Tech startups are key to innovation – data shows
Kolev et. al ’22 (Julian Kolev; Senior Research Economist at the United States Patent and Trademark Office (USPTO), Alexis Haughey; MIT Sloan, Fiona Murray; The Associate Dean of Innovation and Inclusion at the MIT School of Management and the William Porter (1967) Professor of Entrepreneurship, serves on the British Prime Minister’s Council on Science and Technology, a member of the Ministry of Defence Innovation Advisory Panel and the European Innovation Council Joint Expert Group, Scott Stern; The David Sarnoff Professor of Management at the MIT Sloan School of Management, “OF ACADEMICS AND CREATIVE DESTRUCTION: STARTUP ADVANTAGE IN THE PROCESS OF INNOVATION”, August 2022, https://www.nber.org/system/files/working_papers/w30362/w30362.pdf) /CPSW LP
In this paper, we present theory and evidence for the unique role of startups in the innovation ecosystem. We begin with vignettes of prominent startups: Moderna, BioNTech, Commonwealth Fusion, and Sublime Systems demonstrate the tendency for startups to pursue novel, high-upside technologies, while Sublime Systems offers an example of a startup aiming to displace existing technologies in an industry dominated by powerful incumbents. We also present evidence from university licensing that startups have taken an increasing share of the technology transfer ecosystem since 2000, reaching nearly 30% of all licenses in 2019 while displacing large firms. Next, combining and extending the insights of AH and ADS, we argue that there are two specific channels through which theory predicts startups will have an advantage in multi-stage research lines. First, startups will have private information on the value of their ideas, and this asymmetry is likely to be highest in novel and high-upside technologies, leading them to be developed internally rather than transferred to an outside party. Second, startups do not face the threat of cannibalization, and are more likely to pursue disruptive technologies that would undermine the competitive advantages of existing incumbents.
We evaluate the above predictions using a dataset of all patents granted within the regional innovation ecosystems centered on the top 25 US research universities from 2000 to 2015. Our results suggest that there is a clear startup advantage in terms of both the average and the right tail of innovation value, as measured by forward citations, relative to both academic and incumbent patents. We then show that startup inventions are both more original and more general than those of other institutions, and conclude by highlighting how former startups, or “scale-ups,” have overtaken pre-existing incumbents in their citation-weighted inventions in the space of just fifteen years. Taken together, our findings highlight that startups produce inventions that are both more valuable and more disruptive and novel than those pursued by either private-sector incumbents or academic institutions.