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Startups Lose Innovative Edge Under Corporate Funding
AUSTIN, Texas – When an established corporation invests in a startup, it hopes to share in the startup’s innovative technological advances. But such investments can have the opposite effect, according to a new study by a researcher in the McCombs School of Business at The University of Texas at Austin.
Post-investment, startups steer away from radical new technologies. Instead, they focus on incremental advances in domains where the established company is already strong, according to the paper forthcoming and online in advance in Organization Science.
“They’re warping their technology trajectory,” said Francisco Polidoro Jr., associate management professor in the McCombs School and the lead author of the paper. “They’re diminishing the distinctiveness that made them attractive to investors in the first place.”