Emerging from the Valley of Death: Science-to-Commerce Transfer Styles and Generating Support for Proven Ideas

• In Event: 4255 - Section on Economic Sociology Roundtables (1 hour)
  In Refereed Roundtable 60min: 4. Firm / Organizational Level Dynamics

Abstract

To explain how entrepreneurial firms generate financial support for their proven ideas, I develop theory on the link between a firm’s style of transferring non-commercial science into commercial products and its ability to attract equity investment. They key challenge these firms face is surviving the valley of death that stretches between developing a prototype and generating the financial support to fund production, further development, and distribution. I explain the decade-long financial outcomes of 816 biomedical firms in four product industries, conditioning on the alternative explanations proposed in the commercialization and venture capital literature. To study each firm’s style of transferring ideas from non-commercial to commercial science, I first create a conceptual map of biomedical science through a topic model based on 7,000,000 cleaned conceptual elements across all 77,000 research grants at the National Institute of Health from 2008 to 2011. A correlated topic model represents the network of non-commercial biomedical knowledge from which entrepreneurs draw. I then model each firm’s transfer style as the dispersion of its core technology on this map. I find that among the three styles supported by organizational theory, bridging diverse elements, consolidating knowledge clusters, and moderating these approaches, bridging diverse elements induces the highest probability of surviving the valley of death by achieving a major capital investment. I conclude by discussing the relationship of the study to the patenting literature, outlining the current limitations and opportunities for future work, and proposing the perspective of knowledge embeddedness to better understand the health of innovation ecosystems.

Author

• Dylan Nelson, University of Michigan