David H. Hsu

Venture Capitalists and Cooperative Start-up Commercialization Strategy

This paper examines the possible impact of venture capital (VC) backing on the commercialization direction of technology-based start-ups by asking: To what extent (if at all) do VC-funded start-ups engage in cooperative commercialization strategies (strategic alliances or technology licensing, or both) relative to a comparable set of start-ups, and with what consequences? To address these questions, I assemble a novel data set that matches firms receiving a federal research and development subsidy through the U.S. Small Business Innovative Research program to VC-funded firms by observable characteristics in five technology-intensive industries. These data allow decoupling of cooperative activity resulting from start-up development via the passage of calendar time from that due to association with VCs. An analysis of the 696 start-ups in the sample (split by an external funding source) suggests substantial boosts in both cooperative activity associated with VC-backed firms and in the likelihood of an initial public offering.

Knowledge Brokering and Organizational Innovation: Founder Imprinting Effects

We empirically examine the innovation consequences of organizational knowledge brokering, the ability to effectively apply knowledge from one technical domain to innovate in another. We investigate how organizational innovation outcomes vary by founders’ initial mode of venture ideation. We then compare how firms established with knowledge-brokering-based ideation differ in their methods of sustaining ongoing knowledge-brokering capacity compared with firms not established in such a manner. We do so by tracking all the start-up biotechnology firms founded to commercialize the then-emergent recombinant DNA technology (the sample of initial knowledge brokers) together with a contemporaneously founded sample of biotechnology firms that did not license the DNA technology (the sample of initial nonbrokers). Our results suggest that (a) ongoing knowledge brokering has an inverted U-shaped relationship with innovative performance in general; (b) initial knowledge brokers have a positive imprinting effect on their organizations’ search patterns over time, resulting in superior performance relative to nonbrokers; and (c) initial nonbrokers rely more on external channels of sourcing knowledge, such as hiring technical staff, relative to initial brokers, reinforcing the imprinting interpretation. The described imprinting mechanism differs from extant mechanisms such as partner affiliation- and trigger-based mechanisms in explaining entrepreneurial performance differentials.

Improving energy benchmarking with self-reported data

Energy benchmarking for buildings has become increasingly important in government policy and industry practice for energy efficiency. The questions of how energy benchmarking is currently conducted, and how it might be improved using rapidly growing quantities of self-reported data, are examined. A case study of commercial office buildings in New York City demonstrates how the rapid growth in self-reported data presents both new opportunities and challenges for energy benchmarking for buildings. A critique is presented for the scoring methodology and data sources for Energy Star, one of the largest and most successful benchmarking certification schemes. Findings from recent studies are examined to illustrate how this certification currently works in the marketplace. Self-reported building energy data are rapidly growing in Portfolio Manager (the user interface to Energy Star) due to mandatory energy benchmarking laws, and can be used to improve Energy Stars current scoring methods. These self-reported data are tested and improved for analysis by applying theories and methods of data quality developed in computer science, statistics and data management. These new data constitute a critical building block for the development of energy efficiency policies, and will affect how government, consultants, and owners measure and compare building energy use.

Experienced Entrepreneurial Founders and Venture Capital Funding

Using a novel dataset of 149 early stage start-up firms, I empirically examine how prior entrepreneurial founding experience affects the timing and valuation of venture capital (VC) funding. Such founding experience results in both enhanced skill in building current start-ups and in improved social capital that can be used to, for example, recruit executive officers. The results suggest that entrepreneurs differ in accumulated human and social resources, which in turn have measurable effects on VC timing and valuation. The results are accentuated for entrepreneurs with financially successful prior founding experience. The study concludes with implications for academics and managers.

Unobserved Heterogeneity in Matching Games

Agents in two-sided matching games vary in characteristics that are unobservable in typical data on matching markets. We investigate the identification of the distribution of unobserved characteristics using data on who matches with whom. In full generality, we consider many-to-many matching and matching with trades. The distribution of match-specific unobservables cannot be fully recovered without information on unmatched agents, but the distribution of a combination of unobservables, which we call unobserved complementarities, can be identified. Using data on unmatched agents restores identification.

Information and communication technologies and climate change adaptation in Latin America and the Caribbean: a framework for action

Despite ongoing interest in deploying information and communication technologies (ICTs) for sustainable development, their use in climate change adaptation remains understudied. Based on the integration of adaptation theory and the existing literature on the use of ICTs in development, we present an analytical model for conceptualizing the contribution of existing ICTs to adaptation, and a framework for evaluating ICT success. We apply the framework to four case studies of ICTs in use for early warning systems and managing extreme events in the Latin American and the Caribbean countries. We propose that existing ICTs can support adaptation through enabling access to critical information for decision-making, coordinating actors and building social capital. ICTs also allow actors to communicate and disseminate their decision experience, thus enhancing opportunities for collective learning and continual improvements in adaptation processes. In this way, ICTs can both communicate the current and potential impacts of climate change, as well as engage populations in the development of viable adaptation strategies.

Technology commercialization strategy in a dynamic context: Developing specialized complementary assets in entrepreneurial firms

A firm that lacks the specialized complementary assets necessary to commercialize an innovation faces a trade-off between contracting with an incumbent to access those assets and integrating downstream into commercialization. According to the framework developed in the prior literature, under a strong appropriability regime the innovator is likely to be better off contracting with an incumbent (as long as it can negotiate reasonable terms). However, we argue that if the innovator can learn from its experience in product commercialization, and thereby build its own commercialization capabilities, then the benefits of integrating downstream may outweigh the opportunity costs of learning and foregone profits. Alternatively, by engaging in joint commercialization, the innovator may be able to avoid these opportunity costs, albeit at the expense of higher inter-organizational governance costs. We illustrate the relationship between the choice of commercialization mode, commercialization experience, and performance in the context of the pharmaceutical industry. Specifically, we study how commercialization mode and experience affects the likelihood of drug approval. We find that when innovators lacking commercialization experience participate in the commercialization process though either joint commercialization or by commercializing alone, the product is less likely to be approved. However, innovators that have participated in the commercialization process in the past are more likely to successfully commercialize subsequent innovations under joint commercialization than those which have only contracted the commercialization to an incumbent. The results suggest that in some circumstances participating in the commercialization process, either through self-commercialization or by engaging in joint commercialization, may be the optimal strategy even for firms without the requisite complementary assets.

Bringing entrepreneurial ideas to life

Prior work on the commercialization of innovation is motivated by competitive dynamics between startup and incumbent firms and has looked at the determinants of innovator commercialization mode. We contribute to the literature by examining variation in performance resulting from the choice of whether to innovate technologically in new ventures. The institutional and business environment conditions which strategies lead to higher performance for start-up innovators. In contrast to the factors shown to determine commercialization mode, we show that the team characteristics and economic environment play a stronger role in predicting an innovators entrepreneurial firm performance. Using unique data from a novel survey of entrepreneurial firms founded over five decades and across diverse industries, we show the conditions when technology focused vs. functionally diverse founding teams outperform. In addition, we show that in certain environments firms with more highly original innovations and innovating firms founded during a recession have higher performance.

Organizational Routines Development and New Venture Performance

To better understand how entrepreneurial ventures vary as they evolve, we introduce and develop the concept of an organizational routine in a prototypical state, a protoroutine. Protoroutines allow experienced new ventures (but not inexperienced start-ups) to economize on decision-making and execution time in problem solving by drawing from an inventory of prior solutions to challenges. Protoroutines are not, however, tailored to the challenge at hand. We embed protoroutines into a simulation-based model featuring agents with differing decision-making speeds and abilities of exploring more distant solutions, two parameters influenced by founding team characteristics. Search speed and distance are typically traded off against each other at the team design level. Protoroutines may therefore be particularly helpful in organizational contexts in which it is optimal to have both search speed and distance. We characterize the organizational contextual configurations along the dimensions of environmental turbulence and decision complexity in which protoroutines, search speed, and search distance are associated with elevated (and dampened) organizational performance. One important conclusion is that decision-making speed can be a valuable organizational resource across organizational environments. Overall, our agent-based model and simulation results deepen our understanding of how and with what performance consequence new ventures develop.

How Strategy and Industry Should Shape Your Choice of Co-Founders

We determined that founding teams that have diverse skills and specialties enjoy a high probability of success when they face competition in getting their product or service to market. Conversely, we found that founding teams comprised largely of technical experts are better suited to perform well if they are focused on innovating and if they are operating in a business environment that is cooperative (in the sense that incumbents and startups tend to partner).