Business models and the probability of new venture survival: the effects of pivoting

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In this talk, Prof. Estrin will discuss his new paper on how different business models — understood as systems of interconnected organisational activities to create and capture value— affect the probability of the survival of new ventures, with a particular focus on Revenue Models. The paper also considers whether business model pivoting –a change in the business model–affects start-up survival, and how this relationship is affected by initial firm size. Drawing on a unique dataset of Italian start-ups from applicants to the Mind-the-Seed acceleration program (2013-14), the findings reveal that adopting a Paid Revenue Model, as opposed to a Freemium model, reduces the likelihood of failure by approximately 33%. Moreover, firms that pivot decrease their probability of failure by 61%, and that this effect is stronger for larger start-ups. These results suggest that pivoting the business model in the early days of new ventures greatly enhances survival probabilities.

Speaker

Saul Estrin is an emeritus Professor of Managerial Economics and Strategy and was the founding Head of the Department of Management at LSE. He was formerly a Professor of Economics, and Associate Dean (Faculty and Research), at London Business School. His research focuses on international business and entrepreneurship, particularly in emerging and transition economies. Key areas of his work include the comparative performance of state-owned and private firms, FDI entry modes, the influence of business group affiliation on internationalisation, and the role of emerging market multinationals.