Changes

This page details the 2012 version [[Media:Egan_(2013)_-_How_Startups_Innovate_(Job_Market_Paper).pdf|Download a copy of my job market paper. The 2013 version is a radical overhaul with strong emphasis on (pdf)]] and the model and its identification. The [[Media:Egan (2013) - Model Appendix to Job Market Paper Development.pdf|separate model appendix]] is restricted to authorized readers only.

*[[Media:Egan_(2012)_''How Start-_Technology_and_Commercialization_Strategy_(October_Version)up Firms Innovate'', proposes a `system vs.pdf‎|Download components' theory of innovation to understand the PDF]] *[[:Image:Egan_(2012)_relationship between inventive activity and commercialization investment choices for patent-_Technology_and_Commercialization_Strategy_(October_Version)holding high-technology start-up firms. I test the theory using cross-sectional analyses and a difference-in-difference analysis on near-population data of patent-holding start-up firms that secured either an initial public offering or an acquisition between 1986 and 2004. The theory requires that entrepreneurs maximize their expected profits given both the available technological opportunity and the state of technology in their industry. Start-up firms should specialize to pit their strengths against incumbents' weaknesses or generalize to best incumbents on every dimension. Moreover, policy that affects commercialization investment choices should also affect research and development choices, and vice versa. I show that following the introduction of the 2002 Sarbanes-Oxley Act, which raised the costs of an initial public offering, start-up firms preferred to specialize in component-based invention rather than developing competitive systems.pdf‎|Repository record]]

This Companion paper explores :*Egan, Edward J. (2013), ''Venture Capitalists as Vendors of Complementary Components'', Job Market Companion Paper Note: Until ''Venture Capitalists as Vendors of Complementary Components'' is released, its model is included in the relationship between the technology of a ''Model Appendix to 'How Start-up Firms Innovate'''. ==Abstracts== ''How Start-up Firms Innovate'': A successful start-up and firm makes two important strategic innovation choices during its choice to remain an independent competitor through an initial public offering or cooperate with an incumbent through an acquisitionearly life. I use two new measures of patent citations It must decide upon a 'technology strategy' -- whether citations are made to valid specialize or expired patents and whether citations are between firms generalize in the same productallocation of its research and development efforts --market or not and a 'commercialization strategy' -- whether to show that patent citations map complementary and/cooperate or substitution-based relationships between property-rightscompete with incumbents to secure the investment it will need to commercialize its inventions. In this paper, I test advance a number `system vs. components' theory of theories of patent citations and innovation from the literature by interpreting the consequences , which supposes that they would have for these measures technological products are based on systems of complementary components. A pattern of specialize-and-cooperate and generalize-and-compete then occurs naturally as entrepreneurs maximize their expected profits given both the choice to IPO or be acquired available technological opportunity and the value state of a technology in their industry. I derive measures of technology strategy for patent-holding start-up firms, and use the choice to sell the firm; my results are not consistent with any in an acquisition or to raise investment through an initial public offering (IPO) as prototypical examples of themcooperate versus compete commercialization strategies. I then articulate a theory show that measures of `systems versus component innovation', technology strategy Granger-cause commercialization strategies in which cross sectional analyses. I argue also address the endogeneity issue that arises because forward-looking start-ups face up firms chose their technology strategy in anticipation of their commercialization strategy by using the introduction of the 2002 Sarbanes-Oxley Act (SOX) as a choice shock to either the relative costs of an IPO. I provide complete systems evidence that successful start-up firms altered their technology strategies to favor component specialization following the introduction of SOX.  ''Venture Capitalists as Vendors of Complementary Components'': Venture capitalists obtain most of their earnings by selling or specialize 'exiting' their ownership positions in producing highsuccessful start-quality componentsup firms through either initial public offerings (IPOs) or third party acquisitions. The paper seeks to explain the choice between IPOs and acquisitions as exit vehicles. I posit that component substitution explains why citationsThis paper provides a model where acquisitions of venture-capital-backed start-received to up firms occur because of complementarities between a start-ups are negatively correlated with value, up firm's innovations and argue that the greater specificity technology of systems as compared with components to product-markets gives rise to potential acquirers. The complementarities reduce the very strong explanatory power cost of production for an acquiring incumbent and improve welfare for consumers. Initial public offerings, on the decomposition other hand, occur when a start-up firm creates an entire system of citations components and internalizes the complementarities between them. Entry into the product market after an IPO also increases consumer welfare. Venture capitalists can therefore be viewed as vendors of complementary components to either incumbents or public investors, who use complementarities inthe component-sector based structure of technological innovation to both maximize profits and out-of-sector citationsenhance consumer welfare. ==Paper Development== The [[Job Market Paper Development]] section is restricted to authorized readers only.