Abstract
Innovation activities provide considerable challenges to small firms due to resource constraints. Conversely, large, established firms are often forced to buy technologies to remain innovative. This paper investigates the interplay of these two aspects in a specific software-based startup context. Based on structured interviews, the paper analyses what characteristics of startups and small firms and resources accessed through networking determine acquisition likelihoods and growth. This addresses a gap in the literature, namely understanding better the dual role of venture capital, specifically with regard to the type of innovation pursued by small firms and in its interplay with other determinants of growth and acquisition.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Freeman, J., Carroll, G.R., Hannan, M.T.: The liability of newness: age dependence in organizational death rates. Am. Sociol. Rev. 48, 692–710 (1983)
Davidsson, P., Kirchhoff, B., Hatemi, J.A., Gustavsson, H.: Empirical analysis of business growth factors using Swedish data. J. Small Bus. Manage. 40(4), 332–350 (2002)
Desyllas, P., Hughes, A.: The revealed preferences of high technology acquirers: an analysis of the characteristics of their targets. Cambridge J. Econom. 33(6), 1089–1111 (2009)
Gans, J.S., Hsu, D.H., Stern, S.: When does startup innovation spur the gale of creative destruction? RAND J. Econom. 33(4), 571–586 (2000)
Gambardella, A., Torrisi, S.: Does technological convergence imply convergence in markets? Evidence from the electronics industry. Res. Policy 27, 445–463 (1998)
Hall, B., Ziedonis, R.: The patent paradox revisited: an empirical study of patenting in the U.S. Semiconductor Industry 1979–1995. RAND J. Econom. 32(1), 101–128 (2001)
Linden, G., Somaya, D.: System-on-a-chip integration in the Semiconductor Industry: industry structure and firm strategies. Corp. Ind. Change 12(2), 545–576 (2003)
Chakrabarti, A.K., Rubenstein, A.H.: Interorganizational transfer of technology – a study of adoption of NASA innovations. IEEE Trans. Eng. Manag. 23(1), 20–34 (1976)
Henderson, R.: Underinvestment and incompetence as responses to radical innovation: Evidence from the photolithographic alignment equipment industry. RAND J. Econom. 24(2), 248–270 (1993)
Birkinshaw, J., Van Basten Batenburg, R., Murray, G.: Venturing to succeed. Bus. Strat. Review 13(4), 1–17 (2002)
Sangiovanni-Vincentelli, A.: The tides of EDA. IEEE Des. Test Comput. 29(6), 5–74 (2003)
Grover, V., Purvis, R.L., Segars, A.H.: Exploring ambidextrous innovation tendencies in the adoption of telecommunications technologies. IEEE Trans. Eng. Manag. 54(2), 268–285 (2007)
Morris, D.J., Hay, D.A.: Industrial Economics & Organisation – Theory & Evidence. Oxford University Press, Oxford (1991)
Bruno, A.V., Cooper, A.C.: Patterns of development and acquisitions for Silicon Valley Startups. Technovation 1(4), 275–290 (1982)
Penrose, E.: The Theory of the Growth of the Firm. Oxford University Press, Oxford (1959)
Mowery, D.C., Oxley, J.E., Silverman, B.S.: Technological overlap and interfirm cooperation: Implications for the resource-based view of the firm. Res. Policy 27, 507–523 (1998)
Gulati, R.: Managing network resources. Oxford University Press, Oxford (2007)
Stinchcombe, A.L.: Organizations and social structure. In: March, J.G. (ed.) Handbook of organizations, pp. 142–193. Rand-McNally, Chicago (1965)
Kaulio, M.A.: Initial conditions or process of development? Critical incidents in the early stages of new ventures. R&D Manag. 33(2), 165–175 (2003)
Lindsey, L.: Blurring firm boundaries: the role of venture capital in strategic alliances. J. Finan. 63(3), 1137–1168 (2008)
Teece, D.J.: Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Res. Policy 15, 285–305 (1986)
Pisano, G.: Profiting from innovation and the intellectual property revolution. Res. Policy 35, 1122–1130 (2006)
Powell, W., Koput, K., Smith-Doerr, L.: Interorganizational collaboration and the locus of innovation: Networks of learning in biotechnology. Admin. Sci. Q. 41(1), 116–145 (1996)
Henderson, R., Clark, K.: Architectural Innovation: The reconfiguration of existing product technologies and the failure of established firms. Admin. Sci. Q. 35, 9–30 (1990)
Jelinek, M., Markham, S.: Industry-university IP relations: Integrating perspectives and policy solutions. IEEE Trans. Eng. Manag. 54(2), 257–267 (2007)
Santoro, M., Chakrabarti, A.: Corporate strategic objectives for establishing relationships with university research centers. IEEE Trans. Eng. Manag. 48(2), 15–163 (2001)
Geisler, E., Furino, A., Kiersuk, T.J.: Toward a conceptual model of cooperative research: Patterns of development and success in university-industry alliances. IEEE Trans. Eng. Manag. 38(2), 136–145 (1991)
Katz, R., Allen, T.J.: Investigating the not invented here (NIH) syndrome: A look at the performance, tenure, and communication patterns of 50 R&D Project groups. R&D Manag. 12(1), 7–19 (1982)
Cohen, W.M., Levinthal, D.A.: Absorptive capacity: a new perspective on learning and innovation. Admin. Sci. Q. 35, 128–152 (1990)
Bingham, R.: In support of an EDATech: pooling resources for competitive advantage. IEEE Des. Test Comput. 20(6), 74–75 (2003)
West, J., Gallagher, S.: Challenges of open innovation: the paradox of firm investment in open-source software. R&D Manag. 36(3), 319–331 (2006)
Utterback, J.M.: Mastering the Dynamics of Innovation. Harvard Business School Press, Boston (1994)
Jovanovic, B.: Selection and the evolution of industry. Econometrica 50, 649–670 (1982)
Klepper, S.: Entry, exit, growth and innovation over the product life cycle. Am. Econ. Rev. 86, 562–583 (1996)
Klepper, S.: Firm survival and the evolution of oligopoly. RAND J. Econom. 33(1), 3–61 (2002)
Jovanovic, B., MacDonald, G.M.: The life cycle of a competitive industry. J. Polit. Econ. 102(2), 322–347 (1994)
Helfat, C., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., Winter, S.G.: Dynamic Capabilities - Understanding Strategic Change in Organizations. Blackwell Publishing, New York (2007)
Wiklund, J., Shepherd, D.: The effectiveness of alliances and acquisitions: the role of resource combination activities. Entrepreneurship Theory Pract. 33(1), 193–212 (2009)
Wagner, M.: Growth of university-based startups and acquisition as an exit strategy in academic entrepreneurship evidence from software-based ventures. Int. J. Entrepreneurship Small Bus. 12(4), 39–412 (2011)
Stuart, T.: Interorganizational alliances and the performance of firms: a study of growth and innovation rates in a high-technology industry. Strateg. Manag. J. 21, 791–811 (2000)
Wagner, M.: Acquisitions as a means of innovation sourcing by incumbents and growth of technology-oriented ventures. Int. J. Tech. Manag. 52, 118–134 (2010)
Bloom, N., Kretschmer, T., Van Reenen, J.: Are family-friendly workplace practices a valuable firm resource? Strateg. Manag. J. 32, 343–367 (2011)
Design Automation and Test Engineering (DATE) conference: DATE Press Preview. http://www.date-conference.com/. Accessed 5 Mar 2006
Lee, A.S., Baskerville, R.L.: Generalizing generalizability in information systems research. Inf. Syst. Res. 14(3), 221–243 (2003)
Delmar, F., Davidsson, P., Gartner, W.: Arriving at the high growth firm. J. Bus. Ventur. 18(2), 189–216 (2003)
Shepherd, D., Wiklund, J.: Are we comparing Apples with Apples or Apples with Oranges? Appropriateness of knowledge accumulation across growth studies. Entrepreneurship Theory Pract. 33(1), 105–123 (2009)
Romijn, H., Albaladejo, M.: Determinants of innovation capability in small electronics and software firms in southeast England. Res. Policy 31, 1053–1067 (2002)
MacCallum, R.C., Widaman, K.F., Zhang, S., Hong, S.: Sample size in factor analysis. Psychol. Methods 4, 84–99 (1999)
MacCallum, R.C., Widaman, K.F., Preacher, K.J., Hong, S.: Sample size in factor analysis: the role of model error. Multivar. Behav. Res. 36, 611–637 (2001)
Preacher, K., MacCallum, R.: Exploratory factor analysis in behavior genetics research: Factor recovery with small sample sizes. Behav. Genet. 32, 153–161 (2002)
Costello, A.B., Osborne, J.W.: Best practices in exploratory factor analysis: four recommendations for getting the most from your analysis. Pract. Assess. Res. Eval. 10(7) (2005). http://pareonline.net/pdf/v10n7a.pdf
Allison, P.D.: Change scores as dependent variables in regression analysis. Sociol. Methodol. 20, 93–114 (1990)
Henkel, J., Rønde, T., Wagner, M.: And the winner is – acquired entrepreneurship as a contest yielding radical innovations. Res. Policy 44, 295–310 (2015)
Tyrväinen, P., Warsta, J., Seppänen, V.: Evolution of secondary software businesses: understanding industry dynamics. In: León, G., Bernardos, A.M., Casar, J.R., Kautz, K., De Gross, J.I. (eds.) TDIT 2008. ITIFIP, vol. 287, pp. 381–401. Springer, Boston (2008). doi:10.1007/978-0-387-87503-3_22
Tyrväinen, P., Mazhelis, O. (eds.): Vertical Software Industry Evolution - Analysis of Telecom Operator Software. Springer-Physica, Heidelberg (2009). doi:10.1007/978-3-7908-2352-3
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Appendix: Interview Questions Used in the Analysis
Appendix: Interview Questions Used in the Analysis
Questions used in the structured interviews for calculation of the Low risk/day-to-day factor variable:
Large firms are so involved with the day-to-day requirements of their customers that they do not have resources for the innovation.
Large firms that lead the market are too risk-averse do carry out the innovation.
Question used in the structured interviews for calculation of the age of the firm:
When was your firm founded?
Question used in the structured interviews for identifying the fate of non-acquired companies:
What happens to start-ups that are not acquired after some years? Do these mostly go out of business and leave the market? Or do most of unacquired firms exist in small but lucrative market niches or merge with another small firm?
Question used in the interviews for identifying organisationally radical innovations:
Would you agree that compared to the competences of the top 3 firms in the industry) innovating your product requires new capabilities or skills of researchers (e.g. only recently taught at universities) or a different structure of R&D in a firm?
Rights and permissions
Copyright information
© 2017 Springer International Publishing AG
About this paper
Cite this paper
Wagner, M. (2017). Acquisitions and Growth of Software Startups: The Dual Role of Venture Capital as a Success Factor. In: Ojala, A., Holmström Olsson, H., Werder, K. (eds) Software Business. ICSOB 2017. Lecture Notes in Business Information Processing, vol 304. Springer, Cham. https://doi.org/10.1007/978-3-319-69191-6_2
Download citation
DOI: https://doi.org/10.1007/978-3-319-69191-6_2
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-69190-9
Online ISBN: 978-3-319-69191-6
eBook Packages: Computer ScienceComputer Science (R0)