Too Much, Too Soon? Early Funding, Technological Unconventionality, and Innovation Capabilities

The availability of financial resources significantly shapes firm innovation outcomes, especially for early-stage, innovation-focused technology firms. However, prior research has provided conflicting findings about this relationship: On the one hand, resource availability may boost innovation outcomes; on the other hand, resource constraints also may do so. We hypothesize that the timing and size of resource availability in the early life stages of a firm may predict its propensity to generate more unconventional technology combinations compared to its competitors. We use a novel dataset constructed from PitchBook and BuiltWith that consists of nearly 800,000 observations and covers 11,853 firms founded and funded between 2010 and 2019. Our findings provide evidence suggesting that early-stage firms that take longer to obtain first funding are more likely to use unconventional technological combinations to build their product after the funding event. However, firms that receive a larger first funding round experience a decline in the unconventionality of their technology stack following the funding event. Thus, by focusing on the timing and size of first funding, we offer a way to reconcile conflicting findings from prior literature.