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- Title
EXPOSED: VENTURE CAPITAL, COMPETITOR TIES, AND ENTREPRENEURIAL INNOVATION.
- Authors
COX PAHNKE, EMILY; MCDONALD, RORY; WANG, DAN; HALLEN, BENJAMIN
- Abstract
This study investigates the impact of early relationships on innovation at entrepreneurial firms. Prior research has largely focused on the benefits of network ties, documenting the many advantages that accrue to firms embedded in a rich network of interorganizational relationships. In contrast, we build on research emphasizing potential drawbacks to examine how competitive exposure, enabled by powerful intermediaries, can inhibit innovation. We develop the concept of "competitive information leakage," which occurs when firms are indirectly tied to their competitors via shared intermediary organizations. To test our theory, we examine every relationship between entrepreneurial firms and their venture capital investors in the minimally invasive surgical device segment of the medical device industry over a 22-year period. We find that indirect ties to competitors impede innovation, and that this effect is moderated by several factors related to the intermediary's opportunities and motivation to leak important information.
- Subjects
NEW business enterprises; TECHNOLOGICAL innovations; MEDICAL equipment industry; BUSINESS networks; VENTURE capital companies; TRADE secrets; INTELLECTUAL property; ECONOMIC competition
- Publication
Academy of Management Journal, 2015, Vol 58, Issue 5, p1334
- ISSN
0001-4273
- Publication type
Article
- DOI
10.5465/amj.2012.0777