The dynamic impact of innovative capability and inter-firm network on firm valuation: A longitudinal study of biotechnology start-ups

By Yanfeng Zheng, Jing Liu, Gerard George. 2010

185 citations recorded by the source corpus.

Prior research suggests that a high technology start-up's innovative capability and inter-firm network influence its performance and consequently, firm valuation. Few studies consider their joint influence and even fewer consider the temporal change of those effects on firm valuation. In this study, we propose that firm age, a key organizational variable, represents both the development of organizational routines from a start-up's perspective and the accumulation of accessible information from an investor's viewpoint. As such, an investor's evaluation of a high technology start-up's innovative capability and inter-firm network evolves with firm age. Using panel data of 170 biotechnology start-ups, our results suggest that the relative value of network status declines while the impact of innovative capability increases with firm age. Interestingly, there is a growing complementary effect of innovative capability and network heterogeneity on firm valuation. The implications of these findings for entrepreneurial practice and theories of firm capabilities and inter-firm network are discussed.

Subfields: Accounting, Economics and Econometrics, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/b5d4da569ed9f3fb4d9ce9a4d7663cca8ad1ba18

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Citations in the corpus

Friends, Family, or Fools: Entrepreneur Experience and its Implications for Equity Distribution and Resource Mobilization (2012, background): “Studies have focused on network ties between entrepreneurs and their financiers (Shane and Cable, 2002; Zheng et al., 2010); and the prominence of the entrepreneur (Burton, Sorensen, and Beckman, 2002) to explain capital mobilization from professional investors.”
Startup valuation by venture capitalists: an empirical study (2012, background): “Zheng, Liu, and George ( 2010 ) show in their sample of biotechnology companies that the firm's network influences its performance and therefore, the valuation of the company by venture capital investors – the younger the firm, the greater is this influence.”
Completing the technology transfer process: M&As of science-based IPOs (2012, unknown): “Following Stuart et al. (1999) and Zheng et al. (2010), we identified four categorical variables to indicate whether the start-up firm operated in the immunology, diagnostic, genetics and protein engineering, or new drug investigation sectors.”
Entrepreneurial talent and venture performance: A meta-analytic investigation of SMEs (2013, unknown): “1 A 266 K. Mayer-Haug et al. / Research Policy 42 (2013) 1251– 1273 ppendix A. Details on studies included in the meta-analysis Authors name (year) Sample size Country of origin Economy Uncertainty avoidance index N firms N ind.** Aarstad et al. (2010) 20 40 Norway Advanced 50 Agarwal et al. (2004) ”