The Early Stages of New Product Development in Entrepreneurial High‐Tech Firms

Abstract

This study examines the most valuable sources of new product ideas and the criteria used to screen potential new products in entrepreneurial, high‐tech firms. Teresa Pavia explored the practices of 118 small, young, high‐tech firms. Her findings complement a variety of existing studies of the new product process in large firms and the few existing studies of the process in entrepreneurial, high‐tech firms. The firms participating in this study rely on informal techniques to generate new product ideas. They place heavy reliance on input from their customers and often develop new products in response to problems articulated by these customers. Although the annual strategic plan is not used by most firms as a new product identification tool, it is highly rated by the most successful firms. Successful firms also actively engage in environmental scanning. The majority of the respondents do not use financial measures as a screening criterion, preferring to evaluate new products by “gut feel.” However, the firms that have experienced the fastest growth in sales employ financial hurdles for project selection. The educational background of the key GO/NO GO decision‐makers was also evaluated. Two thirds of the firms reported having a key decision‐maker with an educational background in business. The educational background of the key decision‐makers had little impact on the aspects of the new product process studied here.

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