Technological achievements in entrepreneurial firms – legacy, value chain experience, and division of innovation labour

ABSTRACT

This paper examines whether founders’ origin is systematically associated with the technological orientation of their new established organisation. Using an exploratory design, we empirically investigate how the technological achievements of organisations are associated with the founder’s prior experience identifying where in the industry’s value chain the founder worked previously. Using a unique dataset of Swedish and Danish biotechnology start-up firms, we explore the relationship between the founders’ prior position in the value chain and the technological achievements of their start-up. Firms established by founders from academia tend to perform well in early stages of technology development, while firms established by founders from further up the value chain tend to exhibit technological achievements in the later stages of development. Building on these results, we discuss possible mechanisms that may trigger these empirical regularities and propose that these mechanisms cause a division of innovation labour among biotechnology start-ups.

KEYWORDS:

• Start-ups
• founders
• biotechnology industry
• innovative performance
• division of innovation labour

Acknowledgments

Funding was provided by the Swedish Foundation for Small Business Research under the research program Policy for Small Business, Entrepreneurship and Innovation, and the Danish Social Science Research Council for the research program Organisation and Management in Biotech Industries. Rasmus Lund Jensen assisted in the preparation of the data analysed in this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ This dataset has proven useful for studying several aspects of the Scandinavian biotech sector (See e.g. Valentin and Jensen 2007; Valentin, Jensen, and Dahlgren 2008).

² We were able to identify 83 start-ups in the 5 year period under investigation. However, 4 (4.8%) of these were established only by founders who had no immediate prior experience from the biotech/pharmaceutical value chain and where hence not considered in the current study.

³ Results not including controls are not reported here but are available upon request.

⁴ By definition, a single founder firm is homogenous as there is only one founder and hence only one immediate prior affiliation.

⁵ Only rounds involving new issued shares and capital increases with a share premium are taken into account, to reduce the risk of biased and internal determination of share prices, resulting from converting debts or warrants exercised into share capital.