Do Innovative Users Generate More Useful Insights? An Analysis of Corporate Venture Capital Investments in the Medical Device industry

Abstract

Users are an important source of innovation. Scholars have suggested that established firms will gain valuable innovative insights by working with user innovators. However, no study compares the extent to which knowledge sourced from innovative users, as compared to other external sources of knowledge, triggers the creation of new technologies and commercial products within established firms. This leaves established firms with little guidance when it comes to choosing where to search for external knowledge that ignites innovation. Based on existing empirical work in the literature on user innovation, we build a theoretical framework that explains why user knowledge will provide established firms with more ‘useful’ innovative insights than will other sources of knowledge. We test this claim in the context of corporate venture capital investment in the medical device industry. We find that established firms incorporate more knowledge from user innovators than from other sources of external knowledge into their patents and highly innovative products. Accessing the knowledge contained in user‐generated innovations enriches the product development outcomes of established firms. We trace the flow of knowledge from start‐ups to established firms using both an established method based on backward patent citation data and a novel algorithmic method that compares the content of regulatory documents. Copyright © 2013 John Wiley & Sons, Ltd.

Corporate venture capital portfolios and firm innovation

“…Despite this widespread goal, surprisingly little research has explored the influence of CVC on investor innovation. The few studies that have done so examined the influence of the amount of CVC activity (Dushnitsky and Lenox, 2005;Wadhwa and Kotha, 2006) or have employed a dyadic perspective (Schildt et al, 2005;Smith and Shah, 2013). Research examining the link between CVC and corporate investor innovation has not examined the influence of CVC portfolio diversity or how this influence is conditioned by other characteristics of the portfolio firms.…”

Implementing Responsible Research and Innovation Practices in SMEs: Insights into Drivers and Barriers from the Austrian Medical Device Sector

“…We apply a qualitative case study approach [60,61] to explore influential factors on research and innovation activities and their role in implementing RRI in a specific contextual setting. Regulations and standards in the Austrian medical devices industry are analyzed as contextual factors.…”

The User Innovation Paradigm: Impacts on Markets and Welfare

“…Evidence from a Finnish nationally representative survey of consumer innovators shows that 6% of innovation designs developed by consumers for their own use are adopted and commercialized by existing producers, and an additional 2% are commercialized by user-formed start-up ventures (de Jong et al 2015). The literature shows that user innovation spillovers can be exceedingly valuable to producer firms (Lilien et al 2002, Smith andShah 2013). In studies from several industries, the best user-generated solutions and product concepts have been found to be more novel and to offer higher customer benefit than the best producer-generated ones (Poetz and Schreier 2012), which translates into higher sales revenues and gross margins (Lilien et al 2002, Nishikawa et al 2013) and longer product life cycles (Nishikawa et al 2013).…”