Dollinger index

134 ENTREPRENEURSHIP

binations of technology, human resources, and organizational systems to discover what

works. Successful combinations are adopted by other firms as fundamental, and further

experiments are conducted to refine the concepts and practices. Usually a single standard

emerges for all firms. Occasionally, two competing standards reach the public at the

same time as, for example, video technologies like Beta and VHS. But only one survives.

Strategic Uncertainty. Emerging firms also face a great deal of strategic uncertainty.

New ventures in emerging industries are often unaware of who the competition is (or

will be), what types of products and processes the competition is working on, and what

posture the government will take toward the new industry. Because birth rates are high,

new firms are springing up all the time, making it difficult to keep track of who and

what they are. Government regulatory agencies at all levels are slow and bureaucratic.

They are unlikely to have existing rules to help guide the new ventures.

Resource Uncertainty. Additional uncertainty looms in the firm’s input markets. It is

often difficult for the new venture to raise capital, because financial sources are unfa-

miliar with the new industry’s risk/reward profile. Although some venture capital firms

specialize in supporting investments in emerging industries, most financial institutions

shy away from them. Labor is another input that is difficult to procure, especially man-

agerial talent. Managers and executives face a great deal of career risk and economic un-

certainty when joining firms in emerging industries. Turnover may be high in an unsta-

ble and turbulent industry. Managers and executives may need to be as entrepreneurial

as the founders in order to meet the challenge of a new venture in a new industry.

The procurement of raw materials, supplies, and parts may also be difficult during the

industry’s emergence. If these inputs are also employed by other industries, there may

Emerging Transitional Maturing Declining

1 2 3 4

FIGURE 4. 2 The Industry Life-Cycle Curve