New Firm Formation : A Dynamic Capability Perspective

The dynamic capability perspective is used as a way of understanding new firm formation.To better understand the ways in which entrepreneurs acquire resources, the gestational activities (actions that develop a business framework and operations that aid in creating a business) of new firms are reviewed. A thorough literature review covers research such as new firm formation, conceptual development, specificity, commonalities, and market dynamism.The data were collected from the Panel Study of Entrepreneurial Dynamics (PSED), with 817 nascent entrepreneurs randomly chosen as subjects.The data were analyzed using Spearman's rho correlation and binary logistic regression. The gestational activities common to nascent entrepreneurs include developing models and/or prototypes, purchasing materials, committing full time to the venture, hiring employees, and engaging in promotional efforts. The findings of the study revealed the following:the process to firm formation becomes less complex as market velocity increases, and for low-tech nascent entrepreneurs only those who actually invest saved capital in the venture will succeed.It was also found that prior firm founding experience may negatively influence the chances of founding a new firm.The implications, limitations, and areas for future research are discussed. (AKP)