Science-Based Business: Knowledge Capital or Entrepreneurial Ability? Theory and Evidence from a Survey of Biotechnology Start-Ups

38 Pages Posted: 23 Sep 2010 Last revised: 28 Nov 2014

See all articles by Serguey Braguinsky

Serguey Braguinsky

Carnegie Mellon University - Department of Social and Decision Sciences

Yuji Honjo

Chuo University

Sadao Nagaoka

Hitotsubashi University - Institute of Innovation Research

Kenta Nakamura

Kobe University

Date Written: September 22, 2010

Abstract

The conventional view of science-based businesses focuses on the inseparability of the roles of the inventor generating the underlying idea and the Schumpeterian entrepreneur who implements it in practice. We present an equilibrium model of science-based entrepreneurship where scientific ideas and entrepreneurial ability of a scientist-entrepreneur are complementary resources that can be positively matched for an idea of certified good quality. If the costs of outside evaluation (certification) of an idea are not very high, there is a unique equilibrium where high-ability founders whose ideas are not good become free agents and are hired to develop good ideas for the startups with low-ability founders. The equilibrium is constrained efficient and a reduction in evaluation costs increases entrepreneurial turnover and improves welfare. We use novel data on the biotechnology startups in Japan and find evidence that is consistent with the theory and also with empirical studies of the U.S. biotechnology industry.

Keywords: Science-based Business, Biotechnology, Start-ups, Entrepreneurship, Innovation

JEL Classification: O31, O32

Suggested Citation

Braguinsky, Serguey and Honjo, Yuji and Nagaoka, Sadao and Nakamura, Kenta, Science-Based Business: Knowledge Capital or Entrepreneurial Ability? Theory and Evidence from a Survey of Biotechnology Start-Ups (September 22, 2010). Available at SSRN: https://ssrn.com/abstract=1680941 or http://dx.doi.org/10.2139/ssrn.1680941

Serguey Braguinsky (Contact Author)

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States

Yuji Honjo

Chuo University

2nd floor Blg 4 Tampa Campus
742-1 Higashinakano, Hachioji
Tokyo 192-03
Japan

Sadao Nagaoka

Hitotsubashi University - Institute of Innovation Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Kenta Nakamura

Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

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