R&D activities in start-up firms: What can we learn from founding resources?

Abstract

Research and development is critical in promoting innovation and firm development. While many studies have been discussing how firms’ R&D behaviour is affected by the internal factors and external factors, little has been done to link it to firms’ founding conditions. Using resource-based view theory, this study suggests the firms’ R&D activities in their later stages are partly determined by firms’ starting resource bundle. We propose that the financing structure, entrepreneurs’ education background and intellectual property of the new firms will affect their R&D behaviour. The study examines the performance of a random sample of firms established in 2004 using data from the Kauffman Firm Survey. The result shows a mixing impact of firms’ starting resources. The founders’ education and the ownership of intellectual property have a positive and long-lasting impact, while firms’ financial capital matters mostly in the short term. The study also finds subsequent resource development is highly reliant on the initial resource bundle.