New Technology-Based Firms and Industrial Dynamics Evidence from the Technological System of Biomaterials in Sweden, Ohio and Massachusetts

Doctoral thesis, 2000

The aim of this thesis is to enhance the understanding of the relationship between industrial dynamics and new technology-based firms (henceforth NTBFs). For a population of biomaterials NTBFs in Sweden, Ohio and Massachusetts, we have analyzed two facets of this issue. First, we addressed the process of a firm's establishment, development and performance in relation to the technological system of which the firm is a part. In particular we analyzed (a) pre-firm activities as related to firm development, (b) firm development through network exchanges, and (c) performance as related to connectivity and system functionality. Second, we set out to conceptualize the mechanisms by which new technology-based firms influence the process of industrial dynamics. We found that pre-firm activities pervasively influenced not only the initial formation of a new firm, but to some extent, its further evolution as well. Analyzing the pattern of networking and the associated resource flows (i.e. the connectivity) confirmed the proposition that innovative activity is a collective process, taking place at the interface between the NTBF and its partners. Many of the connections are regional in character, as networks were established in a path-dependent manner. Further, an NTBF develops in the context of three evolutionary co-selective processes: technology evolution, actor functionality and network evolution. As regards firm performance, we found that it was significantly influenced by a number of dimensions of connectivity. In particular, technology-related connectivity proved important. Our analysis also showed that the functionality of a region is influential for the performance of our groups of biomaterials NTBFs. Turning to the second facet, that of the role of NTBFs in industrial dynamics, the analysis clearly showed that the NTBF is one important actor in the evolution of a technological system and in industrial dynamics. It may influence the workings of specific actors and of the technological system as a whole, through a set of interrelated mechanisms. We have contributed to the analytical framework of technological systems through the discussion of functionality, through an elaboration on the concept of connectivity, and by improving the methodology for identifying and delineating a technological system. Implications for management concern three themes: (1) innovation and firm development as collective processes, (2) being embedded versus locked-in, and (3) the need to invest in the system. The two general policy implications are that focus should be on functionality rather than on actors, and that policy initiatives should have a holistic view of functionality. Based on the weaknesses of each region, we pointed to some specific policy measures regarding the provision of input of technological resources, networking and facilitated financing.