Technological opportunities and new firm creation

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Citation: Scott Shane (2001) Technological opportunities and new firm creation. Management Science (RSS)
Internet Archive Scholar (search for fulltext): Technological opportunities and new firm creation
Tagged: Business (RSS) Innovation (RSS), Entrepreneurship (RSS), Patents (RSS), Intellectual Property (RSS)


Shane uses data from the MIT Technology Licensing Office as he did in his famous 2001 paper. Shane argues that previous work on entrepreneurship has normally focused on issues related to industry (e.g., ecological approaches to new firm creation). Shane uses a sample of technologies that might be used in entrepreneurial ventures and looks at which ones are more likely to result in new ventures. He concludes that the probability that an invention will be commercialized through firm creation is influenced by the invention's importance, radicalness and scope.

Shane uses a dataset of all patents granted by MIT between 1980-1996 (n=1,397) which represent a set of commercializable inventions. His major measures all all taken from the previous literature and he argues that, although it's not possible to measure any of the concept directly, that previous work has established construct validity in each:

  • Importance is the magnitude of the economic value of the invention.
  • Radicalness is the degree to which the invention differs from previous inventions in the field.
  • Patent scope is the breadth of the intellectual property protection for the invention.

He offer three formal hypotheses for each concept and argues that, in each case, the higher the degree of each, the higher the chance that the patent will be commercialized by a new venture.

Shane uses Cox regression to model the likelihood of a patent being commercialized through a new venture and, even with the addition of an impressively large number of control variables, finds support for each of the hypotheses above.

Theoretical and Practical Relevance

Shane's paper has been cited several hundreds times in the literature on entrepreneurship and, in particular, on the literature on the sources of entrepreneurship.