Entrepreneurial Success in the New Economy

In the past decade, technological advancements have led to changes in the economy with important implications for the strategic management of new ventures. In this paper, we argue that the dynamics of competition, success, and failure for new ventures have been significantly altered by the convergence of electronic technologies and the growing importance of knowledge- based assets. We proceed from the traditional argument that relates first-mover advantage positively and liabilities of newness negatively to entrepreneurial success. The extremely high failure rate of new firms suggests that traditional startups have typically been overwhelmed by liabilities of newness. We then argue that two features of firms competing in the new economy – knowledge-based assets and “virtual embeddedness” – work to diminish the effects of the liabilities of newness and increase returns to first movers, consequently increasing the probability of success for pioneering new ventures.