TECHNOLOGY STRATEGY AND NEW VENTURE PERFORMANCE - A STUDY OF CORPORATE-SPONSORED AND INDEPENDENT BIOTECHNOLOGY VENTURES

New ventures, companies eight years or younger, play a major role in t he development of an emerging, high-technology industry. Corporate-spo nsored new ventures (those supported by an established corporation) an d independent ventures (those founded by independent entrepreneurs) fr equently battle for industry leadership and financial success. Whereas both venture types use technology to achieve financial and market suc cess, little is known about the differences in their technology strate gies. Technology strategy is the plan that guides a new venture's deci sions on the development and use of technological capabilities. This s trategy covers six major areas. The first is selecting the pioneering posture, where a venture decides whether or not be among the industry' s first companies to introduce new products (technologies) to the mark et. The second is determining the number of products to be introduced to the market. The third is choosing the extent of a venture's use of internal and external R&D sources. Internal sources usually refer to i n-house R&D activities. External sources may include purchasing or lic ensing of technology from other companies, or joining strategic allian ces to acquire that technology. The fourth is deciding the level of R& D spending. The fifth is selecting the combination (portfolio) of appl ied and basic research projects. Whereas basic R&D advances science, a pplied R&D leads to new products and technologies. The sixth, and fina l, dimension is the venture's use of patenting to protect any competit ive advantages it might gain from its R&D activities. This article rep orts the results of a study that explored the differences in the techn ology strategies and performance of corporate and independent ventures . The biotechnology industry was chosen to test the study's hypotheses , using 112 ventures. Seven of the study's hypotheses focused on the p otential variations in technology strategy between corporate and indep endent ventures. Independent ventures (IVs) were expected to surpass c orporate ventures (CVs) in pioneering new products (technologies), usi ng internal R&D, and emphasizing applied R&D. CVs were expected to sur pass Ns in introducing new products, using external R&D sources, spend ing on R&D, and patenting. The study's remaining three hypotheses cove red possible variations in new venture performance (NVP) and their sou rces. The results showed that Ns focused more on pioneering, pursued a more applied R&D portfolio, and emphasized internal R&D more than CVs . CVs utilized external technology sources, spent more heavily on R&D, stressed basic R&D, and used patenting more intensively than IVs. The se results were consistent with the hypotheses. However, contrary to e xpectations, there were no significant differences between CVs and IVs in the frequency of new product introductions, probably because most ventures were at the invention, rather than the commercialization, sta ge. The results on the NVP of CVs and IVs were counter to expectations . IVs outperformed CVs, probably because of the high motivation of the IV owners who reaped the rewards of growth and profitability. Also, w hereas CVs may have greater access to the resources of their sponsors, political conflicts and rigid corporate controls might have reduced t heir ability to achieve competitive advantages. The results also indic ated that CVs and IVs appeared to gain competitive advantages from dif ferent technological choices. Pioneering, a focus on applied R&D, and extensive use of the internal R&D sources were also positively associa ted with the performance of IVs. Heavy, R&D spending, the use of both internal and external R&D sources, frequent product introductions, and patenting were positively associated with the performance of CVs. Fin ding that technology strategies significantly impacted NVP should enco urage executives to consider pursuing a formal technology strategy. Li kewise, the finding that different dimensions of technology strategy i nfluenced the performance of CVs and IVs in different ways has practic al implications. CV managers can learn from their higher performing IV rivals. Also, because established companies frequently acquire IVs, i nformation about their technology strategies can be valuable in assimi lating the acquired ventures. Overall, the results show that technolog y strategy is an important factor in enhancing new venture performance .