An Image of Industry: Exploring the Effects of Knowledge Sources in the Medical Imaging Industry
Author Information
U. David Park, Assistant Professor of Entrepreneurship and IES Faculty Fellow at the Whitman School of Management, Syracuse University
Youngsir Rha, Gies College of Business, University of Illinois, Urbana-Champlain
Sonali K Shah, Gies College of Business, University of Illinois, Urbana-Champlain
Shinjinee Chattopadhay, Gies College of Business, University of Illinois, Urbana-Champlain
Journal
Industrial and Corporate Change (2024)
Summary
This paper explores the impact of different knowledge sources on firm behavior and survival in the modern medical imaging industry, revealing that user-founded new ventures tend to outsurvive other types of entrants, emphasizing the significance of founder expertise and niche market focus, with implications for evolutionary theory, strategic management, and entrepreneurship literature.
Research Questions
This research paper asks if knowledge sources of industry entrants generate survival differentials and if so, why.
What We Know
A rich literature documents that industry entrants stem from different knowledge sources and entrants from various knowledge sources contribute to the colorful and dynamic mosaic that is an industry. The existing literature suggests that entrants stemming from different knowledge sources may possess unique knowledge that shapes their behaviors and relative survival rates. However, existing empirical work has largely focused on examining entrants stemming from a particular knowledge source or comparing across just two types of entrants—most often employee-founded new ventures to all other new ventures or new ventures to diversifying entrants. Therefore, the broad question of if and how various knowledge sources differentially shape firm capabilities, strategic choices, and performance is ripe for investigation. Put differently, there is a gap in our understanding of how user- and academic- founded new ventures fare against other entrant types, with scholars calling for additional work examining differences amongst entrants in the context of the same industry. We take an initial step towards filling this gap by illuminating the relationship between knowledge sources and one important outcome measure: firm survival.
Novel Findings
Using novel, hand-collected archival data on the population of entrants in the modern medical imaging industry from 1967 to 2013, the paper suggests that user-founded new ventures outsurvive all other entrant types, on average from our quantitive survival analysis. Furthermore, the in-depth qualitative analysis reveals that user-founded new ventures produced first-of- type or niche scanners. They often draw on their deep knowledge of clinical needs to guide initial and subsequent product development, refining, and honing their product offerings for particular applications. The qualitative analysis further suggests that developing application-specific scanners allowed them to achieve a high level of product-market fit and offer novel product functionality, while avoiding the highly competitive market for general-purpose scanners. In contrast, firms stemming from other knowledge sources faced a variety of challenges: at a high-level, academic-founded new ventures struggled to find buyers for products offering significantly enhanced functionality; employee-founded new ventures improved functionality along dimensions known to be important to consumers (and therefore developed by many firms), but still struggled; related diversifying entrants engaged in premature growth or struggled to gain market share (although some scaled and became market leaders); and unrelated diversifying entrants often found that they had gaps in their resources and capabilities, often failing even when they managed to access resources to support operations.
Novel Methodology
The paper utilizes a mixed-methods approach and employs abductive reasoning to examine the association between knowledge sources and survival.
Implications for Practice
By highlighting the impact of diverse knowledge sources on firm behavior and survival, the study encourages entrepreneurs, investors and strategists to embrace a wider array of knowledge inputs, including academic and user-based insights. This approach could lead to more innovative and sustainable business strategies, challenging the traditional emphasis on employee-founded ventures. For practitioners, this means actively seeking and integrating varied perspectives, particularly from users, to drive innovation and competitiveness. Such a practice could lead to more customer-centric products and services, ultimately benefiting the firm’s market position and longevity.
Implications for Policy
From a policy perspective, the study underscores the need for frameworks that support and encourage diversity in knowledge sources for new ventures. Policymakers could leverage these insights to design regulations and incentives that foster a more inclusive and varied entrepreneurial ecosystem. This might involve funding programs that support user-founded startups or initiatives that bridge academic research and commercial ventures. By recognizing the distinct contributions of different knowledge sources to industrial development, policies could be tailored to stimulate a broader range of innovative activities, thereby promoting a more dynamic and resilient economy.
Implications for Society
For society at large, this research suggests a move towards a more inclusive and diverse innovation landscape. The recognition of different knowledge sources in driving industrial development and creating socially valuable products implies a societal benefit from a more holistic approach to innovation. This could lead to a greater appreciation and support for diverse forms of entrepreneurship, including those based on user experience and academic research. Such a shift could result in products and services that are more closely aligned with societal needs and challenges, leading to enhanced social welfare and more vibrant industries.
Implications for Research
This paper contributes to the literature on evolutionary theory in strategic management by showing how academic and user knowledge shape firm behavior and survival outcomes and thereby diversifying the base of empirical support for evolutionary theorizing. Moreover, this study contributes to the strategy and entrepreneurship literatures by providing empirical evidence that countervails conventional wisdom that privileges employee-founded new ventures and related diversifying entrants; instead, the qualitative findings show how new ventures stemming from different knowledge sources contribute to industrial development in different ways. The paper adds to the user innovation literature by documenting the value of user knowledge for the survival of new ventures and showing how user-founded new ventures may be distinct from other entrants.
Full Citation
U David Park, Youngsir Rha, Sonali K Shah, Shinjinee Chattopadhyay, An image of industry: exploring the effects of knowledge sources in the medical imaging industry, Industrial and Corporate Change, 2023;, dtad072, https://doi-org.libezproxy2.syr.edu/10.1093/icc/dtad072
Abstract
Scholars have long been interested in understanding how a firm’s “pre-history” shapes its behavior and performance, with recent scholarship highlighting the fact that industry entrants stem from different knowledge sources. Knowledge sources, the context in which entrants develop the knowledge they bring as they enter an industry, are argued to be important, because they may have differential effects on firm strategy and performance. We explore the effects of five different knowledge sources on firm behavior and survival using a mixed-methods approach. Survival analysis shows that user-founded new ventures outsurvive academic-founded new ventures, employee-founded new ventures, related diversifying entrants, and unrelated diversifying entrants. Qualitative analysis suggests that user-founded new ventures often enter niche markets defined by the clinical expertise of their founders and remain in these markets over time, honing their product offerings to specific clinical needs. Our analyses are based on novel, hand-collected archival data on the population of entrants in the modern medical imaging industry. We discuss the implications of these findings for the evolutionary theory, strategic management, and entrepreneurship literatures.
Web URL for the Article
https://academic-oup-com.libezproxy2.syr.edu/icc/advance-article/doi/10.1093/icc/dtad072/7469298