Bringing Science to Market: Knowledge Foundations and Performance

Possessing unique knowledge is widely considered a critical source of competitive advantage. In this paper, we assess whether new ventures that exploit their founders’ technologically unique knowledge perform better on the exit market than those that do not (or only little). Using a panel dataset of 510 academic startups in biomedicine created between 2005 and 2015, we find that, contrary to expectations, startups that rely heavily on their founders’ academic work are less likely to be acquired, while we do not observe marked differences with regards to their ability to generate valuable technologies. Besides their outcomes on the commercial market, we further examine the potential ramifications on the academic market. Applying a difference-in-difference design, we find that founders who build extensively on their academic work as the foundation of their startup experience a decrease in both the number of publications and top publications. Our crude back-of-the-envelope calculations suggest that this decrease represents a potential loss of value generated from publications of 40,000–333,000 dollars per year per academic entrepreneur that relies strongly on their own research as the basis of the firm. Additional analyses reveal a notable shift in the research approach of these founders after entering entrepreneurship targeted towards increasing economic payoffs. Of note are our observations of a reduction in collaboration with other scientists, both within and outside their institution, a narrowing of their research focus, though not at the expense of exploring new concepts, and an increase in patenting activity.