When Does Start-Up Innovation Spur the Gale of Creative Destruction?

This paper is motivated by the substantial differences in start-up commercialization strategies observed across different high-technology sectors. Specifically, we evaluate the conditions under which start-up innovators earn their returns on innovation through product market competition with more established firms (such as in many areas of the electronics industry) as opposed to cooperation with these incumbents (either through licensing, strategic alliances or outright acquisition as observed in the pharmaceutical industry). While the former strategy challenges incumbent market power, the latter strategy tends to reinforce current market structure. Though the benefits of cooperation include forestalling the costs of competition in the product market and avoiding duplicative investment in sunk assets, imperfections in the market for ideas' may lead to competitive behavior in the product market. Specifically, if the transaction costs of bargaining are high or incumbents are likely to expropriate ideas from start-up innovators, then product market competition is more likely. We test these ideas using a novel dataset of the commercialization strategies of over 100 start-up innovators. Our principal robust findings are that the probability of cooperation is increasing in the innovator's control over intellectual property rights, association with venture capitalists (which reduce their transactional bargaining costs), and in the relative cost of control of specialized complementary assets. Our conclusion is that the propensity for pro-competitive benefits from start-up innovators reflects an earlier market failure, in the market for ideas.'

Do Venture Capitalists Affect Commercialization Strategies at Start-ups?

I empirically study the effect of venture capital (VC) on product development and commercialization strategy of start-up organizations. In doing so, I segment entrant commercialization strategies into two camps according to competitive effect: to “cooperate” is to license-out technology or be acquired, while to “compete” is to develop technology independently. Building on the work of Gans, Hsu, and Stern (2000) on the drivers of entrant commercialization strategy, this paper examines the direct and indirect effects of VC on product development and competition. I start with two important determinants of start-up commercialization strategy: (1) the entrant’s relative investment cost of acquiring and controlling complementary assets needed to successfully commercialize its innovation, and (2) the entrant’s ability to effectively protect its intellectual property. I then test a novel sample of 118 technology-based projects divided almost evenly between two mechanisms of entrepreneurial finance. These two mechanisms differ in institutional detail in ways that allow a quasi-experiment of the effect of VC on start-up commercialization strategy. The U.S. Small Business Innovative Research (SBIR) program provides a grant to R&D without taking equity in a start-up or changing the corporate governance of project development. In contrast, VCs take an equity stake and participate in corporate governance in exchange for capital. Neither of these financing mechanisms, however, alters the underlying complementary asset or intellectual property regime associated with the project. Two main findings about the commercialization strategy and product market effects of venture capital emerge: (1) VCbacking skews commercialization strategies across industries toward cooperating, and (2) VCs make their portfolio firms more sensitive to the business environment.Center for Innovation in Product Development at MIT through NSF Cooperative Agreement EEC-9529140 is gratefully acknowledged

Fostering Innovation and Entrepreneurship: Shark Tank Shouldn\u27t be the Model

For the past half century, innovation has driven the economic growth that has made the American economy the envy of the world. For most of this period, venture capitalists provided not only the capital that new innovative companies needed, but also the management expertise

Creating a 21st Century national innovation system for a 21st Century Latvian economy

The Latvian economy made great strides in recovering from the economic shock of the early transition and the adverse aftereffects of the 1998 Russian financial crisis. Nevertheless, Latvia faces serious challenges to its future growth and prosperity despite these impressive achievements and the outward appearance of macroeconomic stability and economic progress. A wide variety of recent studies suggest that the Latvian economy is not particularly competitive and, even more worrisome, they indicate that Latvia is not well positioned to gain ground in the race for global competitiveness, prosperity, and rising standards of living. Most of Latvia's growth to date has come from one-off gains generated by structural reforms, privatization, and reallocating resources, not inexhaustible reservoirs of growth. Latvian enterprises will be able to sustain economic growth and create high wage jobs only by becoming internationally competitive, innovating, accumulating new knowledge and technology, and finding a high value added niche in the European and global division of labor. This paper is designed to help Latvian leaders develop a clear diagnosis of the innovation and competitiveness challenges facing Latvia as it prepares to enter the EU and, more important, design and implement policies and programs to ensure that Latvia reaps the maximum possible benefits from EU structural funds. Section II analyzes the current structure of Latvia's production, imports, and exports. Section III uses data from a number of competitiveness reports to benchmark Latvia's current progress against a number of comparator countries and to pinpoint Latvia's strengths and weaknesses as an innovative economy. Section IV offers a detailed list of potential policies and programs that could improve the competitiveness of Latvian enterprises and the efficiency of the Latvian National Innovation System. The recommendations include specific policies and programs to improve (1) the production of knowledge in Latvia, (2) the commercialization of technology produced by Latvian scientists, small companies, and research institutes, and (3) local firms'capacity to absorb, adapt, and adopt existing knowledge produced outside Latvia for use inside Latvia.ICT Policy and Strategies,Economic Theory&Research,Labor Policies,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Environmental Economics&Policies,Economic Theory&Research,Agricultural Knowledge&Information Systems,ICT Policy and Strategies,Banks&Banking Reform

From knowledge to wealth : transforming Russian science and technology for a modern knowledge economy

Russia possesses a sophisticated science and technology (S&T) infrastructure (research capability, technically trained workforce, and technical research universities) which, even today, is a world leader in many fields. Despite this world class basic research capacity, Russia's exports are primarily raw materials. At a time when wealth depends to an increasing degree on knowledge, Russia does not have an effective system for converting its scientific capacity into wealth. Russia's S&T resources are isolated bureaucratically (they are deployed in the rigid hierarchical system devised in the 1920s to mobilize resources for rapid state-planned industrial development and national defense), functionally (there are few links between the supply of S&T output by research institutes and the demand for S&T by Russian or foreign enterprises), and geographically (many assets are located in formerly closed cities or isolated science/atomic cities). Overcoming these inefficiencies and adjusting the S&T system to the demands of a market economy will require a major program of institutional and sectoral reform. Part I of this paper describes the ambiguous legacy of the Soviet S&T system and the status of the Russian S&T sector after 10 years of transition. Part II describes the evolution of the Russian system of intellectual property rights protection from Soviet times to the present and argues that Russia will never develop a successful commercialization program until it clarifies the ownership of the large stock of intellectual property funded with federal budget resources. Part III outlines a comprehensive 10-point sectoral reform program to improve the efficiency of government research and development spending and link the Russian S&T system with market forces.ICT Policy and Strategies,Public Health Promotion,Scientific Research&Science Parks,Agricultural Knowledge&Information Systems,General Technology,ICT Policy and Strategies,Scientific Research&Science Parks,Science Education,Agricultural Knowledge&Information Systems,General Technology

Founders\u27 Credentials and Performance of Startups

In this dissertation, I unpack startup founders’ characteristics and investigate their impact on the performance of young high-tech startups. I distinguish specific aspects of founders that convey their unobservable quality and human capital, and advance new arguments that deepen our understanding about founders’ role in shaping the prospects and performance of young high-tech startups. In particular, I examine founders’ distinct technical and entrepreneurial credentials that have the effect of facilitating important milestones for startups, such as strategic alliances and initial public offering, which ensure startups’ growth and survival. Further, I also investigate the contingent effects of these credentials of startup founders on the degree of uncertainty that prevails for potential alliances partners and investors about startups’ underlying quality. In three essays that comprise this dissertation, I find evidence that startup founders’ scientific and entrepreneurial credentials promote favorable cooperative commercialization agreements for startups with alliances partners and accelerate their initial public offerings. I also find evidence that these distinct credentials of founders are more useful when there is higher uncertainty about startups’ quality. These findings have important implications for research in strategy and entrepreneurship about the significance and enduring impact o

High-technology in the Midwest—biotech and beyond

Industrial production long was the heartbeat of the Midwest economy. As that industry’s role in the region diminishes, policymakers have explored new directions. At a series of conferences, local experts discussed the potential of the biotech industry as the Midwest’s next frontier.Industrial productivity

The Performance of University Spin-Offs: The Impact of Entrepreneurial Capabilities and Social Networks of Founding Teams during Start-Ups

Objectives: University spin-offs have increasingly received attention from academia, governments, and policymakers because they not only generate new innovations, productivity, and jobs the regional economies but also significantly improve university productivity and creativity (Hayter, 2013, Urbano and Guerrero, 2013). However, a lack of understanding of the contribution made by a founding team to a spin-off’s performance still remains within current studies. Employing a resource-based view theory and social networks approach, this paper addresses this gap by exploring university spin-offs in Spain. Prior work: University spin-off studies have concentrated on analysing entrepreneurial business models (Ndonzuau et al., 2002, Vohora et al., 2004b, Bower, 2003, Mets, 2010) to understand how the commercialization of research is undertaken to create a university spin-off. University spin-offs were also been analysed from the perspective of a university’s capabilities (Powers and McDougall, 2005), or capabilities and social networks of an established spin-off instead of the founding teams (Walter et al., 2006). Moreover, Vohora et al. (2004a) and Shane (2004) have suggested founders need to build capable teams, which must have entrepreneurial capabilities and qualitative social networks, to create effective university spin-offs. Both entrepreneurial capability and social network theory have been studied in prior entrepreneurship research, but have received less attention within the context of the university spin-offs (Gonzalez-Pernia et al., 2013). Approach: Utilising an internet-based survey, this paper explores entrepreneurial capabilities and social networks of founding teams in Spanish university spin-offs using quantitative data analysis. Basing upon resource-based view theory of Barney (1991) to study entrepreneurial capabilities of the founding teams, the research employ entrepreneurial technology, strategy, human capital, organizational viability, and commercial resources (see Vohora et al., 2004a). To study social networks of a founding team, we employ the conceptual model of Hoang and Antoncic (2003) that divides networks into three components: structure, governance, and content. Results and implications: The results from an examination of the sample of 181 Spanish university spin-offs empirically demonstrate that by exploiting social networks a founding team can improve its entrepreneurial capabilities, which in turn enhance its spin-off’s performance. By employing the work of Vohora et al. (2004a) and Shane (2004), this paper constructs a model in which entrepreneurial capabilities play a mediate role between social networks and spin-off’s performance. Thus, the paper has implications for universities in training and policy development to support spin-off’s activity. Value: This study addresses some fundamental questions to contribute to the theory-based understanding of university spin-offs: How do entrepreneurial capabilities of founding teams influence the performance of university spin-offs? How do social networks of founding teams contribute to the process of the university spin-offs

The Biotechnology industry in Germany and Japan

Biotechnology is considered as one of the key high-technology sectors in the future. It has been increasingly accepted that small, innovative businesses were the major stimulus for the development of this emerging industry. Many studies on new entrepreneurial entrants in biotechnology are mainly addressed to the situation in the United States and neglected developments in other countries. Therefore, the present paper concentrates on two latecomers into the industry of biotechnology, namely Japan and Germany, and addresses the question how different institutional frameworks may have an impact on its emergence. More specifically, we investigate the role of venture capital, governmental initiatives, large companies, and entrepreneurship on the development and current situation of the biotechnology industry. The comparison of the biotechnology industry between two countries against the background of their different institutional settings provides some important insights for management scholars as well as policy makers. --Biotechnologische Industrie,Japan,Deutschland

The role of venture capital in the commercialization of cleantech companies

Venture Capital (VC) plays an important role in the success of their portfolio companies. Small- and medium-sized companies often struggle with the resources required to succeed in the market. vc not only helps companies with the required financing but also provides the knowledge, understanding and expertise required to excel in the market. The study explores vc non-financial value-added contributions in the commercialization of clean technologies. Cleantech is a term associated with the companies involved with technologies, products, processes or services that seek to lower the negative environmental impact by improving efficiencies, reducing waste, encouraging the use of sustainable sources and environmental protection. However, the success of companies operating in this sector, at times, becomes challenging since these technologies are often disruptive in nature, contest business-as-usual practices by inducing efficiencies in the current processes or radically transforming the existing infrastructures. This qualitative case study is based on five companies operating in the Finnish clean technology sector. Data is collected in the form of semi-structured interviews whereas within the case and cross-case analysis approach is adopted to gain a comprehensive understanding of the studied phenomena. This study delineated vc’s contribution to technology development, corporate governance, mentoring & industry expertise, recruitment, collaboration & internationalization, acquiring additional financing and certification effect. The findings of this research provide important insights for the industry specialists, managers as well as the scientists involved in this field of research.fi=vertaisarvioitu|en=peerReviewed