Day: July 22, 2010

Great data for Entrepreneurs

The article Perspective: Economic Conditions, Entrepreneurship, First-Product Development, and New Venture Success in Journal of Product Innovation Management studies 539 new ventures started between 1998 and 2001 and has the following great findings:

  1. Consistent with prior research, less than half of the 539 ventures survived more than two years. 
  2. Economic downturns lead to higher failure rates for new ventures. 
  3. New venture success is highly correlated with first-product success. 
  4. First-product success is enhanced when those products are introduced into markets with emerging market needs but with established industry standards. 
  5. First-product and venture performance are significantly higher for products based on ideas that came from the founders. 
  6. Most successful first products are based on ideas that reflect both technology development and an analysis of customer needs.
Take away for me: Starting a business is risky.  However, as long as it is based on my own ideas and I am strongly aware of / pay attention to customer needs, I should be OK!

R&D Collaborations and Product Innovation

The paper R&D Collaborations and Product Innovation in Journal of Product Innovation Management confirms some of the findings we discussed earlier in the week: It is good to collaborate with suppliers and not so good to develop products with customers. Specifically, this particular paper is based on R&D collaborations undertaken by a sample of 781 manufacturing firms during 1998–2002.  The paper finds that:

  1. Collaborations with suppliers have the highest positive impact on product innovation, followed by collaborations with universities. 
  2. R&D collaborations with customers do not appear to affect product innovation
  3. Collaborations with competitors appear to harm
  4. Positive influence of R&D collaborations with universities and suppliers is sustained over the long-term
  5. Negative influence of R&D collaborations with competitors is, fortunately, short-lived. 
Also, some specifics about quality of collaboration: 

Their findings indicate that ease of knowledge access, rather than breadth of knowledge, appears to drive the success of R&D collaborations for product innovation. R&D collaborations with suppliers or universities, which are characterized by relatively easy knowledge access, have a positive influence on product innovation, whereas R&D collaborations with customers or competitors, which are characterized by reduced ease in knowledge access, are not related or are even negatively related to product innovation.

More importantly, partners with a narrow knowledge-base (at least the part that is shared) is better for collaboration than otherwise.  This is similar to what we discussed in the paper on cross-function collaborations.

Moreover, to achieve product innovation with the help of R&D collaborations, it appears that the collaboration must first have mechanisms in place to facilitate the transfer of knowledge; once these are in place, it is better if the partner has a relatively narrow knowledge base. Thus, while R&D collaborations with both suppliers and universities are positively related to product innovation, the narrow knowledge base provided by collaborations with suppliers appears to have a larger positive impact on product innovation than the wider knowledge base provided by collaborations with universities