The success of an emerging business depends largely on the owner’s ability to convince potential employees or customers that the nascent company is operational, according to new research.
In an attempt to explain why some organizations succeed and others flounder, Erno Tornikoski from the Seinajoki University of Applied Sciences and Scott Newbert from the College of Commerce and Finance at Villanova University, analyzed data collected in the panel study of entrepreneurial dynamics. The three-year study identified and repeatedly surveyed 830 Americans who were actively involved in starting a small business.
About half of the survey participants ultimately created successful businesses — defined by researchers as ventures that had made a sale, hired employees, or received external funding.
The researchers found that an entrepreneur’s personal characteristics, such as level of education, had little to do with the success of his or her venture. Rather, the quality shared by successful entrepreneurs was the ability to make their emerging organization seem legitimate.
“People are likely to buy products, work for, and give money to entities that are credible, that they perceive as operational,” said Newberg. “Organizations that make their fledgling operation appear more legitimate than it might actually be are better able to access customers and recruit employees.”
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