High-tech Entrepreneurial Ventures Research Articles

Benefit from market knowledge: Failure analysis capability and venture goal progress in a turbulent environment

Drawing on the dynamic capabilities view, this study investigates the role of failure analysis capability in affecting venture goal progress in the technologically turbulent environment in which entrepreneurial failures are commonplace. Combining a three-wave time-lagged questionnaire survey (Study 1) with a qualitative interview (Study 2) on high-tech entrepreneurial ventures in China, we conclude that technological turbulence weakens the positive association between failure analysis capability and venture goal progress. However, the market knowledge depth of new ventures can be applied to mitigate the negative moderating effect of technological turbulence on the failure analysis capability-venture goal progress association. Theoretical and practical implications are derived from the above findings to guide future research.

The \u201cfirst match\u201d between high-tech entrepreneurial ventures and universities: the role of founders\u2019 social ties

This paper studies the collaborations between entrepreneurial ventures and universities by investigating the “first match”, namely, the probability that a given entrepreneurial venture, which has never established university collaborations before, forms a collaboration with a given university (out of all the possible collaborations it might have formed). Expanding on the literature about university–industry collaborations, we argue that the formation of the first match is socially bounded. Specifically, we contend that individual social ties, which the founders of an entrepreneurial venture have formed with the personnel of a given university as they worked there, increase the probability of a first match because these ties reduce the costs and increase the benefits of forming a collaboration (H1). We also hypothesize that geographical (H2) and cognitive proximity (H3) between entrepreneurial ventures and universities influence these costs and benefits, thus moderating the relation sub H1. Econometric estimations on a large set of dyads, which represent realized and potential first matches between Italian high-tech entrepreneurial ventures and universities, support our hypotheses.

Dynamic capabilities and high-tech entrepreneurial ventures’ performance in the aftermath of an environmental jolt

This paper contributes to studies on dynamic capabilities (DCs) by showing that a neglected environmental contingency – i.e. the occurrence of a jolt – shapes the DCs–performance relationship. We focus on high-tech entrepreneurial ventures because these are the firms that jolts affect most; in so doing, we also advance the understanding of DCs in the entrepreneurship field. We argue that, in the aftermath of an environmental jolt, the high-tech entrepreneurial ventures that use internationalization and new product development capabilities to modify their resource configuration and regain environmental fit enjoy better performance. Econometric estimates on a sample of 340 Italian high-tech entrepreneurial ventures confronting the consequences of the global economic crisis that began in 2008 confirm that separately using these two DCs has a positive performance effect. This effect is stronger for relatively smaller ventures. Interestingly, despite synergies should arise from the combined use of the two DCs, we do not detect any superadditive effects.

A policy mix experiment to promote start-up success: exploratory evaluation of the NSF Small Business Innovation Research (SBIR)/Industry University Cooperative Research Center (IUCRC) membership supplement

This paper investigates the outcomes of a policy experiment, the NSF SBIR/IUCRC Membership Supplement, designed to promote the success of small high-tech entrepreneurial ventures by providing subsidized memberships in university-based cooperative research centers (IUCRCs). Data collected via semi-structured interviews with representatives of 61 Small Business Innovation Research (SBIR) firms indicated that SBIR firms who used the supplement to join an IUCRC reported multiple R&D benefits including research cost avoidance, research savings, and access to expensive equipment. A vast majority of SBIR firms also reported realizing or anticipated realizing commercial benefits (e.g., new investors, new products, and improvements to existing products). As suggested by social capital theory, SBIR firms reported that the policy mix experiment helped them make new connections with faculty and industry. Following our qualitative results, a structural equation model was applied to test the effect of social capital as an antecedent of SBIR firm R&D and commercialization outcomes. Results suggested that the SBIR firms who developed more social capital through interactions with faculty and industry members realized significantly more R&D and commercialization benefits. Further, commercialization benefits mediated the relationship between social capital and the SBIR firm’s perceived return on investment. Overall, this study demonstrates the feasibility of subjecting mixed policy interventions to evaluative scrutiny and provides evidence that such instruments can have substantive and positive effects on small high-tech entrepreneurial ventures. We discuss implications for social capital theory, policy mix initiatives and entrepreneurship policy.

The geography of venture capital and entrepreneurial ventures’ demand for external equity

In this paper, we study how the geography of venture capital (VC) and the location of entrepreneurial ventures affect the propensity of the latter to seek external equity financing. We analyse a sample of 533 European high-tech entrepreneurial ventures and examine their external equity-seeking behaviour in the 1984–2009 period. We find that ventures are more likely to seek external equity when the local availability of VC is higher, whereas the level of competition of the local VC market plays a negligible role. The stimulating effect of the availability of VC on the demand for external equity rapidly decreases with distance and vanishes at approximately 250 km. It also vanishes when national borders are crossed, except for countries at close cultural and institutional distance. Moreover, the distance decay of the stimulating effect of the availability of VC varies with the characteristics of prospective VC investors, namely, their private or public ownership and governance, and their reputation. These results have important implications for the policy that European countries and the European Commission should implement to foster the demand for VC by entrepreneurial ventures, thereby improving the functioning of the VC market in Europe.

Knowledge misappropriation risks and contractual complexity in entrepreneurial ventures’ non-equity alliances

This paper explores the role of anticipated knowledge misappropriation risks in contract design in non-equity alliances involving high-tech entrepreneurial ventures. We argue that these ventures anticipate higher knowledge misappropriation risks, and are, thus, inclined to negotiate more complex contracts, when partner firms have greater ability and incentives to appropriate the ventures' technological knowledge, and knowledge misappropriation is more detrimental to the ventures. In the empirical sections of the paper, we consider 211 dyadic non-equity alliances involving Italian high-tech entrepreneurial ventures, and we examine the relationship between contractual complexity and a series of characteristics of partner firms associated to either higher ability/incentives to appropriate ventures’ knowledge or more negative consequences of misappropriation.

High-tech entrepreneurial ventures seeking external equity: whether, when, where… and why not?

In this paper, we study the demand of high-tech entrepreneurial ventures for external equity, revealing the conditions that determine whether, when and where they decide to seek external equity during their lives. We also provide evidence on the most important reasons for not looking for external equity at all. We focus on a sample of 530 high-tech entrepreneurial ventures located in 7 European countries and founded between 1984 and 2009. We reveal that company-level characteristics, namely the human capital, the innovativeness, the size, the asset intangibility, and the alternatives to equity capital (internal cash flows and debt) determine whether, when (i.e., at what age) and when (i.e., in international or domestic markets) companies seek external equity. Industry- and country-level variables also play a secondary role in explaining high-tech entrepreneurial ventures’ demand for external equity.

Should I sell my shares to an external buyer? The role of the entrepreneurial team in entrepreneurial exit

This article advances the debate on entrepreneurial exit by shedding new light on the role of the entrepreneurial team (ET) in the exit process. We analyse how ET characteristics influence a founder choice to exit by selling shares to an external buyer versus selling to another team member. Our main argument being that ET characteristics indicate the level of team cohesion. In cohesive ETs, members are resistant to the entry of newcomers; thus, they attempt to induce exiting founders to sell their shares to other team members. Accordingly, we formulate hypotheses on how three indicators of ET cohesion (team size, heterogeneity and the presence of family ties within the ET) affect the probability that a founder will exit by selling her shares to an external buyer rather than another ET member. The hypotheses are tested through econometric estimates using data on 986 founders of 365 Italian high-tech entrepreneurial ventures.

How high-tech entrepreneurial ventures cope with the global crisis: changes in product innovation and internationalization strategies

The global crisis that began in the second half of 2008 abruptly changed the business context, inducing firms to react by modifying their strategies. This paper examines changes in innovation and internationalization strategies that high-tech entrepreneurial ventures implemented to react to the crisis. Relying on insights from the behavioural theory of the firm and threat-rigidity theory, we explore the antecedents of firms’ investments in development of new products and in expansion in international markets and the consequences of these changes on firms’ growth performance. Econometric results from a sample of 140 Italian high-tech entrepreneurial ventures support the view that the stock of resources accumulated by larger firms, firms’ innovation and internationalization investments in the pre-crisis period and firms’ cash flow determine the extent of the two changes. The effects of these changes on firms’ short-term growth performance are positive only for investments in development of new products.

The patterns of venture capital investment in Europe

We study the investment patterns of different types of venture capital (VC) investors in Europe: independent VC, corporate VC, bank-affiliated VC and governmental VC. We rely on a unique dataset that covers 1663 first VC investments made by 846 investors in 737 young high-tech entrepreneurial ventures in seven European countries. We compare the relative specialization indices of the different VC investor types across several dimensions that characterize investee companies: industry, age, size, stage of development, distance from the investor and country. Our findings indicate that VC investor types in Europe differ substantially in their investment patterns when compared to one another and that, in terms of investment patterns, governmental VC investors appear to be the most distinct type of VC investor. The investment patterns of different VC investors are stable over time and similar across different European countries. Finally, the investment patterns of the different VC investor types in Europe are significantly different from those observed in the USA.

Does informal risk capital relax the financial constraints of high-tech entrepreneurial ventures?

This work analyses the effect of informal risk capital financing on a firm’s investment/cash flow sensitivity (ICFS) in a sample of 498 Italian privately held high-tech entrepreneurial ventures (HTEVs) observed from 1996 to 2008. To detect financial constraints, we resort to an error correction model (ECM). We find that the receipt of informal risk capital in the seed stage results in reduced ICFS, indicating a persistent relaxation of financial constraints.

How do the Characteristics of Entrepreneurial Teams Influence the Exit Path of Founders?

This paper focuses on the exit of founders from entrepreneurial ventures. We investigate the influence of the characteristics of the entrepreneurial team on two different exit paths that founders may pursue, namely sale of firm shares to internal buyers and sale to external buyers. We develop hypotheses on the impact of entrepreneurial team’s size, heterogeneity in the demographic characteristics of team members, and family ownership on the relative likelihood of the two exit paths. The hypotheses are then tested through econometric estimates on a sample composed of founders of Italian high-tech entrepreneurial ventures. Our results indicate that the characteristics of the entrepreneurial team do influence founders’ exit paths.

Family firms and internationalization: An exploratory study on high-tech entrepreneurial ventures

This paper empirically explores a highly relevant, although poorly investigated topic: internationalization of family firms that operate in high-tech industries. Specifically, we compare internationalization of family and nonfamily entrepreneurial ventures in these industries. Relying on prior studies on internationalization of family firms, we speculate on how the specificities of high-tech industries shape the advantages and disadvantages of family entrepreneurial ventures in pursuing internationalization as compared with their nonfamily peers. In the empirical part of the paper, through a rigorous quantitative analysis of unique data from 264 Italian high-tech entrepreneurial ventures, we explore whether in high-tech industries family entrepreneurial ventures are more (or less) likely to pursue internationalization than their nonfamily counterparts. Surprisingly enough, our econometric estimates indicate that, in high-tech industries, family entrepreneurial ventures exhibit a higher internationalization propensity than their nonfamily peers.

Patterns of Venture Capital Investments in Europe

We study the investment strategies of different types of Venture Capital investors (VCs) using a unique dataset that includes 1,663 VC first investments made by 846 investors in 737 young high-tech entrepreneurial ventures located in seven European countries between 1994 and 2004. Using a transformed Balassa index, we analyze the relative investment specialization of independent VCs, corporate VCs, bank-affiliated VCs and governmental VCs along several dimensions that characterize investments (e.g., syndication, duration and exit mode) and investee companies (e.g., industry of operation, age, size, development stage, location and distance from investor’s premises at the time of the investment). Our findings indicate that VC types in Europe differ markedly in their patterns of investment specialization, especially governmental VC on the one side and private VC on the other. We compare our findings with evidence from the USA and find some interesting differences, notably regarding independent and governmental VCs.

The Creation of High-Tech Entrepreneurial Ventures at the Local Level: The Role of Local Competences and Communication Infrastructures

This paper sheds light on the role of human capital for the creation of New Technology-Based Firms (NTBFs) in a geographical area. We relate NTBF creation to the local availability of human capital (local competences) and to the local accessibility of distant competences through communication infrastructures. We argue that local competences and communication infrastructures have a differential impact on NTBF creation in manufacturing and service industries due to the diverse productive characteristics of the sectors. In particular, we claim that local competences have a more positive effect on manufacturing, whereas communication infrastructures affect services more. Findings from the estimations of econometric models on the Italian provinces are in line with these predictions. The moderating effects of local economic and technological development on the inquired relationships are also considered. Whereas economic development seems to weaken the effect of local competences in manufacturing and reinforce that of communication infrastructures in services, technological development has no moderating effects.

Assessing the Relationship between Human Capital and Firm Performance: Evidence from Technology–Based New Ventures

We assess the role of human capital in the growth and development of new technology–based ventures, based on longitudinal data from 198 high–tech ventures. Our empirical results imply that there is a strong relationship between team experience and strategy. Although there is a weak direct link between team experience and venture performance, the findings strongly suggest that the fit between strategy and team experience is a key determinant of the long–term performance of high–tech entrepreneurial ventures. For small, technology–based new ventures, the team's technological experience appears to be the most important determinant of the success of a differentiation strategy.