When Does Lack of Resources Make New Firms Innovative

In this study, the environmental characteristics that giverise to innovation in new firms are investigated. Following a discussion of theresource-based view of the firm, several hypotheses are proposed. Takentogether, these hypotheses predict that new firms will have a higher rate ofinnovation in smaller, more competitive markets in which financial resourcesare more plentiful. A fourth hypothesis suggests that new firms innovate less often inmanufacturing-intensive markets. Data on 964 attempts by firms to innovateusing 1,397 inventions patented by the Massachusetts Institute of Technology(MIT) between 1980 and 1996 are used to test the hypotheses. Analysis of thedata indicates that the market environment does indeed play an important rolein determining when new firms innovate. New firms are more likely to achieve first sale and less likely to abandonefforts to innovate in smaller, more competitive markets that boast fewresources and are not focused on manufacturing. These results challenge theconventional assumption that low-competition, high-demand environments withplentiful resources most often lead to innovation. (SAA)

[1]  Henrich R. Greve,et al.  Interorganizational Learning and Heterogeneous Social Structure , 2005 .

[2]  Steven Klepper,et al.  The tradeoff between firm size and diversity in the pursuit of technological progress , 1992, Small Business Economics.

[3]  M. Hannan,et al.  Structural Inertia and Organizational Change , 1984 .

[4]  Mary Tripsas.  UNRAVELING THE PROCESS OF CREATIVE DESTRUCTION: COMPLEMENTARY ASSETS AND INCUMBENT SURVIVAL IN THE TYPESETTER INDUSTRY: UNRAVELING THE PROCESS OF CREATIVE DESTRUCTION , 1997 .

[5]  M. Trajtenberg,et al.  Universities as a Source of Commercial Technology: A Detailed Analysis of University Patenting, 19651988 , 1995, Review of Economics and Statistics.

[6]  K. Arrow.  Economic Welfare and the Allocation of Resources for Invention , 1962 .

[7]  R. Katila,et al.  Where do resources come from? The role of idiosyncratic situations , 2004 .

[8]  G. Briefs.  Business cycles , 1949 .

[9]  Hayagreeva Rao,et al.  Overcoming Resource Constraints on Product Innovation by Recruiting Talent From Rivals: A Study of the Mutual Fund Industry, 1986–1994 , 2002 .

[10]  O. Sorenson.  Letting the market work for you: an evolutionary perspective on product strategy , 2000 .

[11]  Constance E. Helfat,et al.  The birth of capabilities: market entry and the importance of pre-history , 2002 .

[12]  Simon Kuznets,et al.  Inventive Activity: Problems of Definition and Measurement , 1962 .

[13]  Elaine Romanelli,et al.  Environments and Strategies of Organization Start-Up: Effects on Early Survival , 1989 .

[14]  Bengt Holmstrom,et al.  AGENCY COSTS AND INNOVATION , 1989 .

[15]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[16]  Harbir Singh,et al.  The Evolution of Corporate Capabilities in Emerging Technologies , 1992 .

[17]  Charles E. Bamford,et al.  Differences in large and small firm responses to environmental context: strategic implications from a comparative analysis of business formations , 1998 .

[18]  Scott Shane,et al.  Special Issue on University Entrepreneurship and Technology Transfer: Organizational Endowments and the Performance of University Start-ups , 2002, Manag. Sci..

[19]  J. Lerner,et al.  VENTURE CAPITALISTS AND THE DECISION TO GO PUBLIC , 1994 .

[20]  M. Porter,et al.  HOW MUCH DOES INDUSTRY MATTER , REALLY ? , 1997 .

[21]  Raphael Amit,et al.  WHY DO VENTURE CAPITAL FIRMS EXIST? THEORY AND CANADIAN EVIDENCE , 1998 .

[22]  A. Swaminathan.  The proliferation of specialist organizations in the American wine industry, 1941-1990 , 1995 .

[23]  H. White.  A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity , 1980 .

[24]  Anne S. Miner,et al.  Improvising firms: bricolage, account giving and improvisational competencies in the founding process , 2003 .

[25]  G. Dosi.  Sources, Procedures, and Microeconomic Effects of Innovation , 1988 .

[26]  S. Klepper,et al.  Time Paths in the Diffusion of Product Innovations , 1982 .

[27]  I. MacMillan,et al.  Resource Cooptation Via Social Contracting: Resource Acquisition Strategies for New Ventures , 1990 .

[28]  P. Schoemaker,et al.  Strategic assets and organizational rent , 1993 .

[29]  Anne S. Miner,et al.  Organizational Improvisation and Organizational Memory , 1998 .

[30]  J. Brockner.  The Escalation of Commitment to a Failing Course of Action: Toward Theoretical Progress , 1992 .

[31]  Lung-fei Lee.  Generalized Econometric Models with Selectivity , 1983 .

[32]  Riitta Katila,et al.  Exploiting technological opportunities: the timing of collaborations , 2003 .

[33]  S. Klepper.  Employee Startups in High‐Tech Industries , 2001 .

[34]  Anand Swaminathan,et al.  The Underemphasized Role of Established Firms as the Sources of Major Innovations , 1996 .

[35]  A. Bhide,et al.  Bootstrap finance: the art of start-ups. , 1992, Harvard business review.

[36]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[37]  David J. Miller,et al.  The Resource-Based View of the Firm in Two Environments: The Hollywood Film Studios From 1936 to 1965 , 1996 .

[38]  Jay R. Galbraith.  Designing the Innovating Organization , 1982 .

[39]  J. Barney,et al.  IS THE RESOURCE-BASED " VIEW " A USEFUL PERSPECTIVE FOR STRATEGIC MANAGEMENT RESEARCH ? , 2001 .

[40]  Ken Kelley’s,et al.  Multiple Regression , 2002, Deutsche medizinische Wochenschrift.

[41]  Constance E. Helfat,et al.  The dynamic resource-based view: capability lifecycles , 2003 .

[42]  R. Katila.  New Product Search Over Time: Past Ideas in Their Prime? , 2002 .

[43]  L. J. Wei,et al.  The Robust Inference for the Cox Proportional Hazards Model , 1989 .

[44]  A. Nerkar,et al.  Beyond local search: boundary‐spanning, exploration, and impact in the optical disk industry , 2001 .

[45]  Scott Shane,et al.  Technology Regimes and New Firm Formation , 2001, Manag. Sci..

[46]  J. Pfeffer,et al.  The Effect of Competition on Some Dimensions of Organizational Structure , 1973 .

[47]  Harry J. Sapienza,et al.  IMPACT OF AGENCY RISKS AND TASK UNCERTAINTY ON VENTURE CAPITALIST-CEO INTERACTION , 1994 .

[48]  Daniel A. Levinthal,et al.  Exploration and Exploitation in Organizational Learning , 2007 .

[49]  S. Snell,et al.  THE STRATEGIC USE OF INTEGRATED MANUFACTURING: AN EMPIRICAL EXAMINATION , 1996 .

[50]  Albert A. Cannella,et al.  So Close and Yet So Far: Promotion Versus Exit for CEO Heirs Apparent , 2001 .

[51]  M. Sarkar,et al.  The conditioning effect of time on firm survival: An industry life cycle approach , 2002 .

[52]  Matthew S. Kraatz,et al.  Modeling the dynamics of strategic fit: a normative approach to strategic change , 2000 .

[53]  W. P. Barnett,et al.  EVOLUTIONARY PERSPECTIVES ON STRATEGY , 2007 .

[54]  David B. Audretsch,et al.  Innovation in Large and Small Firms: An Empirical Analysis , 1988 .

[55]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[56]  James M. Utterback,et al.  Mastering the Dynamics of Innovation , 1996 .

[57]  C. Trevor,et al.  Interactions among actual ease-of-movement determinants and job satisfaction in the prediction of vo , 2001 .

[58]  Jesper B. Sørensen,et al.  Aging, Obsolescence, and Organizational Innovation , 2000 .

[59]  W. A. Sahlman,et al.  What do venture capitalists do , 1989 .

[60]  D. Teece.  Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy , 1993 .

[61]  Suresh Kotha,et al.  Continuous “Morphing”: Competing Through Dynamic Capabilities, Form, and Function , 2001 .

[62]  Kim B. Clark,et al.  Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of , 1990 .

[63]  E. Hippel.  Sticky Information and the Locus of Problem Solving: Implications for Innovation , 1994 .

[64]  Clayton M. Christensen,et al.  CUSTOMER POWER, STRATEGIC INVESTMENT, AND THE FAILURE OF LEADING FIRMS , 1996 .

[65]  Sidney G. Winter,et al.  Schumpeterian Competition in Alternative Technological Regimes , 1983 .

[66]  D.,et al.  Regression Models and Life-Tables , 2022 .

[67]  David J. Miller,et al.  An asymmetry‐based view of advantage: towards an attainable sustainability , 2003 .

[68]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[69]  Manuel Trajtenberg,et al.  AS A SOURCE OF COMMERCIAL TECHNOLOGY : A DETAILED ANALYSIS OF UNIVERSITY PATENTING , 1965 – 1988 , 1995 .

[70]  R. Henderson.  The evolution of integrative capability: innovation in cardiovascular drug discovery , 1994 .

[71]  Ken G. Smith,et al.  Existing Knowledge, Knowledge Creation Capability, and the Rate of New Product Introduction in High-Technology Firms , 2005 .

[72]  Thomas H. Brush,et al.  Toward a contingent resource‐based theory: the impact of information asymmetry on the value of capabilities in veterinary medicine , 1999 .

[73]  James D. Thompson.  Organizations in Action , 1967 .

[74]  D. Leonard-Barton.  CORE CAPABILITIES AND CORE RIGIDITIES: A PARADOX IN MANAGING NEW PRODUCT DEVELOPMENT , 1992 .

[75]  M. Brewer,et al.  Intellectual Capital and the Birth of U.S. Biotechnology Enterprises , 1994 .

[76]  Jacob Schmookler,et al.  Invention and Economic Growth , 1967 .

[77]  Wesley M. Cohen,et al.  Empirical studies of innovation and market structure , 1989 .

[78]  K. Eisenhardt,et al.  Speeding Products to Market: Waiting Time to First Product Introduction in New Firms. , 1990 .

[79]  Robert N. Stern,et al.  The External Control of Organizations: A Resource Dependence Perspective. , 1979 .

[80]  M. Tushman,et al.  Technological Discontinuities and Organizational Environments , 1986 .

[81]  P. Lawrence,et al.  Organization and Environment: Managing Differentiation and Integration , 1967 .