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The dynamic impact of innovative capability and inter-firm network on firm valuation: A longitudinal study of biotechnology start-ups

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  • Zheng, Yanfeng
  • Liu, Jing
  • George, Gerard
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    Abstract

    Prior research suggests that a high technology start-up's innovative capability and inter-firm network influence its performance and consequently, firm valuation. Few studies consider their joint influence and even fewer consider the temporal change of those effects on firm valuation. In this study, we propose that firm age, a key organizational variable, represents both the development of organizational routines from a start-up's perspective and the accumulation of accessible information from an investor's viewpoint. As such, an investor's evaluation of a high technology start-up's innovative capability and inter-firm network evolves with firm age. Using panel data of 170 biotechnology start-ups, our results suggest that the relative value of network status declines while the impact of innovative capability increases with firm age. Interestingly, there is a growing complementary effect of innovative capability and network heterogeneity on firm valuation. The implications of these findings for entrepreneurial practice and theories of firm capabilities and inter-firm network are discussed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 25 (2010)
    Issue (Month): 6 (November)
    Pages: 593-609

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    Handle: RePEc:eee:jbvent:v:25:y:2010:i:6:p:593-609

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    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: Capabilities Absorptive capacity Alliances R& D Valuation;

    References

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    Cited by:
    1. Michele Meoli & Stefano Paleari & Silvio Vismara, 2013. "Completing the technology transfer process: M&As of science-based IPOs," Small Business Economics, Springer, Springer, vol. 40(2), pages 227-248, February.
    2. Aurora A.C. Teixeira & Marlene Grande, 2013. "Determinants of the economic performance of Portuguese Academic Spin-offs: do Science & Technology infrastructures and support matter?," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 502, Universidade do Porto, Faculdade de Economia do Porto.
    3. Tarek Miloud & Mathieu Cabrol, 2011. "Les facteurs stratégiques influençant l'évaluation des start-ups par les capitaux-risqueurs," Post-Print, HAL hal-00951565, HAL.
    4. Mayer-Haug, Katrin & Read, Stuart & Brinckmann, Jan & Dew, Nicholas & Grichnik, Dietmar, 2013. "Entrepreneurial talent and venture performance: A meta-analytic investigation of SMEs," Research Policy, Elsevier, Elsevier, vol. 42(6), pages 1251-1273.

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