High-tech Ventures Research Articles

Absorptive capacity and NPD: salient issues in bipolar entrepreneurial SMEs

PurposeThe purpose of this study is to explore knowledge absorptive capacity (ACAP) (both potential and realized) and new product development (NPD) in bipolar entrepreneurial small- and medium-sized enterprises (SMEs).Design/methodology/approachIn response to recent calls for research on knowledge ACAP and NPD in entrepreneurial SMEs, particularly in different contexts, this research aims to answer a specific question: What are the characteristics of ACAP (both potential and realized) and the salient issues concerning working complementarily between both types of ACAP to foster NPD in bipolar entrepreneurial SMEs (in this case, three new low-tech and three established high-tech cases)? The authors conduct case study research based on cross-case and within case analyses to answer the question.FindingsThe findings show that, in the established high-tech cases, realized ACAP plays an outsized role in developing new products and prior-related knowledge acts as a precondition for capturing useful knowledge from external sources (potential ACAP). On the contrary, in the new low-tech cases, potential ACAP is the key driver of NPD, so external knowledge from network ties becomes a crucial source of acquiring new knowledge, along with entrepreneurs’ level of skill at applying useful knowledge (realized ACAP) to achieve NPD.Research limitations/implicationsOn the basis of the bipolar entrepreneurial SMEs (i.e. established high-tech and new low-tech ventures), the characteristics of entrepreneurial SMEs (i.e. firm’s age, size and level of technology) affect the different roles of realized and potential ACAP in driving NPD successes. Realized ACAP plays a critical role for NPD in established high-tech SMEs, whereas potential ACAP is the main driver of NPD in new low-tech SMEs. This research has some limitations that future research should conduct quantitative research in other industries’ context as well as in other countries.Practical implicationsFor new ventures, they should be aware that to strengthen their network ties with customers and suppliers can be an important tool for not only overcoming their limitations of existing knowledge but also acquiring tacit knowledge from the external sources. For established high-tech ventures, they should focus not only on the short-term NPD (the achievement of current NPD) but also the long-term NPD (e.g. series of new products and new strategic alliances) that can help avoid a not-invented-here syndrome situation.Social implicationsThe government should customize the policy to suit each targeted SME. Policymakers should play a crucial role of a linking pin among key external sources (e.g. R&D national and international institutions, SME banks and marketing agents) in different stages of the business cycle.Originality/valueThis research contributes to the literature of knowledge ACAP in SMEs to the understanding of the distinction roles of potential and realized ACAP as a mechanism in the different natures of entrepreneurial SMEs.

The contribution of board experience to opportunity development in high-tech ventures

This study investigates the board of directors’ contribution to opportunity development in high-tech ventures. Based on the dynamic managerial capabilities perspective, we argue that more experienced boards will contribute more to opportunity development. Furthermore, building on the attention-based view, we argue that this effect will be moderated by structural and situational factors that affect board members’ attention to the venture’s opportunity development process. Using hand-collected data on 179 high-tech ventures in Belgium, we find that board experience has a stronger relationship with the board’s contribution to opportunity development when board size decreases, when board tenure increases and when the venture underperforms. These findings offer a contribution to the literature on opportunity development in new ventures and to research on the boards of directors’ role in new ventures. They also have important implications for entrepreneurs who are trying to develop opportunities and their stakeholders. Plain English summary While experienced board members have the potential to contribute to opportunity development in high-tech ventures, they often refrain from leveraging this experience due to the structure of the board and the situation of the venture. When high-tech ventures try to develop new opportunities, they mostly rely on the experience of the top management team. As this could limit the range of opportunities they see, bringing in experienced board members may seem a fruitful way of getting new information and a broader perspective. This study indeed shows that, in the context of high-tech ventures, more experienced boards can contribute more to opportunity development. However, even if board members have relevant experience, they are not always motivated to use this experience to the benefit of the venture. In fact, they are less likely to leverage their experience when boards are bigger in size, when board members have spent less time sitting together on the board, and when the venture performs better. The implication of this study is that high-tech ventures should be aware that board members can potentially contribute to opportunity development, but that their actual contribution depends on structural and situational factors that direct board members’ attention to opportunity development.

Exploration-exploitation and acquisition likelihood in new ventures

The market for acquisitions has been a blind spot in exploration-exploitation research in the new venture context. The introduction of the acquisition exit outcome as a performance dimension for new ventures, especially among high-tech ventures, shifts the traditional temporal logic of exploration-exploitation theory by introducing previously unacknowledged short-term benefits of exploration. We bring the acquisition outcome into the picture and investigate the relationship between the exploration-exploitation continuum and profitability, survival, and acquisition likelihood simultaneously. Using the Kauffman Firm Survey data, we provide evidence for a link between exploration and the likelihood of acquisition (defined as the business being sold to or merged with another business), although industry technology level poses a boundary condition such that the association is not observed in low- and medium-technology firms. An inverse U-shaped relationship that is monotone negative for most of the data range was found between exploration and the profitability of low- and medium-tech firms, and a negatively linear relationship was found for exploration and the profitability of high-tech firms. Our findings lend some support to the viability of “born to flip” strategies involving comparatively higher exploration levels in high-tech start-ups and sacrifice of short-term profitability. Plain English Summary Built-to-flip strategy really does work, but only for some startups. There has been a debate on whether start-ups should be managed specifically with the aim of short-term exit through M&As (built to flip) or if they should always focus on long-term viability (built to last). We tap into the Kauffman Firm Survey data to provide evidence-based insights on this issue. Our results support the viability of “built-to-flip” strategies among some new firms at least when it comes to the balance of exploration and exploitation, measured as relative allocation of employees to R&D vs. sales. High-tech ventures that exited through M&A had higher exploration levels compared to all other sub-groups including high-tech ventures that closed or did not exit, and all low- and medium-tech ventures. Among high-tech ventures, increased exploration does—to a point—lead to a higher likelihood of acquisition, but it comes at the price of reduced profitability. After this peak point, further increase in exploration reduces both acquisition likelihood and profitability.

International new product development performance, entrepreneurial capability, and network in high-tech ventures

This study aims to investigate the role of external network resources of emerging market ventures (EMVs) in shaping ventures’ entrepreneurial capability and achieving superior new product development (NPD) performance in the international marketplace. It integrates the extended resource-based view and knowledge-seeking perspectives of EMVs with the literature on entrepreneurship and international business. We collected survey data from 179 high-tech ventures in China and validated the model using structural equation modeling. Findings suggest that external network resources of Chinese ventures play a crucial role in driving their development of entrepreneurial capability, which in turn positively affects their international NPD performance. Moreover, findings elucidate the network condition in which they can facilitate the contribution of entrepreneurial capability to NPD performance. They also suggest that EMVs with well-developed entrepreneurial capability perform better in NPD for international markets when they are capable of developing international networks.

The impact of market orientation on university spin-off business performance

Extant literature on the antecedents of university spin-off (USO) business performance has developed with the aim of highlighting those drivers that could foster the performance of such firms, focusing on a variety of factors. Less interest has been devoted to the market orientation–performance relationship, despite the positive link frequently found in the marketing literature. The aim of the present paper is therefore to fill this gap and investigate the relationship between market orientation (MO) and USO performance using the Netval database of Italian research spin-offs. To measure MO, we adopted an ad hoc questionnaire, and after testing its validity with a factor analysis, we performed a regression model. The results show that MO, particularly some of its components (customer intelligence generation, intelligence dissemination, integration and inter-functional coordination), has an impact on business performance. This contribution presents some valuable research implications useful for academics, but professionals from new high-tech ventures and technology transfer offices may also benefit from this knowledge.

How Do Small Businesses Utilize Public R&D Funding to Grow? Evidence from the SBIR/STTR Program

Public R&D provides a critical resource for ventures to innovate. However, scholars have not sufficiently investigated how these firms strategically manage R&D between hiring internally or partnering externally as they pursue growth plans. We trace first-time U.S. Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) recipients from the five leading federal mission agencies (2001 – 2015). We set up a research design that leverages exogenous variation in R&D using state SBIR/STTR matching programs. We find evidence that additional public R&D grants decrease, rather than increase, direct employment among small high-tech ventures. Our results indicate a strategic choice whereby ventures substitute away from direct hiring toward external partnering. These results highlight tensions for ventures as they balance competing expectations of public R&D programs to advance economic growth and stimulate innovation.

On the Right Tract: How Location and Certification Affect Venture Performance in Distressed Areas

Although one in six Americans lives in an economically distressed urban or rural area, little is known about the potential competitive advantages for small businesses located in these tracts. This is especially relevant for high-tech ventures that may be catalysts for community revitalization. We investigate how a high-tech venture’s neighborhood level location and certification choices in economically distressed areas affect its contracting performance. Utilizing a unique nationwide sample of firms with place-based government procurement certification carefully matched to comparable uncertified firms, we conduct a counterfactual analysis. We find empirical evidence that place-based certification yields firms a 7.8 percent higher probability of securing contracts and $192,000 in additional revenue. Certification enhances pricing power without reducing competitive intensity among suppliers. We discuss scholarly, managerial, and policy implications.

From Normalization to Innovation in New Product Development Projects

Although tolerating failure has been regarded as an essential part of the innovation process, much less is known about how failure normalization can drive innovation. We argue that failure normalization facilitates innovation by encouraging learning from failure, which in turn, depends on entrepreneurial passion. Using data from collected a survey of 237 new product development project (NPD) leaders in high-tech ventures, we find that learning from failure acts as a mediator in the relationship between failure normalization and innovation performance in the NPD process. However, failure normalization only provides an opportunity to learn and whether actual learning from failures occurs depends on NPD project leaders’ entrepreneurial passion. Our results suggest that the path from failure normalization to innovation in NPD requires a much more nuanced examination of not only the mediating role of learning from failure but also entrepreneurial passion, which functions as a motivational on-off switch for learning from failure.

The Role of the Board of Directors for Opportunity Development in Early-Stage High-Tech Ventures

This study investigates the role of the board of directors for the opportunity development process in early-stage high-tech firms. Based on a board capital perspective, we argue that boards with more experience will contribute more to the development of opportunities. Furthermore, building on the attention-based view, we argue that this effect will be moderated by situational and structural factors that affect board members’ attention to the venture’s opportunity development process. Using hand-collected data on 183 early-stage high-tech firms in Belgium, we find that board experience has a stronger relationship with the board’s contribution to opportunity development when board size decreases, when board tenure increases and when the firm underperforms. These findings offer a contribution to the literature on opportunity development in new ventures and to research on the role of boards of directors in new ventures. They also have important implications for entrepreneurs who are trying to develop opportunities and their stakeholders.

A close look at the contingencies of founders’ effect on venture performance

AbstractStudies show that founders’ industry-specific experience is beneficial to venture performance. However, we know little on the contingencies associated with such an effect. Using a panel dataset of 338 Italian high-tech ventures, we find that founders’ industry-specific experience positively affects venture performance. However, changes in the top management team (TMT) during the initial phases of the venture’s life weaken the positive relationship between founders’ industry-specific experience and venture performance, whereas founders’ functional heterogeneity does not. We further find evidence of substitution effects between founders’ human and social capital affecting venture performance, such that the effect of founders’ industry-specific experience on venture performance is attenuated when a subset of founders had common background prior to founding their venture.

Resource Based Capability and Competitive Strategy of High-Tech Ventures in Kerala

The paper examines the impact of resource- based capability and competitive strategy on the performance of high- tech new ventures in Kerala. The resource-based capability was analyzed using the variables managerial capability, technical capability, marketing capability and input sourcing capability of the firm. Competitive strategy was measured by looking into cost strategy, quality strategy, innovation strategy, and customization strategy adopted by the firm. A descriptive research was undertaken to analyze the performance of the ventures. A survey method was administered to collect data from 83 high- tech startups in Kerala. Independent sample t-test, Multiple regression and Cluster analysis were used to arrive at a conclusion. The findings indicate that both resource- based capability and competitive strategy influences the performance of a venture. It was found that the entrepreneurs of profitable ventures exhibit better managerial capability. The results of the cluster analysis show that the entrepreneurs with high performance indicators are customer centric. The innovation strategy and marketing capability adopted by the firm has an impact on the venture performance. The findings suggest that sales, profitability and financial position can be predicted to an extend by the resource- based capability and competitive strategy adopted by the venture. The research work can be used by emerging entrepreneurs, policymakers and incubation managers to develop a framework to improve the performance of startups.

International Digital Competence

Abstract This article evaluates which specific capabilities of a firm enable its internationalization process, with an emphasis on companies with exclusively digital products. The results provide an opportunity to examine the strength of earlier findings in International Entrepreneurship (IE) research, which has largely addressed high-tech ventures that export physical products. We reveal a set of intangible capabilities that are especially relevant to digital companies and their internationalization process, without foreign direct investment (FDI) or with limited outward assets characterized by non-equity entry modes. Using an inductive, multiple-case study methodology, we develop a new construct that we term ‘international digital competence’ (IDC). IDC consists of four capabilities critical to these companies: cross-cultural programming skills, global virtual networks, cross-border digital monetizing adaptability, and international business model reconfiguration. The possession of IDC enables digital companies to expand internationally through an online presence. Therefore, we propose that international online expansion can increase the likelihood of a digital company performing outward assets via non-equity entry modes. We also conceived that the digital company's strategy to achieve non-equity investments is moderated by its entrepreneur's international orientation.

Product newness and product performance in new ventures: Contingent roles of market knowledge breadth and tacitness

Although knowledge has been built around how product newness affects product performance in the context of established firms, such an effect in new ventures remains to be explored. Building on the knowledge-based view, the open innovation literature, and observations of the liability of newness, this study examines the differential effects of technological and market newness on product performance and tests how market knowledge breadth and tacitness moderate these effects in distinctive ways. Results obtained using data from new high-tech ventures in China show that market newness has a stronger positive effect on product performance than technological newness. Market knowledge breadth enhances the effect of technological newness on product performance, whereas market knowledge tacitness appears to be a double-edged sword: it weakens the effect of technological newness but enhances the effect of market newness on new product performance. These findings provide novel insights into how distinct dimensions of product newness have differential effects on product performance and a more nuanced view of how market knowledge characteristics function as boundaries in the product newness–performance link in new ventures.

Knowledge Transfer via Information Intermediaries: Evidence from Venture Capital Investments

This study investigates the impact of interfirm relationships on knowledge transfer at high-tech ventures. Prior studies have by and large emphasized that knowledge flows between organizations via their direct ties. In this study, however, we build on research stressing the role of information intermediaries and argue that knowledge can be transferred between organizations that are connected indirectly via shared intermediaries. To test our arguments, we investigate entrepreneurial investments made by venture capitalists in medical device industries in the US and analyze patent citation trajectories among these ventures. We find that ventures indirectly connected to other ventures via a common venture capitalist exhibits greater cross-patent citation than those not indirectly connected. We further find that this effect is more pronounced when venture capitalist’s incentive to transfer knowledge is closely aligned with that of ventures.

Evolution of Perceived Uncertainty and Behavioral Logic: Evidence from High-tech Ventures

In this study, drawing on effectuation theory, we combine analytical strategies for process data to examine inductively and theorize how founder teams’ perceptions of uncertainty and behavioral logics develop during new venture creation processes. The results reveal four phases and suggest a possible evolution from a causal conditional relationship between perceived uncertainty and behavioral logics to an integrative relationship. We bring to light the notion of temporality and unanticipated consequences, discuss their central roles in perceived uncertainty, effectuation, and causation, and offer revelatory insights into why and when effectuation is used in relation to uncertainty and entrepreneurial action.

The role of corporate venture capital investment in patent sales

Patents are important strategic assets for high-tech ventures. However, many ventures sell patents instead of investing time and resources for commercializing them. We explore the organizational underpinnings for these decisions. We highlight the role of the venture’s investors and corporate venture capital (CVC) investments in particular. We integrate CVC literature into theory from markets for technology and predict that CVC investments provide access to complementary assets for ventures, reducing the likelihood for patent sales. Effects are expected to be stronger for patents with high strategic value for the CVC, i.e. specialized technological expertise of the venture and in strong IPR regimes. We test and support these hypotheses analyzing 12,024 patents of 1,679 US-based ventures between 2004 and 2009. Our findings have implications for the strategic management of technologies.

Knowledge integration methods, product innovation and high-tech new venture performance in China

ABSTRACTCombining insights from knowledge-based theory (KBT) and the product innovation literature, this paper explores whether and how knowledge integration methods contribute to high-tech new venture performance in China’s emerging economy. Using data from 295 entrepreneurs and top executives in Chinese high-tech new ventures, we find that both the coordinated integration of knowledge and systemic integration of knowledge have positive effects on high-tech new venture performance and product innovation. Competitive intensity moderates the impact of knowledge integration methods on product innovation. Moreover, product innovation is a mediator in the relationship between knowledge integration methods and high-tech new venture performance. Our findings have important theoretical and practical implications.

The New Fontiers of Service Systems Engineering

Services are an abundant form of value creation in many countries. Even advanced products and technologies are increasingly made available as services, as exemplified by the dramatic expansion of cloud-based analytics and artificial intelligence. Digital transformation drives servitization. The process of digital transformation amplifies the trend to changing business models, towards offering and selling the utility of a product or a service – everything becomes a service, enabled though digital technologies. Traditional manufacturing sees advances of services through smart services and industry 4.0. Service industries themselves are also transforming into high tech ventures. Retail, finance, media, mobility, to name just a few industries, have become hotbeds of digital services that thrive on advances in information technology.

The Correlation Influences by the Quality of Product Pivoting Boot Camp and its level of Training Satisfaction on the Applying Will to Their Real Business of High-tech Ventures in the Early Stage of Growth

The Correlation Influences by the Quality of Product Pivoting Boot Camp and its level of Training Satisfaction on the Applying Will to Their Real Business of High-tech Ventures in the Early Stage of Growth

When startups exit: comparing strategies in Europe and the USA

PurposeThe purpose of this paper is to present an overview of trends toward start-up exits. Exits represent the “end phase” of the start-up process, at least for the founders and the early investors. For high-growth venture-capital-backed companies, exits are often considered the ultimate goal of building a profitable venture. These ventures are intended from the beginning to harvest the financial value created by the business at some point in the future, and return capital to early investors.Design/methodology/approachThe authors tracked 5,744 merger and acquisition transactions that have occurred between European and US tech start-ups since 2012. Data are drawn from CrunchBase, the most comprehensive database of high-tech companies and investors with information on the companies and investors around the world. The authors then compared the trends of acquisitions between European and US companies.FindingsResults show that US companies are far more inclined to make acquisitions than European ones. Acquirers of start-ups, both from Europe and the US, prefer to buy local companies. However, recently, US companies have started to show more interest in European start-ups. Thus, signaling that the European start-up ecosystem is growing and becoming more attractive for US buyers. Furthermore, results show that start-up exits typically happen within a few years after a company’s establishment.Research limitations/implicationsThe research does not take into consideration the price of the transaction, or the amount of capital invested by venture capitalists in the high-tech start-ups that have been acquired. Further research should address this specific problem by helping European start-ups understand how to plan the exit phase within few years from establishment.Practical implicationsThe results have important implications both for entrepreneurs/managers and policymakers. Early exit appears to be a global trend among start-ups. This suggests that the exit phase should be properly planned to happen in the very early stage of the start-up process. On the other hand, the research also shows that there is still a gap to be filled in the European start-up ecosystems’ ability to produce exits and create new large innovative companies (the so-called “unicorns”).Originality/valueTo date, there has been a little research about exits for young high-tech ventures. This paper will attempt to shed new light on this so far under-explored issue by specifically analyzing exits as financial strategy for investors and entrepreneurs.