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

Saul Estrin; Andrea Herrmann; Moren  Lévesque; Tomasz Mickiewicz; Mark Sanders

doi:10.1007/s11187-025-01062-x

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

Saul Estrin, Andrea Herrmann, Moren Lévesque, Tomasz Mickiewicz, Mark Sanders

Research output: Contribution to journal › Article › peer-review

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, multioutput 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.

Original language	English
Number of pages	26
Journal	Small Business Economics
Early online date	6 Jun 2025
DOIs	https://doi.org/10.1007/s11187-025-01062-x
Publication status	E-pub ahead of print - 6 Jun 2025

Bibliographical note

Copyright © The Author(s) 2025. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/.

Keywords

entrepreneurship
innovation
new venture creation
propriety
stochastic frontier analysis
Schumpeter

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10.1007/s11187-025-01062-xLicence: CC BY 4.0

New venture creation- innovativeness, speed‑to‑breakeven, and revenue tradeoffs
Copyright © The Author(s) 2025. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/.
Final published version, 2.46 MBLicence: CC BY 4.0

Cite this

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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, multioutput 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. ",

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N2 - 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, multioutput 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.

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

Abstract

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Keywords

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