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Profitable Advice: The Value of Information Provided by Canadas Inventors Assistance Program
Abstract
Inventors who are considering whether and how to commercialize their inventions. can often avail themselves to evaluations and advice provided by government supported programs initiated to encourage innovation. In Canada. such a service is provided by the Canadian Innovation Centre. through its Inventor's Assistance Program. In its twenty years of operations the IAP has evaluated 11,000 inventions. The fee charged for an invention evaluation was Cdn. $262 in 1995, and these fees covered about half the program's expenses. We compute the expected value of the information the IAP's evaluation provides under different assumptions and scenarios. Under plausible conditions, the value of the information to the inventor is found to be higher than both the fee and the social cost of the program. The implications of some inventors not following the advice given to them by the IAP are briefly explored.
... Dechenaux et al. (2008) finds that the 'strength' of patent applications is positively correlated with the probability of commercialisation, but Palmberg (2006) does not find evidence of such a relationship. Astebro and Gerchak (2001) find that of inventors in the competitive Canadian Inventor's Assistance Program (CIAP), 45% survive; the prospects for those with lower ratings are grim, ranging from 16% to 0% being successful. ...
... Our dependent variable is the commercial success of Sri Lankan SLIC award winning inventors. Astebro and Gerchak (2001), in their exploration of the CIAP defined the success as "successfully reaching the marketplace and selling at least one unit." The same measure is employed to define success by Astebro and Dahlin (2000), Bizan (2003), Dechenaux et al. (2008), Weick and Eakin (2005), Mattes et al. (2006) and Nerkar and Shane (2007), among others. ...
... Research question 2 a seeks to explore the satisfaction of inventors with the patenting process at NIPOSL. We measure satisfaction with the complexity of the legal process (Pendsey and Agarwal, 2012), time taken for patenting (author developed), the value of advice from NIPOSL (Astebro and Gerchak, 2001), motivation to develop the product from NIPO (author developed), working with patent lawyers (Pendsey and Agarwal, 2012), the cost of the patent process (Pendsey and Agarwal, 2012), trustworthiness of NIPOSL (author developed), and transparency in the patenting process (Pendsey and Agarwal, 2012). Each item is reflected in a Likert score. ...
Sustainable economic growth is in theory, positively related to Schumpeterian 'creative destruction', which occurs due to innovation, technological change, and entrepreneurship-factors that can transform inventions into marketable innovations. Sri Lanka has produced many independent inventors with high technical merit, and many of have won awards in international competitions and exhibitions. However, the country remains heavily dependent on the import of technologies. By improving the local innovation system, the country may be able to achieve a higher level of economic success. In this study, we investigate award winners of the Sri Lanka Inventors Commission (SLIC), who likely have the highest potential to commercialise their inventions. We conduct a detailed survey of award winners' demography, inventive, and commercialisation aspects, and find that around 75% of the local independent inventors have not achieved commercial success due to insufficient support from external parties. Based on our findings, we make recommendations for inventors, national entities such as the SLIC, and supranational entities interested in promoting economic development regarding the proper use of the invention process and support for the facilitation of commercialisation of these inventions.
... The purpose of this evaluation is to advise the potential entrepreneur on whether and how to continue efforts. [For further descriptions see Å stebro and Gerchak (2001), Udell (1989), and Udell, Bottin, and Glass (1993).] Analysts from the IAP use a fixed set of 37 criteria, each with a three-point linguistic scale, to evaluate each new product idea. ...
... Identifying information was used in these records to conduct a telephone survey of the inventors, obtaining 561 usable telephone survey responses for an adjusted response rate of 75%. For background demographics data and tests for sample selection bias, please see Å stebro and Gerchak (2001). Out of the 561 inventions, 50 had been brought to market according to interviews. ...
... The chance of commercialization is therefore approximately 50/561 5 0.09. Correcting for sampling plan and conducting sensitivity analysis, the probability of commercialization varies between 0.05 and 0.11 (Å stebro, 1998;Å stebro and Bernhardt, 1999;Å stebro and Gerchak, 2001). This rate differs from Griffin (1997), who found the probability of commercialization of new ideas to be approximately 0.25 among Product Development Management Association (PDMA) member firms. ...
The key success factors influencing the survival of innovations that have reached market and were developed by inventors outside of established organizations, are discussed. The use of experts who are unrelated to the project avoids decision making biases potentially associated with project manager's assessment of their own projects. The recording of expert evaluations of the ideas before they reach the market and independent of the measure of success eliminates measurement biases. An explanatory method of data analysis can be used to distinguish research-appropriate constructs and their indicators in these data. The degree of survival has a marginally significant effect on the survival of innovations.
... Several studies investigate the value of business advice where the entrepreneur's business presentation/plan is judged by expert competencies. These studies also highlight that both society and entrepreneurs benefit when the business proposal is reviewed and judged by an expert panel at an early stage (Åstebro and Gerchak, 2001;Sapsed et al., 2007). However, Åstebro and Gerchaks (2001) also suggestin a study which comprises 1026 startup entrepreneursthat many businesses do not follow the expert advice. ...
... Theoretically, the present study contributes by revealing different speech patterns that appear during organized advice-giving. Thereby, it complements the findings of Sapsed et al. (2007), Åstebro and Gerchak (2001), and Ljungkvist and Andersén (2016). The study contributes with extensive and refined information about the speech patterns which have different implications depending on the type of entrepreneur. ...
Purpose
The purpose of this paper is to investigate the verbal content and its impact on panel-based business advice meetings (springboards) for family business owners and startup entrepreneurs. Further, the study also investigates how panel-based advising assists entrepreneurship.
Design/methodology/approach
The investigated springboards concern family business owners who run established firms and startup entrepreneurs who are applying for venture capital. Data from 12 different springboards are collected and studied by content analysis.
Findings
The outcomes indicate that advising is more constructive for the family business owners than for the startup entrepreneurs. This can mainly be explained by the rational screening that follows the business plan concept and group dynamics which appear in these meetings.
Research limitations/implications
The study was conducted in Sweden and concerns Swedish family business owners and startup entrepreneurs. It reveals different speech patterns that appear during organized advice-giving and its implications depending on the type of entrepreneur.
Practical implications
This study provides potential input to change the institutional practice of panel-based business advice, which will likely support entrepreneurs in their business development and network building.
Originality/value
This study is the first to investigate the verbal content in panel-based business advice for family business owners. Further, it provides a deeper understanding of the institutionalized conditions that this kind of advising builds on.
... At this step, it should also be ensured that the level of importance, completeness and differentiation of the strategical value drivers and technical features are sufficient for value creation. Such indicators allow to really steer the knowledge acquisition in the so-called fuzzy front end stage (i.e. the product planning and conceptual design) described in the literature [68], and of the RID methodology [27,25]. ...
... VD is the set of Value Dimensions • TF(o) is the set of Technical Features of the solution o • A(i,j) is the direct influences matrix • N is the maximum level of the series A n (i, j) before its convergence to the null matrix in the case there is no influences loop between the parameters • Weight l is the importance level of the Value Dimension l • The contribution to differentiation of an architectural solution The contribution to differentiation of an architectural solution corresponds to the consolidation of the differentiating contributions of all the instantiated features to the differentiating value dimensions. It can be calculated for a given stakeholder or customer profile.The contribution to differentiation of an architectural solution o is given by formula(25). ...
The mass production of aircrafts has been mainly led by the objective of both maximizing technological performances and minimizing the manufacturing costs. Within also the constraints of safety and security rules defined by certification organisms, the traditional innovation management has consisted above all in implementing a "technology-push" approach. New developed aircrafts have been then mostly driven by Research and Technology projects outputs. Nevertheless, current market competitiveness and complexity lead to change this approach. The needs of aeronautical customers evolve, change and become diversified, which raise multiple specific profiles to be taken into account as early as possible in today's development programs. In order to ensure high value and differentiation perception by all the stakeholders, the innovation policy has to shift from mass production to mass customization, and to integrate both "market-read" and 'technology-push" approaches in the preliminary phase of innovation. The goal of this PhD thesis is to provide the aircraft program managers with a methodological support, named Concept-to-Value, to steer by value the so called Fuzzy Front End of Innovation stage in the literature. At the bridge between the Product Planning and Conceptual Design research works, our contribution improves the existing methodologies on the Business and Engineering domains integration. Concept-to-Value brings a more agile and integrated collaboration of multidisciplinary players: a common language and value model represent their innovation Knowledge, Problems and Solutions. Finally, a convergence process is also defined to conduct the preliminary phase and to deliver high value aircraft concepts.
... 25-32). In addition, recent publications indicate that the recommendations delivered by the IAP at the Canadian Innovation Centre (CIC) to entrepreneurs correlates positively with the projects' subsequent probability of commercial success and offers substantial value to entrepreneurs (Åstebro and Gerchak, 2001). We estimate the ability of experts in the CIC's IAP to forecast, at an early stage of a venture's development, the probability that the venture will subsequently become commercialized. ...
... Researchers disagree on how an appropriate R&D project evaluation model should be structured and how data should be assessed (Balachandra and Friar, 1997). Some authors have 2 The 37 variables and their definitions are described in Appendix A. 3 For more information on IAPs see Åstebro and Gerchak (2001), Udell (1989), and Udell et al. (1993 proposed evaluation models based on operations research principles (e.g., Souder, 1973a). However, these have been found to be too complex for R&D managers to be of much practical use (Liberatore and Titus, 1983; Souder, 1973b). ...
We estimate the ability of both experts and a statistical model to forecast the probability that an early stage venture will be commercialized based on data from 561 new ventures. Experts correctly predict 83.8% of the outcomes, while the best statistical model correctly predicts 82.6% of all outcomes in forward cross-validation tests. We investigate several explanations for the surprisingly good forecasting ability of both the experts and the statistical model. The statistical model and the experts perform vastly better than venture capitalists and R&D managers, who have forecasting accuracies of similar ventures varying between 17.1% and 66%. The statistical model can potentially be used by venture capitalists to better screen ventures for investments.
... We gathered information from actual inventors who had sought advice from the Inventors' Assistance Program (IAP) at the Canadian Innovation Centre (CIC). This center was initially established in 1976 at the University of Waterloo in Waterloo, Ontario, Canada to help evaluate early stage inventions and the likelihood of market success (Å stebro & Bernhardt, 1999;Å stebro & Gerchak, 2001). By 1994 the Canadian IAP had a very strong presence as a trustworthy and dominating supplier of unbiased invention evaluation in Canada. ...
... They provide consulting and evaluation services to inventors who want to transfer their inventions to the marketplace. Astebro and Gerchak (2001), in a case study of the Canadian Innovation Centre and its Inventor's Assistance Program, found significant social benefits from consulting independent inventors as to how they can best manage and/or commercialize their inventions. However, such programs are not always successful. ...
This paper examines the propensity for patents by individual inventors to be commercialized. By exploiting a peculiarity of
the US patent system, concerning the different patent renewal fees paid in order to obtain small or large entity status, we
are able to distinguish patents that become part of a large corporation’s patent portfolio. Using an extensive dataset of
US patents, for both domestic and foreign individual inventors, we find that patent characteristics, size of research teams,
prior patenting experience and past corporate patenting activity are positively associated with an increased likelihood of
transferring patent rights to large corporations.
... • The knowledge utility dimensions: it corresponds to the objective of the knowledge acquisition [AB1], to its cost and to its accuracy level [AL1] [AP1]. There are two objectives in the model: the exploration of the potential value drivers and the exploration of the potential design solutions. ...
The preliminary design phase is very important in a new product development project since it already defines globally the value created to the stakeholders. The main purposes of this phase consist in defining the pertinent strategies of value creation and design concepts. It has to be ensured that these latter create enough value and even higher value than the existing concurrent products. Our proposal is a method based on knowledge acquisition management and a model of stakeholders value dimensions for the exploration of value drivers, the establishment and evaluation of value creation strategies and design concepts.
... The knowledge management challenge consists in acquiring the important knowledge needed to create value in a given amount of time and cost of the conceptual design. The knowledge acquisition tasks have then to be managed efficiently through the evaluation of the value of information acquired to define, select and order them [25]: this is the basics of the information economics which is the study in the literature of information acquisition decisions under conditions of resources scarcity [26]. The value of information or knowledge acquisition is measured on the basis of the Utility Theory. ...
This paper is dealing with the problem of steering the conceptual design by value. Indeed, the preliminary phase of the design process, which generates the innovative concepts that will be developed in detail, already defines broadly the created value of an innovation project. Contrarily to the detailed design that consists in design solutions refinement for well defined performances increase, the conceptual design is characterized by the fact that the design objects, like the design problems, the design concepts and knowledge, are not frozen, known or precised, and have to be defined progressively in a value creation way for customers and stakeholders. Since there are few works on this issue, we try then to suggest a conceptual design process based on the capture and evaluation of the generated intermediate objects for the maximization of the created value of this phase, and so of an innovative project. A descriptive model, a value model and a prescriptive production model of the intermediate objects are thus built and explained.
... We gathered information from real inventors who had sought advice from the Inventors' Assistance Program (IAP) at the Canadian Innovation Centre (CIC). This centre was established in Waterloo in 1976 to help evaluate early stage inventions and the likelihood of market success (Åstebro & Bernhardt, 1999;Åstebro & Gerchak, 2001). The Canadian IAP evaluates potential entrepreneurs and their projects on 37 different cues and provides advice on how and whether to continue. ...
The Canadian Innovation Center offers advice to independent inventors regarding the commercial prospects of their inventions. They advise inventors to either continue work or to terminate investment of time and money. We find that while most inventors who were told to cease effort stop, many continue spending time and money on projects with little prospect for commercial success. Using survey data from 501 independent inventors who submitted their invention for evaluation, we analyze the role of optimism and overconfidence in the decision to continue. We find that optimism plays an important role in the decision to continue but that overconfidence was not a factor in the decision. We also find that experience contributes to the decision to ignore expert advice.
... The sampling procedure is described in Åstebro and Gerchak (2001). In the telephone survey we inquired about the entry date (month and year) and the exit date (month and year) for inventions that were commercialized. ...
We analyze how economic factors relate to the continued production versus exit of innovations developed by entrepreneurs. We develop a theory in which sunk costs, uncertainty, and effects on profits should condition decisions to commercialize an invention and then to continue production. The model guides an empirical analysis of data on actual inventors' decisions. Expected price significantly reduces the probability of exit after commercialization, while R&D uncertainty and expected competition from imitators significantly increase the probability of exit. The findings also indicate risk-seeking or (in cases of high uncertainty) over-optimism on the part of inventors.
... An ordinal logistic regression model is fitted with the overall rating as the outcome variable. The overall rating has five values that represents the advise given to the inventor and is ordered from most promising to least promising (for details see Åstebro and Gerchak, 2001). Using a p-value of 0.05 to determine inclusion of predictors, the resulting model has a pseudo-R 2 of 0.38 and contains 11 of the possible 36 explanatory Key Success Factors for R&D Commercialization -23 variables . ...
I examine the potential impact of 36 innovation, technology and market characteristics that may determine, at an early stage assessment, the probability that R&D projects will later reach the market. Analysis is based on data from 561 R&D projects developed outside of established organizations. Administrative records contained subjective evaluations of 36 project characteristics conducted at the start of the projects by project-independent outside analysts. A mail survey collected an objective measure of whether the projects were eventually commercialized or not. Four characteristics stand out as most predictive: expected profitability, technological opportunity, development risk and appropriability conditions. These key variables predict future commercial success well with an out-of-sample forward prediction accuracy of 80.9%. This model performs better than R&D managers' predictions of their own R&D projects' technical success and has the potential to be used as a screening tool for early stage R&D investment reviews.
... For further descriptions see Udell (1989), Udell et al. (1993), and Åstebro and Gerchak (2001). ...
Direct individual-specific evidence on the profit motives of entrepreneurs has been lacking. Indeed, recent work suggests that entrepreneurship may be a non-profit-seeking activity, and that entrepreneurs evaluate risk oddly. In contrast, using direct prior measures of economic potential for inventions, we find that inventors respond sensibly to pecuniary incentives. We construct an empirically-relevant economic theory, with heterogeneous inventions and inventors, outside opportunities, sunk and non-sunk costs, and risk, to guide our investigation of the data. We collected assessment data from a center paid by inventors to assess their inventions' economic potential, and followed up with surveys to determine concrete economic outcomes. We find that inventors decide whether to commercialize their inventions (and later whether to exit) in a manner consistent with profit-seeking motives and risk aversion.
... We gathered information from actual inventors who had sought advice from the Inventors' Assistance Program (IAP) at the Canadian Innovation Centre (CIC). This centre was initially established in 1976 at the University of Waterloo in Waterloo, Ontario, Canada to help evaluate early stage inventions and the likelihood of market success (Åstebro & Bernhardt, 1999;Åstebro & Gerchak, 2001). By 1994 the Canadian IAP had a very strong presence as a trustworthy and dominating supplier of unbiased invention evaluation in Canada. ...
We find that approximately one third (29%) of independent inventors continue to spend money and 51% continue to spend time on projects after receiving highly diagnostic advice to cease effort. Using survey data from actual inventors, this paper studies the role of overconfidence, optimism, and the sunk-cost bias in these decisions. We find that inventors are more overconfident and optimistic than the general population. We also find that optimism and past expenditures increased perseverance after being told to quit, while overconfidence in judgment ability had no effect. After being told to quit, optimists spend 166% more than pessimists and those having already spent, for example, 10 000. Copyright © 2007 John Wiley & Sons, Ltd.
... shows that an early stage evaluation of an entrepreneurial proposition by a third party is both valuable to society and to the entrepreneur, provided the costs are within certain limits. ForÅstebroFor˚ForÅstebro and Gerchak (2001), the figure was Cdn $1500, based on their research on the Canadian Inventor's Assessment Program. This study found significant benefits from encouraging inventors with good ideas to proceed and by discouraging those with bad ideas. ...
Bridging institutions or organisations are regarded as having positive effects in the Sectoral Systems of Innovation (SSI) literature, particularly in compensating for weaknesses in these systems. Yet, we know little about the organisational practices that make their role effective, or the types of innovation paths that they may facilitate within a system. This paper shows how bridging organisations may promote neglected areas of creativity and potential disruptive innovation. These blocked opportunities tend to emerge at the boundaries of SSI: where old sectors overlap and new trajectories form. We draw on the social networks, entrepreneurship and disruptive innovation literature and analyse an intervention in the UK electronic games industry: the evaluation of business propositions exploiting new gaming platforms such as mobile telephones, DVD and film. Using an innovative co-productive research design, the study shows how the effectiveness of bridging organisation activity depends on key design choices and brokerage capabilities.
... Rather, our research indicated these to be tractable to assess and measure ex ante across a range of content areas-even where ideas are highly embryonic. A dimension quantifying the economic size of an idea (hence, the value of an individual's idea set at any given time) is an obvious exclusion (Å stebro & Gerchak, 2001). This we contend, based both on our field work and in taking ex ante uncertainty (Knight, 1964) seriously, is an important dimension but one better assessed for those ideas actually commercialized. ...
Idea sets—the complete stock of entrepreneurial ideas an individual has accessible within his or her memory at any given time—are proposed as a new unit of analysis through which the antecedents, processes, and outcomes of entrepreneurial opportunity recognition may be more fully understood. A number of dimensions are identified along which one person’s idea set may be compared with that of another person. These comprise the novelty, volume, content, stage of development, strategic value logic, and composite knowledge configuration of ideas within the idea set. The idea set construct and the methods advocated for its empirical operationalization provide a differentiated, comprehensive approach to investigating entrepreneurial opportunities. They also help to overcome sample selection and survival biases characterizing empirical research in this domain. A questionnaire-based idea set instrument, designed and tested in the corporate context, demonstrates good evidence of content, convergent and divergent validities.
How should Theory-based entrepreneurs search for strategies to implement their ideas? The theory-based view of strategy posits that decision makers hold key conjectures about their path to success and use theory to understand and test beliefs underlying those conjectures. This causal framework also has implications for entrepreneurial search: the process by which entrepreneurs uncover strategies to implement their ideas. In this paper, we develop a Bayesian model where entrepreneurs update their beliefs as they conduct entrepreneurial search. We find several optimal behaviors for Theory-based entrepreneurs such as reverting to a previous strategy after finding a relatively poor strategy and continuing to search after finding a relatively good strategy, which are missing when entrepreneurs lack such a theory-based approach. As our theoretical predictions align with examples of successful entrepreneurs, our findings both provide a method to empirically identify Theory-based entrepreneurs and demonstrate the usefulness of applying the theory-based view to entrepreneurial behavior more generally.
De senaste 20 åren har svenska regeringar genomfört många förändringar när det gäller satsningar på FoU/innovationer och företagande – i synnerhet inom det sistnämnda området. I denna rapport har förändringarna diskuterats med utgångspunkt från den nationalekonomiska forskningslitteraturen. Det visar sig att flera satsningar inte har varit optimala och att många åtgärder är dåligt utvärderade. Nedan följer en sammanfattning vad som har gjorts och i punktform förslag på vad som behöver göras.
Forskningslitteraturen identifierar flera situationer där det är motiverat att staten går in och stöder innovativa eller nystartade företag. Spillover-effekter gör att företag som utför FoU inte själva kan ta till vara på alla forskningsresultat. Detta leder till underinvesteringar i FoU. Staten bör då finansiera projekt där den samhälleliga avkastningen är hög jämfört med den privata. Exempel är här grundforskning eller FoU-projekt inom miljö och försvar. P.g.a. asymmetrisk information mellan uppfinnare/entreprenör och externa finansiärer uppstår en brist på kapital. Detta gäller i synnerhet små och riskfyllda projekt. Följden blir lägre FoU och nyföretagande än vad som är samhälleligt optimalt. Staten kan då fylla detta tomrum med finansiellt stöd.Teorierna bygger på marknadsmisslyckanden. Den andra teorin förordar att de statliga insatserna ska ske i tidiga faser och i relativt riskfyllda projekt. Den empiriska litteraturen ger många exempel på misslyckade statliga program och projekt. Men det finns vissa tumregler som den statliga fonden eller programmet kan hålla sig till för att skapa effektivitet.
* Ett första problem är att välja ut de projekt som har potential men som inte får finansiering på marknaden. Här bör den statliga fonden ha krav på matchande finansiering från privata finansiärer. Matchningen fungerar som en signal för vilka projekt som marknaden tror på och växlar dessutom upp den statliga finansieringen med privata investeringar som annars inte hade genomförts. Procentandelen matchande finansiering bör vara lägre ju tidigare finansieringen sker.
* Entreprenören har inte alltid samma intressen som den externa finansiären, som har svårt att kontrollera vad entreprenören faktiskt gör. Detta problem är relaterat till moralisk risk. Det finns två metoder att komma till rätta med detta problem. Dels att se till att grundarna eller nyckelpersonalen i företaget är delägare eller har optioner (och är inlåsta), och dels att sätta upp milstolpar för att ytterligare finansiering ska ges. Entreprenören har då starkare incitament av att arbeta efter finansiärens intressen.
* Det är viktigt att pengarna hamnar där det är tänkt. På marknaden finns intermediära aktörer och ansökningsexperter som vill ha sin del av kakan. En lång historia av olika statliga stöd hos ett företag är en varningslampa. Någon form av kontroll och övervakning är även nödvändig. Slutligen måste staten vara uthållig; det kan ta tid att etablera en ny fond eller att få igång entreprenörer i en ny bransch.Det svenska statliga stödet har varit och är i första hand inriktat på direkta stöd till småföretag och teknologiföretag snarare än att förbättra marknadsklimatet för entreprenörer och privata VC-bolag. Det handlar då om statliga fonder, bolag eller myndigheter som själva är ansvariga för tilldel-ningen av finansiering som kan ta formen av riskkapital, lån eller bidrag. Alternativa modeller som används i andra länder såsom lånegarantier, hybridfonder där staten har begränsad avkastning eller statliga lån som ger hävstångseffekt för privata VC-bolag tillämpas inte.
Det finns flera saker som kan förbättras när det gäller inriktningen på de svenska statliga insatserna:
• För mycket av de statliga stöden ges till alldeles för sena faser då företag redan har försäljning och befinner sig i en expansionsfas. Detta gäller i synnerhet det statliga venture kapitalet. Det finns då risk för undanträngningseffekter av privata VC-bolag. En orsak till denna inriktning är att styrelserna där staten är representerad har satt upp avkastningskrav för vissa av fonderna, vilket stimulerar investeringar i sena faser snarare än i tidiga faser där de skulle göra mest nytta och komplettera de privata finansiärerna. Dessa avkastningskrav bör tas bort (för Industrifonden och Fouriertransform) för att stimulera statliga investeringar i tidiga faser där de gör mest nytta.
• Det är i princip endast Innovationsbron som investerar i portföljbolag som ännu inte har någon försäljning och det är också detta bolag som ligger närmast det teoretiska idealet och som bör få utökade resurser. Men bolaget bör tillämpa matchande finansiering oftare för att få rätt signaler om kommersialiserbara projekt. ALMI Invest är bra strukturerat och ligger bra till storleksmässigt på investeringarna, men bör ta bort kravet att portföljbolaget måste ha dokumenterad efter-frågan. Då skulle man kunna fylla en viktig finansieringslucka i den tidiga startupp fasen.
• Den andra aktören som idag är inne i tidiga faser är ALMI Innovation med villkorslån. Denna aktivitet bör också utökas, men modifieras. Kravet på matchande finansiering är för högt (50 %) och bör sänkas. Men å andra sidan bör man istället i högre grad än idag kräva att det sker en faktisk matchande investering istället för att låta obetalda löner (tid) tillgodoräknas. Det senare går nämligen inte att kontrollera. ALMI Innovation skulle då dels få bättre signaler om potentiellt kommersialiserbara projekt och dels skulle låntagarna få starkare incitament att gå vidare med projektet.
• Även bidragen är ofta i sena faser och kräver ofta dokumenterad omsättning i företaget. Alltför lite resurser ges till entreprenörer som befinner sig i såddfasen eller till nyligen startade företag utan försäljning.
• En slående egenskap är att det knappt finns någon samordning av de statliga aktörerna i Sverige. Nästan alla lyder under Näringsdepartementet, men aktörerna går ofta in i varandras projekt utan att rådfråga varandra. T.ex. kan en bidragsgivare gå in i ett projekt som redan har finansierats av en statlig VC-fond. Om detta hade varit känt från början hade mindre statligt riskkapital behövt investeras.
• Nästan alla svenska stöd går ut på att företagen själva ska växa. Såväl teoretisk som empirisk forskning har dock visat att en lämplig alternativ strategi för ett innovativt företag kan vara att licensiera eller avyttra verksamhet till etablerade företag. Det krävs nämligen olika typer av kompetens att skapa någonting nytt och att sedan tillverka och marknadsföra detta. Idag finns ingen marknadsplats där uppfinningar och innovationer kan licensieras eller säljas till företag som är bättre lämpade att ta nya produkter till marknaden. Här skulle staten kunna fylla en viktig lucka som mäklare.
Accelerators aim to help nascent companies reach successful outcomes by providing capital, enabling industry connections, and increasing exposure to investors. Critically, however, accelerators also provide informative signals to founders about the probability of success. Founders use this information to decide whether to continue or shut down. To better understand these issues, I provide a model of accelerator participation and performance and then test empirical predictions from the model using a novel data set of approximately 900 accelerator companies across 13 accelerators and 900 matched nonaccelerator companies. I find that, through accelerator feedback effects, accelerator companies close down earlier and more often, raise less money conditional on closing, and appear to be more efficient investments compared with non-accelerator companies. Additional analysis using a separate sample of rejected accelerator applicants further supports these findings. These results suggest that accelerators help resolve uncertainty around company quality sooner, allowing founders to make funding and exit decisions accordingly.
This paper was accepted by Ashish Arora, entrepreneurship and innovation.
During a springboard session, the entrepreneur meets an expert panel which gives him or her strategic advice. How these meetings transpire is of great importance when it comes to the support of regional, as well as national entrepreneurship and economic growth. The purpose of this paper is to investigate what is verbally expressed during these meetings and how this can assist entrepreneurship. Eleven different springboards are investigated via the method of content analysis. These springboards concerned entrepreneurs who merely sought strategic business advice or those who applied for venture capital. The results indicate that the entrepreneurs who applied for venture capital had less use for the advice than the other group. This can partly be explained by panel members' focus on risk and the institutionalized conditions which build on a rational discourse.Lors d'une session de lancement, l'entrepreneur rencontre un panel d'experts qui lui fournit des conseils stratégiques. Le déroulement de ces rencontres est d'une grande importance pour le soutien de l'entreprenariat et la croissance économique, aussi bien aux plans régionaux que nationaux. L'objectif de cet article est d'examiner ce qui est exprimé verbalement au cours de ces rencontres et en quoi ce contenu peut soutenir l'entreprenariat. Onze sessions sont examinées à travers la méthode d'analyse de contenu. Les personnes concernées étaient des entrepreneurs qui cherchaient simplement à obtenir des conseils en affaires ou à lever du capital risque. Les résultats indiquent que les entrepreneurs qui voulaient lever du capital risque utilisaient moins les conseils que ceux de l'autre groupe. Cela peut s'expliquer en partie par l'intérêt particulier prêté au risque par les membres du panel et par les conditions institutionalisées qui s‘appuient sur un discours rationnel.
This literature review spans several areas of research with a focus on the impact of universities on local entrepreneurship and economic development. This review will analyze whether social welfare is maximized through private ownership of university research and the impact of the increased private protection of these rights on welfare. We will discuss whether maximizing local entrepreneurship necessarily maximizes total welfare. Finally, we will ask whether much of past research and practice on commercializing research from universities may have missed the target. Our hypothesis is that the majority of local entrepreneurial economic development affected by universities is in the form of start-ups created by former students. If this hypothesis is confirmed then the recent transformation of university goals and practices toward increasing spin-off rates and new firm creation by university faculty and researchers may be called to question.
Despite its importance as a potential source of variation within industries, little is currently known about the antecedents of new business ideas in large, established firms. While a number of organization and management literatures address, tangentially, issues pertaining to this topic, none examines it directly. We aim in this paper to contribute to building a body of research that directly addresses idea generation in corporate contexts.From a conceptual standpoint, we propose a theoretical framework of the roles corporate context (viewed from an attentional and information processing perspective) and individual knowledge play in influencing the nature of new business ideas generated by an organization's members. In so doing, we put forward the concept of new business idea sets: the complete stock of new business ideas a person is considering at any given time. By characterizing idea sets along a number of generic dimensions, we contend that new insights into, and a more comprehensive understanding of, corporate idea generation is enabled. We then develop a set of hypotheses regarding commonalities and differences between the contextual and knowledge-based antecedents of idea set novelty (the novelty of a person's ideas at a given time) and idea set volume (the quantity of ideas a person is considering at a given time).From an empirical standpoint, we develop and test our theoretical devices and propositions in a multi-stage field study, comprising: pilot research with 20 knowledge workers in a multinational FMCG company; a survey of 388 knowledge workers across 3 large, multinational organizations (with supplementary supervisory and top management team data); and longitudinal case studies of 22 knowledge workers observed over a 12-month period. In the empirical test described in this paper, using our primary survey data, we anticipate and find that different knowledge processes underlie the novelty and volume of ideas corporate knowledge workers generate. While idea set novelty is primarily accounted for by equivocality-reducing processes of knowledge transformation, idea set volume is explained rather by knowledge combination processes. Furthermore, exposure to a broad range of stimuli enables both many as well as highly novel new business ideas, while broad individual work experience is only associated with the volume of ideas generated. These findings highlight the value of integrating and extending the constructs and propositions of extant literature streams to generating new understandings of corporate idea generation.AIM
Direct evidence has been lacking on entrepreneurs’ response to individual-specific opportunities, and recent work suggests that entrepreneurship may be a non-profit-seeking activity and that entrepreneurs evaluate risk oddly. We model heterogeneous inventors and inventions, outside opportunities, sunk and nonsunk costs, and risk, to guide data analysis. We use assessment data from a center paid to assess the inventions’ economic potential. Inventors’ choices whether to commercialize their inventions and later whether to remain in production were consistent with profit-seeking motives and risk aversion.
We examine the accuracy of forecasts of the commercial potential of new product ideas by experts at an Inventor's Assistance Program (IAP). Each idea is evaluated in terms of 37 attributes or cues, which are subjectively rated and intuitively combined by an IAP expert to arrive at a forecast of the idea's commercialization prospects. Data regarding actual commercialization outcomes for 559 new product ideas were collected to examine the accuracy of the IAP forecasts. The intensive evaluation of each idea conducted by the IAP produces forecasts that accurately rank order the ideas in terms of their probability of commercialization. The focus of the evaluation process on case-specific evidence that distinguishes one idea from another, however, and the corresponding neglect of aggregate considerations such as the base rate (BR) and predictability of commercialization for new product ideas in general, yields forecasts that are systematically miscalibrated in terms of their correspondence to the actual probability of commercialization. Copyright © 2007 John Wiley & Sons, Ltd.
We set out to determine if independent inventors can be considered “heroes” or “hobbyists”, that is, if they produce the most or the least influential inventions in a product category. We study patented inventions by independent and firm-based inventors by comparing patents along four dimensions: Patent citation impact, detail, scope, and maintenance. Examining 225 tennis racket patents granted in the US between 1981 and 1991, we find that independent inventors are a heterogeneous group who generate inventions that are overrepresented both among the most impactful and the least impactful patents. The metrics we develop provide insight into ex ante identification of the importance of inventions.
Research on technological opportunity has typically focused on the impact of broad industry characteristics on R&D intensity of firms. This study complements such approaches by examining the impact of a multidimensional vector that measures technological opportunity on independent inventors’ decisions to patent and commercialize inventions. Using data from 559 inventions and controlling for demand, appropriability, and competitive conditions, we found two of four tested dimensions of technological opportunity – technical performance and technical uncertainty – to be significant and important determinants of the likelihood of commercialization. Technical feasibility appears important in affecting patenting but unimportant in affecting commercialization. Technical significance carries a negative, although insignificant, sign conditioning commercialization.
We investigate the decision heuristics used by experts to forecast that early-stage ventures are subsequently commercialized. Experts evaluate 37 project characteristics and subjectively combine data on all cues by examining both critical flaws and positive factors to arrive at a forecast. A conjunctive model is used to describe their process, which sums "good" and "bad" cue counts separately. This model achieves a 91.8% forecasting accuracy of the experts' correct forecasts. The model correctly predicts 86.0% of outcomes in out-of-sample, out-of-time tests. Results indicate that reasonably simple decision heuristics can perform well in a natural and very difficult decision-making context.
Conventional data envelopment analysis (DEA) methods assume that input and output variables are continuous. However, in many real managerial cases, some inputs and/or outputs can only take integer values. Simply rounding the performance targets to the nearest integers can lead to misleading solutions and efficiency evaluation. Addressing this kind of integer-valued data, the current paper proposes models that deal directly with slacks to calculate efficiency and super-efficiency scores when integer values are present. Compared with standard radial models, additive (super-efficiency) models demonstrate higher discrimination power among decision making units, especially for integer-valued data. We use an empirical application in early-stage ventures to illustrate our approach.
The expected value of sample information (EVSI) depends on the decision-maker's (DM) prior beliefs. Some public information or advisory services, however, cater to entire populations of decision-makers, who differ in their prior beliefs (e.g., their degree of optimism). Evaluating the potential contribution of such services thus necessitates averaging the DM-specific EVSI's over the population's prior beliefs’ distribution. We show how to accomplish that, exemplifying it for two forms of population heterogeneity. We then compare the exact method to an approximation that computes the EVSI for an “average” DM.
Examining a sample of 1,091 inventions I investigate the magnitude and distribution of the pretax internal rate of return (IRR) to inventive activity. The average IRR on a portfolio investment in these inventions is 11.4%. This is higher than the risk--free rate but lower than the long--run return on high--risk securities and the long--run return on early--stage venture capital funds. The portfolio IRR is significantly higher, for some ex ante identifiable classes of inventions. The distribution of return is skew: only between 7--9% reach the market. Of the 75 inventions that did, six realised returns above 1400%, 60% obtained negative returns and the median was negative. Copyright Royal Economic Society 2003.
The impact of 36 innovation, technology, and market characteristics on the probability that early stage R&D projects will reach the market is examined. Analysis is based on data from 561 R&D projects developed by technological entrepreneurs. Four characteristics stand out as most predictive: expected profitability, technological opportunity, development risk, and appropriability conditions. These predict future commercial success well with an out-of-sample accuracy of 80.9 %. This model performs better than R&D managers' and venture capital's (VC's) forecasts of success and has the potential to be used as a screening tool for early stage R&D investment reviews by, for example, VCs. Implications for both research and practice are discussed.
The idea screening stage or R&D project selection decision is a deficient decision area in the new product process. Most quantitative and economic models focus on the commercialization stages, while idea screening models are largely speculative and arbitrary. The paper presents an empirically derived and validated new product screening model. Typical screening variables were measured for each of 195 actual new product projects. Thirteen dimensions were found to describe the screening domain. A multiple regression model was derived from the data, and when validated using a cross-split-half method, yielded a predictive accuracy of 84 percent.
What steps should the industrial new product manager take to improve new product performance? This article pulls together the findings from the many research studies into what makes a new product a success. Six important lessons for managers are developed from those studies. The lessons point to a flow model approach to the development and commercialization of a new product — a step-by-step approach to successful product innovation. A seven-stage model, designed to move a product from the idea stage to product launch, is described. Actual case histories illustrate how each stage of the model can be implemented.
This article uses various micro data sets to study entrepreneurship. Consistent with the existence of capital constraints on potential entrepreneurs, the estimates imply that the probability of self-employment depends positively upon whether the individual ever received an inheritance or gift. When directly questioned in interview surveys, potential entrepreneurs say that raising capital is their principal problem. Consistent with the authors' theoretical model's predictions, the self-employed report higher levels of job and life satisfaction than employees. Childhood psychological test scores, however, are not strongly correlated with later self-employment. Copyright 1998 by University of Chicago Press.
Research on the determinants of industrial innovation performance
using a three-dimensional framework is examined. Those dimensions are:
generality over innovations, decision focus, and managerial
controllability. The major determinants identified are: strategic and
organizational factors, including general management's support,
business-project fit, and R&D-marketing interaction; R&D and
production factors, including product superiority, experience and
synergy effect, user benefit of the product, and patent protection; and
market and environmental factors, including degree of competition and
market growth. An empirical study of 112 industrial products confirms
that dynamic interaction exists between these determinants and the
launch time of the product
This article combines the richest darn set and most rigorous econometric methodology used, to date, to evaluate the impact of manufacturing extension services on client productivity growth. Client plants are identified in the Longitudinal Research Database (LRD) and their labor productivity growth between 1987 and 1992 is compared to nonclients. Both simple OLS and two-stage models are used to estimate the effect of manufacturing extension on productivity growth. The first-stage probit model is informative about the client selection process. Results suggest that participation in manufacturing extension is associated with between 3.4 and 16 percent higher labor productivity growth between 1987 and 1992. The article demonstrates the usefulness of longitudinal microdata sets, such as the LRD, for program evaluation. (C) 1998 by the Association for Public Policy Analysis and Management.
The Small Business Development Center (SBDC) program was begun in 1977 by the U.S. Small Business Administration. The SBDC was initiated to fill an unmet need for consulting for small businesses. The results of two empirical studies designed to test the effectiveness of the SBCD programs in Georgia and South Carolina are reported herein.. The studies measured the contribution to tax revenues in these two states that resulted from the improvements in the performance of small businesses served by the SBDCs. Studies conducted in 1982 were based on 84 Georgia and 19 South Carolina businesses that had used the counseling services between October 1980 and Juy 1981, allowing comparison of performance before and after counseling. Data on gross sales, number of employees, and net income were gathered. Data were analyzed to calculated the average and incremental value added to Georgia and South Carolina state tax revenues (personal state income tax, taxable business income, and business income tax), as well as federal tax revenue. For Georgia, the tax-generating value of the assistance to the sample firms was 1 million dollar cost to run the program. For South Carolina, the tax revenues for the sample firms represent almost 70 percent of the cost of the program. Results offer evidence that the SBDC public sector program has been administered in a cost-effective manner in excess of the operating costs for the program; in addition, many small businesses experienced improved economic performance. (TNM)
1,095 responses were received from a telephone survey of independent inventors. The majority of inventors surveyed (89%) are male, and a plurality of their inventions are designed for consumer products (47%). Conditional on commercializing their invention, and at development costs about 1/8 of those in established firms, inventive efforts by independent inventors lead to gains virtually comparable to those of established firms. Their innovations survive for about as long as the average start-up. Gross profit margins are comparable to the pharmaceutical industry (29%). However, only a small fraction of inventions developed by independent inventors reach the market (6.5%). The probability of reaching the market is four to eight times less than for inventions developed by established firms. Why do only a fraction of inventions developed by independent inventors become commercialized when those that do commercialize are quite profitable and survive for as long as other start-ups?
I. Introduction, 221.—II. The sample of innovations, 222.—III. Estimation of social benefits: product innovations used by
firms, 222.—IV. Parallel innovative efforts, time horizon, and rates of return, 226.—V. Product innovations used by households,
229.—VI. Process innovations, 231.—VII. Social and private rates of return, 233.—VIII. Factors associated with the gap between
social and private rates of return, 235.—IX. Unemployment, repercussions on other markets, and future changes in technology,
238.—X. Conclusion, 239.
A great many people provided comments on early versions of this paper which led to major improvements in the exposition. In addition to the referees, who were most helpful, the author wishes to express his appreciation to Dr. Harry Markowitz of the RAND Corporation, Professor Jack Hirshleifer of the University of California at Los Angeles, and to Professors Yoram Barzel, George Brabb, Bruce Johnson, Walter Oi and R. Haney Scott of the University of Washington.
Inventors, who are considering the commercialization of their inventions,-can often avail themselves of evaluations and advice provided by government supported programs. In Canada, such a service is provided by the Canadian Industrial Innovation Centre (CIIC), through its inventor's assistance program (IAP). In its 20 years of operation, the IAP has evaluated more than 11,000 inventions. The fee (in Canadian [Cdn.] dollars) charged for an invention evaluation was Cdn. $262 in 1995, and these fees cover about half the program's expenses. We compute the social rate of return of the Canadian IAP under different assumptions. The most plausible estimate is a social rate of return between 36% and 70%.
(This article originally appeared in Management Science, January 1969, Volume 15, Number 5, pp. 215–227, published by The Institute of Management Sciences.)
A growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables. The basic assumption of the model is that the timing of a consumer's initial purchase is related to the number of previous buyers. A behavioral rationale for the model is offered in terms of innovative and imitative behavior. The model yields good predictions of the sales peak and the timing of the peak when applied to historical data. A long-range forecast is developed for the sales of color television sets.
This article combines the richest data set and most rigorous econometric methodology used, to date, to evaluate the impact of manufacturing extension services on client productivity growth. Client plants are identified in the Longitudinal Research Database (LRD) and their labor productivity growth between 1987 and 1992 is compared to nonclients. Both simple OLS and two-stage models are used to estimate the effect of manufacturing extension on productivity growth. The first-stage probit model is informative about the client selection process. Results suggest that participation in manufacturing extension is associated with between 3.4 and 16 percent higher labor productivity growth between 1987 and 1992. The article demonstrates the usefulness of longitudinal microdata sets, such as the LRD, for program evaluation. © 1998 by the Association for Public Policy Analysis and Management
This paper summarizes our extensive study (n = 158) of new product success and failure in the electronics industry. Conventional “external factor” explanations of commercial product failure based on the state of the economy, foreign competition and lack of funding, were found not to be major contributors to product failure in this industry. On the other hand, factors that can be strongly influenced by management such as coordination of the create, make and market functions, the quality and frequency of customers' communications, value of the product to the customer, and the quality and efficiency of technical management explained the majority of the variance between successful and unsuccessful products. From these findings a framework for understanding and managing the new product development process that places learning and communication in the center stage was developed.Successes and failures in our sample were strongly interrelated. The knowledge gained from failures was often instrumental in achieving subsequent successes, while success in turn often resulted in unlearning the very process that led to the original success. This observation has led us to postulate a new product “learning cycle model” in which commercial successes and failures alternate in an irregular pattern of learning and unlearning.
The expansion of public policies and programs to promote the technological modernization of small and mid-sized manufacturing enterprises in the United States has been accompanied by an increased interest in assessing the effectiveness and impact of these initiatives. This article examines current practices used in the evaluation of US industrial modernization programs at state and national levels, drawing on interviews with program managers, site visits, and scrutiny of available studies. Issues related to the meaning of evaluation in the context of industrial modernization, the scale and scope of existing programs, and the definition of metrics are considered. A series of evaluation approaches, methods, and studies are identified and reviewed, including the role of program monitoring, customer valuation, external reviews, economic impact studies, control groups, and assessments of best practice. The authors address the use of evaluation results and discuss key challenges and directions relevant to the development of more robust evaluation procedures.
This article presents a comprehensive review of the current state of invention evaluation services in the United States. Gerald Udell critically examines technical evaluation programs at the National Institute of Standards and Technology and discusses the Preliminary Innovation Evaluation System (PIES) developed during the Oregon Innovation Center Experiment. He reports that most evaluation services using the PIES format are operating below the state of the art reached by the Oregon experiment and that the quality of some evaluations is suspect. Some of these programs appear to have adopted portions of the PIES format without considering PIES' substance and the five years of research and experimentation that went into PIES' development. Inasmuch as invention evaluation activity is now part of public policy in the United States, invention evaluation activity is likely to increase. Replication and extension of either the technical evaluation procedures of the National Institute of Standards and Technology or the PIES format should be undertaken with careful attention to past experiences.
The Wal-Mart Innovation Network (WIN) is a cooperative experiment designed to test an infrastructure for stimulating American innovations—new products invented and manufactured in the U.S.A. The WIN venture focuses on independent and small business inventors because it is here that WIN is likely to have the greatest impact. Contrary to the opinions of many, inventors continue to be a major source of new products, processes and services. Unlike their corporate rate and institutional counterparts, noncorporate inventors suffer from the lack of viable channels for getting their creative efforts to the marketplace and often are lacking in some essential resource or expertise. Rather than attempt to stimulate invention, the WIN strategy is simply to make it easier for existing ideas and inventions to reach the marketplace. In addition to other resources, WIN draws on the expertise of some 160 volunteer Wal-Mart executives, buyers and marketing specialists who provide an assessment of marketability. Although innovation is the primary focus of the WIN venture, the bottom line objective is the creation of new, domestic manufacturing jobs.
Eight broad areas appear to be important for new product success in a high-technology environment: 1) market knowledge gained through frequent and intense customer interaction, which leads to high benefit-to-cost products; 2) and 3) planning and coordination of the new product process, especially the R&D phase; 4) emphasis on marketing and sales; 5) management support for the product throughout the development and launch stages; 6) the contribution margin of the product; 7) early market entry; 8) proximity of the new product technologies and markets to the existing strengths of the developing unit.
Government programs to finance small firms have attracted little empirical attention. This article examines the largest U.S. initiative, the Small Business Innovation Research program. Using a unique database, the author shows that program awardees grew significantly faster than matched firms over a decade and were more likely to attract venture financing. The superior performance of awardees was confined to firms in regions with substantial venture capital activity and was pronounced in high-technology industries. Multiple awards did not increase performance. These results suggest that awards played an important role in certifying firm quality but also that distortions of the award process occur. Copyright 1999 by University of Chicago Press.
On the basis of present information, the probability of severe damage is less if a hurricane is seeded.
Public programs to provide early-stage financing to firms, particularly high-technology companies, have become commonplace in the United States and abroad. The long-run effectiveness of these programs, however, has attracted little empirical scrutiny. This paper examines the impact of the largest U.S. public venture capital initiative, the Small Business Innovation Research (SBIR) program, which has provided over $6 billion to small high-technology firms between 1983 and 1995. Using a unique database" of awardees compiled by the U.S. General Accounting Office, I show that SBIR awardees grew significantly faster than a matched set of firms over a ten-year period. The positive effects of SBIR awards were confined to firms based in zip codes with substantial venture capital activity. The findings are consistent with both the corporate finance literature on capital constraints and the growth literature on the importance of localization effects.
Explores the expectations of entrepreneurs in newlyestablished businesses regarding their own chances of success and theirpredictionsregarding the chances for success of others with similarstartup ideas, in one of the first such studies. Past research suggests that,at best, fewer than 50% of firms survive for more than five years with a givenowner/manager. Based on this past research, three hypotheses are posited:entrepreneurs will perceive their odds of success at less than or equal to 50%,entrepreneurs' prediction of others' success will not differ significantly fromtheir prediction of their own success, and entrepreneurs' expectations ofsuccess will be related to a number of personal factors including theirbusiness experience, prior ownership, and educational level. Data were gathered from surveys sent in 1985 to members of the NationalFederation of Independent Business (NFIB) who reported that they had openedtheir own businesses in the United States. Of those responding, 2994entrepreneurs were selected from the original sample. Findings did not support any of the three original hypotheses of cautiousoptimism (as prior research predicted). In fact, the results show thatentrepreneurs' perceptions of their own odds for success display a noteworthydegree of optimism. In addition, entrepreneurs believe their own odds ofsuccess to be greater than other new business owners with similar ideas.Furthermore, an analysis of the predicted factors for success showed aremarkable lack of relationship between an entrepreneur's belief of their ownpotential and the objective predictors. In fact, those who were poorly preparedseemed just as optimistic as those who were well prepared. One implication isthat business founders should seek advice from more objective outsiders.(SFL)
Sparked by concerns about their shrinking market share, 14 leading U.S. semiconductor producers, with the financial assistance of the U.S. government in the form of 100 million in annual subsidies, formed a joint R&D consortium -- Sematech -- in 1987. Using Compustat data on all U.S. semiconductor firms, we estimate the effects of Sematech on members' R&D spending, profitability, investment, and productivity. In so doing we test two hypotheses: the `commitment' hypothesis that Sematech obligates member firms to spend more on high- spillover R&D, and the `sharing' hypothesis that Sematech reduces duplication of member R&D spending. Whereas the commitment hypothesis provides a rationale for the government subsidies, the sharing hypothesis does not. We find that Sematech induced members to cut their overall R&D spending on the order of 300 million per year, providing support for the sharing hypothesis.
This study presents, for the first time, an empirically tested estimate of the extent to which technological innovations in various industries have been based on academic research. The analysis also estimates the time lags between the investment in the academic research projects and the industrial utilization of their findings. A random sample of 76 major American firms in seven manufacturing industries - information processing, electrical equipment, chemicals, instruments, drugs, metals, and oil - was used. Each firm's top R&D executive was asked about the proportion of the firm's new products and processes commercialized in 1975-1985 that, according to these executives, could not have been developed without academic research done within fifteen years of the first introduction of the innovation. Differences in the percentage of such innovation can be explained by R&D intensity; more R&D-intensive firms are more likely to carry out innovations based on recent academic research. The study reveals that about 11 percent of the new products introduced in these industries in 1975-85 were based in recent academic research. In order to establish the economic importance of these products, data from each firm were examined concerning the 1985 sales of its new products first commercialized in 1982-85 that were based on academic research, revealing the total of about $24 billion for these seven industries. The time lag between academic research findings and the commercialization of the products based on these findings has a mean of about 7 years. The research calculated the social rate of return from investment in academic research by comparing the stream of social benefits from this investment with what it would have been without the investment. Overall, the results reveal that the contribution of academic research to industrial innovation has been particularly strong in the drugs, instruments, and information processing industres. (AT)
R&D spillovers are, potentially, a major source of endogenous growth in various recent "new growth theory" models. This paper reviews the basic model of R&D spillovers and then focuses on the empirical evidence for their existence and magnitude. It surveys the older empirical literature with special attention to the economic difficulties of actually coming up with convincing evidence on this topic. Taken individually, many of the studies are flawed and subject to a variety of reservations, but the overall impression remains that R&D spillovers are both prevalent and important. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
There have been many attempts to discover the critical factors
that can indicate the success or failure of R&D projects and new
product introductions. Because of the large number of studies that
exist, the authors undertook an extensive review of the germane
literature to find whether a general agreement exists about the factors
leading to success or failure in new product development and R&D
projects. The review shows first that even with a conservative approach
to listing significant factors, the list is very long. Second, comparing
the factors across studies demonstrates that different authors have
found that the magnitude of significance and the direction of influence
vary. Third, given the differences in context, the meaning of similar
factors may also vary. The contradictory findings lead us to propose a
contingency framework for the new product and R&D project models.
This framework consists of a contingency cube with three contextual
dimensions. Based on this framework, we propose a set of propositions.
We conclude this paper with a discussion of the implications of a
contingent approach for both researchers and managers in the area of
management of new products and R&D projects
The factors that affect the supply of entrepreneurs are important but poorly understood. We study a sample of individuals who choose either to be employees or to run their own businesses.
Design and Marketing of New Products
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More Inventors Try their Luck as Aid Increase
Wall Street Journal (1991): "More Inventors Try their Luck as Aid Increase," August 19, Section B1,
1991.