One challenging mission for nanotechnology startups is to acquire complementary resources for product commercialization. If it is located in an area where manufacturing capability is declined, the strong linkage with partners working in hardware fabrication become alienated and in the long run, will lose its ability to innovate.
Supply chain management is the attribute to be sources of sustained competitive advantage (Barney, 2012). It is particularly important to start-ups when the company requires to gain access to and leverages resource resided in the relevant supply chain. However, with limited social capital, it is a rather difficult process to them because knowledge transformation that allows new technologies to develop requires a certain level of person-to-person contact for gaining efficient information (Tassey, 2010).
Through inviting a strategic investor with strong social capital to invest in the startup is able to compensate for the vulnerability in social networking. At theoretical level, this paper will combine the concept of weak ties concept originally from Granovetter's micro-macro bridge (Granovetter, 1973) to Burt’s social network research (Burt, 1992) in sociological theory, and the notion of complementary asset (Teece, 1986) to address the relationship between a startup and its supply chain.
The field of research seems to lack of an empirical study on the social capital of a start-up with hard (technological) innovation and how the company boosts its technology via the relationship of two units in the node of networking links with asymmetric social capital resources in previous literature.
What is the critical success factors of radical hard innovation for a startup? How does a startup with hard innovation extend industrial networking through leveraging the partner’s social capital via investment relation, when the company locates in the region without the clusters of product design and manufacturing?
In this research, participant observation as a data collection method is the approach for the case study. The method is a widely used methodology typically used in qualitative research and ethnography. By participating-as-observer with the executive management team of the focal company over an extended research time period, the research is able to obtain more detailed and accurate information about the company under study. The observation in this study in the sense that the data is gathered when the events happen and provide real-time insights on the sequence of decision making and strategy forming processes.
The focal company in this study is a start-up company in North America spun-off a revolutionary, high conductive functional nanotechnology from a lab in a university with deep material science knowledge in small-molecule. It is in the pre-revenue stage and is looking for a new strategic investor based in Asia who is able to help the company to engage with its potential customers in manufacturing industries. The interaction with the focal company is a process to enhance mutual understanding and building partnership via capital investment.
During the field study, the author was acting as an investment manager on behalf of one of the potential new investors. The empirical material related to this study extracted from the process of conducting venture capital due diligence for making the final investment decision over 14 months. To gaining access to phenomena of interest, the method of covert observation and interaction provides empirical evidence through interviewing the existing investors, industrial partners, and the new investor in the same investment round of the focal company.
Most successful nanotechnology innovations in the market are either developed and incubated by larger size companies or developed by start-up companies but targeting to be acquired after the proof of concept. Even though the breakthrough of nanotechnology may have a significant impact on a wide variety of hi-tech areas, similar to other material science innovations, several bottlenecks need to be overcome before scaling-up the technology, including the verification of its functionality for various applications, the utilization of the materials, and customer engagements. One fundamental reason is that startups have relatively weak social networking, and it is a challenging mission for a startup to overcome the hurdles mentioned above.
Through the networking of the investment arm of the Industrial Technology Research Institute (ITRI), an independent research organization focusing on developing applied science technology, the focus company can access to the broad networking this research organization has built since 1973. This is an important social capital asset to the focus company because some of ITRI’s research directions are perfectly matched to the company. Through the channel, the company can access to the makers in Asian countries, the hub of OEM/ODM service providers.
Contribution to Scholarship
This exploratory study develops a framework to explain and conceptualize the relationship of two units with asymmetric social capital in the same field of social networking. The argument proposed in this research indicates that through the ties of a strategic partner with strong external social capital, the unit at a weaker node is empowered to entering into well-built networking to bond the resources for growth. It reduces the amount of redundant investment on time and effort to build networking which is essential and precious to the weaker side.
The insight from this research provides initial evidence to explore the mechanism on how to convert a tangible tie into an intangible bond to extend the networking from firm-to-firm level to much wider networking. Through the new proposed lens, it extends the interpretability of the social capital theory and provides the breeding ground in the field of entrepreneurship studies.
Contribution to Practice
This paper provides a practical contribution to identifying the keys to the success of a radical hard innovation from an academic research. The evidence in this paper indicates that a startup from university can fill the gap of social capital by leveraging its strategic investor’s social networking. It is crucial when it is facing asymmetric competitions from well-established competitors in the same sector, and geographical proximity is a challenge factor in the commercialization process. The conclusionhopes to create an example for other university spin-offs in the future.
One of the themes of this track expects to explore how associated innovation processes are closely coupled to frontier technologies, taker example, nanotechnology. The case study is a good fit for the attendees from academics and industries who are interested in the commercialization process of a university hard innovation.
Barney, J. B. (2012). Purchasing, supply chain management and sustained competitive advantage: The relevance of resource-based theory. Journal of Supply Chain Management, 48(2), 3-6.
Burt, R. S. (1992). Structural holes: the social structure of competition: Cambridge, Mass.: Harvard University Press.
Granovetter, M. S. (1973). The Strength of Weak Ties. American Journal of Sociology, 78(6), 1360-1380.
Tassey, G. (2010). Rationales and mechanisms for revitalizing US manufacturing R&D strategies. J Technol Transf, 35(3), 283-333.
Teece, D. J. (1986). Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy, 15(6), 285-305.