Market Selection and Entry: Calibration Through Experimentation and Speed

Dean A. Shepherd () and Holger Patzelt ()
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Dean A. Shepherd: University of Notre Dame, Mendoza College of Business
Holger Patzelt: Technical University of Munich, School of Management

Chapter 3 in The Entrepreneurial Compass, 2026, pp 17-23 from Springer

Abstract: Abstract This chapter examines the transition from mental conjectures to market realities through a staged commitment model. This process moves through prospecting, developing, and exploiting to reduce the ignorance gap systematically. Central to this is Real Options Reasoning (ROR), a strategic heuristic in which early investments serve as small probes to “reserve the right to play” while bounding the costs of failure. The authors advocate for a scientist’s mindset, treating business models as sets of hypotheses tested through lean learning cycles and pivots. The timing of entry is governed by the ignorance threshold, where the cost of acquiring further knowledge outweighs the gains from delaying exploitation. Additionally, the chapter outlines evaluative frameworks for investor readiness (technology, market, and management) and the resource-based view (value, rarity, inimitability). Finally, it discusses strategic alliances as scaffolding, allowing entrepreneurs to access essential resources while using specialized technological capabilities to defend against partner opportunism.

Keywords: Ignorance Threshold; Investor Readiness; Lean Learning; Real Options Reasoning; Scientist’s Mindset; Staged Commitment; Strategic Alliances (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1007/978-3-032-36429-6_3

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