Business Management Articles

Overcoming the Innovator’s Paradox

1. The term “innovator’s paradox” is inspired by Nobel Prize-winning economist Kenneth Arrow’s description of the information paradox, in which the seller of information can convince the buyer of its value only after it has been fully disclosed, at which point the information has already been transferred to the buyer, who hasn’t paid for it. In an analogous manner, we argue that innovators struggle to convince the buyer (investors, customers, supporters) to support a new idea before the uncertainty associated with the idea has been resolved, at which point it is no longer a risk and thus support would be easy to come by.

2. For additional information on innovation capital, see J. Dyer, N. Furr, and C. Lefrandt, “Innovation Capital: How to Compete — and Win — Like the World’s Most Innovative Leaders” (Boston: Harvard Business Review Press, 2019).

3. M.L. Martens, J.E. Jennings, and P.D. Jennings, “Do the Stories They Tell Get Them the Money They Need? The Role of Entrepreneurial Narratives in Resource Acquisition,” Academy of Management Journal 50, no. 5 (October 2007): 1107-1132; and J.P. Cornelissen, J.S. Clarke, and A. Cienki, “Sensegiving in Entrepreneurial Contexts: The Use of Metaphors in Speech and Gesture to Gain and Sustain Support for Novel Business Ventures,” International Small Business Journal 30, no. 3 (April 2012): 213-241.

4. C. Davenport, “The Space Barons: Elon Musk, Jeff Bezos, and the Quest to Colonize the Cosmos” (New York: PublicAffairs, 2018).

5. M.A. McDaniel and G.O. Einstein, “Bizarre Imagery as an Effective Memory Aid: The Importance of Distinctiveness,” Journal of Experimental Psychology: Learning, Memory, and Cognition 12, no. 1 (January 1986): 54-65.

6. J. Bigelow and A. Poremba, “Achilles’ Ear? Inferior Human Short-Term and Recognition Memory in the Auditory Modality,” PloS One 9, no. 2 (Feb. 26, 2014).

7. V.P. Seidel and S. O’Mahony, “Managing the Repertoire: Stories, Metaphors, Prototypes, and Concept Coherence in Product Innovation,” Organization Science 25, no. 3 (May-June 2014): 691-712.

8. K. Weill, “Elon Musk Hyperloop Dreams Slam Into Cold Hard Reality,” The Daily Beast, March 29, 2019,

9. G.J. Stephens, L.J. Silbert, and U. Hasson, “Speaker-Listener Neural Coupling Underlies Successful Communication,” Proceedings of the National Academy of Sciences 107, no. 32 (Aug. 10, 2010): 14425-14430; U. Hasson, Y. Nir, I. Levy, et al., “Intersubject Synchronization of Cortical Activity During Natural Vision,” Science 303, no. 5664 (March 12, 2004): 1634-1640; and T. Sharot, “The Influential Mind: What the Brain Reveals About Our Power to Change Others” (New York: Henry Holt, 2017).

10. P.J. Zak, “How Stories Change the Brain,” Greater Good, Dec. 17, 2018,

11. D. Clark, “Alibaba: The House That Jack Ma Built” (New York: HarperCollins, 2016).

12. R. Garud, H.A. Schildt, and T.K. Lant, “Entrepreneurial Storytelling, Future Expectations, and the Paradox of Legitimacy,” Organization Science 25, no. 5 (September-October 2014): 1479-1492.

13. L.A. Plummer, T.H. Allison, and B.L. Connelly, “Better Together? Signaling Interactions in New Venture Pursuit of Initial External Capital,” Academy of Management Journal 59, no. 5 (October 2016): 1585-1604.

14. B.L. Hallen, “The Causes and Consequences of the Initial Network Positions of New Organizations: From Whom Do Entrepreneurs Receive Investments?” Administrative Science Quarterly 53, no. 4 (December 2008): 685-718.

15. R.B. Cialdini, “Scarcity: The Rule of the Few,” ch. 7 in “Influence: The Psychology of Persuasion” (New York: HarperCollins, 2006).

16. B.L. Hallen and K.M. Eisenhardt, “Catalyzing Strategies and Efficient Tie Formation: How Entrepreneurial Firms Obtain Investment Ties,” Academy of Management Journal 55, no. 1 (February 2012): 35-70.

17. Ibid.

18. D. Kahneman and A. Tversky, “Choices, Values, and Frames,” American Psychologist 39, no. 4 (April 1984): 341-350.

By Juan Rodulfo

Defined by Nature: Planet Earth Habitant, Human, Son of Eladio Rodulfo & Briceida Moya, Brother of Gabriela, Gustavo & Katiuska, Father of Gabriel & Sofia; Defined by the Society: Venezuelan Citizen (Human Rights Limited by default), Friend of many, Enemy of few, Neighbor, Student/Teacher/Student, Worker/Supervisor/Manager/Leader/Worker, Husband of Katty/ Ex-Husband of K/Husband of Yohana; Defined by the US Immigration System: Legal Alien; Defined by the Gig Economy: Independent Contractor Form 1099; Studies in classroom: Master Degree in Human Resources Management, English, Chinese Mandarin; Studies at the real world: Human Behavior; Studies at home: Webmaster SEO, Graphic Web Apps Design, Internet & Social Media Marketing, Video Production, You Tube Branding, Trading, Import-Exports, Affiliate Marketing, Cooking, Laundry, Home Cleaning; Work experience: Public-Private-Entrepreneur Sectors; Other Definitions: Bitcoin Evangelist, Human Rights Peace and Love Advocate. Author of: Why Maslow: How to use his theory to stay in Power Forever (EN/SP); Asylum Seekers (EN/SP); Manual for Gorillas: 9 Rules to be the “Fer-pect” Dictator (EN/SP); Why you must Play the Lottery (EN/SP); Para Español Oprima #2: Speaking Spanish in Times of Xenophobia (EN/SP).
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