Abstract

     Recent literature suggests entrepreneurs struggle to pivot—or fundamentally change aspects of their venture—due to identity-based resistance to change. Yet, when entrepreneurs receive negative feedback, overcoming this resistance may be important to pivoting their business model. We adopt a convergent, mixed methods research design to explore when and why some entrepreneurs overcome resistance to change in response to negative feedback during early-stage business model experimentation. Building upon qualitative data that we gathered and analyzed, we theorize entrepreneurs may resist pivoting their value proposition relative to other business model components despite receiving negative feedback on this aspect of their business model. However, we find three factors – entrepreneurial experience, startup mentoring, and team size – may enable entrepreneurs to pivot in response to negative feedback. We theorize that these factors broaden a startup team’s perspective, enabling value proposition pivoting during early-stage business model experimentation. We test these relationships with quantitative data from 80 startups engaged in business model experimentation and find support across hypotheses. We contribute to understanding when and why entrepreneurs pivot aspects of their business models in response to negative feedback during early-stage business model experimentation.

Introduction

     The entrepreneurship literature suggests startups may benefit from experimentation and pivoting business model components in response to negative feedback from stakeholders (Andries et al., 2021; Blank and Eckhardt, 2023; Camuffo et al., 2020; Ries, 2011). In early stages of a new venture, a business model refers to a cognitive schema of a potential activity system designed to create and capture value (Massa et al., 2017; Shepherd and Gruber, 2021; Snihur & Eisenhardt, 2022). Business model experimentation is the process of testing assumptions underlying a potential business model schema and pivoting aspects of the business model in response to negative feedback (Andries et al., 2013; McDonald and Eisenhardt, 2020; Leatherbee and Katila, 2020). Building upon prior literature, we define business model pivoting as a fundamental change to a business model component (Berends et al., 2021; Shepherd et al., 2023; Shepherd et al., 2023). Yet, startup founders often struggle to change business model assumptions in response to negative feedback. Identity-based motives to preserve beliefs and assumptions related to founders’ self-concept may conflict with the capacity to change aspects of an emerging business model in response to negative feedback (Grimes, 2018; Kirtley and O’Mahony, 2023; Zuzul and Tripsas, 2020). Despite the general understanding that founders struggle to change their ideas, however, the entrepreneurship literature currently lacks precise insight into when and why some founders can overcome resistance to pivoting distinct business model components during early-stage business model experimentation.

     In this research, we use a convergent, mixed-methods research design to explore when and why startups pivot different aspects of their business model. We do so within the context of early-stage business model experimentation, wherein startup founders explicitly state business model assumptions, test those assumptions against stakeholder feedback, and are encouraged to pivot business model components in response to negative feedback. Through an exploratory qualitative analysis in Study One, we observe that founders are more willing to pivot when negative feedback relates to peripheral aspects of their business model—the activity system designed to deliver value. By contrast, founders resist pivoting the value proposition of their business model despite receiving negative feedback from stakeholders. This finding is important because the value proposition may be critical to pivot in response to negative feedback during early-stage business model experimentation to realize value creation (Camuffo et al., 2020; Danneels, 2007; Marvel et al., 2020; Zellweger and Zenger, 2021; Zott and Amit, 2007, 2008).

Conclusion

     Our research explored how startups experiment with and pivot their business models in response to negative feedback. Using a mixed-methods research design, we highlight founders are more likely to pivot certain aspects of their business model as opposed to other aspects of their business model. To overcome this resistance to change, startups can gain entrepreneurial experience, engage frequently with startup mentors, and expand the size of their team. We suggest these factors enable pivoting because they increase breadth of perspective, which in turn allows founders to consider more alternative solutions when facing negative feedback. Overall, we contribute to understanding the social psychological mechanisms that enable startups to pivot different aspects of their emerging business model schemas during early-stage experimentation.