Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation

By Emily Cox Pahnke, Rory M. McDonald, Dan J. Wang, Benjamin L. Hallen. 2014

168 citations recorded by the source corpus.

This study investigates the impact of early relationships on innovation at entrepreneurial firms. Prior research has largely focused on the benefits of network ties, documenting the many advantages that accrue to firms embedded in a rich network of inter-organizational relationships. In contrast, we build on research emphasizing potential drawbacks to examine how competitive exposure, enabled by powerful intermediaries, can inhibit innovation. We develop the concept of competitive information leakage, which occurs when firms are indirectly tied to their competitors via shared intermediary organizations. To test our theory, we examine every relationship between entrepreneurial firms and their venture capital investors in the minimally-invasive surgical segment of the medical device industry over a 22-year period. We find that indirect ties to competitors impede innovation, and that this effect is moderated by several factors related to the intermediary’s opportunities and motivation to leak important information.

Subfields: Accounting, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/96b1b4dc0e21f96d455e0ab3487b428550c29f3e

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In Accounting

In Management of Technology and Innovation

Citations in the corpus

The Schumpeterian entrepreneur: a review of the empirical evidence on the antecedents, behaviour and consequences of innovative entrepreneurship (2017, unknown): “This idea is based on the argument that networks and other business relationships enable entrepreneurial firms to overcome resource constraints and the corresponding liabilities of newness and smallness (Cox Pahnke et al. 2015).”
Who Takes You to the Dance? How Partners’ Institutional Logics Influence Innovation in Young Firms (2015, background): “Research and the popular press frequently focus on venture capitalists (VCs) in this role (Gulati and Higgins, 2003; Pahnke et al., 2015).”