When Failure Is Not Fatal: Examining Venture Resource Acquisition Following Product Development Failure

Amrita Lahiri, Chandresh Baid, Arvin Sahaym and Greg Fisher

Entrepreneurship Theory and Practice, 2025, vol. 49, issue 1, 196-231

Abstract: Product development in innovation-driven industries often fails. Although such failures cause new ventures to struggle to raise follow-on investments, some overcome this challenge. Why? Synthesizing insights from the research on signaling and social evaluation theory, we identify how certain resources can mitigate the risk of funding termination for new ventures despite product development failure. Through a longitudinal study of 254 venture capital-funded biotechnology ventures, we show that internal quality signals decrease in their effectiveness while industry endorsement signals increase in their effectiveness as quality signals over time. Our findings contribute to the literatures on entrepreneurial failure, entrepreneurial resource acquisition and signaling.

Keywords: product development failures; entrepreneurial resource acquisition; social evaluation; signaling; entrepreneurial failure (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:49:y:2025:i:1:p:196-231

DOI: 10.1177/10422587241261618

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