Technology commercialization, competition, and the direction of innovation

The technology commercialization process—translating ideas into products—depends on access to critical resources and complementary assets, which in many markets are concentrated among a small number of firms. This structure may enable an efficient division of labor, with smaller actors specializing in upstream innovation and larger firms in downstream commercialization. Yet the need to ultimately transact over ideas may also shape upstream innovation, influencing which projects are pursued and which innovations reach the market. This dissertation examines questions motivated by this phenomenon, detailed in Chapter 1. Chapter 2 studies how startup acquisitions impact the positioning of rival startups. On one hand, the acquisition of a startup may put rivals at a competitive disadvantage, incentivizing positioning away from the acquired firm. On the other hand, a startup acquisition may send positive signals of future demand on the acquisition or product market, incentivizing rivals to position closer to the acquired firm. I compile a novel dataset of historical snapshots of startup websites over time and construct a measure of distance between startups' positions on the product market. Applying a matched difference-in-differences framework, I find that following the acquisition of a rival, startups move away from the acquired rival (differentiate themselves), on average. The effect is stronger among startups that have not raised venture capital, consistent with such firms possessing larger resource buffers to compete with an acquired rival, and in older markets, indicating that acquisitions in nascent markets convey stronger demand signals that mitigate competitive forces. These findings highlight the role of the M&A market in shaping the direction of entrepreneurial innovation, with implications for entrepreneurial strategy and antitrust policy. Chapter 3 investigates whether U.S. national security restrictions, which reduce acquisition market “thickness” in certain sectors but not others, alter the upstream R&D investments of potential targets. The analysis leverages a shift in U.S. national security policies through the Foreign Investment and National Security Act of 2007 (FINSA). We find a significant and deleterious effect of FINSA on the R&D intensity of potential targets, particularly in sectors with a higher reliance on foreign acquirers pre-FINSA. The results are robust to multiple acquisition-likelihood cutoffs and not explained by the late-2000s finance crisis. The study provides new evidence that fluidity in the market to acquire technology companies is consequential for upstream R&D investment incentives and reveals a possible unintended link between national security policies and innovative activity. Chapter 4 studies how the direction of innovative output changes as resource constraints are relaxed in the context of high-performance computing (HPC), a critical input to modern scientific research that is increasingly concentrated among a small number of technology firms. Using data from XSEDE, an NSF-funded program that allocates supercomputing resources to researchers, we leverage system-wide capacity constraints to identify the causal impact of variation in resource constraints on scientific output. We find that relaxing constraints increases the number of publications and shifts the direction of research. Scientists pursue less popular and newer topics, explore areas beyond their prior expertise, and broaden the scope of their work. However, these directional shifts are associated with fewer citations, suggesting a trade-off between frontier-expanding innovation and impact. Our findings show that allocation strategies shape not just the volume but the trajectory of innovation, with direct implications for R&D managers and policymakers supporting innovation under resource constraints.

Author dc:creator

• McKeon, John L.

Advisor dc:contributor.advisor

• Simcoe, Timothy S.

• Business administration
• Entrepreneurship

Language dc:language.iso

en_US

Handle dc:identifier.uri

https://hdl.handle.net/2144/52939

OAI identifier oai:identifier

oai:open.bu.edu:2144/52939