Profiting from technology in small technology start-ups

Jean Michel Brask Deleuran & Eske Bo Knudsen

Student thesis: Master thesis


Occasionally small technology start-­‐ups (STSUs) are unable to advance their technology towards commercialization due to financial limitations and lack of crucial complementary assets. For this reason, STSUs are bound to profit through an intermediate market for immature technology. Here, STSUs collaborate with incumbents who assume control over the technology, mature it and eventually commercialize it. Different collaboration agreements exist, such as e.g. licensing or joint venture. However, some STSUs are left with only one option, namely outright technology sale. The Profiting from Innovation literature studies the dynamics of innovation and the implications for business strategy. However, the particularities of STSUs bound to profit from technology sale are neglected. Accordingly, this thesis provides a contribution to the Profiting from Innovation literature. First, it is hypothesized that Profiting from Innovation has a limited reach in terms of providing adequate strategic advice for STSUs bound to profit from technology sale. By applying the Profiting from Innovation framework to a case study of a Danish STSU the hypothesis is confirmed, due to the immature nature of the technology, the immature state of the industry, and the lack of financial resources. It is argued that the strategic advice offered by the Profiting from Innovation framework is focused on the last phases of the innovation process. Subsequently, this thesis sets out to expand the reach of Profiting from Innovation as well as its practical application. The case study is now used in an explorative manner while derived findings are enriched with selected theory. It is proposed that STSUs have weak bargaining positions due to the imperfections of markets for immature technology, caused by limited thickness of the markets, asymmetric information, high uncertainty and high transaction costs. To improve this bargaining position, and enhance the probability of becoming profitable, STSUs need to build advantageous appropriability regimes and explorative complementary asset positions. An advantageous appropriability regime must balance between the protection and transferability of STSUs’ technologies. In order to optimize the explorative complementary asset position STSUs need to focus on building up competences for combining the right explorative assets – including scientific research, process innovative, product innovative (technical or functional application), and aesthetic design – and managing the alliances from which these assets stem. The findings are arranged in a proposed ‘Exit strategy decision & action flow chart’ targeted towards STSUs bound to profit from outright technology sale and thus focuses on the earlier phases of the innovation process.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
Publication date2010
Number of pages159