Venture capital investment strategies under financing constraints: Evidence from the 2008 financial crisis

This paper employs the 2008 financial crisis as an empirical setting to examine how investment strategies of venture capitalists (VCs) vary in the presence of a liquidity supply shock, and what the performance implications of these strategies are for their portfolio startups. We show that while, on aggregate, funded startups receive no less financing during the financial crisis than in non-crisis times, VCs allocate relatively more resources to startups operating in the VCs’ core sectors. We show that this skew allocation follows from VCs choosing to double down on their core-sector investing, rather than by a changed mix of investors or startups during the financial crisis. These effects are strongest for early-stage startups, for which information problems are most severe. Furthermore, these results are driven by the investment strategies of more-experienced VCs. Building on these findings, we find superior ex post performance among crisis-funded portfolio startups operating in more-experienced VCs’ core sectors.     

Publicly funded business advisory services and entrepreneurial outcomes

Given the mixed evidence for the impact of various publicly funded initiatives that aim to foster entrepreneurial activity, this paper empirically examines the efficacy of publicly funded business advisory services in relation to entrepreneurial outcomes. Based on a sample of 228 early-stage firms, of which 101 used business advisory services focused on helping companies secure 1st rounds of financing and start generating revenues, we examine the firm-level impact such services can have on sales growth, innovation, finance and alliances. We find services are positively associated with firms’ sales growth, patents, finance and alliances. We assess statistical and economic significance, and assess robustness to controls for the non-randomness of the firm's using business advisory service program, as well as endogeneity of advisors’ hours spent with firms. Other robustness checks are also included. We find significant robustness of hours spent on sales and finance, but sensitivity of the effect of hours on patents and alliances after controlling for endogeneity.     

The interplay of cognitive and relational social capital dimensions in university-industry collaboration: Overcoming the experience barrier

The use of university-industry collaboration in the innovation process is viewed as a major driver of firm competitiveness. The organizational dynamics underlying successful external relationships, however, remain poorly understood. Using longitudinal case studies of 15 innovation projects, we examine how firms with varying degrees of experience in collaborating with universities and public research organizations rely on different social capital dimensions to achieve successful collaborations. We find that experienced firms establish external collaborations on the basis of cognitive social capital, but this basis is reinforced by relational social capital over time. Conversely, less experienced firms initially base their university collaborations on relational social capital, which is reinforced by cognitive social capital over time. Based on these findings, we theorize on the interplay of different dimensions of social capital in university-industry collaborations over time. Our study has important implications for the management of collaborative innovation projects. In particular, it provides guidance to enable less experienced firms to develop successful collaborations with university partners.     

Turning scientific and technological human capital into economic capital: the experience of biotech start-ups in France

This paper examines how scientific and technological (S&T) human capital is transformed into financial capital through the creation of firms by scientists. The analysis is based on a database describing the positions held by 132 founders from 62 French biotech SMEs. It shows that star scientists engage in highly risky but also valuable firms. Less famous scientists must develop their human capital rather than valorising a stock. The paper concludes by pointing to three paradoxes concerning the commitment and compensation scheme of star scientists and the managerial position of less known scientists.     

Innovation and knowledge sharing across professional boundaries: Political interplay between boundary objects and brokers

The article examines the process of innovation and knowledge sharing from a perspective that focuses on the influence that local circumstances can have. In particular, it looks at the problems of knowledge sharing between groups of professionals. It presents a comparative analysis of two studies, one involving two groups of IT professionals; the other a network of healthcare professionals. The data was collected in two sets. The first set consisted of the results from two earlier, independent studies; the second was collected specifically for this article. We investigate the role played by boundary objects and brokers. Through an analysis of the interplay between boundary object and broker, we uncover the dynamics of the innovation process and show that the role played by the broker can be political. We identify two strategies that are used by brokers in the selection of a boundary object. The first is directed towards achieving a balance between the actors involved and the second is directed towards controlling their activities. We conclude by suggesting that other researchers should also consider the interplay between broker and boundary object when examining cross-boundary knowledge sharing.     

Initial public offering and financing of biotechnology start-ups: Evidence from Japan

This study explores the initial public offering (IPO) and financing of biotechnology start-ups in Japan. Using a unique data set, we find that biotechnology start-ups initially backed by venture capital (VC) firms and those originating from universities are more likely to go public within a shorter period. Moreover, we find that neither staged financing nor syndication by VC firms is associated with higher IPO value relative to investment. Furthermore, we provide evidence that the timing of IPOs does not depend on equity market conditions in the biotechnology industry, whereas IPO value tends to depend on equity market conditions. We discuss the factors that explain these findings, which contradict findings in previous studies of VC investments.     

The birth of a new industry: entry by start-ups and the drivers of firm growth: The case of encryption software

The paper analyses the birth of the encryption software industry (ESI), a new niche in the software industry. Using a Chandlerian perspective, this work reports the main facts about firm entry and growth, with a particular focus on start-up strategies and actions.Since scale economies do not play a major role in ESI, the paper investigates the different sources of firm competitive advantages.This work shows that innovation and product differentiation, along with investments in co-specialised assets, are variables strongly correlated to young firm probability to survive and grow. In doing so, we have collected highly detailed information on product introduction, US patents granted, worldwide alliances and biographical data of firm founders.     

Innovation and firm performance in developing countries: The case of Pakistani textile and apparel manufacturers

Using unique innovation survey data collected from a homogenous sample of firms in Pakistan, this paper presents an analysis of the firm level determinants of product innovation and its impact on firm performance. We employ a multi-stage structural model linking the decision of a firm to innovate, its innovation investment, product innovation, and firm performance using primary data from the textile and wearing apparel sector, which is the largest export sector of Pakistan. We find that product innovation leads to increased labor productivity as well as higher labor productivity growth. A 10 percent increase in innovative sales per worker is associated with a greater than 10 percent increase in labor productivity and labor productivity growth. On the determinants of innovation, we find that vertical knowledge flows from foreign clients and suppliers are important determinants of a firm's decision to innovate. Larger firms are more likely to engage in innovation, however, there is no significant evidence that they invest more in innovation. Exporting is positively associated with innovation performance and firms exporting to Europe and America are more likely to engage in innovation. There is mixed evidence on the impact of competition: foreign competition adversely affects a firm’s decision to innovate, whereas, local competition increases investment in innovation. Subsidies seem to have a crowding out effect since firms receiving national subsides invest less in innovation. Furthermore, firms that have higher investment in innovation, that are more productive, and that introduce organizational innovations have higher innovative sales per worker.     

Entrepreneurship policy and the financing of young innovative companies: Evidence from the Italian Startup Act

While there is a general consensus that young innovative companies (YICs) need special attention by public policy which should aim at alleviating the financial constraints these firms commonly suffer, much less agreement has been reached on the most effective policy instruments reputed to accomplish the task. In this respect, if the scientific debate has very much revolved around the dilemma about the crowding-in or crowding-out effect of public R&D subsidies to firms, there is a dearth of scientific studies which analyse the effectiveness and potential interrelations of different policy instruments which at the same time and in the same institutional context are offered to YICs. By taking advantage of the Italian Startup Act issued in 2012, we analyse, for the first time, the possible existence of interrelationships between firm access to a Government-guaranteed (GG) bank loan programme and fiscal incentives for venture capital (VC) equity investments. Results suggest two important facts. First, the two mechanisms appear to be functional to different typologies of YICs. Second, VC investments significantly reduce the probability to access GG bank loans. Overall, our analysis highlights a sort of “institutional division of labour” between the two measures and depicts what we label as a Task segmentation effect.     

The workforce of pioneer plants: The role of worker mobility in the diffusion of industries

Does technology require labour mobility to diffuse? To explore this, we use German social-security data and ask how plants that pioneer an industry in a location – and for which the local labour market offers no experienced workers – assemble their workforces. These pioneers use different recruiting strategies than plants elsewhere: they hire more workers from outside their industry and from outside their region, especially when workers come from closely related industries or are highly skilled. The importance of access to experienced workers is highlighted in the diffusion of industries from western Germany to the post-reunification economy of eastern German. While manufacturing employment declined in most advanced economies, eastern German regions managed to reindustrialise. The pioneers involved in this process relied heavily on expertise from western Germany: while establishing new manufacturing industries in the East, they sourced half of their experienced workers from the West.     

The creation of spin-off firms at public research institutions: Managerial and policy implications

We consider the managerial and policy implications of the rise of spin-offs at public research institutions (PRIs), based on a knowledge-based view (KBV) of the firm. This framework highlights the importance of knowledge in the creation and development of spin-offs. We argue that in order to understand the development of spin-offs, researchers should focus on “knowledge gaps” these new ventures encounter. Knowledge gaps can occur at different levels of aggregation, including the PRI, spin-off, team, individual, incubator, and at different stages of spin-off development. Based on this framework, we synthesize findings from previous studies and papers in the special issue and offer some suggestions for additional research on spin-offs from PRIs.     

Innovation and government intervention: A comparison of Singapore and Hong Kong

Government is one of the determinants for innovation capacity although its role and degree of involvement in innovation is debatable. Government intervention can be vital in supporting R&D and innovation as market alone cannot provide adequate incentives for knowledge production. Degrees of government intervention, however, vary in different economies and range from directive intervention by actively advising industrial policy and investing in selected areas, to facilitative intervention by creating positive environment and providing public goods for industry. This study uses Singapore and Hong Kong as two cases to explore the influence of government intervention on innovation performance. Singapore is known for strong government intervention while Hong Kong is famous for its positive non-intervention policy that minimizes the power of government in influencing the market. The comparison shows that innovation activities in Singapore are largely policy driven and dominated by big players, while in Hong Kong industry innovation is less active but the local industry has a dynamic innovation base contributed by small firms. Using a difference-in-differences analysis of USPTO patents filed by Singapore and Hong Kong, we find evidence for the effectiveness of government intervention on enhancing the technological significance and scope of innovation. The findings could shed light on the implication of government involvement in innovation.     

From symbolic values to symbolic innovation: Internet-memes and innovation

Innovation studies has largely focused on technological assets, while leaving other sources and forms of innovation less tackled. Among this neglected corpus, this article stresses the important role played by symbolic value in the consumption and production processes of innovative goods and services. I explore especially Internet-memes that represent iconic productions of the Internet ‘lead culture’, which embed significant symbolic values. This article therefore, refers to the economic sociology and innovation management literature to emphasise the force of these creations of symbolic value by culture-lead communities, through their production of Internet-memes. I argue that Internet-memes represent a widespread source of innovation in various sectors (from cultural industries to less expect ones like finance). While exploratory, the present study extends the debate on the nature of innovation, its symbolic and cultural aspects and its diffusion processes. It ultimately suggests potential new paths for innovation policies to tackle these new forms of innovations.     

The innovative performance of firms in heterogeneous environments: The interplay between external knowledge and internal absorptive capacities

This paper investigates the link between firm-level innovative performance and innovation prone external environments where knowledgeable individuals tend to cluster. Organizational ambidexterity and absorptive capacities (potential and realized) make it possible for firms to leverage the availability of external knowledge and boost their innovation performance. The empirical analysis focuses on England and is based on a novel combination of Community Innovation Survey (CIS) firm-level data and patent data. The results show that only firms complementing potential and realized absorptive capacities are able to take advantage of favorable external environments by actively combining internal and external sources of knowledge.     

Innovation and strategy: Does it make a difference! A linear study of micro & SMEs

Innovation is known to be used by some businesses to help them differentiate their trading position within a specific locale. Research has also proven that by adopting a strategy, aims can be achieved and turnover increased. This study will endeavour to use these two key areas to evaluate how, they are used and to what extent they can improve business performance. The study was carried using 145 Micro and SME business, located within the rural county of Lincolnshire. The businesses were taken from specific locations on a random basis which included rural, remote rural and urban settings. Initial findings found that businesses situated within remote areas performed better than those within the other test areas, leading to the conclusion that they use innovation as a strategy to outperform their business rivals.     

Public science and public innovation: Assessing the relationship between patenting at U.S. National Laboratories and the Bayh-Dole Act

Most studies of the effects of the Bayh-Dole Act have focused on universities. In contrast, we analyze patenting activity at two prominent national laboratories, Sandia National Laboratories and the National Institute of Standards and Technology before and after the enactment of this legislation and the Stevenson-Wydler Act. It appears as though the enactment of Bayh-Dole and the Stevenson-Wydler Act were not sufficient to induce an increase in patenting at these labs. However, the establishment of financial incentive systems, embodied in passage of the Federal Technology Transfer Act, as well as the allocation of internal resources to support technology transfer, stimulated an increase in such activity.     

科技型中小企业资本结构与企业社会资本关系研究:技术创新绩效的观点

运用自组织理论和利益相关者理论来描述科技型中小企业技术创新绩效在资本结构与企业社会资本关系研究中的中介作用,通过实证研究,得出以下结论:(1)科技型中小企业资本结构与技术创新绩效具有负相关关系;(2)科技型中小企业技术创新绩效对企业社会资本中的强关系和弱关系具有正向促进作用,对弱关系的正向促进作用强于对强关系的正向促进作用;(3)科技型中小企业技术创新绩效在资本结构对企业社会资本网络关系影响中起完全中介作用.     

The effectiveness of university knowledge spillovers: Performance differences between university spinoffs and corporate spinoffs

While much prior research has focused upon how the Technology Transfer Offices (TTOs) and other contextual characteristics shape the level of university spinoffs (USO), there is little research on entrepreneurial potential among individual academics, and to the best of our knowledge, no comparative studies with other types of spinoffs exist to date. In this paper we focus on an important but neglected aspect of knowledge transfer from academic research involving the indirect flow to entrepreneurship by individuals with a university education background who become involved in new venture creation by means of corporate spinoffs (CSO) after gaining industrial experience, rather than leaving university employment to found a new venture as an academic spinoff. We argue that the commercial knowledge gained by industry experience is potentially more valuable for entrepreneurial performance compared to the academic knowledge gained by additional research experience at a university. This leads us to posit that the average performance of CSOs will be higher than comparable USOs, but the gains from founder‘s prior experiences will be relatively higher among USOs whose founders lack the corporate context. We investigate these propositions in a comparative study tracking the complete population of USOs and CSOs among the Swedish knowledge-intensive sectors between 1994 and 2002.     

The role of makerspaces in supporting consumer innovation and diffusion: An empirical analysis

Makerspaces are open communities for tinkering, innovating, and socializing: They are equipped with tools and training that support “making” by participants. It has been argued that makerspaces can be a powerful vehicle to enhance both innovation and innovation diffusion by consumers. This research note offers initial empirical evidence for these claims. Through a survey of 558 participants drawn from makerspaces worldwide, the study shows that the innovation rate is about 53% and that the diffusion rate is about 18% among these individuals – substantially higher than the innovation and diffusion rates found in national innovation surveys of general populations, i.e. individuals who innovate independently at home at their own discretion.These findings doubtless reflect both a selection and a treatment effect: Individuals inclined or motivated to innovate and/or diffuse, tend to join makerspaces; and once individuals do participate, the rich resources they find in makerspaces most likely will improve the opportunities to innovate and/or diffuse successfully. Since innovation by consumers is both personally and economically valuable, these findings support the case for further research into the nature of successful makerspaces, and suggest the potential social welfare value of public investment.     

Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act

This article examines how the excise tax affects firms’ R&D investment, performance, and market strategy in the US medical device industry. The Affordable Care Act imposed a 2.3% excise tax on medical devices beginning in January 2013, and thus this study compares the medical device firms with other high-tech firms before and after the tax incidence. Using COMPUSTAT data from 2006 to 2015, the author finds that the excise tax reduced R&D investment, sales revenue, gross margins, and earnings for medical device firms. In addition, the excise tax increased their global market sales intensity, global market diversification, and customer diversification in the US domestic market.