Navigating market entry decisions in the solar PV industry: The role of founders' pre-entry experience across the value chain

Abstract

Research Summary: In emerging industries characterized by several technological generations giving rise to multiple submarkets that emerge at different points in time, start-ups entering with novel technologies encounter markets at varying development stages and are confronted with the choice to enter either a nascent or an established market. We study the solar photovoltaic industry between 1985 and 2017 to examine how founders' pre-entry experience along the industry value chain helps them navigate this complex decision. We find that founders with upstream industry experience possess operational acumen and manufacturing knowledge, prompting them to favor established markets. Conversely, founders with focal industry experience, guided by their unique insights into new applications and the limitations of existing technologies in fulfilling emerging customer needs, are more inclined to enter nascent markets. Managerial Summary: New technologies often enable fulfillment of new user needs. In emerging industries witnessing successive waves of technologies, new markets materialize at different point in times. When firms enter these industries with fungible technologies, they can target markets in the early phases of formation or markets that are more mature and well developed. Evidence from the solar PV industry shows that the experience that entrepreneurs gained before founding their start-up in this industry influences the choice of market: founders with prior experience developing solar technologies enter markets addressing new and undefined user needs while founders with prior experience in upstream industries that supply components to the solar industry gravitate toward mature markets, which place greater value on value efficiency enhancements.