Experience and Pivoting in Entrepreneurial Product Development

Problem definition: Pivoting is a significant shift from the current product under development to an alternative opportunity. Pivoting is strongly advocated in the popular press and is commonly used in entrepreneurial product development. However, a high proportion of startups that pivot fail subsequently, since many entrepreneurs chase pivots that are ultimately not fruitful. We explore how an entrepreneur's level of experience influences the decision to pivot. Experienced entrepreneurs, possessing a clearer perception of potential obstacles and opportunities, tend to exhibit reduced overconfidence. Methodology/results: We develop a decision-theoretic model to analyze the entrepreneurial choice regarding pivoting, while accounting for overconfidence and market and pivot opportunity uncertainties. We show that lack of experience, i.e., a higher level of overconfidence, can systematically influence pivoting decisions. The effect of overconfidence on a pivot decision depends on the market uncertainty of the pivot opportunity relative to that of the already initiated product. More specifically, we show that novice (more overconfident) entrepreneurs are likely to make radical risky pivots, whereas experienced (less overconfident) entrepreneurs are more likely to make safe pivots. We find that the dominant development errors for inexperienced founders relate to pivoting and persisting when faced with risky and safe pivots, respectively. Furthermore, we show that if pivoting can be postponed until after the product launch, novice founders are more likely to postpone safe pivots than experienced founders. We also explore the effects of different types of experience on the entrepreneur's pivoting decisions. Managerial implications: Our results can benefit entrepreneurs in deciding how to set the duration of their supply chain contracts, choose the types of employees to hire, and select appropriate mentors, based on the experience level of the founders and their likely pivot behavior. For startup incubators and accelerators, our results indicate what type of training programs to provide for entrepreneurs when accounting for their experience level.

• 저널Manufacturing & Service Operations Management
• 토픽Entrepreneurship Studies and Influences · Management of Technology and Innovation
• DOI10.1287/msom.2024.1178
• 저자Janne Kettunen, Karthik Ramachandran