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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

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.

Suggested Citation

  • Zheng, Yanfeng & Liu, Jing & George, Gerard, 2010. "The dynamic impact of innovative capability and inter-firm network on firm valuation: A longitudinal study of biotechnology start-ups," Journal of Business Venturing, Elsevier, vol. 25(6), pages 593-609, November.
  • Handle: RePEc:eee:jbvent:v:25:y:2010:i:6:p:593-609
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    References listed on IDEAS

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    Cited by:

    1. 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 502, Universidade do Porto, Faculdade de Economia do Porto.
    2. Michele Meoli & Stefano Paleari & Silvio Vismara, 2013. "Completing the technology transfer process: M&As of science-based IPOs," Small Business Economics, Springer, vol. 40(2), pages 227-248, February.
    3. repec:spr:manrev:v:68:y:2018:i:1:d:10.1007_s11301-017-0131-5 is not listed on IDEAS
    4. Henar Alcalde & Maribel Guerrero, 2016. "Open business models in entrepreneurial stages: evidence from young Spanish firms during expansionary and recessionary periods," International Entrepreneurship and Management Journal, Springer, vol. 12(2), pages 393-413, June.
    5. Tarek Miloud & Mathieu Cabrol, 2011. "Les facteurs stratégiques influençant l'évaluation des start-ups par les capitaux-risqueurs," Post-Print hal-00951565, HAL.
    6. 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, vol. 42(6), pages 1251-1273.
    7. repec:spr:joevec:v:28:y:2018:i:1:d:10.1007_s00191-016-0486-0 is not listed on IDEAS
    8. Mary Beth Rousseau & Blake D. Mathias & Laura T. Madden & T. Russell Crook, 2016. "Innovation, Firm Performance, And Appropriation: A Meta-Analysis," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-29, April.
    9. repec:spr:jbecon:v:88:y:2018:i:3:d:10.1007_s11573-017-0857-5 is not listed on IDEAS

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