When do investors prefer copycats? Conditions influencing the evaluation of innovative and imitative ventures
Journal
Strategic Entrepreneurship Journal
ISSN
1932-4391
Type
journal article
Date Issued
2019
Author(s)
Research Team
https://www.alexandria.unisg.ch/persons/9249
Abstract (De)
Research Summary
This article investigates the conditions under which investors preferentially evaluate fast follower business model copycats (BMCs)—less novel, imitative ventures—over novel ventures. Employing a conjoint experiment, we find that venture investors prefer fast follower BMCs when the venture team has major capability advantages in exploitation (compared to exploration). Further, we find that investors' experience reduces their preference for fast follower BMCs when the team's capability advantage is in exploitation, and reduces their preference for novel ventures when the team is strong in exploration. These findings provide important theoretical and managerial implications.
Managerial Summary
Business model copycats represent a popular phenomenon in the global market. Fast follower BMCs are especially influential as many of them received millions of dollars of investment, and achieved billions of dollars in evaluations, both resulting in worldwide recognition. But although fast follower BMCs have the potential to conquer any market, they are not always highly valued by investors when initiating their businesses. We investigate when this is the case and find that team exploration–exploitation capabilities influence investors' evaluation preference toward novel ventures and fast follower BMCs. If entrepreneurs are skilled in exploitation, creating a fast follower BMC venture might be a great pitch to secure investment. Yet, if entrepreneurs are mostly competitive in exploration, creating fast follower BMCs does not attract investment easily.
This article investigates the conditions under which investors preferentially evaluate fast follower business model copycats (BMCs)—less novel, imitative ventures—over novel ventures. Employing a conjoint experiment, we find that venture investors prefer fast follower BMCs when the venture team has major capability advantages in exploitation (compared to exploration). Further, we find that investors' experience reduces their preference for fast follower BMCs when the team's capability advantage is in exploitation, and reduces their preference for novel ventures when the team is strong in exploration. These findings provide important theoretical and managerial implications.
Managerial Summary
Business model copycats represent a popular phenomenon in the global market. Fast follower BMCs are especially influential as many of them received millions of dollars of investment, and achieved billions of dollars in evaluations, both resulting in worldwide recognition. But although fast follower BMCs have the potential to conquer any market, they are not always highly valued by investors when initiating their businesses. We investigate when this is the case and find that team exploration–exploitation capabilities influence investors' evaluation preference toward novel ventures and fast follower BMCs. If entrepreneurs are skilled in exploitation, creating a fast follower BMC venture might be a great pitch to secure investment. Yet, if entrepreneurs are mostly competitive in exploration, creating fast follower BMCs does not attract investment easily.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Wiley
Volume
13
Number
4
Start page
529
End page
551
Subject(s)
Division(s)
Eprints ID
262525
File(s)![Thumbnail Image]()
open.access
Name
Fu, Tietz, 2019, SEJ, When do investors prefer copycats. Conditions influencing the evaluation of innovative and imitative ventures.pdf
Size
2.77 MB
Format
Adobe PDF
Checksum (MD5)
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