Survivor: The role of innovation in firms’ survival

This paper explores the relationship between innovation and the survival probability of manufacturing firms in the Netherlands, conditional on firm age and size. The empirical analysis combines firm level data on innovation, derived from the second Community Innovation Survey, and on the date of exit, from the Business Register of all firms active in the Netherlands. To estimate the survival probability of a firm we use a non-parametric approach, based on the calculation of Transition Probability Matrices over different time periods. The results show that innovation has a positive and significant effect on the probability of firms’ survival. This effect increases over time and is conditional on firm age and size; we observe that small and young firms are the most exposed to the risk of exit, as found in earlier studies, but also those that most benefit of innovation to survive in the market, especially in the longer term.     

Incubator firm failure or graduation?: The role of university linkages

One of the theoretically important factors for incubator firm performance is the strength of their linkages to the research university sponsoring the technology incubator. Herein, we focus on two types of university linkages to the sponsoring institution: a license obtained from the university and a link to university faculty, while controlling for incubator firm linkages to non-sponsoring research universities, among other factors. We propose that a university link to the sponsoring institution reduces the probability of new venture failure and, at the same time, retards timely graduation. Further, we suggest that these effects are more pronounced the stronger the university link. Due to the difficulty of obtaining fine-grained longitudinal data, the incubation literature is characterized by a dearth of studies focusing on incubator firm differential performance. We attempt to take a first step towards closing this gap by testing these hypotheses through following 79 start-up firms incubated in the Advanced Technology Development Center at the Georgia Institute of Technology over the 6-year period between 1998 and 2003. We find broad support for the hypotheses advanced.     

Experienced entrepreneurial founders, organizational capital, and venture capital funding

This paper empirically investigates the sourcing and valuation of venture capital (VC) funding among entrepreneurs with varied levels of prior start-up founding experience, academic training, and social capital. Social ties with VCs have been identified as an important precursor to organizational resource attainment and performance, and so this study analyzes the correlates of heterogeneous social links with VCs. I also examine venture valuation, as it reflects enterprise quality and entrepreneurs’ cost of financial capital. Using data from a survey of 149 early stage technology-based start-up firms, I find several notable results. First, prior founding experience (especially financially successful experience) increases both the likelihood of VC funding via a direct tie and venture valuation. Second, founders’ ability to recruit executives via their own social network (as opposed to the VC's network) is positively associated with venture valuation. Finally, in the emerging (at the time) Internet industry, founding teams with a doctoral degree holder are more likely to be funded via a direct VC tie and receive higher valuations, suggesting a signaling effect. The paper therefore underscores some important dimensions of heterogeneity among VC-backed entrepreneurs.     

Going, going, gone. Exit forms and the innovative capabilities of firms

Although innovation is essential to build a competitive advantage and survive in the long run, some firms choose to exit, through mergers and acquisitions (M&As), or radically change their business portfolio and identity. This paper examines how innovative capabilities influence the decision of a firm to exit, among business closure, M&A, and radical restructuring. Using an analysis of a large and rich panel of Dutch manufacturing firms, we find that product and process innovation are equally important to lower the probability to close down activities, and this effect is stronger when product and process innovations are pursed in combination. We also find that process innovation reduces the probability of exit by radical restructuring, while product innovation, when not supported by process innovation, especially increases the probability of exit by M&As. Our findings suggest that exit strategies are intimately bound to the nature and synergies of innovative efforts.     

Founders’ human capital and the growth of new technology-based firms: A competence-based view

In this paper, we analyze empirically the relation between the growth of new technology-based firms and the human capital of founders, with the aim of teasing out the “wealth” and “capability” effects of human capital. For this purpose, we take advantage of a new data set relating to a sample composed of 506 Italian young firms that operate in high-tech industries in both manufacturing and services. In accordance with competence-based theories, the econometric estimates show that the nature of the education and of the prior work experience of founders exerts a key influence on growth. In fact, founders’ years of university education in economic and managerial fields and to a lesser extent in scientific and technical fields positively affect growth while education in other fields does not. Similarly prior work experience in the same industry of the new firm is positively associated with growth while prior work experience in other industries is not. Furthermore, it is the technical work experience of founders as opposed to their commercial work experience that determines growth. The fact that within the founding team there are individuals with prior entrepreneurial experiences also results in superior growth. Lastly, we provide evidence that there are synergistic gains from the combination of the complementary capabilities of founders relating to (i) economic-managerial and scientific-technical education and (ii) technical and commercial industry-specific work experiences. We conclude that the human capital of founders of new technology-based firms is not just a proxy for personal wealth.     

Uniform separable differential operators with parameters

In this paper we study boundary value problems for anisotropic partial differential-operator equations with parameters. The principal part of the appropriate differential operators are not self-adjoint. Several conditions for the uniform separability in weighted Banach-valued L_p-spaces are given. Sharp estimates for the resolvent of the corresponding differential operator are obtained. In particular the positivity and R-positivity of these operators are established. As an application we study the separability of degenerate DOEs, maximal regularity for degenerate abstract parabolic problem with parameters, the uniform separability of finite and infinite systems for degenerate anisotropic partial differential equations with parameters.     

Venture capital financing and the growth of high-tech start-ups: Disentangling treatment from selection effects

The financial and innovation literature generally claims that venture capital (VC) investments spur the growth of new technology-based firms (NTBFs). However, it has proved difficult so far to separate the “treatment” effect of the VC investment from the “selection” effect attributable to the ability of the VC investor to screen high growth NTBFs. The aim of this work is to test whether VC investments have a positive treatment effect on the growth of employment and sales of NTBFs. For this purpose we consider a 10-year longitudinal data set for 538 Italian NTBFs, most of which are privately held. The sample includes both VC-backed and non-VC-backed firms. We estimate Gibrat-law-type dynamic panel-data models augmented with time-varying variables that capture the VC status of firms. To control for the endogeneity of VC investments we use several GMM estimators. The econometric results strongly support the view that VC investments positively influence firm growth. The treatment effect of VC investments is of large economic magnitude, especially on growth of employment. Most of it is obtained immediately after the first round of VC finance. Conversely, the selection effect of VC appears to be negligible in the Italian context.     

Applying open innovation in business strategies: Evidence from Finnish software firms

Our study aims at shedding light on the innovative business strategies in the software sector and understanding better the economics that underlies the supply of Open Source Software (OSS). We use survey data collected from 170 Finnish software companies to investigate how different properties of software firms, such as size, age, intellectual capital, absorptive capacity, and ownership structure affect their decisions to base their business strategies on OSS supply or proprietary distribution of products and services.Our empirical findings indicate that the adoption of technologically advanced strategies requiring complex legal and managerial knowledge, such as the OSS supply strategy, demands relatively highly educated employees. The support for and development of an education system providing highly skilled people from different fields are essential for the firms’ successful adoption of innovative business strategies. We also find that market entrants have largely driven the OSS adoption, but there are no significant age-related differences in the adoption behavior of incumbent software firms.     

In search of a useful theory of the productive potential of intellectual property rights

Mainstream theory, which has informed the belief systems regarding the operation as well as the predicted social and economic effects of IPR systems, cannot explain why the IPR system generates different performance results and varying potential for growth across the firms, sectors and nations participating in the IPR system. This paper sketches a theory of the ‘productive potential of intellectual property rights’ which is able to do just that. Focusing on the ‘rules of the game’ embedded in the institutional IPR environment and the ‘play of the game’ within the alternative institutions of IPR governance, the paper emphasizes the importance of the nature or quality of the relationships among IPR stakeholders and the contribution of such relationships to the processes of financial and non-financial value creation and distribution from IPRs. The central role of cooperation, asymmetric relationships, and the effective resolution of conflicting interests amongst stakeholders is addressed. It is suggested that the proposed framework provides a better starting point for the design of IPR policy and management.     

Innovation strategy, firm survival and relocation: The case of Hong Kong-owned manufacturing in Guangdong Province, China

Based on a survey adapted from the Fourth European Community Innovation Survey (CIS-4), this study finds that, in the changing manufacturing environment of Guangdong Province in China, Hong Kong-owned businesses that generate a higher share in new product sales as a percentage of total sales or engage in R&D or collaborative innovation activities in China are more likely to survive and remain in Guangdong. The study fills a gap in the literature by investigating the effects of innovation on the survival and relocation of Hong Kong-owned manufacturing firms in Guangdong. The results support policy initiatives that strengthen collaborative ties among key innovation system actors.     

Periodic solutions for a kind of Rayleigh equation with two deviating arguments

In this paper, we use the coincidence degree theory to establish new results on the existence of T-periodic solutions for the Rayleigh equation with two deviating arguments of the form

x^″+f(x^′(t))+g₁(t,x(t-τ₁(t)))+g₂(t,x(t-τ₂(t)))=p(t).     

Periodic solutions for p-Laplacian neutral Liénard equation with a sign-variable coefficient

Using Lu's continuation theorem, the extension one of Manásevich-Mawhin, we study the existence of periodic solutions for p-Laplacian neutral Liénard equation of the form

(?_p(x(t)-cx(t-σ))^′)^′+f(x(t))x^′(t)+β(t)g(x(t-τ(t))=e(t).     

How patenting informs VC investors – The case of biotechnology

In the presence of asymmetric information, economic agents need to communicate their quality to investors and other parties. This paper investigates how information generated during the patenting process affects the ability of new ventures to attract VC financing. While much of the literature on information asymmetries focuses on patent applications, we argue that the entire examination process should be considered, including information that emerges in the course of patent examination and review. We test several hypotheses using a sample of British and German companies that seek venture capital. We find that the filing of patent applications is positively related to VC financing. Moreover, the examination process at the patent office generates valuable technological and commercial information via search reports, citations and opposition procedures which affect the likelihood of VC financing. Our results suggest that the patenting process supports investors in updating their expectations regarding the quality of new ventures.     

Selective subsidies,entrepreneurial founders' human capital,and access to R&D alliances

We investigate if and to what extent the receipt of a “selective” subsidy – a public subsidy awarded through a competitive procedure – helps new technology-based firms (NTBFs) to access R&D alliances. In particular, we theoretically enquire and empirically analyze which founding team-level characteristics allow NTBFs to: i) get a selective subsidy; and ii) access an R&D alliance with another firm or a public research organization/university, once the subsidy is awarded. We use a sample of 902 NTBFs that operate in Italy, where industrial policy has never had an explicit and exclusive mandate neither for targeting NTBFs nor for easing their access to R&D networks. By means of several identification strategies and estimation methods, our results point to the relevance of selective subsidies in facilitating NTBFs to enter R&D alliances, independently from the objective of the policy measure. Second, founders’ technical education figures as a key determinant to get the first selective subsidy. Finally, founders’ previous industry-specific work experience allows NTBFs to better exploit the selective subsidy, by positively moderating the impact of the subsidy on the likelihood to establish a corporate R&D alliance.     

Comparing firms’ triadic patent applications across countries: Is there a gap in terms of R&D effort or a gap in terms of performances?

This paper addresses the question of national differences as regard the number of triadic patents applied for by inventors from several OECD countries. The key idea is to determine whether such differences should be attributed to differences in R&D expenditures or rather to some other reasons, mainly institutional or behavioural ones. With this aim in view, both a macro-economic analysis, based on aggregate data for triadic patent counts and R&D expenditures and a micro-economic analysis based on firms’ data from three selected sectors are performed. In both cases, the methodological focus is made on the introduction, the definition and the estimation of a national index of relative efficiency in standard count data models. The main empirical findings are that there is a strong heterogeneity in terms of performance among European countries and a strong intra-country heterogeneity among sectors. This suggests that, in the field of innovation policies, there is a need for “tailored” solutions reflecting the specificities of each innovation system. Moreover, we show that European countries over-perform the United States in some high-tech sectors where the leadership of American firms is traditionally alleged, whereas European firms fail to keep up in more traditional sectors.