gained new knowledge of a specific technology important formy forthcoming business.

0.260 0.903

3. Gained new knowledge of a technology that is central to myforthcoming business.

0.200 0.904

4. Gained new knowledge of a technology not known to thegeneral public.

0.251 0.818

5. Gained new hands-on experiences with a technology that isimportant for my forthcoming business.

0.396 0.654

6. Gained new knowledge about how the market functions ofmy forthcoming business.

0.797 0.294

7. Gained new knowledge of suppliers in the primary market ofmy forthcoming business.

0.839 0.278

8. Gained new knowledge of manufacturers or developers inthe primary market of my forthcoming business.

0.770 0.345

9. Gained new knowledge about the market of my forthcomingbusiness not known to the general public.

0.853 0.259

10. Gained new first-hand experiences from within the primarymarket of my forthcoming business.

0.794 0.200




were asked to report on the source of their knowledge acquisition. After the knowledgeacquisition items, respondents were asked to report whether the knowledge acquisitionoccurred via interacting with network partners or due to solo activities. These items usedcategorical responses, that included acquired the knowledge (1) alone, or from (2) anacquaintance, or (3) a close friend/family member. Responses indicating that the knowl-edge was concurrently acquired from interacting with an acquaintance or close friend/family members were considered network sources for knowledge acquisition (Greve andSalaff, 2003; McDonald and Westphal, 2003). Responses indicating the knowledge camefrom acquiring the knowledge alone (e.g. physical experiments, reading industry publi-cations, engaging in thought experiments) (Kaish and Gilad, 1991) were consideredautonomous knowledge acquisition. Using this data, ratios were computed that indicatethe extent to which the entrepreneur relied on networks for acquiring technology andmarket knowledge. Specifically, the number of responses for which the entrepreneurreported they sourced their knowledge via network sources were coded as one and solosources were coded as zero in the numerator. This was then divided by the total possibleresponses. Numbers closer to +1 indicate a greater reliance on network sources fortechnology and market knowledge acquisition.

First-year venture sales. A survey item asked respondents to report the total dollar amountof sales achieved in the first year following venture launch. Incubator managers wereasked to confirm the sales data and were able to in all cases.

Product/service innovativeness. To assess the innovativeness of the venture’s offerings,Marvel and Lumpkin’s (2007) seven-item, four-point, innovation scale was employed(a = 0.76) that asked respondents to assess the innovativeness of their venture’sproduct/service at venture launch. The items include: (1) there is a large groupof customers that already uses a very similar product/service; (2) our product/service represents an entirely new type of product/service; (3) our product/service maybe described as a new technology; (4) our product/service is a gradual progression uponthe last generation; (5) our product/service meets a want or need that has not beenaddressed by other products/services; (6) our product/service could be described as aproduct line extension; and (7) our product/service is a new twist on an old theme. Items1, 4, 6, and 7 are reverse coded. Higher numbers indicate more innovative product/services.

Control variables. To control for human capital effects (Davidsson and Honig, 2003;Dimov and Shepherd, 2005), controls included an entrepreneur’s formal educationand depth of experience. Research suggests that variables associated with human capitalhave been related to the success of entrepreneurs and business formation. Consequently,in this study’s context, human capital might relate to the development of innovativetechnologies and the achievement of early venture sales. To assess education level,an item asked respondents to report their highest level of education. The levelsincluded high school, associates, bachelors, masters, and doctoral degrees. FollowingWiklund and Shepherd (2008), responses were recoded into years of education.



Depth of experience was operationalized as the number of years of professionalexperience.

Product and service offerings differ on a number of key attributes like intangibility,heterogeneity, perishability, and imitability ( Jong and Vermeulen, 2003). Similarly,innovativeness has been found to differ across products and processes (Utterback,1994). To control for these possible effects, we controlled for whether the offeringwas a product or service. Specifically, a single survey item asked about the natureof the venture’s offering and employed four categorical responses including: product(s),mostly a product but some service, service(s), or mostly service but some product.Responses were coded as 1 representing an offering of product or mostly product butsome service, and 0 representing services or mostly services but some product.

Entrepreneurs possessing prior entrepreneurial experience may be more successfulwhen pursuing subsequent entrepreneurial activities (Singer, 1995). To control for theseeffects, we controlled for whether or not the participants had previously started anotherventure. A dummy variable was included to control for this possibility (1 = prior entre-preneurial experience; 0 = no prior entrepreneurial experience).[1]

Finally, to control for firm-level effects, we first controlled for firm age as older firmsmay have more experience developing technologies, a more established network ofresource providers, and may be better at managing difficulties with liabilities of newness(Freeman et al., 1983). Second, we controlled for the number of years between the firm’sfounding and the year it achieved its first sales, as this may explain the receptivity of thefirm’s offerings in the marketplace.[2]

ANALYSIS AND RESULTS

Table II includes descriptive statistics and correlations for all variables. When examiningthe data relative to the assumptions for OLS regression, we discovered first-year sales waspositively skewed. Consequently, a natural logarithmic transformation on the variablewas used (Cohen et al., 2003). Prior to transforming variables with zeros, we added aconstant of 1 to each score to bring the smallest value to at least 1 (Cohen et al., 2003).After the transformation, the data were normally distributed. As a sensitivity analysis, wealso added constants of 100 and 1000. Results were unchanged, and analyses reportedare those including the constant of 1.

For analyses testing moderators, to reduce multicollinearity, the predictor variableswere mean-centred (Cohen et al., 2003) and variance inflation factor scores were exam-ined. All were considerably below 10.0 (Ryan, 1997), suggesting multicollinearity was nota problem. All hypotheses were tested using hierarchical moderated multiple regressionanalysis. Regression results for product/service innovativeness are reported in Table IIIand results for first-year sales are reported in Table IV.

Hypothesis 1a predicted a positive relationship between technology knowledge acqui-sition and product/service innovativeness. According to Table III, step 2, the overallmodel is significant (R2 = 0.20, F = 4.05, p < 0.001) and the addition of the independentvariables significantly explains an additional proportion of variance in the dependentvariable (DR2 = 0.05, p < 0.01). In addition, step 2 indicates that the relationship ismarginally significant and in the predicted direction (b = 0.13, p < 0.10). Finally, an




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examination of step 3, the fully-specified model, suggests that the relationship is significantand in the predicted direction (b = 0.18, p < 0.05). Overall, results suggest support forHypothesis 1a.

Hypothesis 2a predicted a positive relationship between market knowledge acquisitionand product/service innovativeness. According to Table III, step 2, the relationship ismarginally significant and in the predicted direction (b = 0.13, p < 0.10). Further, anexamination of step 3, the fully-specified model, suggests that the relationship is margin-ally significant and in the predicted direction (b = 0.14, p < 0.10). Overall, results suggestmarginal support for Hypothesis 2a.

Hypothesis 1b predicted a positive relationship between technology knowledgeacquisition and first-year venture sales. Hypothesis 2b predicted a positive relationshipbetween market knowledge acquisition and first-year sales. An examination of

Table III. Hierarchical regression results for product/service innovativeness outcomea

Variable Step 1 Step 2 Step 3

Controls Predictors Full

Controls

Formal education 0.23*** 0.24*** 0.28***(0.08) (0.08) (0.08)

Experience depth 0.09 0.09 0.08(0.08) (0.08) (0.08)

Product/service offering 0.12† 0.12† 0.12†(0.07) (0.07) (0.07)

Entrepreneurial experience 0.11† 0.11† 0.11†(0.07) (0.07) (0.07)

Firm age 0.11† 0.11† 0.10†(0.07) (0.07) (0.07)

Years until first sale 0.07 0.05 0.05(0.08) (0.07) (0.07)

Predictors

Market knowledge acquisition 0.13† 0.14†(0.09) (0.09)

Technology knowledge acquisition 0.13† 0.18*(0.09) (0.10)

Network reliance for technology knowledge -0.09 -0.12†(0.08) (0.08)

Moderators

Technology knowledge acquisition ¥ Networkreliance

0.17**(0.08)

F-value 4.23*** 4.05*** 4.15***R2 0.15 0.20 0.23DR2 0.05** 0.03*

Notes:a n = 151, standardized beta coefficients are reported.*** p < 0.001; ** p < 0.01; * p < 0.05; † p < 0.10, one-tailed test; standard errors in parentheses.




Table IV, step 2, indicates that the overall model is significant (R2 = 0.49, F = 15.54,p < 0.001). However, the addition of the independent variables does not significantlyexplain an additional proportion of the variance in first-year sales (DR2 = 0.02, ns).Finally, the main effect of market knowledge acquisition and first-year sales is mar-ginally significant (b = 0.11, p < 0.10), and the main effect of technology knowledgeacquisition and first-year sales is significant and in the opposite direction than pre-dicted (b = -0.17, p < 0.01). Overall, results suggest that Hypotheses 1b and 2b are notsupported.

Hypothesis 3a predicted that an entrepreneur’s reliance on their network for technol-ogy knowledge acquisition would moderate the relationship between their technology

Table IV. Hierarchical regression results for first-year salesb outcomea

Variable Step 1 Step 2 Step 3

Controls Predictors Full

Controls

Formal education -0.23*** -0.22*** -0.22***(0.06) (0.06) (0.07)

Experience depth 0.04 0.05 0.05(0.06) (0.06) (0.06)

Product/service offering -0.17** -0.18** -0.19**(0.06) (0.06) (0.06)

Entrepreneurial experience -0.01 -0.02 -0.02(0.06) (0.06) (0.06)

Product/service innovativeness 0.01 0.02 0.02(0.06) (0.06) (0.07)

Firm age -0.08 -0.08 -0.08(0.06) (0.06) (0.06)

Years until first sale -0.53*** -0.53*** -0.53***(0.06) (0.06) (0.06)

Predictors

Technology knowledge acquisition -0.17** -0.17**(0.07) (0.07)

Market knowledge acquisition 0.11† 0.10(0.08) (0.08)

Network reliance for market knowledge -0.01 -0.01(0.06) (0.06)

Moderators

Market knowledge acquisition ¥ Network reliance -0.02(0.06)

F-value 18.41*** 15.54*** 12.24***R2 0.47 0.49 0.49DR2 0.02 0.00

Notes:a n = 151, standardized beta coefficients are reported.b Natural log of first-year sales.*** p < 0.001; ** p < 0.01; * p < 0.05; † p < 0.10, one-tailed test; standard errors in parentheses.



knowledge acquisition and product/service innovativeness such that as an entrepre-neur’s reliance on their network increases, so will the innovativeness of the product/service. The analyses suggest that an entrepreneur’s reliance on their network foracquiring technology knowledge does moderate the relationship. According to Table III,step 3, the moderating relationship was significant and in the predicted direction(b = 0.17, p < 0.01). Further, the addition of the interaction explains a significant addi-tional proportion of variance in product/service innovativeness (DR2 = 0.03, p < 0.01),supporting Hypothesis 3a. To further understand this relationship, procedures fromCohen et al. (2003) were followed to plot the interaction where values representing plusor minus one standard deviation from the mean were used to generate the plottedregression lines.

Figure 1 illustrates the interaction. The interaction plot revealed a significantand positive moderating effect of technology knowledge acquisition and networkreliance on innovativeness. Further, this relationship holds for high levels of tech-nology knowledge acquisition, whereas for low levels of technology knowledge acqui-sition, network reliance may not impact innovativeness. These findings are additionallysupported as a test of the slopes reveals that the slope for high network relianceis statistically significant from zero (t = 2.12, p < 0.05) and the slope for low networkreliance is not (t = 0.05, ns). Overall, the results suggest that Hypothesis 3a issupported.

Finally, Hypothesis 3b predicted that an entrepreneur’s reliance on their network formarket knowledge acquisition would moderate the relationship between their marketknowledge acquisition and first-year venture sales such that as an entrepreneur’s networkreliance increases, so will first-year venture sales. According to Table IV, step 3, while theoverall model is significant, the moderating relationship was not (b = -0.02, ns), notsupporting Hypothesis 3b.

Figure 1. Interaction of technology knowledge acquisition and network reliance on product/serviceinnovativeness




DISCUSSION

The main purpose of this study was to assess the relationship between both technologyand market knowledge acquisition and venture development outcomes of product/service innovativeness and first-year venture sales. A secondary purpose was to examineif a technology entrepreneur’s reliance on their network for knowledge acquisitionimpacts these relationships. To achieve these aims, this paper builds upon and extendsresearch on the relationship between knowledge and venture outcomes in several ways.First, some prior research examining knowledge and venture outcomes has not empiri-cally distinguished relationships between different types of knowledge and venture out-comes ( Yli-Renko et al., 2001) and/or has not examined these relationships within thecontext of technology ventures (Wiklund and Shepherd, 2003). Second, research that hasassessed the effects of multiple knowledge types within technology firms has not exam-ined these effects within the context of early-stage technology ventures (Agarwal et al.,2004; Burgers et al., 2008; Danneels, 2002; Jansen et al., 2005a). Finally, by integratingpremises from the knowledge-based view, network theory, and ACAP, this paper soughtto examine how early-stage technology entrepreneurs might lessen their knowledgeshortcomings and constraints associated with their ACAPs to more effectively developtheir new ventures.

With regard to distinguishing between different types of knowledge, results suggestthat a technology entrepreneur’s acquisition of both technology and market knowledgeare important to venture outcomes, particularly those related to the innovativenessof their offerings. Results of Hypothesis 1a suggest a positive relationship betweenan entrepreneur’s technology knowledge acquisition and the innovativeness of theproducts/services they develop. Thus, these findings suggest that entrepreneurs who seekto generate innovative products/services would be advised to acquire more technologyknowledge early. With regard to Hypothesis 2a, we predicted that market knowledgeacquisition would positively relate to innovativeness, and although we found a positivebeta for this relationship it was marginally significant. Although we found only marginalsupport, we believe further study will find full support for this proposal. Specifically, astudy with a larger sample and more power (Cohen et al., 2003) may find full support forthis relationship. Additionally, recent research suggests it is important for entrepreneursto pay attention to both technology and market knowledge when developing theirventures (Burgers et al., 2008; Danneels, 2002; Jansen et al., 2008) and the findings hereprovide full support for technology knowledge and marginal support for market knowl-edge relative to product/service innovativeness. We believe this evidence, coupled withprior research, suggests future research should more fully explore the theoretical rami-fications for the simultaneous impact that technology and market knowledge can have onyoung technology firms. However, speaking strictly to this study’s results, it seems thatearly-stage technology entrepreneurs would be well-advised to focus their efforts onacquiring technology versus market knowledge – at least for developing innovativeofferings.

Regarding Hypothesis 1b, we predicted a positive relationship between technologyknowledge acquisition and first-year sales. This was not supported, and technologyknowledge was negatively related to first-year sales. One explanation for this counterin-



tuitive finding may be that more innovative products/services are more frame-breakingthan other solutions within the same domain. Research suggests that creating moreradical or frame-breaking innovation entails high levels of risk (Leifer et al., 2000). Inthese cases, products/services may be ‘too radical’ with respect to existing offerings(Marvel and Lumpkin, 2007) and may be too far ahead of their time to gain early salesor penetrate markets. It may be that more innovative offerings are detrimental for newtechnology ventures because they lack the resources required to appropriately develop ormarket the innovation and achieve financial viability. In addition, although we cannotdirectly test this possibility, we believe this finding may hint at the challenges some firmsface as they seek to be ambidextrous, thereby simultaneously achieving exploratory andexploitative innovation ( Jansen et al., 2005a). This highlights the difficulty in managingtensions between creating novel innovations and achieving value (Ford and Gioia, 2000),like sales. Further, these effects may be especially prevalent for young technology ven-tures who are potentially exploring emerging technologies. Supporting this, an exami-nation of Table II indicates that product/service innovativeness was significant andnegatively related to first-year sales, supporting previous research that more innovativeofferings are less likely to obtain sales as early as more incremental innovations. Echoingothers (Gupta et al., 2006; Jansen et al., 2008), we believe these findings highlight theneed for more research examining the challenges firms face as they seek organizationalambidexterity.

For Hypothesis 2b, market knowledge was not related to first-year sales. Beyond thechallenges described above that new technology firms face as they commercialize inno-vations, another explanation for this finding may be our study’s context. Firms that areadmitted to incubator programmes are generally screened prior to admittance. Thus,our sample may be biased towards successful firms as they have already been profes-sionally vetted in terms of financial viability. An examination of our sample supports thisnotion, with only 30 per cent reporting zero first-year sales. Because first-year firm failurerates are estimated at 40 per cent, rising to 90 per cent over ten years (Timmons, 1990),it could be that there are other factors contributing to the generation of sales forearly-stage technology incubator firms. Moreover, it is possible that our sample did notcontain enough variance in sales to detect the relationships. As a partial test of this, weconducted a sensitivity analysis and included only observations where firms had gener-ated sales. The results were unchanged, suggesting the findings are robust. Finally, it ispossible that a one-year timeframe was not enough lag time to detect the effects of marketknowledge acquisition on sales. To test this possibility, we conducted post hoc analysesand examined the direct effect of market knowledge acquisition and third-year sales aswell as fifth-year sales. We found significant and positive relationships between marketknowledge acquisition and both third- and fifth-year sales. In light of these post hocfindings, future research might consider more thoroughly exploring these relationshipswithin different windows of time.

While results from Hypothesis 1a support a positive direct relationship betweentechnology knowledge acquisition and product/service innovativeness, findings fromHypothesis 3a suggest a contingency to this relationship. Results suggest that at highlevels of technology knowledge acquisition, entrepreneurs can strengthen this relation-ship by more heavily relying on their networks for technology knowledge acquisition. As




Figure 1 illustrates, at high levels of technology knowledge acquisition, entrepreneurswho rely more on networks for technology knowledge benefited in terms of producingofferings that were more innovative relative to those who relied less on their networks.This finding suggests support for the idea that early-stage technology entrepreneurs maybe able to enhance their ACAPs, at least in terms of creating innovative offerings,through relying more on interactive knowledge acquisition (Lane and Lubatkin, 1998)via networks versus solo activities. This finding also informs research on knowledgeacquisition by exploring the value of networks relative to knowledge acquisition. In thisstudy, we examined the relative focus of the entrepreneur (network versus solo) as theyacquired knowledge. The results suggest that relatively more reliance on network ties forknowledge acquisition can help technology entrepreneurs develop more innovative offer-ings. However, we did not examine different types of network partners (e.g. weak/strong,large/small, diverse/homogeneous) upon whom entrepreneurs were focusing (Burt,1992; Burt et al., 2000; Granovetter, 1973). Future studies examining knowledge maybenefit from a finer-grained analysis examining additional network constructs as well astechnology and market knowledge acquisition.

Findings from Hypothesis 3a also contribute to research on organizations and infor-mation processing. Research from this tradition has described different activities, likerelying on intra-organizational networks, that are useful for acquiring knowledge, andthey have discussed the high costs entailed with engaging in such activities (Burgers et al.,2009; Tushman and Nadler, 1978). The results contribute to this literature by illustratingthat engaging in costly activities like relying on external sources (e.g. networks) fortechnology knowledge may be worthwhile when technology knowledge requirements arehigh. However, when technology knowledge requirements are low, the results suggestthat the costs associated with networking activities may not be worthwhile as they do notappear to impact the innovativeness of the offerings developed. This finding also informsresearch on early-stage technology ventures. Because early-stage entrepreneurs areresource constrained, the results provide insights into areas that may, or may not, beworthwhile for entrepreneurs to invest their limited resources (e.g. networking for tech-nology knowledge acquisition).

Results did not support Hypothesis 3b. Entrepreneurs who more heavily relied onnetwork ties for acquiring market knowledge were not able to utilize their marketknowledge more effectively to generate higher first-year sales. Although unexpected, thisnon-significant finding in combination with the pattern of results found in this studysuggests that research should theoretically and empirically consider the independenteffects of technology and market knowledge. Although not all of our proposals wereempirically supported, results suggest that these different knowledge types differentiallyrelate to the outcomes examined. Thus, we believe it is plausible to suggest that subse-quent research consider the multifaceted nature of knowledge and treat these knowledgetypes independently in their investigations.

Managerial Implications

Several managerial implications arise from this study. First, entrepreneurs shouldacquire more technology knowledge via technical training and learning of relevant



technology fields if they want to develop innovative products/services. Second, invest-ments in formal education may enhance one’s ACAP (Reagans and McEvily, 2003),allowing entrepreneurs to understand, assimilate, and apply new knowledge more effec-tively – particularly in terms of generating innovative products/services (Fiet, 2007).Finally, where entrepreneurs’ focus their attention when acquiring technology knowledgeis important. In our study, entrepreneurs who had high levels of technology knowledgeacquisition and who relied more on networks for their knowledge acquisition were betterequipped to generate innovative offerings. Thus, highly proficient technology entrepre-neurs who seek to generate increasingly innovative offerings should focus more onexternal knowledge acquisition activities like conferences and trade shows.

Limitations and Future Research

Entrepreneurs from Midwestern US technology incubators were surveyed, suggestingcaution when generalizing the results. Further, because ventures are vetted prior toincubator admittance, our sample may be biased towards successful firms. A secondlimitation concerns the types of network relationships examined for sourcing knowledge.We asked respondents to report the focus of their attention as they acquired knowledgein order to create a ratio measure of network reliance. Future research might utilizemeasures that capture network reliance in absolute terms (e.g. relying solely on networksfor knowledge) or examine specific relationships for sourcing knowledge (e.g. investors)and network characteristics like density ( Jansen et al., 2005b) or centrality (Tsai andGhoshal, 1998).

We also did not distinguish between potential and realized ACAP ( Jansen et al.,2005b; Zahra and George, 2002), which might be relevant for future research. Inhigh-technology contexts, entrepreneurs may face significant challenges with their real-ized ACAPs and market knowledge acquisition because these markets are new, oremergent. While entrepreneurs may be able to acquire and assimilate some marketknowledge (potential ACAP), the newness may hinder them exploiting and integratingthe knowledge into venture operations (realized ACAP) ( Jansen et al., 2005b). Addition-ally, as a cross-sectional study, a limitation includes potential endogeneity concerns (cf.De Clerq et al., 2011), particularly for the first-year sales and market knowledge acqui-sition relationship. While this study does not account for this, future research shouldintegrate methods like instrumental variable techniques (see, for example, Dalziel et al.,2011) and utilize longitudinal designs to reduce this concern.

Finally, we did not discuss the potential for network reliance to moderate the rela-tionship between market knowledge and innovation or technology knowledge and sales.This is because ACAP constraints might hinder early-stage entrepreneurs’ abilities tovalue and assimilate diverse knowledge from external sources (Collinson and Gregson,2003). Because technology knowledge is a close kin to innovativeness as market knowl-edge is to sales, we believe that knowledge from network partners will be easier tounderstand, value, and apply. However, more diverse knowledge from network partnerscould be too complex or conflicting to assimilate effectively. Research on network sizehas proposed an analogous idea whereby too many partners are deleterious to actorslacking the cognitive capacities or time to deal with the knowledge flowing from them




(Greve and Salaff, 2003). Exacerbating this, ACAP research describes difficultiesnetwork partners face in framing and translating complex, loosely connected, knowledge(Cohen and Levinthal, 1990). The more complex the knowledge, the less likely thenetwork partner can translate it in a language understandable to the entrepreneur. Thus,future research is needed to enhance our understanding of how different networkcharacteristics and knowledge bases relate to venture outcomes.

CONCLUSION

This study investigated the relationship between entrepreneurs’ technology and marketknowledge acquisition, the context for acquiring the knowledge (networks), and theinteractive relationship of these constructs on technology venture outcomes (offeringinnovativeness and early sales). Results suggest that technology entrepreneurs canenhance the relationship between technology knowledge acquisition and product/service innovativeness by relying more heavily on interactive knowledge acquisition vianetworks versus autonomous knowledge acquisition. Although research has only begunto uncover the relationships among knowledge acquisition, networks, and venture devel-opment outcomes, it is of little doubt that these topics will remain important.

ACKNOWLEDGMENTS

The authors thank the editor, Henk Volberda, and four anonymous reviewers for their helpful comments.Funding for this project was provided by the Ewing Marion Kauffman Foundation. We wish to thank theKauffman Foundation for their generous support.

NOTES

[1] We would like to thank an anonymous reviewer for this suggestion.[2] We would like to thank an anonymous reviewer for this suggestion.

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