New York, NY — When people think of startups that shape our economy, they often imagine fast-moving innovators, like Amazon, Uber, or Airbnb. However, most startups do not become high-growth companies and they may never invent or develop new markets. Instead, most are small startups that do not grow beyond a local community or region, and instead of creating a new technology, provide additional services to consumers based on a startup’s original technology. These startups have typically been thought of as unrelated to technological innovation. New research from Columbia Business School Professor Jorge Guzman seeks to understand how these startups are influenced by innovation.
The research, The Composition and Dynamics of Technology-Enabled Entrepreneurship, explores how businesses like auto repair services, video rental stores, or IT consulting are not directly innovative or creating a new technology, but instead provide new services that stem from ongoing technological innovation. Professor Guzman and his co-authors Harvard University PhD student Innessa Colaiacovo and Duke University Professor Daniel Gross find that smaller startups are an important part of the entrepreneurial ecosystem because they use large-scale technologies to create accessory products or services that can be widely accessed by consumers.
The authors use patent data to systematically identify 386 major technologies over the past century for which new words were invented. They use business registration records from 47 states—which include all new corporations, limited partnerships, and limited liability companies—to measure over a century of startup creation. They then link the two by identifying companies that include one of the focal technologies in their name and/or function and tracking the mentions of technologies that coincided with their name being invented. For example, the laser was invented in 1960, and since then, the technology has been used by subsequent startups for optometry, hair removal, printing, and more. Looking at the first 100 patents related to a technology, they also found that when technologies are recombined with others, the number of new businesses increased significantly. The research adds a new and important perspective to entrepreneurial strategy that is largely overlooked — which is the importance of small startups on the larger economy. The research provides new evidence to show how small startups have an economic advantage over the original startup due to their ability to quickly identify opportunities to meet growing local demand for a product or service.
To learn more about cutting-edge research being conducted, please visit Columbia Business School.