This study deals with entrepreneurial activities for which there has been growing interest in academic research in recent years. Research has shown that the risk of failure among new ventures can be estimated at more than 50% in the first year, rising to 85% over three years. Such a rate of failure suggests that new business development is problematic. Against this background, the overall aim of this study has been to examine the difficulties encountered in developing a new business venture and to contribute to a better understanding of the causes of the frequent failures. The central assumption in our research has been that the key factors in explaining the success or failure of a new venture are the characteristics of the market context in which the new venture must be embedded through newly developed business relationships, primarily with customers and suppliers. Taking a contextualized view of entrepreneurship prevailing in recent research, we examine and interpret the difficulties a new business encounters when developing the initial business relationships and argue that to better understand why a business succeeds or fails it is vital to focus on the process of embedding the new business in the pre-existing context through relationship formation. In the first part of the thesis we review four theoretical approaches that offer different conceptualizations of the market, and highlight different features of the business landscape in which new businesses emerge: the neoclassical economic, the Austrian school of economics, the socioeconomic perspective, and the marketing perspective. The marketing perspective, which acknowledges the existence and centrality of customer-supplier relationships in markets, has been influential in formulating the concept of markets as networks, which has significant implications for the new business development process. Empirically, this study is based on three case studies of newly established businesses about to develop initial business relationships. To investigate the topic, we followed an inductive approach involving longitudinal qualitative research methods and multiple sources of evidence, including in-depth, semi-structured interviews with key informants, and secondary data sources. The findings support the argument that unpredictability in new business formation is related to difficulties in connecting with the pre-existing business network context in the dimensions of the resource constellations, activity patterns, and webs of actors while developing new business relationships. Based on the literature review and our empirical study, we reached four main conclusions about the roots of the difficulties encountered in developing a new business. The first conclusion is that in starting a new business, entrepreneurs adopt an introspective view, attending to issues internal to the venture, rather than considering the external business relations and the dynamics that tend to endanger the venture’s successful development. The second conclusion is that new businesses struggle more to generate revenues from potential customers than they do in canvassing funds from investors and other funding bodies, which reinforces the tendency to look inward. The third conclusion is that in the initial stages of the new business, insufficient attention is paid to the critical organizing dimension. In particular, the internal organization needs to be developed, and the external organizing of the context as the new relationships are developed needs to be considered. Finally, the fourth conclusion is that in order to succeed, the new venture company has to generate positive economic outcomes for the partners (positively affecting their assets) and simultaneously ensure that the business is economically sustainable by generating sufficient revenues to cover operating costs. The thesis concludes with a discussion of the implications of our findings for practice and further research.
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