Doctoral Dissertation Research in DRMS: Is All Money the Same? Funding Innovation in Young Firms

Stanford University, Stanford CA

Investigators

Abstract

Innovation is critical to the success of many young firms. Venture capital is, in turn, critical if young firms are to innovate. What is not well understood is what type of venture funding best promotes innovation. In this Doctoral Dissertation Research Grant, the co PI addresses this question by first constructing a novel longitudinal dataset on 230 U.S. Minimally Invasive Surgical device startups founded between 1986 and 2007 and then comparing the impact of four types of investors (government agencies, venture capitalists, corporate venture capital groups, and angel investors) on innovation among these firms. The proposed research will make several novel theoretical contributions. First, it explores how young organizations can best select and manage relationships with investors. This approach is in contrast to current research that emphasizes ways in which organizations can mitigate their dependence on external resource providers. A second contribution will be an exploration of how external resources, as opposed to internally generated R&D funds, impact firm innovation. Third, this research considers both the benefits and perils associated with forming relationships to acquire financial resources. Findings will have direct applicability to entrepreneurs making decisions about when and from whom to take funding in order to promote innovation. This research has implications for public policy regarding the public funding of innovation, and about incentives for private investment in innovation. It will illuminate how aspects of investment relationships- including timing of investment, and combinations of public and private funds, can be utilized to promote innovation in young firms.