Internalization among Technology Entrepreneurs: Looking to the Future While Grounded in the Past

Abstract

The dynamic knowledge creation process, traditionally described and applied in the context of large firms, is receiving growing attention in entrepreneurship research as a model to identify ways to decrease mortality rates in the "valley of death," the stage of entrepreneurship infamously known for the high percentage of startup failures. Prior innovation literature associates entrepreneurship activities with the socialization phase of Nonaka’s dynamic theory of knowledge creation (also known as the SECI model). However, linguistic analysis of interviews with entrepreneurs indicates that internalization (i.e., the creation of tacit knowledge from explicit assets) plays an important role in new ventures activities. In this study, we distinguish between internalization in the current venture from internalization during the entrepreneur’s prior employment. We find a strong relationship between references to the past and internalization that is mediated by negative emotions, which may have motivated the entrepreneur to leave prior employment and launch a new venture. We also find a strong relationship between an entrepreneur’s references to the past and the number of employees in the venture, indicative of the importance of an entrepreneur’s prior knowledge internalization to the current venture. This research contributes to the growing field of entrepreneurial knowledge management by extending the role of the entrepreneur’s past knowledge creation activities to those of her/his new venture. It underscores the common tagline that we can learn more from our failures (negative emotions).