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While the pandemic caused tremendous changes in the work and job space, an interesting trend is the surge in the number of start-ups that have come into place. The US alone has seen a 24% increase in the number of self-employed individuals, with a whopping 4.4 million entrepreneurs entering the market and shaking up their competition in early 2021. These unfathomable figures show that entrepreneurship has become an increasingly lucrative and popular career choice, which has been fueled by COVID-19. Entrepreneurs face a myriad of hurdles when setting out to establish themselves in this competitive environment – from product, location, industry to funding. While all these hurdles affect an entrepreneur’s choice in every aspect, the most crucial dilemma faced is undoubtedly the ‘big fish vs big pond’ dilemma. Entrepreneurial firms choose to collaborate with other established firms in order to enhance their engagement wherein they seek:

  1. Development help to hone ideas into marketable products and services

  2. Market access

These relationships generally involve choosing between significant access to markets and significant development help, as more than often it has been found that it is difficult to get both. Entrepreneurs have to forego one for the other, thereby, creating the dilemma in the first place.

Entrepreneurs face a trade off between being the ‘big fish in a small pond’ where they choose a relatively smaller firm that provides good personal attention but limited market access or being the ‘small fish in a big pond’, that is partnering with a larger, established firm as one of their large number of clients, thereby giving the entrepreneurs greater market access but lesser development help. Solving this dilemma marks the beginning of every entrepreneur’s journey.

The dilemma and the way entrepreneurs handle it can further be understood by taking the example of the video game industry. In the video game industry, developers (entrepreneurs) propose the game concept and provide for its initial development. On the other hand, publishers, who the entrepreneurs partner with, provide access to markets and late-stage development. When striking a partnership, developers look for a close collaboration which would help them develop the best product possible as well as enable them to gain good access to the market space. The problem lies in meeting both these goals, very often requiring entrepreneurs to prioritise one over the other. Large publishers have the resources and the connections to retailers. They also have the ability to organise large marketing events to attract a considerable share of the market. However, as they deal with a large number of developers, personalised attention and development help are often compromised.

In a study conducted by Stanford University and INSEAD titled “Big Fish vs Big Pond? Entrepreneurs, Established Firms and Antecedents of the Formation”, data was obtained from a sample of 367 developers and 170 publishers that collaborated on games for a PS2 console during the 10 year period, 2000-2009. During this time. gaming consoles were popular and preferred over mobile and PC games. Furthermore, self-publishing was not an option and it was mandatory for there to be developer-publisher ties. Based on the data obtained and the tests run, it was found that there was a positive correlation between experienced developers and market access. This means that market access was weighed as more important for those developers with greater experience as they did not feel the lack of personalised attention. To experienced developers, market access was their priority. On the contrary, inexperienced developers preferred publishers who could provide them with personalised attention in order to further their game development. Inexperienced developers prioritised development help over market access. Novice developers preferred smaller publishers with fewer developers in tow as this enabled them to get more support, thus providing them with a greater chance at product differentiation. In quantitative terms, experienced entrepreneurs were willing to give up almost four times as much development help as inexperienced developers to secure greater market access. From a publisher’s perspective, established and larger publishers prefer partnering with more experienced developers as well, therefore, many a times the choice lies with the publisher more than the entrepreneur.

The trade off between development help and market access also depends on the stage of development of an entrepreneurial firm. This can be factored into two categories mainly:

1. Resource need evolution – Many studies show that an entrepreneur’s resource need stays relatively constant. However, the problems an entrepreneur faces and the resource needs evolve as an entrepreneur moves through the various stages of product development. Inexperienced entrepreneurs, who are still in the process of establishing their internal production process may prefer more personalised help over the external factor of market access. This is because external market access is often not a priority; expanding their buyer base is still an early proposition. During these early stages, entrepreneurs prefer to hone and develop the product, as early exposure may jeopardise the existing product and reputation of the firm. Nevertheless, as time passes, entrepreneurs tend to shift their priority from internal to external factors, which could later pose as a determining factor when choosing a collaborator.

2. Resource uncertainty – Resource uncertainty refers to the competitive landscape present. If the environment is such that the entrepreneur anticipates intense competition, there may be a shift, leading to an increase in the demand for personalised attention. This further helps to create greater product differentiation. However, during lower levels of competition, entrepreneurs prioritise their market reach and increase their consumer base.

The ‘big fish vs big pond’ dilemma is common among entrepreneurs that need partners or collaborators in order to enter any particular industry. Therefore, it is not only faced by individuals and firms entering the gaming industry but also other industries like pharmaceutical companies and biotechnological enterprises. In conclusion, entrepreneurs generally choose to move from being the ‘big fish’ to being in the ‘big pond’ over time after gaining experience and the expertise to reduce the original support they needed. The stage of development of an entrepreneurial firm also affects the choice of partner to collaborate with, early stages wanting smaller collaborators who can provide greater support and personalised attention. While most of the factors that affect this choice are internal, the external factor – environmental competition, that affects the decision makes entrepreneurs move in the reverse direction, that is, from ‘big pond’ to ‘big fish’. Therefore, the ‘big fish vs big pond’ question is one of the first few decisions an entrepreneur makes, and it eventually sets the stage for the enterprise’s success or failure.

By Nikita Rajagopal




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