Innovation and venture capital exit performance

Venture capital is a potent source of R&D financing which contributes significantly to technological innovation output in the form of patented inventions. Scholars have argued that tighter protection of intellectual property rights reduces expropriation risks and encourages venture capitalists to invest in technology firms. Prior studies have showed that early stage technology investors give much weight to investment selection criteria related to innovation e.g. protection of intellectual property, platform and uniqueness. However, VC investors generally receive little on their investments until a liquidation event occurs – IPO and M&A (trade sale) exits define venture capital performance. A review of the literature indicates that few empirical studies have examined the influence of patented innovation on the exit performance of VC-backed technology firms. This paper seeks to address this specific knowledge gap in venture capital research and practice. It builds on resource-based view (RBV) theory which argues that technological innovation is an important strategic resource of the entrepreneurial firm that can attract VC investment, provide competitive advantage and produce superior performance. This study is based on matched data compiled from VentureXpertTM, DelphionTM and NBER/USPTO databases. The resulting unique and proprietary dataset consists of 1504 U.S. VC-backed exits across 7 technology sectors in the 20 years from 1980-2000, 961 IPOs and 543 M&As. The influence of technological innovation on the exit performance of VC-backed technology firms is examined. As predicted by RBV theory, technology firms engaged in patenting activity were found more likely to be associated with the more profitable IPO exit route, higher VC investment and exit value

Explicitly searching for useful inventions: dynamic relatedness and the costs of connecting versus synthesizing

Inventions combine technological features. When features are barely related, burdensomely broad knowledge is required to identify the situations that they share. When features are overly related, burdensomely broad knowledge is required to identify the situations that distinguish them. Thus, according to my first hypothesis, when features are moderately related, the costs of connecting and costs of synthesizing are cumulatively minimized, and the most useful inventions emerge. I also hypothesize that continued experimentation with a specific set of features is likely to lead to the discovery of decreasingly useful inventions; the earlier-identified connections reflect the more common consumer situations. Covering data from all industries, the empirical analysis provides broad support for the first hypothesis. Regressions to test the second hypothesis are inconclusive when examining industry types individually. Yet, this study represents an exploratory investigation, and future research should test refined hypotheses with more sophisticated data, such as that found in literature-based discovery research

20-3101

Abstract. INH preventive therapy (IPT) has been shown in several randomized controlled trials to reduce the risk of developing active TB in tuberculin skin test (TST) or purified protein derivative (PPD) positive HIV infected individuals. Detection of latent tuberculosis by TST and determination of factors associated with the PPD positivity in HIV-infected persons are important for the targeting of chemoprophylaxis. Six hundred asymptomatic and early symptomatic HIV-infected subjects attending the AIDS Clinic of the Chulalongkorn University Hospital, Bangkok, Thailand were enrolled in two randomized clinical trials of chemoprophylaxis against TB from December 1994 to December 1996. The availability of baseline characteristics, including TST reactivity, among these participants enabled a cross-sectional analysis of factors associated with PPD positivity. The results showed that 117 (19.5%) were PPD positive and 483 (80.5%) were PPD negative with ages 18-65 years (median 29 years). HIV exposure category was 46.2%, 34.5%, and 6.7% for heterosexual contact, commercial sex work, and homosexual and bisexual male contact respectively. The median CD4 cell count was 315/mm 3 (range, 5-1,074/mm 3 ). HIV exposure category and CD4 cell count were significantly associated with PPD status. Homosexual/bisexual contact had 3 times higher risk of PPD positivity than heterosexual contact (adjusted OR=2.9; 95% CI,1.4-6.1) and risk of PPD positivity was higher among patients with CD4 cell counts of 200-500/ mm 3 (adjusted OR=1.8; 95% CI,1.0-3.1) and above 500/mm 3 (adjusted OR=3.4; 95% CI,1.7-6.7) when compared to patients with CD4 cell counts of less than 200/mm 3 . The HIV-infected persons in Bangkok with homosexual/bisexual contact are at higher risk for latent TB. Population-based tuberculin screening without accompanying HIV testing cannot be used to estimate the prevalence of actual latent TB in a population where HIV infection is widespread, such as in Thailand