When Do Technology Entrepreneurs Start New Ventures? Discontinuities, Knowledge Resources, and Market Entry

Abstract

This paper examines the question of whether the initial stock of resources of new ventures that enter an industry differs based on the whether they enter before or after a technological discontinuity occurs. We draw on the theoretical foundations of the resource-based view of the firm, and those of industry evolution, to argue that differences in the technological resources of these new ventures are driven by shifts in the valuation of resources caused by the technological change, and by shifts in the opportunity awareness advantage that knowledge proximity confers to scientists and to specialized technology investors in periods of change. We show that prior to a dramatic technological shift, talented entrepreneurial scientists are more likely to populate and lead venture founding teams and that, after a shift, the flow of scientists reverses, as they are less likely to be involved in the founding of new ventures. Further investigation also reveals that opportunity recognition is a key factor in the change of scientific resources in new ventures, and that knowledge proximity plays an important role in this recognition. The findings provide support for a link between competitive heterogeneity, the origin of organizational endowments, industry life cycle, and knowledge resources.

Keywords: resources, innovation, entrepreneurship, technology, new ventures, human capital

JEL Classification: L2, M1, O31, O32, M13