Startups Spur Other Companies To Innovate

Fledgling companies outdo established businesses when it comes to accelerating the development of new technologies.  

What They Studied 

To examine the interplay between startups and established companies, Francisco Polidoro Jr., professor of management, and his co-author looked at patents in one emerging industry: photovoltaic cells. The researchers analyzed 6,116 patents from the mid-1970s to 2016. They counted the number of citations these patents received in subsequent patents filed by other organizations to get an indication of how much the initial patents led to more innovations. 

What They Found 

Although startups accounted for only 13% of patents, they had an outsized number of future citations. In any given year, a startup’s patent had 8.5% more citations than patents of established companies. Over nine years, startups’ patents received 21% more citations than those of established companies. But unless a startup has enough resources to build on its own inventions, it may be hard to profit from them. Established companies with deeper pockets may take the next steps. 

Why It Matters 

Although he looked at photovoltaic cells, Polidoro says his findings have implications for other rapidly evolving technology industries, such as artificial intelligence. “These startups generate a lot of knowledge spillovers. Other entities can build on their ideas to create subsequent inventions, some of which may eventually benefit consumers in product markets,” he says. “Knowledge Diffusion in Nascent Industries: Asymmetries Between Startups and Established Firms in Spurring Inventions by Other Firms” is published in Strategic Management Journal. 

— Deborah Lynn Blumberg