TY - UNPB
T1 - Caught In The Middle
T2 - The Bias Against Startup Innovation with Technical and Commercial Challenges
AU - Arora, Ashish
AU - Rønde, Thomas
AU - Fosfuri, Andrea
PY - 2022
Y1 - 2022
N2 - Startups in IT and life sciences appear to be flourishing. However, startups in other sectors, such as new materials, automation, and eco-innovations, which are often called "deep tech", seem to struggle. We argue that innovations with both technical and commercial challenges, typical of deep tech innovations, are especially disadvantaged in a startup-based innovation system. We develop an analytical model where startups are more efficient at solving technical challenges and incumbents are more efficient at solving commercial challenges. We find that the startup-based system works better for "specialized" innovations, where only one type of challenges is significant. Startups which face both technical and commercial challenges are disadvantaged because they capture a smaller fraction of the value they create. We discuss the implications for various public policies that have been proposed to encourage deep-tech.
AB - Startups in IT and life sciences appear to be flourishing. However, startups in other sectors, such as new materials, automation, and eco-innovations, which are often called "deep tech", seem to struggle. We argue that innovations with both technical and commercial challenges, typical of deep tech innovations, are especially disadvantaged in a startup-based innovation system. We develop an analytical model where startups are more efficient at solving technical challenges and incumbents are more efficient at solving commercial challenges. We find that the startup-based system works better for "specialized" innovations, where only one type of challenges is significant. Startups which face both technical and commercial challenges are disadvantaged because they capture a smaller fraction of the value they create. We discuss the implications for various public policies that have been proposed to encourage deep-tech.
U2 - 10.3386/w29654
DO - 10.3386/w29654
M3 - Working paper
T3 - National Bureau of Economic Research. Working Paper Series
BT - Caught In The Middle
PB - National Bureau of Economic Research (NBER)
CY - Cambridge, MA
ER -