Contents I. Introduction
Factors that affect new firm growth have been discussed a lot, including entrepreneurs' characteristics, resources, strategy, industry, and organizational structure and systems [1]. However, from a more fundamental and direct starting point, new firms entering a market have to supply customers with special values in order to grow and survive. Product innovation helps new firms avoid price competition, build customer loyalty and acquire legitimacy [2] [3]. But, meanwhile, product innovation is a high-risk and resource-consuming task [4] and can be hazardous[5], even to large firms. While larger organizations have the resource slack to absorb failure, for smaller entities, the failure of an innovative product evokes existential risks [6]. Rewards to product introductions are not distributed equally across firms [7]. Thus, product innovation can be a sharp double-edged sword to new firms. Some empirical studies supply evidence to support such an opinion, in terms of inconsistent results from examining the relationship between product innovation and new firm performance. As showed by [8], for independent new technology ventures, product innovation has a significantly negative association with performance; while for samples with mixed firm types, product innovation has a significantly positive association with performance. Also, reviews of [4] and [9]on the effects of product innovation on new start-ups performance describe the evidence as ‘mixed’, ‘inconclusive’, ‘contradictory’. More generally, there are a large amount of studies on SMEs, including new firms, engaging in examining innovation-performance relationship, and their results are also inconsistent [10].
