2010 Conference Paper Abstracts

I. Property and Innovation

Discussant: Jeff Macher (Georgetown)

Regional Disadvantage? Non-compete agreements and brain drain
Matt Marx (MIT), Jasjit Singh (INSEAD), and Lee Fleming (HBS)

We construct inventor career histories using the U.S. patent record from 1975 to 2005 and demonstrate a brain drain from states that enforce employee non-compete agreements to those that do not. We address causality concerns with a differences-in-differences study design based on an inadvertent reversal of Michigan’s non-compete enforcement policy. Non-compete enforcement drives away inventors with greater human and social capital while retaining those who are less productive and less connected.

Prior Knowledge, Intellectual Property & New Firm Performance
Sonali Shah (Washington) and Sheryl Winston Smith (Temple)

Institutional protections in the form of intellectual property were created to guard a firm’s investments in the development of new knowledge and ideas. However, empirical evidence in support of the efficacy of intellectual property in protecting these investments and thereby improving firm performance is mixed at best. One reason for these mixed empirical findings may be the existence of a variety of non-institutional mechanisms that support the relationship between intellectual property protection and firm performance; such mechanisms have yet to be investigated. Here we examine the joint effects of founders’ prior knowledge and intellectual property protection on new firm survival. We examine three types of founder prior knowledge stocks: prior entrepreneurial experience, prior industry knowledge, and prior entrepreneurial experience in the same industry.

We find that the type of prior knowledge founders matters and that different knowledge stocks have dramatically different effects on firm survival: prior entrepreneurial experience in the same industry confers the greatest direct survival benefit on young firms and dramatically enhances the survival benefits that young firms derive through the possession of intellectual property protection in high tech industries. The benefits of prior industry experience are directionally the same, but of a lesser magnitude across high and low tech industries. Prior entrepreneurial experience confers no additional survival benefits in either high or low tech industries. Taken together, these findings show how dramatically prior knowledge effects firm survival and the nuanced manner in which it does so, and lends further support to arguments suggesting that intellectual property protection may be more widely used as a strategic tool, rather than for its intended purpose of serving as an appropriability mechanism – and enhancing social welfare through innovation. These findings are based on panel data from 4,928 new firms founded in the United States in 2004.

II. Understanding the Ecosystem of Support for Entrepreneurial Ventures

Discussant: Andrew Nelson (Oregon)

Individuals and Organizations as Entrepreneurial Resource Providers: “Amateur” Angels, “Super” Angels, and Venture Capitalists as Early-Stage Investors
Benjamin Hallen (Maryland) and Rory McDonald (Stanford)

External resource providers, such as venture capital investors, often aid young organizations in their early development by providing resources, mentoring, network embeddedness, and endorsements. In many contexts, young organizations may obtain resources from either independent individuals (e.g., angel investors) or other organizations (e.g., venture capital firms). While prior literature has often explored individual and organizational resource providers independently, the relative advantages of each type remains unclear. We seek to address this question in the context of early venture investing, contrasting the relative abilities of angel and venture capital investors. Using a combination of field interviews and quantitative analyses of Web 2.0 ventures, we argue and find that the more active individual investors have abilities approaching those of venture capital firms. Specifically, we find that relative to venture capital investors, such “Super Angels” (a term adopted from entrepreneurs and the investors themselves) are associated with near similar improvements in short term venture performance (measured by web traffic), the likelihood of raising a later round, and centralities in the syndication network.

Thought Leadership Keynote: Howard Aldrich

Beam Me Up, Scott(ie)! Institutional Theorists’ Struggles with the Emergent Nature of Entrepreneurship
Howard Aldrich (UNC)

III. Sensemaking within and outside the firm

Discussant: Violina Rindova (UT Austin)

Fitting in new Concepts: How the Insurance Industry Assimilated the Computer, 1945 -1955
Steve Kahl (University of Chicago) and Jo-Anne Yates (MIT)

This paper explores how a new concept is assimilated into an existing cognitive schema and seeks to identify social mechanisms that influence this process. We analyze the various ways the insurance industry conceptualized the computer before its commercial introduction in 1954. One method of assimilation directly integrated the computer into the existing schema as a machine; another used an analogy with the human brain to associate two schemas together. Using cognitive mapping and discursive analysis, this paper shows that these different methods of assimilation faced different challenges to create the new computer concept. We further explore the social factors of why the insurance industry overwhelmingly favored assimilating the computer through integration. We argue that the well agreed upon and highly inter-related structure of the existing schema encouraged agents to interpret the computer in terms of its similarities to that schema. Moreover, the professional societies helped establish the customs around the corroboration of the new concept that encouraged grounding it within a familiar context. We believe this analysis of concept assimilation has broader implications for explanations of conceptual dynamics as well as the challenges facing institutional entrepreneurs.

How firm attributions for negative outcomes influence strategic change
Chris Bingham (UNC) and John Haleblian (UC Riverside)

This study explores how firm attributions for negative outcomes impact strategic change. The context is new venture internationalization. Prior studies argue that strategic change is more likely when executives adopt internal attributions for negative outcomes, and less likely when executives adopt external attributions. In contrast, we find that strategic change is affected not only by whether attributions are internal or external but also by whether attributions between the field and corporate are synchronized, supplanted or supplemented. A central implication of our study is that internal attributions alone may be much less beneficial for strategic change than previously assumed. Instead, strategic change may be more positively influenced by external attributions and hybrid attributions. Overall, we sketch an emergent framework that reveals an elaborated conception of attributions and their relationship to strategic change. This framework provides implications for strategic change theory, attribution theory and the increasingly important psychological foundations of strategic management.

IV. Formal and Informal Entrepreneurial Networks

Discussant: Will Mitchell (Duke)

Putting Universities in Context: Assessing Different Views of the Production and Diffusion of University-Generated Knowledge
Andrew Nelson (Oregon)

Scholars widely acknowledge that knowledge flows from universities are critical to innovation and entrepreneurship. Our ability to measure and assess these flows, however, remains limited and focused primarily on patents and licenses. In this paper, I draw upon a novel data set that captures the complete universe of activities surrounding a unique university group that simultaneously engages in musical composition, sound research, and audio technology commercialization. I show how the diffusion lens employed dramatically alters perceptions of active individuals, patterns of collaboration, timing of activities, organizational reach and impact. Building on these findings, I argue that efforts to “compare the importance” of diffusion channels may miss the larger context in which university research takes place, and I suggest that attempts to assess the impact of university research should move beyond counting outputs to instead evaluate processes.

When Do Unfamiliar Firms Get Together? A Group Level Analysis
Lei Zhang (Maryland) and Anil Gupta (Maryland)

Previous literature suggested that firms tend to partner with past partners and group density matters. However, unfamiliar firms do form ties with each other in actual network. It is not clear under what conditions more unfamiliar firms are willing to join each other in a group. In this paper, I focus on group level and examine when unfamiliar firms get together in a small group network. Based on a matched sample of VC Investments in 1985-2008, unfamiliar firms are more likely to form syndicates when uncertainty is lower, anticipated relationship cost or coordination cost is smaller, and coalition concern within the group is smaller but coalition concern of third party is bigger.

V. Human and Social Capital in the Entrepreneurial Venture

Discussant: Anil Gupta (Maryland)

Scientists as Signals: Strategies for Mitigating the Underpricing of Life Sciences IPOs
Mark Kennedy (USC) and Jay Kwok (USC)

In this research, we argue that life sciences firms seeking public equity benefit from recruiting as science advisors leading scientists who have strong ties to peers whom investors are likely to consult about the merits of their science. We hypothesize that these peer ties mitigate the usual underpricing of an initial public offering (IPO) of stock by increasing the likelihood that underwriter due diligence will turn up favorable opinions ofa firm. Furthermore, this effect should be greater for firms led by scientists because this increases the sensegiving capacity required to explain the significance of science advisors. We find support for this argument in a study of underpricing of IPOs for life sciences firms with formal scientific advisory boards. Our findings contribute to theory by relating signals for mitigating uncertainty in the capital formation process to two key factors that underlie their impact: (1) signal strength supported by the visibility and social capital of a firm¹s science advisors, and (2) signal clarity enhanced by having managers with the absorptive capacity needed to explain the importance of their advisors.

Entrepreneurial Performance in a Developing Economy: Evidence from China
Chuck Eesley (Stanford University)

This paper examines the growth of entrepreneurial ventures in a developing economy. The paper theorizes that different founder characteristics will explain variation in performance as institutional change occurs. I also use variation in the founding year and location from 245 entrepreneurial respondents who founded firms in China. The results show that different factors determine firm performance during different stages of institutional reform. These factors differ from those identified in the literature using data from well-developed economy contexts. The results indicate a significantly strong role for entrepreneur-government connections in the less developed institutional environment and a shift towards factors associated with competition in the market.

VI. Human and Social Capital in the Innovative Organization

Discussant: Rafael Corredoira (Maryland)

The What, the Who, and the How: Coordination Experience and Team Performance in the Electronic Games Industry
Cristian Dezso (Maryland), Thorsten Grohsjean (Munich), and Tobias Kretschmer (Munich)

Team design significantly impacts organizational performance in knowledge and creative industries, in which products are developed by project-based teams. Team members’ expertise in what they do, that is, in the tasks they perform and the hierarchical roles they fulfill, is critical to teams’ success. Equally important is the ability to coordinate complementary expertise and interdependent activities, which may become easier when team members are familiar with who is on their team. Most project teams are fluid, however, hampering the development of team familiarity and raising the question of how team members coordinate effectively. In this paper we propose and investigate the performance consequences of two alternative coordination mechanisms: shared experience with firm-specific coordination routines, and general experience interacting and coordinating within teams. Using data on development teams working on electronic games released in the U.S. between 1995 and 2007, we find that shared firm experience and teaming experience are positively associated with the commercial success of electronic games, and that these effects are important for teams with both low and high levels of familiarity. Our results have implications for the theory of learning and coordination in teams, and for the practice of team design in project-based organizations.

Thought Leadership Keynote: Toby Stuart

Boundary spanning in a for-profit research lab: Scientific publication and the interface between commerce and academe
Toby Stuart (HBS) and Chris Liu (HBS / Rotman)

In innovative industries, private sector firms increasingly are participants in open communities of science or technology. As part of the norms of exchange and engagement in such communities, firms often publicly disclose what would otherwise remain private discoveries. In a quantitative case study of one firm in the biopharmaceutical sector, we explore the consequences of scientific publication—an instance of public disclosure—for a core set of activities within the firm. Specifically, we link publications to human resource practices, finding in researcher-level, fixed effects regressions that bonuses are tied to publications. Second, using a unique electronic mail dataset, we show that researchers within the firm who author publications are much better connected to external (to the firm) members of the open scientific community. This result directly links publishing to current understandings of firms’ absorptive capacity. Third, in an unanticipated finding, our analysis raises the possibility that the firm’s most prolific publisher begin to migrate to the periphery of the intra-firm social network, which may occur because their strong external relationships induce them to reorient their focus to a community of scientists beyond the firm’s boundary.

VII. Nuances of Status Competition

Discussant: David Hsu (Wharton)

Status Differentiation, Consistency, and the Escalation of Disputes: Patent Litigation in the Worldwide Semiconductor Industry
David Tan (Georgetown)

This paper proposes that status hierarchies suppress potential conflict in a market by aligning actors’ expectations of deference and facilitating private settlement of disputes. This general proposition implies two specific hypotheses. First, the more status difference there is between actors, the lower the risk of conflict. Second, the more inconsistency there is in actors’ status, the higher the risk of conflict between actors of different status. These hypotheses are tested in the context of patent litigation among semiconductor firms between 1984 and 2001. Analysis of a matched case-control sample, comparing disputes that resulted in litigation to ones that did not, provides support for the hypotheses.

Quality, taste, and performance gaps at the Olympics
David Waguespack (Maryland)