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Innovation (Eco)Systems
Chuck Eesleyeesley@mit.edu
MIT Sloan School of ManagementCambridge, UK May 22-23rd
International Level
Geographic Location of Firms
1
10
100
1000
1950s 1960s 1970s 1980s 1990s
Founding Decade
nu
mb
er o
f fi
rms
(lo
g s
cale
)
Latin America
Europe
Asia
US
Data from MIT Alumni
National Level
University Level
What Makes the MIT Innovation System Successful?
• Competition
• Flexibility
• Deep commitment to basic research
• Enthusiasm for opening doors
Ecosystem
Drivers of Start-up Performance
Revenues by Reason Firm Was Reported On
1000
10000
100000
1000000
1 2 3 4 5 6 or morefirms
Rev
enu
es (
log
sca
le)
Revenues Most SuccessfulFirms (2001 $)
Important Technology
First
Recent
Employees by Reason Firm Was Reported On
0
500
1000
1500
2000
2500
3000
1 2 3 4 5 6 or morefirms
Em
plo
yees
Most Successful Firms(2001 $)
Important Technology
Recent
1.) Work history (Burton, et al. 2002; Higgins and Gulati 1996)
2.) Social network (Shane and Stuart 2002 – 134 MIT spin-offs)
3.) Timing
Public markets
Persistence (~9-12 months to raise VC)
4.) Partnerships/Endorsements - (Shane and Cable 2002 – 50 MIT spin-offs, 202 seed-stage investors)
5.) Firm strategy – innovation, time frame to exit
6.) No. of cofounders, Prior IPO, same industry start-up, prior start-up (Eesley, unpublished, 2,100 MIT alumni start-ups)
Assuming geography and industry sector that VCs invest in (Sorenson and Stuart 2001)
Assuming fit with VC growth model (Fluck, Zsuzsanna, Douglas Holtz-Eakin, and Harvey S. Rosen, 1998)
Drivers of Obtaining VC
Show regression results Table 6
Differences in Age at First Founding
0
5
10
15
20
25
30
35
40
45
1st firm – one-timeonly
1st firm – eventualrepeat
entrepreneur
# Y
ears Lag to First
Firm
Age founded
Revenues and Prior Experience
0
2000
4000
6000
8000
10000
12000
14000
16000
1st firms 2nd firms 3rd firms 4th firms 5th firmsor higher
Firm Number
Th
ou
san
ds
of
$ (i
n 2
001
$)
Cofounded Firm Revenues /Operating Year Reported
Single Founder FirmRevenues / Operating YearReported
Sources of Ideas
0
10
20
30
40
50
60
70
80
90
100
1st firms 2nd firms 3rd firms 4th firms 5th firms orhigher
%
Idea through research (%)
Idea through industry experience(%)
Idea through networking (%)
Idea from other
• Show Tables 3-4 Cutting Your Teeth
How Do Drivers of Performance Differ for Developing Countries?
Sources of Differences
• Institutions• Policies
– Financial liberalization– Industrial Policy and Regulation
• Culture• Rule of Law
– Property rights
• Resources, Comparative Advantage• Universities / Education / Human Capital
Four Levels of Social AnalysisWilliamson (2000)• Social Embeddedness
– Culture, Religion (Economic Historians, Anthropologists, Sociologists)
• Institutional Environment– “Rules of the Game”, Constitutions, judiciary, politics (Poli. Sci.,
Inst. Economics)
• Governance– Contracts, Theory of the firm (Contract/Info Econ, TCE)
• Resource Allocation– Incentive aligment, Quantities and Prices (Neoclassical
Economists)
Boisot and Child 1988
Hypothesized Drivers of Performance for LDC’s
• Location in Supply Chain / Innovation• Access to $$, tech. (FDI, MNE’s)• Returnees?• Culture
– Risk preferences (France)– Inter-firm collaboration (Chaebols, business networks,
Keiretsu)
• Network Ties– Managers– Government officials– Alumni Associations
Case of Taiwan and the Semiconductor Industry
• Upgrading, How do latecomers compete?• 1975 – foreign firm dominated• Tatung
– Managerial skills• First-movers, optimal-size plants, economies of
scale• Large, National firms• Government led networks / R&D• Outsourced manufacturing
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