Why and how do resources provide sources of competitive advantage? This study sheds new light on this central question of resource-based theory by allowing a single resource—entrepreneurial-firm ...patents—to play distinctive roles in different competitive arenas. As rights to exclude others, patents serve a well-known role as legal safeguards in product markets. As quality signals, patents also could improve access and the terms of trade in factor input markets. Based on the financing activities of 370 venture-backed semiconductor startups, we provide new evidence that patents confer dual advantages in strategic factor markets, improved access and terms of trade, above and beyond their added product-market protection. The study has important implications for empirical tests of resource-based theory and the measurement of resource value.
This paper empirically investigates the sourcing and valuation of venture capital (VC) funding among entrepreneurs with varied levels of prior start-up founding experience, academic training, and ...social capital. Social ties with VCs have been identified as an important precursor to organizational resource attainment and performance, and so this study analyzes the correlates of heterogeneous social links with VCs. I also examine venture valuation, as it reflects enterprise quality and entrepreneurs’ cost of financial capital. Using data from a survey of 149 early stage technology-based start-up firms, I find several notable results. First, prior founding experience (especially financially successful experience) increases both the likelihood of VC funding via a direct tie and venture valuation. Second, founders’ ability to recruit executives via their own social network (as opposed to the VC's network) is positively associated with venture valuation. Finally, in the emerging (at the time) Internet industry, founding teams with a doctoral degree holder are more likely to be funded via a direct VC tie and receive higher valuations, suggesting a signaling effect. The paper therefore underscores some important dimensions of heterogeneity among VC-backed entrepreneurs.
We document the role of entrepreneurial founder and venture capital (VC) partner co-ethnicity in shaping investment relationships. Co-ethnicity increases the likelihood that a VC firm invests in a ...company. Conditional on investment, co-ethnicity strengthens the degree of involvement by raising the likelihood of VC board of director involvement and increasing the size and scope of investment. These results are consistent with trust and social-network based mechanisms. Shared ethnicity in our sample is associated with worse investment outcomes as measured by investment liquidity, however, which our results suggest might stem from looser screening and/or corporate governance.
•We study founder and venture capitalist (VC) co-ethnicity in shaping whether, when, and how investments take place.•A shared ethnicity increases the probability of an investment match.•Conditional on an investment, co-ethnicity is associated with earlier and deeper VC involvement.•However, matches based on a shared ethnicity are associated with less successful company outcomes.
This study empirically evaluates the certification and value-added roles of reputable venture capitalists (VCs). Using a novel sample of entrepreneurial start-ups with multiple financing offers, I ...analyze financing offers made by competing VCs at the first professional round of start-up funding, holding characteristics of the start-up fixed. Offers made by VCs with a high reputation are three times more likely to be accepted, and high-reputation VCs acquire start-up equity at a 10-14% discount. The evidence suggests that VCs' "extra-financial" value may be more distinctive than their functionally equivalent financial capital. These extra-financial services can have financial consequences.
Research summary: Does heightened employer-friendly trade secrecy protection help or hinder innovation? By examining U.S. state-level legal adoption of a doctrine allowing employers to curtail ...inventor mobility if the employee would "inevitably disclose" trade secrets, we investigate the impact of a shifting trade secrecy regime on individual-level patenting outcomes. Using a difference-in-differences design taking unaffected U.S. inventors as the comparison group, we find strengthening employerfriendly trade secrecy adversely affects innovation. We then investigate why. We do not find empirical support for diminished idea recombination from suppressed inventor mobility as the operative mechanism. While shifting intellectual property protection away from patenting into trade secrecy has some explanatory power, our results are consistent with reduced individual-level incentives to signaling quality to the external labor market. Managerial summary: While managers often list trade secrecy protection as their most important appropriation mechanism form and basis of competitive advantage (even more often than formal intellectual property protection), researchers have a hard time studying the effect of such secrets. We use a changing trade secrecy legal environment in some U.S. states (the introduction of the inevitable disclosure doctrine IDD) to study its effect on inventor-level innovation. We find that a strengthened employer-friendly trade secrecy regime adversely affects inventor-level innovation. While part of the effect is due to substituting trade secrecy protection for patents, we also find that inventors' diminished external labor market prospects may dampen their innovation output. Consequently, while employers may wish for strengthened trade secrecy protections, the results may paradoxically be against their innovation interests.
This paper examines the possible impact of venture capital (VC) backing on the commercialization direction of technology-based start-ups by asking: To what extent (if at all) do VC-funded start-ups ...engage in cooperative commercialization strategies (strategic alliances or technology licensing, or both) relative to a comparable set of start-ups, and with what consequences? To address these questions, I assemble a novel data set that matches firms receiving a federal research and development subsidy through the U.S. Small Business Innovative Research program to VC-funded firms by observable characteristics in five technology-intensive industries. These data allow decoupling of cooperative activity resulting from start-up development via the passage of calendar time from that due to association with VCs. An analysis of the 696 start-ups in the sample (split by an external funding source) suggests substantial boosts in both cooperative activity associated with VC-backed firms and in the likelihood of an initial public offering.
•Estimates the value of university patent portfolios.•Estimates the fraction of private economic value captured by universities through licensing.•Applies the methodology developed by Kogan et al. ...(2017) to estimate the value of a portfolio of corporate patents matched to similar university patents.•Investigates factors correlated with university patent value, including the presence of a medical school or a business school, R&D expenditure, the number of faculty members, and whether the university is a Carnegie-ranked research university.•Finds that universities capture on average 16% of the economic value of their patents through licensing revenues.
Despite the economic significance of patented university research, it is difficult to measure the economic value of academic patented inventions and observe the extent to which universities are able to capture such value through patent licensing. Moving beyond assessing commercialization performance by simple statistics, we propose a new approach to benchmarking university patents and commercialization performance based on comparative corporate patent value. Our procedure involves matching university patents to patents with similar patent characteristics granted to public corporations, then estimating the “potential value” of these university patents by stock market reactions to grants of the matched corporate patents. These estimated values of university patents can significantly explain the technology-level income from licensing by a leading US research university and the annual licensing income of the member universities of the Association of University Technology Managers’ (AUTM). We find that AUTM universities realize an average of 16% of the estimated value of matched corporate patents. We also investigate correlates of university‐level potential patent value and suggest avenues for future research.
We examine how initial public offerings (IPOs) and acquisitions affect entrepreneurial innovation as measured by patent counts and forward patent citations. We construct a firm-year panel data set of ...all venture capital-backed biotechnology firms founded between 1980 and 2000, tracked yearly through 2006. We address the possibility of unobserved self-selection into exit mode by using coarsened exact matching, and in two additional ways: (1) comparing firms that filed for an IPO (or announced a merger) with those not completing the transaction for reasons unrelated to innovation, and (2) using an instrumental variables approach. We find that innovation quality is highest under private ownership and lowest under public ownership, with acquisition intermediate between the two. Together with a set of within-exit mode analyses, these results are consistent with the proposition that information confidentiality mechanisms shape innovation outcomes. The results are not explained by inventor-level turnover following exit events or by firms' preexit window dressing behavior.
This paper was accepted by Lee Fleming, entrepreneurship and innovation.
Checkpoint blockade immunotherapy targeting the PD-1/PD-L1 inhibitory axis has produced remarkable results in the treatment of several types of cancer. Whereas cytotoxic T cells are known to provide ...important antitumor effects during checkpoint blockade, certain cancers with low MHC expression are responsive to therapy, suggesting that other immune cell types may also play a role. Here, we employed several mouse models of cancer to investigate the effect of PD-1/PD-L1 blockade on NK cells, a population of cytotoxic innate lymphocytes that also mediate antitumor immunity. We discovered that PD-1 and PD-L1 blockade elicited a strong NK cell response that was indispensable for the full therapeutic effect of immunotherapy. PD-1 was expressed on NK cells within transplantable, spontaneous, and genetically induced mouse tumor models, and PD-L1 expression in cancer cells resulted in reduced NK cell responses and generation of more aggressive tumors in vivo. PD-1 expression was more abundant on NK cells with an activated and more responsive phenotype and did not mark NK cells with an exhausted phenotype. These results demonstrate the importance of the PD-1/PD-L1 axis in inhibiting NK cell responses in vivo and reveal that NK cells, in addition to T cells, mediate the effect of PD-1/PD-L1 blockade immunotherapy.
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