The Effect of Value Creation on Startups Performance in the Digital Environment: Evidence from Chinese Digital Startups

Abstract

The use of digital technology has enabled consumers to play an essential role in the success of startups. Priem et al. proposed a demand-value creation-performance framework, which argues that firms can create value for the consumer by exploring consumer demand, and this type of value-creation activity can help firms gain better performance. However, empirical evidence supporting this framework remains scarce. To address this challenge, this study empirically tests Priem et al.’s framework in the context of entrepreneurship. A unique on-site survey dataset of 323 digital startups in the digital environment was employed to explore how consumer demand drives startups to value creation activities and gain better performance. The study results show that consumer demands, in terms of demand heterogeneity, demand uncertainty, and demand interactivity, are positively related to value creation, as reflected by opportunity recognition and consumer innovation. Furthermore, both opportunity recognition and consumer innovation are positively related to the performance of startups. These findings support the demand-side perspective by providing empirical evidence for its key arguments from an entrepreneurial view and extend the demand-side perspective by contextualizing it in the increasingly digital environment.