A Theory of Product-Form Strategy: When to Market Know-How, Components, or Systems?

Abstract

Commercializing technological innovations is a strategic goal in entrepreneurial ventures and established firms. A fundamental decision that remains understudied in this context is the form in which the innovation is to be commercialized. The authors term this decision the firm's “product-form strategy” for the innovation. In Study 1, they employ a theories-in-use approach and, using in-depth interviews and field observations with technology entrepreneurs and angel investors, develop a theory of product-form strategy—to market the innovation as know-how, a component, or a system—and identify the primary drivers of this choice. The theory is tested using a multimethod, multicontext approach. In Study 2, the authors use proprietary investment proposals generated by entrepreneurial ventures when they seek support from angel investors. In Study 3, they test the theory using video transcriptions of technology proposals from the television show Shark Tank. In Study 4, the authors assess the internal validity of the theory with active angel investors as subjects. They find consistent support for their theory and conclude with implications for theory and managerial practice.