CREATe 2012-2016: Impact on society, industry and policy through research excellence and knowledge exchange

On the eve of the CREATe Festival May 2016, the Centre published this legacy report (edited by Kerry Patterson & Sukhpreet Singh with contributions from consortium researchers)

A new business model?

The paper delivers an analysis of the “New Economy” focussing on the roles of new business models, the capital market and venture capital. The capital market created a double standard in the 1990s: A high return on capital was required from old economy firms whereas money was thrown at new economy firms which had a business idea that stimulated the fantasies of financial investors but no earnings. Through the gradual burst of the tech stock bubble since spring 2000 it has come to the eyes of the public that many new economy start ups were unable to recover their costs. This paper shows that business models related to the internet can only work under certain conditions. The sectoral distribution of power, for example, determines the prospects of the single firms to realise e-commerce in a profitable way. Digital technologies do not necessarily enhance profitability. On the contrary, they can increase competition and lead to lower profit rates. The limitation of competition appears to be a central condition of successful cost recovery. The venture capital cycle has been an important driving force of the new economy boom, but it can also be momentum of a longer crisis. Enormous amounts of money have been channeled to new economy start ups hoping that successful IPOs will one day give venture capitalists a high return. But the burst of the bubble has brought down the IPO activity and interrupted the valorisation cycle of venture capital. Financial investors have reacted to the crisis by shifting their capital to even riskier investments, as the come-back of hedge funds indicates. --

Patents and the Survival of Internet-related IPOs

We examine the effect of patenting on the survival prospects of 356 internet-related firms that IPO'd at the height of the stock market bubble of the late 1990s. By March 2005, nearly 2/3 of these firms had delisted from the NASDAQ exchange. Although changes in the legal environment in the US in the 1990s made it much easier to obtain patents on software and, ultimately, on business methods, less than half of the firms in this sample obtained, or attempted to obtain, patents. For those that did, we hypothesize that patents conferred competitive advantages that translate into higher probability of survival, though they may also simply be a signal of firm quality. Controlling for age, venture-capital backing, financial characteristics, and stock market conditions, patenting is positively associated with survival. Quite different processes appear to govern exit via acquisition compared to exit via delisting from the exchange due to business failure. Firms that applied for more patents were less likely to be acquired, though obtaining unusually highly cited patents may make them more attractive acquisition target. These findings do not hold for business method patents, which do not appear to confer a survival advantage.

Entrepreneurship and heterogeneity among firms\u27 strategies: Three essays

The first essay of this dissertation focuses on the entrepreneurship survival in the early stage, during which time an entrepreneur plays the game at the edge of chaos and improvises in real-time to learn the strategic playing field. It examines the social networks of entrepreneurs and the impact on new venture survival. Specifically, it explores how the entrepreneurs\u27 social connections with other entrepreneurs and their types of employment differentially affect survival during the different stages of the entrepreneurial journey in the United States and India. Using the Global Entrepreneurship Monitor (GEM) dataset, this study documents not only how the social connections differentially impact survival in the U.S. and India during the early and later stages, but also the differences between the importance of full-time and hybrid entrepreneurship across regions. It thus sheds light on the challenges faced by early-stage entrepreneurship in both developed and developing economies, as well as the effect of these differences on venture survival. Implications for theory and practice are discussed. The second essay looks at growth of entrepreneurial ventures. Despite prior entrepreneurship research highlighting the role of access to resources, the experience of founders, and new ventures\u27 innovation in a startup\u27s growth, researchers are yet to explore how some startups achieve unicorn status, i.e., get to a one-billion dollar in valuation. This study examines how the founders\u27 prior entrepreneurial experience, the venture\u27s intellectual property (IP), and access to corporate venture capital (CVC) influence a startup\u27s likelihood of becoming a unicorn venture. It is found that IP partially mediates the relationship between the founders\u27 prior entrepreneurial experience and the likelihood of becoming a unicorn venture and that the presence of CVC investors negatively moderates the effect of founders\u27 prior entrepreneurial experience on the venture\u27s IP. Surprisingly, the results suggest that that the presence of CVC does not impact the relationship between founders\u27 prior entrepreneurial experience and the likelihood of becoming a unicorn venture. Implications for the theory and practice of entrepreneurship are discussed. The third essay investigates how a unicorn venture\u27s strategic decisions regarding diversification and acquisition affect its likelihood of an IPO and how these relationships can vary depending on firm age. Using data on unicorn ventures founded in the United States between 1983 and 2021, this study finds that a unicorn venture\u27s likelihood of an IPO has an inverted-U relationship with its age. It is also revealed that younger unicorn ventures are more likely to go public with less diversification and more acquisitions, whereas older unicorn ventures are more likely to go public with greater diversification and fewer acquisitions. The findings suggest that unicorn ventures have a window of opportunity to go public. This work contributes to both entrepreneurship literature and population ecology research by bringing the two literature together to explore how firm age and ventures\u27 strategic decisions influence the IPO exit of a unicorn venture

The Impact of E-Commerce Strategies on Firm Value: Lessons from Amazon.com and its Early Competitors

Which strategies generate value in e-commerce environments? In a step towards answering this question, this paper estimates the impacts of several competitive strategies on the values of the well-known Internet retailer Amazon.com and three of its early competitors, BarnesandNoble.com, CDNOW, and N2K, from their IPO dates until exit or the end of 2001. The strategies analyzed include alliance formation, offline expansion, pricing, product line expansion, and service improvement. The results provide insight into the usefulness of various ways of competing online and could be applied in other settings where firms enter new environments about which they have little information.competitive advantage; competitive strategy; event studies; internet; valuation

Does it Make You Better Off? Initial Public Offerings (IPOs) and Corporate Sustainability Performance: Empirical Evidence

Going public (or an IPO) is a strategic decision for value creation motivated by various reasons such as capital raising, windows of opportunities that reflect the perfect market timing and publicity. It is associated with financial and business attributes. In this article, we establish an original linkage between the IPO event and sustainability performance post-IPO, emphasizing the impacts of listing on enhancing sustainability performance. We integrate IPO theories and sustainability views in explaining the effect of the IPO on sustainability measures. We study a sample of Italian firms that went public from 2009 to 2018. Sustainability performance is measured by a sustainability rating which is a composite rating that comprises of 10 elements. Using empirical testing, we show a positive effect of the IPO on sustainability and governance indicators in the 3 years following the IPO, suggesting an image-improving and better compliance practices. And a mixed impact on financial performance

Spinning off new ventures: a typology of facilitating services

This study analyses the spin-out activity in seven technology transfer units, which are considered to be successes in Europe: Crealys in France, the Top Initiative of the university of Twente in the Netherlands, Leuven R&D at the KUL in Belgium, Business Develop-ment at IMEC in Belgium, BioM in Germany (Munich area), Technology Transfer Partners (TTP) and Scientific Generics, both in Cam-bridge, UK. In each of these institutes, an in depth analysis is made of how they organise the following activities: (1) sensibilisation and Detection of opportunities, (2) management of IPR, (3) selection of spin-out projects, (4) incubation and business plan preparation, (5) financing of these spin-outs and finally (6) the follow-up of spin-outs after start-up. Based upon the analysis of these activities, three different models have been defined: a self selective model, a supportive model and a protective model. In the first model, the specific aim is to generate as many start-ups as possible. Stimulating general entrepreneurship rather than financially or economically attractive companies are thus the goal. This means that sensibilisation and opportunity seeking is the main activity. In the second model, the emphasis lies on creating economically attractive companies with a transitional starter profile. These companies might not yet have a financially attractive business plan but have the ambition to make one in the future. Usually they are based upon the IP generated in the mother institute. Management of IPR and business plan preparation are crucial activities in this model. Finally, the protective model focuses on the creation of financially attractive companies, which receive VC-money at start. In addition to the previous activities, also financing activities are of crucial importance here. In addition to analysing the activities developed in each of these models, also theresources necessary to organise these activities are examined. In the first model, the crucial resources seem to be an experienced entrepreneur as manager who can sensibilise students, researchers and professors to start up a company and public money to facilitate this start up. In the second model, a financially autonomous organisation is needed which is strongly supported by the top management of the university in its activities. This organisation needs to have a minimum critical mass of people specialised in legal issues, IPR and business plan development. In addition, a public-private early stage. Capital fund is needed to support the start-ups. Finally, the protective organisation needs a worldwide recognised leading research team in a particular technology. The tech transfer or business development unit needs to be able to incubate the organisation and facilitate the recruitment of external management, attraction of international early stage venture capital and the formation of the company's intellectual property base

Internationalisation of High-Tech Start-Ups and Fast Growth–Evidence for UK and Germany

For firms acting in technological niches the expansion into foreign markets can be a way to increase sales and to thus to recover initial sunk costs over a shorter time frame. Our research, based on survey data for nearly 600 British and German high-tech start-ups, examines whether internationalisation leads to faster growth among high-tech start-ups. Results show that firms with international sales have higher sales growth than firms that sell only domestically. We find that technological sophistication of products and the experience of entrepreneurs has a positive impact on growth. In addition, intense competition and shorter windows of opportunity increase the pressure to grow rapidly to appropriate the returns from innovation. The findings suggest that high tech firm founders should be more determinedly international in their vision and strategies from the very start of their business to increase the economic success of their efforts

Essays on Business Value Creation in Digital Platform Ecosystems

Digital platforms and the surrounding ecosystems have garnered great interest from researchers and practitioners. Notwithstanding this attention, it remains unclear how and when digital platforms create business value for platform owners and complementors. This three-essay dissertation focuses on understanding business value creation in digital platform ecosystems. The first essay reviews and synthesizes literature across disciplines and offers an integrative framework of digital platform business value. Advised by the findings from the review, the second and third essays focus on the value creation for platform complementors. The second essay examines how IT startups entering a platform ecosystem at different times can strategically design their products (i.e., product diversification across platform architectural layers and product differentiation) to gain competitive advantages. Longitudinal evidence from the Hadoop ecosystem demonstrates that product diversification has an inverted U-shaped relationship with complementors success, and such an effect is more salient for earlier entrants than later entrants. Earlier entrants should develop products that are similar to other ecosystem competitors to reduce uncertainty whereas later entrants are advised to explore market niche and differentiate their products.The third essay investigates how platform complementors strategies and products co-evolve over time in the co-created ecosystem network environment. Our longitudinal analysis of the Hadoop ecosystem indicates that complementors technological architecture coverage and alliance exploration strategies increase their product evolution rate. In turn, complementors with faster product evolution are more likely to explore new partners but less likely to cover a wider range of the focal platforms technological layers in subsequent periods. Network density, co-created by all platform complementors, weakens the effects of complementors strategies on their product evolution but amplifies the effects of past product evolutions on strategies.This three-essay dissertation uncovers various understudied competitive strategies in the digital platform context and enriches our understanding of business value creation in digital platform ecosystems