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Small Business Economics

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01.01.2011

Public knowledge, private knowledge: the intellectual capital of entrepreneurs

verfasst von: Albert N. Link, Christopher J. Ruhm

Erschienen in: Small Business Economics | Ausgabe 1/2011

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Abstract

This paper focuses on the innovative actions of entrepreneurs, namely their tendency to reveal the intellectual capital that results from their research efforts either in the form of public knowledge (publications) or private knowledge (patents). Using data collected by the National Research Council within the US National Academies from their survey of firm’s that received National Institutes of Health phase II Small Business Innovation Research awards between 1992 and 2001, we find that entrepreneurs with academic backgrounds are more likely to publish their intellectual capital compared with entrepreneurs with business backgrounds, who are more likely to patent their intellectual capital. We also find that, when universities are research partners, their presence complements the tendencies of academic entrepreneurs but does not offset those of business entrepreneurs.

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The forerunner to Schumpeter was Abbé Nicholas Baudeau. Baudeau (1910) treated the agricultural entrepreneur as a risk bearer, in the manner of Cantillon (i.e., uncertainty), but he added a distinctly modern twist. He made the entrepreneur an innovator as well, one who invents and applies new techniques or ideas in order to reduce his costs and thereby raise his profit. Other writers, besides Baudeau and Schumpeter, who emphasized the theme of the entrepreneur as an innovator and leader comme aucun autre include, Bentham, Thünen, Schmoller, Sombart, and Weber. See Hébert and Link (1989, 2006, 2007, 2009).

Teece and Pisano (1994, p. 553) contend that Schumpeter “saw economic development as consisting of a process where entrepreneurs dipped into a stream of technical opportunities ostensibly made for reasons independent of particular markets and brought those innovations to market.”

For instance, see Colombo and Grilli (2005). Baton and Ensley (2006), for example, examined the relationship between background and opportunity recognition. Related literature has examined the behavior of innovative consumers; see in particulate Popielarz (1967) and Robertson and Kennedy (1968).

See Audretsch (2009). Roper (1998), for example, studied the relationship between entrepreneurial characteristics (e.g., year of education and experience in firms with 500 or more employees) and strategic choices (e.g., entering into new markets or management changes with the organization).

Surprisingly, these strands of literatures have not previously been woven together in a paradigmatic way to formulate testable hypotheses.

Baron et al.’s (1999, p. 529) interpretation of Stinchcombe’s theory is that “founding conditions become imprinted on organizations and mold their subsequent development.”

Richardson was influenced by the work of Coase. According to Coase (1937, p. 393), in his seminal paper on the nature of the firm: “A firm, therefore, consists of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur.”

The RBV framework is in contrast to the paradigm that preceded it, namely Porter’s theory (1980, 1985) of competitive advantage. See Link and Siegel (2007) for a more in depth discussion of these paradigms.

Barney (1991), for example, asserted that, if a firm’s resources and capabilities are valuable, rare, inimitable, and nonsubstitutable, then they constitute a source of sustainable competitive advantage.

Teece et al. (1997, p. 510) state: “Rudimentary efforts are made to identify the dimensions of firm-specific capabilities that can be sources of advantage, and to explain how combinations of competences and resources can be developed, deployed, and protected. We refer to this as the ‘dynamic capabilities’ approach in order to stress exploiting existing internal and external firm-specific competences to address changing environments.”

Dasgupta and David (1994) and Stern (2004) argue that personal preferences influence a researcher’s choice between alternative property rights.

In the wake of Schumpeter’s treatment of economic development, a tradition of historical studies of entrepreneurship began at Harvard University’s Research Center in Entrepreneurial History, established by Arthur H. Cole (1946), who decried the neglect of the entrepreneur by economic historians and economic theorists, advocating a case-study approach that employed various methods, including cross-sectional investigations of specific individuals over time, longitudinal studies of particular entrepreneurial functions, and conceptual studies in historical entrepreneurship that might relate to contemporary issues. See Hébert and Link (2009) for a more direct comparison between the views of Schumpeter and Cole.

A small firm must be at least 51% owned by US citizens or lawfully admitted permanent resident aliens, and it cannot employ more than 500 workers to apply for an SBIR award. The majority of firms that receive SBIR awards have fewer than 20 employees.

It is not uncommon, however, for NIH phase II awards to exceed the US $750,000 threshold.

About one-third of phase I awardees applying for phase II awards are funded.

Current annual SBIR awards in the 11 participating agencies total over US $2 billion. These agencies are, in descending order of award funding: Department of Defense, Health and Human Services (primarily NIH), Department of Energy, National Aeronautics and Space Administration (NASA), National Science Foundation, Department of Agriculture, Department of Homeland Security, Department of Education, Department of Commerce, Environmental Protection Agency, and the Department of Transportation.

A more detailed history of SBIR is provided in Link and Ruhm (forthcoming) and Wessner (2004, 2008). In April 2008, the US House of Representatives passed H.R. 5819, the SBIR/STTR Reauthorization Act of 2008. However, the Senate Committee on Small Business and Entrepreneurship (SBE) passed their own version of the SBIR/STTR Reauthorization Act of 2008, S. 3362. Among other things, phase I funding would increase to US $150,000 and phase II funding would increase to US $1 million, with a provision for these guidelines to be exceeded by 50%. Also, the current 2.5% set aside would increase to 3.5% at a rate of 0.1% over 10 years, except for NIH, which would stay at 2.5%. S. 3362 would not have passed by the critical September 30, 2008 deadline; P.L. 110–235 temporarily extended the existing SBIR Act until 2009.

In 2005, the most recent year of cross-agency comparable data, NIH granted 732 of the 4,031 phase I awards and 369 of the 1,842 phase II awards. NIH’s awards in that year totaled US $562.1 million, compared with a total of US $1,851.0 million by all 11 agencies.

The NRC surveys were administered in mid-2005, thus building in a 4-year lag for 2001 phase II projects to be completed. The database does not cover projects funded under the related Small Business Technology Transfer (STTR) program, which has similar aims but different eligibility requirements.

Papers submitted for publication but not yet published, and patents applied for but not yet granted, were not included in these measures.

According to Bush (1945, p. 13): “Basic research is performed without thought of practical ends. It results in general knowledge and an understanding of nature and its laws. This general knowledge provides the means of answering a large number of important practical problems, though it may not give a complete specific answer to any one of them. The function of applied research is to provide such complete answers.”

Stokes (1997, p. 8) took issue with this view. He described the goal of basic research as “understanding,” and the goal of applied research as “use.” At a point in time (p. 12): “The belief that the goals of understanding and use are inherently in conflict, and that the categories of basic and applied research are necessarily separate is itself in tension with the actual experience of science.” Kane (2006, p. 545) argued that the “basic tools of scientific and technological work”—which are a foundation for much published research—are not patentable. See also, Mohammed (2008).

Our measure of the entrepreneur’s vocational background is limited by data availability. Ideally, we would have like to control for such characteristics as number of years within a university and responsibilities therein, as well as number of years within a business and responsibilities therein.

This group includes firms with both academic and business founders as well as all firm that have at least one founder without either an academic or business background.

The results in Tables 5 and 6 below are not materially changed by controlling for a quadratic in size, to allow for nonlinear effects.

This percentage reflects 396 project responses from a random survey population of 1,672 projects; see Table 1.

These results are available from the authors upon request. See Heckman (1979) for a discussion of selection bias.

This last result may be slightly misleading if firms with business entrepreneurs are less likely to have university involvement than those with academic entrepreneurs. The actual difference is quite small (53.1% of the former versus 54.3% of the latter). Specifications corresponding to those in model a, except without controlling for university involvement, yield marginal larger negative predicted effects of firms led by business-only entrepreneurs on patenting (and slightly stronger positive results for patenting below). Relatedly, Stuart et al. (2007) found that biotechnology firm founders with academic ties are more likely to enter into formal technology agreements with universities.

Alternatively, we measured firm size as the number of employees in the firm at the time of the phase II award (empstart); see Table 1. The same results hold. These results are available from the authors upon request.

Baumol et al. (2007) complete their charge by suggesting a number of policy initiatives that should be considered, ranging from tax policies to encourage risk taking, to reforming bankruptcy laws to promote the formation of new businesses, to revising the patent system. Such actions will “adjust the rules of the game to induce a more felicitous allocation of entrepreneurial resources” (Baumol 1990, p. 4).

Link and Link (2009) make the case that government can similarly act as entrepreneur.

Link and Ruhm (forthcoming) has shown that including universities as a research partner also increases the probability of commercialization from NIH-funded phase II research.

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Titel: Public knowledge, private knowledge: the intellectual capital of entrepreneurs
verfasst von: Albert N. Link
Christopher J. Ruhm
Publikationsdatum: 01.01.2011
Verlag: Springer US
Erschienen in: Small Business Economics / Ausgabe 1/2011
Print ISSN: 0921-898X
Elektronische ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-009-9179-5

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