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Journal of Applied Economics and Business Research
JAEBR, 2(3): 155-171 (2012)
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation
Geral J. Groenewegen1, Frank de Langen
Novi Vendi Marketing and Innovation Management, The Netherlands.
School of Management, the Open University, Heerlen, The Netherlands.
The purpose of the article is to determine which factors are most important for the success of a startup with a
radical innovation in the first three years. First a conceptual model is designed in which three main factors
determine the success of growth: the uniqueness of the advantages of the innovation, the startup organization
characteristics and the person of the entrepreneur. A survey was setup with startup companies which are not
older than fifteen years and which are active in a diversity of segments. A correlation analyses was done based
on 75 respondents.
Growth was operationalised in two ways: the growth in turnover and the growth in employment. We found
different factors correlating in a different way with the different growth concepts. Both growth in employment
and in turnover are positively related to a thorough business plan and more than 75k Euro seed capital. The
uniqueness of the advantages of the innovation, customer pro-activeness, multiple founders and a relevant social
network have a positive influence on turnover growth but not on employment growth. For turnover growth the
uniqueness of the advantages of the innovation and more than 75k Euro initial capital had a high significance.
There is a positive relation between employment growth and external advice and investor capital but not with the
turnover growth. Only a thorough business plan, external advice, 75k Euro initial capital and using investors
capital had a positive significant influence on employment growth. Other conclusions are that depending on the
used criterion for growth the significant factors differ and that in general the employment growth is a factor 4
smaller than the turnover growth.
Copyright © 2012 JAEBR
Keywords: Startup, Radical, Innovation, Entrepreneurship, Success, Growth
1 Correspondence to W. G. J Groenewegen, E-mail: g.groenewegen@novivendi.nl
156 W. G. J Groenewegen
1. Introduction
Little research is been done, until now, in the matter of the radical innovation by start-ups. De
Jong & Marsili (2006) explain this by the fact that research into patterns of innovation give a
dominant role to large firms and are often based on empirical studies which exclude small
companies; whereas radical innovation seems to be one of the reasons for some start-ups. In
the Netherlands a research after the success of techno starters (Timmermans et al., 2010)
states that only 67% of this type of company survives after 5 years. Techno-starters are
defined as new companies based on a technological innovation. Although not all
technological innovations are radical innovations, it is clear that the success ratio is at most
equal or below the success ratio of techno starters. The goal of the present study is therefore
to answer the question: What are the specific success factors that determine the successful
radical innovation by a start-up?
After a literature study a selection of the factors that determine the success of a radical
innovation and the success of a start-up will be combined in a model, as depicted in figure 1
below, which was tested using a survey.
The article is organized further as follows: section 2 examines the theory and
conceptual framework; section 3 data and empirical method; section 4 empirical results and
section 5 the conclusions and discussion.
2. The conceptual framework
In this paragraph, we first define the concept of innovation. Our research needs to measure if
the innovation is radical, before we can determine the success of the innovation. After
defining the radical innovation, we describe the success and fail factors of radical innovations
in existing firms, and the success and fail factors of radical innovation. Some research has
been done on the critical success factors of radical innovations within established firms,
which we will combine with the research on the success of innovative entrepreneurs.
All the identified success factors are combined in a model in paragraph 2.2.
To define innovation, we start with the definition of Schumpeter (in Brem, 2008:6).
He defines innovation in five parts. As the introduction of a, until then for the consumer,
unknown product or new quality of the product; the introduction of a new production method
not earlier seen in the industry; the unlocking of a new market, that until then didn’t exist or
wasn’t used; the usage or creation of new sources for raw materials and intermediate
products; introducing a new organization form in the industry. Later Schumpeter added (in
Sandberg, 2008:52) that an innovation isn’t synonym to an invention. “Inventions are
economical not relevant while innovation depicts the idea of economical leadership or a
commercial success”. In the 60-ties Schmookler (in van der Veen, 2010) added that an
invention is a new combination of pre-existing knowledge which satisfies some need. He also
stresses that innovations are often demand-induced, not supply-led: without the ‘wants’ there
would not be a problem to solve.
There is also a difference between technology oriented authors (Schilling, 2008; Brem,
2008) defining the innovation from a technological renewal perspective and business
orientated authors (Kim & Mauborgne, 2005; Sandberg, 2008; Ostewalder & Pigneur, 2009),
who define innovation as new to the business model or market.
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 157
The definition for innovation that is used in this article is based on the definition of
McFadzean et al. (2005) which combines several approaches. In this view, innovation is a
process that delivers added value and newness to an organization, suppliers and customers by
the development of new processes, procedures, solutions, products, services, new methods of
commercialization and/or business model by a small entrepreneurial or large established firm
in an open or closed system.
So an innovation can differ in scope (Schilling, 2008; Cooper in McFadzean et al.,
2005:363) and newness (Heany in McFadzean et al., 2005:354); that it can be technological
(Schilling, 2008; Brem, 2008) or business orientated (Kim & Mauborgne, 2005; Sandberg,
2008 and Ostewalder & Pigneur, 2009). Additions to the original definition of McFadzean et
al.(2005) is that the innovation can happen in an open or closed system (Chesbrough &
Crowther, 2006; Herzog, 2007) and by means of three patterns.
These patterns are:
- Schumpeter-Mark I or entrepreneurial pattern: the entrepreneurial activity and creativity of
small and new firms;
- Schumpeter Mark II or routinised pattern (de Jong & Marsili, 2006): the formal R&D
activity of large and established firms;
- the hybrid form of ‘system integration in network model (Rothwell in McFadzean et al.,
2005).
The second concept which should be defined is radical innovation. There are several
different ways to define radical innovation found in the literature. Some stress the
technological newness as characteristic for a radical innovation to distinguish it from a
incremental innovation. This technological newness is defined as the possibility of receiving a
patent (Schmookler in van der Veen, 2010), the impact of the innovation (Duysters &
Schoenmakers, 2010) or the level of new technological knowledge and new knowledge of the
market (Brentani et al. in Burgers et al, 2008:56). Others use the effect of the innovation on
the market. Then the newness of the innovation is measured through the obsoleteness of other
products (Abetti, 2000), The impact on competitive advantages of the firm (O’Connor &
DeMartino, 2006) or the emergence of a new knowledge approach towards the market
(Schilling, 2008:49). Trauffler & Tschirky (2007) mention that ‘technology-push’ often is
companied by a high degree of newness while ‘market-pull’ often is companied by regular
renewal of a low degree. How companies used radical different business models to change the
marketplace is described by Ostewalder & Pigneur (2009) in their book ‘Business Model
Generation’. The ‘blue ocean’ strategy (Kim & Mauborgne, 2005) is related and uses radical
innovation to escape the bloody competition in a current market, the ‘red ocean’ by creating
an open market space in which the competition is irrelevant. Successful radical strategies
build on ‘value innovation’ by combining innovation with usefulness, process and cost
positions. ‘Value without innovation’ focuses on value creation on a incremental level while
‘innovation without value’ is purely technology focused or too futuristic market pioneering.
The definition for radical innovation that is used in this article is based on the
definition of Abetti (2000) with a number of additions to encapsulate the most common
visions found in the literature. A radical innovation is an innovation with a unique and
original product , system or business model, that will make other already existing ones
unnecessary or obsolete and has a high uncertainty of success because of the level of newness
and obscurity of the needed design effort, technology, knowledge and market.
158 W. G. J Groenewegen
This definition takes into account that radicalism is accompanied by a high level of
uncertainty (Freeman in Jain et al., 2010), newness (Schilling, 2008; Trauffler & Tschirky,
2007 ), risk (Schilling, 2008), differentness (Schilling, 2008) and market impact (O’Connor &
DeMartino, 2006 en Duysters & Schoenmakers, 2010).
Success and fail factors of radical innovation for a startup firm
Several factors are mentioned in the literature that explain the success or failure of a radical
innovation. Firstly, the First Mover principle is referred to (Schilling, 2008:88-91). First-
movers are companies that initiate the introduction of a new product or service to the
marketplace. As first-movers disadvantages Schilling mentions High R&D costs with long
payback period, a non existing or under developed distribution channel, lack or immature
‘enabling’ technologies and supporting products, unclear customer needs and no agreed
standards. The latter has the risks that developed standards won’t be accepted by the market
or that the standards are to far ahead.
Sandberg (2008) remarks that for an innovation to be successful it must satisfy the
needs of customers, although it is still unclear who exactly the customers will be.
Unfamiliarity causes fear and resistance, the newness of the products encourages to focus on
irrational needs, time and effort must be invested to overcome the problems with the
interaction with the new product, resistance to acceptance is increased by uncertainty of
advantages and risk of using the new product and the appeal of the product can be diminished
when the product is still in a pilot phase (see Veryzer in Sandberg, 2008:57).
Since a radical innovation can have a restructuring and reshuffling effect on the
existing market (Trauffler & Tschirky, 2007) there will be large resistance by the established
order. Trauffler & Tschirky (2007) adds furthermore that current management theory hasn’t
much understanding about solving the problems of dealing with radical innovation.
A shortlist of the problems when dealing with radical innovations:
High costs of R&D and long payback period;
Largely unknown size of market and customer needs;
Resistance, fear and uncertainty of potential customers;
Uncertainty how to manage a radical innovation;
Difficultness of getting feedback by secrecy because of competition threats;
Non existing distribution channel;
Non existing ‘enabling’ technologies and supporting products;
Not matching existing legislation and current quality norms;
Defensive behavior of the established order;
Struggle about the use of standards and agreements upon them.
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 159
The critical success factors of radical innovation for a startup firm
Several factors are mentioned as success factors for a starting firm, although these factors are
not undisputed. Rauch (2000) and Brem (2008) found that the number of years of working
experience is a success factor for a starting firm. Brem (2008) and Nandram & Boemans
(2001) found that the willingness to take risks is a success factor. Brem (2008) and Rauch
(2000) contradict each other about “being part of a family of entrepreneurs” being a success
factor.
Two distinct groups of critical success factors (CSF ) were found: organizational and
entrepreneurial. This is in compliance with De Mel et al. (2009) who asks if the innovative
power of a company is determined by the innovative power of the organization or the
innovative power of the owners. On an organizational level, the success is influenced by a
thorough business plan (Brem, 2008; Rauch, 2000), a clear strategy/mark analysis/competitor
analyses and aggressive competitor strategy (Brem, 2008; Rauch, 2000), the usage of a
innovation as a business idea (Brem, 2008; Rauch, 2000), being a member of a formal
network (Nandram & Boemans, 2001), having an advisory board (Nan dram & Boemans,
2001) and active marketing (Brem, 2008). On the entrepreneurial level these factors are: the
need for achievement (Brem, 2008; Nandram & Boemans, 2001; Rauch, 2000), having locus
of control (Brem, 2008; Nandram & Boemans, 2001; Rauch, 2000), the willingness to take
risks (Brem, 2008; Rauch, 2000), number of years experience (Rauch, 2000; Brem, 2008),
experience as entrepreneur (Rauch, 2000; Brem, 2008), industry specific experience (Rauch,
2000), management experience (Rauch, 2000) and a relevant social network (Nandram &
Boemans, 2001; Brem, 2008).
The critical success factors of radical innovations within established firms.
As there is not much empirical research on the success of radical innovations in
starting firms, we present an overview of success factors in established firms. In the literature
there is a difference over the importance of market-pull versus technology-push. For example,
Sandberg (2008) emphasizes customer interaction during the phase of radical innovation
development (idea, development and launch) versus Abetti (2000) who stresses the unique
advantage and keeping a technological lead. Verganti (2008:443) merges both visions: “As
successful technology-push innovation requires a deep understanding of market dynamics,
design-driven innovation also implies analyzing user needs, observing them, and exploring
new technologies.”
Three distinct groups of CSF were found: factors concerning the organizational level,
the characteristics of the entrepreneur and the character of the innovation. The important
influencers on a organizational level are the process of interaction with the environment and
the degree of customer pro-activeness (Sandberg, 2008; Abetti, 2000; Trauffler & Tschirky,
2007), the process of setting up the radical innovation (Brink, 2005; Trauffler & Tschirky,
2007), free communication (Abetti, 2000), methods of acquiring market information
(Trauffler & Tschirky, 2007), methods of acquiring market technology developments
(Trauffler & Tschirky, 2007), business structure and plan (Brink, 2005; Bacon in Salomo et
al., 2007), execution of process & methods (Abetti, 2000; Trauffler & Tschirky, 2007) and
being an expert (Abetti, 2000; Brink, 2005).
The important influencers on an entrepreneurial level are having technological skills
(Brink, 2005), market insight (Brink, 2005) and being entrepreneurial (Brink, 2005).
160 W. G. J Groenewegen
The important influence on innovation level is the degree in which the radical innovation
offers a unique advantage compared to the existing possibilities (Abetti, 2000).
The success of innovative entrepreneurs.
The identified critical success factors don’t differ very much from the factors found when
examining the success of entrepreneurs in general. Some factors however are quite specific
for innovative entrepreneurs. Two groups of critical factors are identified: organizational and
entrepreneurial.
The important influencers on organizational level are a high seed capital (Lasch et al.,
2007), a thorough business plan (de Witte, 2008; Syntens website
http://www.syntens.nl,2011), market focus / customer involved (Song et al., 2008;
Cobbenhagen, 2000), a multidisciplinary and project focused organization (Cobbenhagen,
2000; Syntens website http://www.syntens.nl), marketing and commerce (de Witte, 2008;
Cobbenhagen, 2000; Syntens website http://www.syntens.nl), a team of founders (Lasch et al.,
2007), using external knowledge (Cobbenhagen, 2000), entering alliances (Duysters & de
Man, 2005) and using investors capital (de Witte, 2008).
The important influencers on entrepreneurial level are the willingness to take risks (de
Mel et al., 2009), optimism (de Mel et al.,2009), logical mind (de Mel et al., 2009), a higher
education (de Mel et al., 2009), multiple earlier jobs (Song et al., 2008; De Mel et al., 2009)
and industry experience (Song et al., 2008 ).
2.2 The model
The success of a radical starter can be explained by three major variables, the unique
advantage of the radical innovation, characteristics of the organization and the characteristics
of the entrepreneur, as shown in figure 1. All the CSF found in the literature review are
grouped into these three categories.
Figure 1. Venture success model for starters with a radical innovation
Since the large number of CSF found in the former paragraph, the CSF list is reviewed
critically to make the empirical research feasible.
To do this three criteria are used. Firstly a check which factors are relevant for radical
innovating start-ups. Secondly a check is done to see which factors coincide. At last the
relevance is determined based on the contribution towards the possibility of problem
reduction. Seven factors are deleted because of this selection process. Using innovation as a
business idea (Brem, 2008; Rauch, 2000) because the respondents are all starters around an
innovation, multidisciplinary and project directed organization (Cobbenhagen, 2000) which
doesn’t play a large role in a small firm, forming alliances (Duysters & de Man, 2005) which
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 161
isn’t realistic for a small firm, logical thought ability (de Mel et al.,2009) because it coincides
with ‘higher education’, technical skills (Brink,2005) because it coincides with ‘being an
expert’, having market insight (Brink,2005) because ‘good business plan’ will lead to it,
having entrepreneur spirit (Brink,2005) which exists of the personal traits of entrepreneurs.
All the remaining factors are listed in table 4 in appendix 2.
Herein the relations are fixed between the specific characteristics from a radical
innovation (A1), the organization (B1 t/m B9), the entrepreneur (C1.1 t/m C2.7) and the
ultimate success of the venture expressed in personal growth or turnover (see table 4 in
appendix 2). The relations in this model are all positive. The more unique the advantages the
radical innovation has the more motivated a consumer will be to overcome initial resistance
and negativism. The better the organizations meets the defined CSF (good business plan etc.)
the better it will be able to cope with the problems a first mover venture faces. The better the
personal traits (need for achievement etc.) and human capital (higher education etc.) aspect of
the entrepreneur are conform the CSF mentioned the better he will be able to cope with the
problems facing him when radically innovating.
3. Data and empirical method
3.1 Data
For use of this article a clear definition of venture success is needed and calculation method
had to be defined. Nandram & Boemans (2001) use the definition of the Dutch Ministry of
Economic Affairs that venture success means growth of employment. According to them very
fast growers grow with 32% in three year, normal growers with 12% in three year, stable
companies have no growth, and a crimper declines with 4,5% or more.
For this article two definitions of venture success are used. Firstly, success is
measured as the percentage of employment growth between the first full fiscal year and the
third full fiscal year, as used by the Ministry:
1_/)1_3_%.(100 WPWPWPWPG
(WPG:
Percentage employment growth in 3 years; WP_1: Mean number of employment in the first
year (JR_1); WP_3: Mean number of employment in the third year (JR_3)). . However, we
think it possible that small and medium enterprises often use an extended network of suppliers
and other sme’s to outsource activities, so an additional measure of growth is used: the
percentage of turnover growth between the first full fiscal year and the third full fiscal year:
1_/)1_3_%.(100 OMOMOMOMG
(OMG: Percentage turnover growth in 3 years
OM_1: Turnover in the first year (JR_1); OM_3: Turnover in the third year (JR_3).
Using both definitions it would make it possible to determine, after the data gathering,
if there were differences between the CSF for employment growth or turnover growth.
Because of these measures of growth, we restricted the relevant responses to firms
which existed for minimal three years, but not longer than 15 years (as the questionnaire was
about the first three years of existence). (See appendix 1 for a description of all the used
variables.)
3.2 Empirical method
All variables are operationalised using a questionnaire. In this questionnaire questions were
put that could be answered directly (e.g. number of working experience, using seed capital )
other questions had to be answered by choosing an option on a 7-points Likert scale (e.g. I
162 W. G. J Groenewegen
like working hard [1] Totally disagree … [7] Totally agree). The questionnaire was put to a
number of entrepreneurs using different methods as personal contacts, LinkedIn groups and
different entrepreneurial forums. The entrepreneurs had to be based in the Netherlands but
could be from any industry. The companies had to be start-ups based on an innovation on
product, service, production process or business model. Some of the questions in the
questionnaire existed of a single question others were a combination of a number of questions.
The questions used to compose these variables are explained in more detail in Table 1 below:
Table 1 Question composition of used variables
Uniqueness of the advantage of the innovation (UVI)
To what degree do you think that your innovation delivers a unique advantage for your customers?
To what degree was confirmed that your innovation offers a unique advantage for your customers?
Customer Pro-activeness (B4)
How (much) did you anticipate on needs of potential users and/or relevant market parties during the idea phase
of the innovation?
To what extent did you let potential users and/or relevant market parties participate during the development
phase of the innovation?
To what degree have you tried to influence potential users and/or relevant market parties during the launch phase
of the innovation?
Willingness to take risks (RSC)
To what degree do you concur with the following statements:
I don’t mind taking risks
In order to be successful you need to take risk on a regular base
Degree of radicalness (MRAD)
How high was/is the impact of your innovation on the existing market(s)?
To what degree was/is the knowledge that you used new?
To what degree was/is the product, service, product, process or business model new for the market?
To what degree was/is there a discussion about standards and/or norms?
To what degree was/is it unclear who where the potential customers for your innovation?
To what degree was/is unknown how large the development effort would be for your new product, service,
production process or business model?
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 163
Some variables that were meant to be composed could not be used, the Cronbach’s
Alfa was lower then <0.6.These were NFA (Need For Achievement), LOC (Locus of
Control), and POS (Positivism). Some variables were composed of fewer variables then
intended. So was RSC (willingness to take risk) composed of 2 questions instead of 4 and
MRAD uses 6 questions instead of 7.
4. Results
Description of Respondents
From the entered 125 questionnaires only 75 were valid. Some organizations where to old,
some to young, others had not filled in the turnover or employment numbers so the growth
percentage couldn’t be calculated. No respondents were filtered out because of lack of
radicalness, only a few entrepreneurs had a real low degree of radicalness (figure 2 in
appendix 3) the mean had quite a high degree of radicalness. Because of statistical restrains it
wasn’t possible to split the population in low and high radicalness so therefore we used all the
respondents.
The youngest participant was born in 1984, the oldest participant was born in 1947.
The mean age of the participants was 44.
The top 4 percentage of the type of business the respondents are in consists of
‘business services’(57,3%), ‘Remaining’ (13,3%) , ‘Industrial activity’ (12,0 %)and ‘personal
services’ (5,3 %).
The geographical focus of the respondents activities shows that 60% focuses only on
the Netherlands while 20% have a worldwide focus and 18,7% focuses on Europe.
The oldest companies were started in 1995, the youngest in 2008. The mean starting
year was 2004, most of the companies started quite recent, this is good for the validity.
The lowest growth in turnover of the respondents found was a company that actual
shrunk with 50%, the highest growth found was 4512,1%, the mean growth in turnover in 3
years was 493,4 %.
The lowest employment growth was established by a company that shrunk with 25%.
The largest grower grew with 2720,0%, the mean growth in personal in 3 years was 32,1%.
In figure 2 (Appendix 3) the degree of radicalness can be seen. The minimal score
possible was 6 (not radical at all) the maximum score was 42 (extremely radical). As can be
seen there is a good nominal distribution. The lowest score was 12 the highest score was 36.
Since the mean was 25,12 the group respondents exists of a properly radical innovative group.
Empirical results
With help of statistical software the Cronbach’s Alfa where calculated and ultimate the
regressions determined. In table 2 an overview is given of all the statistical results. In table 3
the variables mean, standard deviation and correlations can be seen for all measured variables.
In table 2 below, the result of the empirical research is shown. In the right two
columns can be found if a factor has a relation with the growth (Yes or No), if the relation
was positive or negative (+/-) and how significant the relation was (*, ** and ***). (*
Significant on < 0.2 level; ** Significant on < 0.1 level ; *** Significant op < 0.01 level.)
164 W. G. J Groenewegen
Table 2 Results of the validation of the critical success factors
Category
Critical success factor
Venture success (growth)
Turnover
Employment
Innovation
Unique advantage
Yes *** (+)
No
Organization
Thoroughness of the business plan
Yes ** (+)
Yes ** (+)
Membership of one or more formal networks
No
No
Usage of external advice and knowledge
No
Yes * (+)
Proactive customer approach
Yes ** (+)
No
Structure of the radical innovation process
No
No
Expertise (technology or other specific)
No
No
75000 Euro seed capital
Yes *** (+)
Yes * (+)
Usage of investors capital
No
Yes* (+)
Multiple owners
Yes ** (+)
No
Entrepreneur
Willingness to take risks
No
No
Years of industry experience
Yes ** (-)
No
Years of management experience
No
No
Relevant social network
Yes ** (+)
No
Higher education
No
No
Number of previous jobs
Yes ** (-)
No
Years of working experience
Yes ** (-)
No
Years of previous entrepreneurs experience
No
No
All
Uniqueness of advantage**, Thorough Business
plan*, Relevant social network***, Working
experience**
Yes (+/+/+/-)
Thorough business plan*,
Usage investors capital*
Yes (+/+)
In the table 3 below, a variable matrix is shown. In it the mean value of the variables, the
standard deviation and the correlation between the variables can be seen.
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 165
Table 3 Variable Matrix: variables mean, standard deviation and correlations.
Variable
Mean
Std. Dev.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
1.
Thoroughness Business plan
3,75
1,96
1,00
2.
Member of formal networks
0,56
0,50
0,35
1,00
3.
Intensity external advice
3,69
2,37
0,26
0,25
1,00
4.
Customer Proactiveness
12,23
4,02
0,20
-0,04
0,25
1,00
5.
Degree of structure innovation process
3,51
1,49
0,31
0,12
0,21
0,43
1,00
6.
Degree of expertise
4,79
1,73
0,04
0,00
0,10
0,12
0,15
1,00
7.
Application of investors money
0,35
0,48
0,33
0,25
0,15
0,04
0,11
-0,04
1,00
8.
More then 75000 seed capital
0,25
0,44
0,12
0,08
0,06
0,31
0,09
0,04
0,09
1,00
9.
Multiple owners
0,51
0,50
0,08
0,09
0,03
0,08
0,14
-0,06
0,16
0,02
1,00
10
Uniqueness advantage of the innovation
9,77
2,44
0,17
0,02
0,16
0,32
0,34
0,25
0,15
-0,07
0,17
1,00
11
Willingness to take risk
11,55
1,79
0,29
0,15
0,10
0,23
0,17
0,21
0,11
0,11
-0,06
0,14
1,00
12
Years of industry-experience
5,52
6,60
-0,14
0,01
0,18
0,12
0,22
0,32
-0,14
-0,03
-0,16
-0,08
0,10
1,00
13
Years of management experience
5,40
6,56
0,05
0,11
0,05
0,25
0,25
-0,20
-0,03
0,39
-0,15
-0,14
0,03
0,24
1,00
14
Relevant social network
5,23
1,62
0,05
0,23
0,19
0,25
-0,02
0,11
-0,03
0,13
0,11
-0,01
0,13
0,08
0,06
1,00
15
Higher education (BSc or higher)
0,83
0,38
0,07
0,09
0,03
0,11
0,01
0,31
0,04
-0,06
0,18
-0,01
0,12
-0,07
-0,27
0,28
1,00
16
Previous jobs
3,20
2,09
-0,19
-0,07
-0,04
-0,09
-0,07
0,15
0,00
-0,03
-0,14
-0,29
0,04
0,23
0,01
0,14
0,13
1,00
17
Years of previous working experience
11,47
8,39
-0,08
0,23
-0,03
0,17
0,19
-0,05
-0,18
0,14
-0,24
-0,18
0,19
0,50
0,51
0,13
-0,12
0,51
1,00
18
Years of earlier entrepreneur experience
2,35
4,77
-0,01
0,02
0,14
0,28
0,12
0,07
0,21
0,18
-0,10
0,11
0,07
0,12
0,39
0,16
-0,19
-0,12
-0,01
1,00
19
Degree of radicalness
25,12
5,09
-0,02
0,12
0,07
0,36
0,22
0,33
-0,06
0,10
0,06
0,53
0,05
0,02
0,03
0,05
0,06
-0,30
0,00
0,07
1,00
20
Turnover growth in %
493,37
879,81
0,24
0,01
0,15
0,20
0,01
-0,03
0,24
0,09
0,27
0,36
0,04
-0,21
-0,10
0,22
0,15
-0,21
-0,26
0,05
0,08
1,00
21
Employment growth in %
132,12
332,70
0,21
0,07
0,18
0,09
0,00
0,09
0,16
0,20
0,09
0,14
0,11
-0,05
0,06
0,12
0,09
-0,02
-0,04
0,12
0,11
0,57
1,00
On the vertical axe the variables are numbered, on the horizontal axe the numbers represent the same variables as on the vertical axe.
166 W. G. J Groenewegen
With the help of table 3 some extra observations were done. A very high correlation (>0,5)
exist between degree of radicalness and uniqueness of advantage of the innovation. This is
also true between working- experience, industry-experience, management experience and
previous jobs. And also true for turnover growth and personal growth. The percentage of
employment growth turned out to be a factor 4 smaller then the turnover growth.
5. Conclusions and discussions
This study tried to expand the existing theory of the success factors of a radical starter. In the
other empirical research on success factors of starters, we have seen the importance of
specific organisational and entrepreneurial traits. This we combined with the success factors
of a radical innovation within an established firm, which added innovation characteristic
(unique advantage), organizational traits ( customer proactiveness) and confirmed
entrepreneurial traits. This we combined further with the success factors found for
innovative entrepreneurs in general which added specific organisational (use of seed capital)
and entrepreneurial traits (willingness to take risks). All these factors were combined in a
model for starters with a radical innovation. This model states that to succeed, there are three
relevant factors. The starter has to be an entrepreneur (with specific personal traits and human
capital), the organization has to have certain characteristics (business plan, seed capital, etc.)
and the innovation has to have some unique advantages for the (potential) customers.
Testing this model through a questionnaire, we see a statistical relevance for each
measurement of success. The general findings do support the idea that growth is determined
by the uniqueness of the advantage of an innovation, specific organizational characteristics
and entrepreneurial traits. The results however are clearer for turnover then for employment
growth and not all the factors identified in the existing literature were found statistically
significant or positive.
From the outcomes of this study an image of the start-up with the most turnover
growth in the first 3 years can be drafted. The start-up exist of a team of founders with not to
much working experience and with a relevant social network. There is a thorough business
plan that is executed with at least 75.000 euro seed capital. By a pro-active customer approach
the start-up is able to bring to the market, successfully, a radical innovation with enough
unique advantages (compared to other existing possibilities) to overcome initial customer and
market resistance.
This study increases the external validity of the earlier research on the success factors
of radical innovation. The results of the case studies by Sandberg (2008), that customer
proactivity is important for the radical innovation within existing companies, can now also be
applied for radical start-ups. The results of the case studies by Abetti (2000), that the
uniqueness of the advantaged of an innovation is important for the success of the radical
innovation within existing companies, can now also be applied for radical start-ups.
Another result of this study is the possibility to increase the internal validity of
research in the field of radical innovation. The central concept ‘radical innovation’ is
redefined in such a way that it can be measured empirically with the help of six distinct
characteristics.
Further study should be done to explain why for radical starters personal traits are less
important then literature proposes. Secondly to explain why experience has a slightly negative
influence on growth instead of what was found in the existing literature. Thirdly a further
study should be done to examine the influence of the used ‘measure of success’ on CSF.
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 167
Furthermore, it would be interesting to see if the conclusion that success measured in
turn over and success measured in employment have different determinants. If this could be
confirmed, it will point towards a possible conflict between the individual interests (financial
growth) and the interests of policy makers (growth in employment).
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Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 169
Appendix 1
Variable
Description
JR_1
First year that the company was operational for the whole year, a full fiscal year
JR_3
The year that is two years later than the first year (JR_1)
OM_1
Turnover in the first year (JR_1)
OM_3
Turnover in the third year (JR_3)
WP_1
Mean number of employment in the first year (JR_1)
WP_3
Mean number of employment in the third year (JR_3)
WPG
Percentage employment growth in 3 years
OMG
Percentage turnover growth in 3 years
Variable
Critical success factor that is measured
UVI
Degree in which the innovation has an unique advantage compared to other possibilities
B1
Thoroughness of the business plan (more then 10 A4 and with market analyses)
B2
Membership of one or more formal networks (with membership fee)
B3
Degree of usage of external advice and knowledge
B4
Proactiveness of the customer approach (in the phases idea, development and launch)
B5
Degree of structure of the radical innovation process
B6
Degree of having a technological or other specific expertise
B7
Having more then Eur 75.000 of seed capital
B8
Having used investors capital
NB9
Having multiple owners
NFA
Degree of need for achievement
LOC
Degree of locus of control
RSC
Willingness of taking risks
POS
Degree of optimism
C21
Years of industry experience
C22
Years of management experience
C23
Degree of having a relevant social network
C24
Having a higher education (BSc or higher)
C25
Having multiple earlier jobs
C26
Years of working experience (Rauch en Brem)
C27
Years of experience as an entrepreneur (Rauch en Brem)
MRAD
Degree of radicalness of the innovation
170 W. G. J Groenewegen
Appendix 2
Table 4. Critical success factors of the radical innovation of a starter
A. Innovation
A1
Degree in which the innovation offers a unique advantage compared to other
existing possibilities (Abetti,2000)
B. Organization
B1
Good business plan (Bacon in Salomo et al., 2007; Brink,2000; de Witte, 2008 and
website Syntens.nl,2011)
B2
Formal membership of networks (Nandram & Boemans, 2001)
B3
Usage of external advice and knowledge (Nandram & Boemans, 2001;
Cobbenhagen,2000)
B4
Proactive customer approach (Cobbenhagen, 2000; Sandberg, 2008; Song et al,
2008; Trauffler & Tschirky,2007)
B5
Good structured process of radical innovation (Brink, 2000; Trauffler & Tschirky,
2007; Jain et al.,2010; Abetti,2000)
B6
Technological or other specific expertise (Abetti,2000; Brink, 2005)
B7
More then Eur 75.000 starting capital (Lasch et al., 2007)
B8
Using investor capital (De Witte, 2008)
B9
Multiple founders (Lasch et al.,2007)
C. Entrepreneur
C1
Personal traits
C11
Need for achievement (Brem, 2008; Nandram & Boemans, 2001; Rauch, 2000)
C12
Locus of control (Brem, 2008; Nandram & Boemans, 2001; Rauch, 2000)
C13
Willingness of risk taking (De Mel et al., 2009; Brem,2008; Rauch, 2000)
C14
Optimism (Nandram & Boemans, 2001; Rauch, 2000; Brem, 2008; de Mel et
al.,2009)
C2
Human Capital
C21
Industry experience (Rauch,2000; Song et al., 2008)
C22
Management experience (Rauch, 2000)
C23
Having a relevant social network (Brem, 2008, Nandram & Boemans, 2001)
C24
Higher education (de Mel et al.,2009)
C25
Multiple earlier jobs (Song et al.,2008; de Mel et al.,2009)
C26
Number of years working experience (Rauch,2000; Brem, 2008)
C27
Experience as an entrepreneur (Rauch, 2000; Brem, 2008)
Critical Success Factors of the Survival of Start-Ups with a Radical Innovation 171
Appendix 3
Respondents radicalness
Figure 2 Degree of radicalness
