Overcoming the liability of patenting in early-stage ventures with market orientation

ABSTRACT

Early-stage ventures often face bounded rationality from a lack of experience as well as limited resources. A strategic choice to patent a firm’s innovations to prevent competitor infringement involves significant resource commitments. We hypothesise that for early-stage ventures, having a patent could create liability on short-term financial performance; however, higher levels of market orientation could overcome it. We find support for our hypotheses using a sample of early-stage ventures that apply to business accelerators for support. This study contributes to the extant literature on innovation and entrepreneurship, as well as on market orientation, to show that for early-stage ventures, a potential liability of patenting exists, but it can be mitigated by higher levels of market orientation.

KEYWORDS:

• Patent
• market orientation
• entrepreneurship
• early stage ventures
• liability of patenting

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Industry sectors include agriculture, artisanal, culture, education, energy, environment, financial services, health, housing development, information and communication technologies, infrastructure/facilities development, supply chain services, technical assistance services, tourism, and water, and among others.

² We conducted another robustness check using the Strength of Legal Right Index as a proxy of the legal institutional context (Davis, Kingsbury, and Merry 2012) and applicant pool size as a proxy for accelerator quality. We found similar results from this alternative model. The results of this model are available upon request.