When Does Start-Up Innovation Spur the Gale of Creative Destruction?

Posted: 28 Oct 2002

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

David H. Hsu

University of Pennsylvania - Management Department

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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Abstract

This article studies the determinants of commercialization strategy for start-up innovators. We examine whether the returns on innovation are earned through product market competition or through cooperation with established firms (through licensing, alliances, or acquisition). Our hypotheses are that the relative returns to cooperation are increasing in (i) control over intellectual property rights, (ii) low transaction costs, and (iii) sunk costs associated with product market entry. Using a novel dataset of the commercialization strategies of start-up innovators, our results suggest that the procompetitive impact of start-up innovation - the gale of creative destruction - depends on imperfections in the market for ideas.

Suggested Citation

Gans, Joshua S. and Hsu, David H. and Stern, Scott, When Does Start-Up Innovation Spur the Gale of Creative Destruction?. RAND Journal of Economics, Vol. 33, No. 4, Winter 2002. Available at SSRN: https://ssrn.com/abstract=338221

Joshua S. Gans

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

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David H. Hsu (Contact Author)

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
215-746-0125 (Phone)
215-898-0401 (Fax)

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States
617-253-3053 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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