How the interplay between innovation ecosystems and market contingency factors impacts startup innovation

Abstract

The complexity of innovating in rapidly changing settings leads startups to seek help from external actors from their innovation ecosystem to deal with such market contingency factors. Therefore, startups rely on innovation ecosystems to find support for developing technological and business model innovations. Nonetheless, the role played by innovation ecosystems in the relationship between market contingency factors and startups' innovativeness remains an underexplored matter. We provide novel findings to the field by analyzing the interplay between market contingency factors (pace of technological change, demand unpredictability, and market profitability) and innovation ecosystem participation on startups' technological and business model innovativeness. Supported by a weighted least square robust regression, we analyze a large sample of German startups (n = 766 responses), a leading country in startup innovation. Our findings show that participating in an innovation ecosystem helps startups deal with market contingencies by allowing them to fit such externalities. Our results show that participating in an innovation ecosystem is especially beneficial for technological innovativeness when startups must cope with rapidly changing, less predictable, and low-profit markets. Whereas for business model innovativeness, the innovation ecosystem is most beneficial for startups that must cope with low-profit and more predictable markets. We expand current literature on startup entrepreneurship and innovation by providing empirical evidence of the different impacts that innovation ecosystems can exert on startups depending on the contingent factors that affect the businesses and how external actors can help startups cope with uncertainty. The originality of this study lies in addressing main market contingency factors that highly impact nascent businesses and provide evidence of how innovation ecosystems’ actors can help them overcome such externalities.