Although knowledge has been built around how product newness affects product performance in the context of established firms, such an effect in new ventures remains to be explored. Building on the knowledge-based view, the open innovation literature, and observations of the liability of newness, this study examines the differential effects of technological and market newness on product performance and tests how market knowledge breadth and tacitness moderate these effects in distinctive ways. Results obtained using data from new high-tech ventures in China show that market newness has a stronger positive effect on product performance than technological newness. Market knowledge breadth enhances the effect of technological newness on product performance, whereas market knowledge tacitness appears to be a double-edged sword: it weakens the effect of technological newness but enhances the effect of market newness on new product performance. These findings provide novel insights into how distinct dimensions of product newness have differential effects on product performance and a more nuanced view of how market knowledge characteristics function as boundaries in the product newness–performance link in new ventures.
As product newness is a critical parameter of new product development (NPD) in industrial firms, marketing scholars have paid great attention to its impact on product performance (see Evanschitzky, Eisend, Calantone, & Jiang, 2012 for a recent review). Although product newness has been widely examined in the context of established firms (Calantone, Chan, & Cui, 2006), its role in new ventures is still underexplored. Differing from most established incumbents, new ventures often confront a paradox in NPD1 : whereas they must develop and introduce radically new products to gain a market foothold and succeed in competition with incumbents (Story, Boso, & Cadogan, 2015), they often lack the resources and skills needed to develop and market such products, a characteristic of the liability of newness (Hyytinen, Pajarinen, & Rouvinen, 2015; Stinchcombe, 1965). This paradox signifies the importance of considering product newness and new ventures' resource reservoirs, such as market knowledge, simultaneously in connection with NPD. However, in spite of the importance of product newness to new ventures and the particular resource hurdles embedded in the NPD they undertake, studies on product newness in new ventures are only beginning to emerge (Song, Song, & Di Benedetto, 2011). Although the NPD literature classifies product newness along two dimensions—technological and market newness (Im & Workman, 2004; Molina-Castillo & Munuera-Aleman, 2009). Technological newness represents the degree to which new products embrace state-of-the-art technologies, while market newness reflects the degree of novelty and meaningfulness of product features and customer benefits (Im & Workman, 2004; Sorescu, Chandy, & Prabhu, 2003). Whereas the positive effects of technological and market newness are well-recognized, empirical evidence is mixed, with findings of positive, non-significant, or even negative effects (Henard & Szymanski, 2001; Szymanski, Kroff, & Troy, 2007). Such mixed findings call for investigation of their boundary conditions (e.g. McNally, Cavusgil, & Calantone, 2010; Rubera & Kirca, 2012).