ABSTRACT
The existing liter at ure focuses on the implementation of open in nova tion, espe cially in large com panies. The examples of open in nova tion often de scribe the changes from a large com pany’s per spect ive, yet new entre pren eurs and small businesses can also leverage both types of licensing agreement. From a new firm’s per spect ive, licensing out can enable the firm to maintain a focus on further in nova tion or free the firm from the investment required to commercialize the idea, while licensing in allows a new business to take ad vant age of an in nova tion to improve the firm’s own good or ser vice production. Yoshikawa suggested that a new firm is more likely to engage in inward licensing agreements for mature technologies that have estab lished patents (Yoshikawa, 2003). The agreements are somewhat less stra tegic in terms of de veloping a com peti tive ad vant age, but the time pressure that a new firm feels to push a product or ser vice to market tends to increase usage of inward licenses. In addition, the firm can then focus time and expenditures on other issues and not “reinvent the wheel”. Innovation strat egies of nascent firms could be con sidered much more absorbing of this form of open innovation. The lack of appropriate meas ures of open in nova tion activity in nascent firms has slowed our understanding of open in nova tion capa city in new business formation. Although nascent businesses are argu ably different from small business, findings such as Schumpeter’s examination of creative destruction and small businesses suggests that the fomentation of ideas is an essential element of their con tri bu tion to the eco nomy. Schumpeter found that small businesses are more likely to generate major in nova tions than large businesses (Scherer & Ross, 1990; Small Business Administration, 1996). Although small businesses may not be nascent firms, new business formation is related to the idea that the firm may be con trib ut ing a new idea, in nova tion and/or pro cess to the market. Thus, it is very likely that nascent firms have sim ilar levels of in nova tion potential to that of small business. Continuing this ana logy, a US Small Business Administration study found that “small patenting firms produce 13-14 times more patents per employee as large patenting firms” and that “small firm patents are twice as likely as large firm patents to be among the 1% most cited patents” (CHI Research Inc., 2002: 3).2 However, some suggest that “it would appear that increasingly those who invent are dissuaded from seeking patents by the costs involved, the time delays,
and the pro spect in many new industries that patents will provide very little protection” (Miner et al., 1992: 103), making external technologies even more appealing to small business and nascent firms. The chapter examines open in nova tion among nascent firms from the per spect ive that in nova tions are largely the work of smaller firms, and nascent firms are certainly more likely to be small. The ana lysis will also ex plore the dif fer ences among high technology nascent firms given that they face even greater changes in their in nova tion model, spending only a fraction of what large firms spend on total R&D but producing more than half of the in nova tions (Small Business Administration, 1996). The ana lysis examines the likelihood of adopting open in nova tion strat egies and de velops testable hypotheses about the measures of in nova tion with respect to firm charac ter istics as well as owner charac ter istics, such as human capital. It ex plores dif fer ences with respect to gender to provide fuller con text to our understanding of entre pren eurs and the use of open in nova tion. Although women have tradi tion ally founded businesses in the retail and ser vice sectors (Loscocco & Robinson, 1991; Moore & Buttner, 1997; Anna & Chandler, 1999), they are increasingly repres ented in nontraditional industries such as high-technology, construction, transportation, pub lic utilities, business consulting and other types of ser vices (Center for Women’s Business Research, 2003, 2004; Langowitz, 2003). The discussion of in nova tion dy namics occurs across a con sider able liter at ure from a variety of dis cip lines. Although Schumpeter focused on creative destruction, others link in nova tion’s eco nomic impact to geographic space and how the agglomeration of in nova tions in one area can have large im plica tions on a locale’s eco nomic well-being. Past studies suggest that know ledge is not distributed evenly across space (Jaffe et al., 1993; Feldman & Audretsch, 1999), resulting in spatial disparities of in nova tion ac tiv ities. Actually, “cited patents origin ate with a high degree of stat ist ical likelihood from the same geographic locality” (Scott, 2006: 9). In addition, there is large heterogeneity in selfemployment across space (Glaeser, 2007). Thus, the chapter examines the charac ter istics of regions that are more likely to have firms that are pursuing a more open in nova tion strat egy. In total, the chapter seeks to examine the use of open in nova tion at the firm level, as well as address the lack of gen eral understanding of the role of location in entrepreneurship.
