The Role of Small Firms, Large Firms and Universities in the Creation, Development and Commercialization of Radical Innovation in Biotechnology

Authors: Ashish Arora (Duke University), Manuel Gigena (KU Leuven/Louvain), Dennis Verhoeven (KU Leuven/Louvain) and Reinhilde Veugelers (KU Leuven/Louvain)

Despite anecdotal evidence, literature does not provide a clear understanding of how the process of radical innovation unfolds. A capabilities-based view leads to a division of labor wherein large firms are more efficient at commercializing novelty, whereas small firms may either be creators of novelty or intermediaries between universities and large firms. Using novel patent-based indicators, we sketch a framework to study the role of different actor types in the generation of technological novelty, its development, and approach its commercial application.

The first results convey a nuanced view on the role of different actor types in the radical innovation process, wherein all types are present in the stages of novelty generation and reuse, but to different extents. Small firms are principally responsible for experimentation, with a disadvantage on commercialization. They are over-represented on the generation of novelty while, consistent with the experimentation idea, the average usefulness of their innovation output (either in technical or commercial sense) is lower. Novelty introduced by universities is more likely to be of high technical usefulness. Large firms are more likely to develop commercially relevant patents. Conditional upon novelty this holds as well, although the advantage of large firms is smaller.

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