Early‐Stage of Innovations: Selection System Criteria for Funding U.S. Biotech SMEs

Abstract

The focus of this paper is small and medium‐sized enterprises (SMEs) operating in the U.S. biotechnology industry and how they compete for financial resources during the early stages of innovation development. We utilize selection system theory, which describes how selectors use reputation‐based information about selectees as decision factors when making investments. Our findings suggest that there are different predictive variables for SME categories and the types of investors attracted to these categories, which is consistent with selection system theory. We extend prior studies by providing context to early‐stage innovation investment funding within an environment characterized as having a long development cycle and representing high uncertainty.

Notes

1. Discriminant analysis was conducted on firm attributes and Cluster analysis was conducted on Promotional methods.

Additional information

Notes on contributors

Mary G. Schoonmaker

Mary G. Schoonmaker is at the Department of Marketing, Western New England University.

George T. Solomon

George T. Solomon is at the Department of Management, The George Washington University.

Pradeep A. Rau

Pradeep A. Rau is at the Department of Marketing, The George Washington University.