Entrepreneurs' Decisions on Timing of Entry: Learning From Participation and From the Experiences of Others

Authors: Lévesque, Moren¹; Minniti, Maria²; Shepherd, Dean³

Source: Entrepreneurship Theory and Practice, Volume 33, Number 2, March 2009 , pp. 547-570(24)

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Abstract:

Depending on the type of industry, an entrepreneur's decision of when to enter an industry may be a crucial one. The longer entrepreneurs wait, the more they learn from others. However, by waiting, they reduce their ability to learn directly and the possibility of locking in competitive advantages. We suggest that the optimal time of entry depends on the hostility of the learning environment since the latter has an impact on dimensions of performance, such as profit potential and mortality risk. The environment for entrepreneurial learning is less hostile when the information to be learned is abundant and when learning from others is relatively more effective at increasing performance than learning from participation. Our results suggest that delaying entry is desirable when the environment is less hostile. Entrepreneurs, however, cannot wait forever. We show that, under some general conditions, an optimal time of entry can be determined, and discuss the specific situations in which, instead, multiple equilibria may arise.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1540-6520.2009.00303.x

Affiliations: 1: University of Waterloo, Waterloo, Ontario, Canada 2: Southern Methodist University, Dallas, Texas 3: Indiana University, Bloomington, Indiana

Publication date: 2009-03-01