Knowledge Development Approaches and Breakthrough Innovations in Technology‐Based New Firms

Abstract

Compared to large established firms, technology-based new firms (TBNF) seem well placed to produce breakthrough innovations although questions remain as to their adeptness at subsequent exploitation. Building on the innovation and strategy literatures, the study identifies two different knowledge-development approaches or modes (business models) in TBNFs-internal versus external-and examines their relation to breakthrough innovation and subsequent progression of the product to market. The internal mode assembles knowledge inside the firm to generate its innovations, whereas the external mode relies heavily on alliances to develop and assemble knowledge among firms embedded in a creative network. The study uses a unique panel dataset of 69 UK new biotechnology firms over an 11-year period to explore this issue empirically. The findings show that the external knowledge-development mode is associated with more breakthrough innovations and a faster movement of innovations to market. The externally focused mode is not impeded by its relative lack of internal knowledge; it uses partners to access, assemble, and develop a wide scope of knowledge in a flexible manner. In addition, partners provide deep domain expertise to undertake the requisite deep-dives. In contrast, the internal mode has the huge challenge of assembling knowledge resources internally and suffers from a quicker onset of path dependence that impedes the generation of breakthroughs. This study provides a choice of business models (internal or external) that is associated with different breakthrough and speed to market performance outcomes. Going forward, policy makers and managers seeking breakthrough innovations, and speedy progression of the innovations to market should consider the potential resource efficiency of the external mode and the vital role played by collaborations-small firm versus large firm and private versus public entities.

‘Engineered’ University‐Industry Collaboration: A Social Capital Perspective

“…In general, organizations have two basic options for developing technological know‐how: (1) build the technology independently in‐house (including the direct acquisition route); or (2) engage in inter‐organizational relationship (Kamuriwo et al, ). However, as technological development projects are becoming excessively demanding, risky, and multidisciplinary (Salerno et al, ; Ebersberger and Herstad, ), organizations increasingly rely on the latter option for knowledge complementary and risk sharing purposes (Lipparini et al, ; Kamuriwo et al, ).…”

“…In general, organizations have two basic options for developing technological know‐how: (1) build the technology independently in‐house (including the direct acquisition route); or (2) engage in inter‐organizational relationship (Kamuriwo et al, ). However, as technological development projects are becoming excessively demanding, risky, and multidisciplinary (Salerno et al, ; Ebersberger and Herstad, ), organizations increasingly rely on the latter option for knowledge complementary and risk sharing purposes (Lipparini et al, ; Kamuriwo et al, ). Among the different forms of these relationships, the collaboration between university and industry emerged as a potentially powerful alternative for driving innovation and technology advancement by increasing the flow of knowledge across sectors and stimulating industrial R&D investments (Dill, ; Thune and Gulbrandsen, ).…”

Determinants of radical drug innovation: a systematic literature review

“…Scientific advances are usually driven by research universities as well as pharmaceutical and biotechnological start-up firms that are dedicated to the understanding of basic sciences (Achilladelis 1993 ; Zucker et al 2002 ). Gaining and maintaining access to this type of new, transformational knowledge is critical for the survival of firms and is key to developing successful radical drug innovations (Cammarano et al 2017b ; Kamuriwo et al 2017 ; Phene et al 2006 ). Thus, firms that develop radical drug innovations are more likely than those that do not to effectively identify, acquire, and integrate external knowledge (i.e., absorptive capacity, as discussed in the Background section of this paper).…”

“…Sorescu et al ( 2003 ) note that research on the relationship between firm size and innovation is the “second largest body of literature in industrial organization economics” (p. 82). While some argue that small pharmaceutical companies deliver more radical innovations than large ones (e.g., Dunlap-Hinkler et al 2010 ; Kamuriwo et al 2017 ; Malva et al 2015 ), other studies come to the opposite conclusion that large firms are more likely to produce radical drug innovations (e.g., Fernald et al 2017 ; Jong and Slavova 2014 ; Karamanos 2016 ; Quintana-García and Benavides-Velasco 2011 ; Sorescu et al 2003 ). On the one hand, the arguments to support the claim that small firms deliver more radical innovations are centered around their nimbleness and lack of bureaucracy (Dunlap-Hinkler et al 2010 ).…”

Exploring the Role of Project Management in Product Development of New Technology-Based Firms

“…They are considered a key source of new employment as well as promoters of technological change and innovation. Since NTBFs have a relatively high probability of failure, the factors that contribute to their success have been a crucial research area (e.g., Fontes & Coombs, 2001; Grilli & Murtinu, 2014; Kamuriwo, Baden-Fuller, & Zhang, 2017; Spencer & Kirchhoff, 2006).…”