How Do Different Knowledge Sources Impact Firm Behavior and Survival?
Associate professor of entrepreneurship David Park first asked this question during graduate school. Recently, he answered it by studying the modern medical imaging industry in an article in Industrial and Corporate Change, together with Ph.D. student of strategy and entrepreneurship Young Sir Rha, professor of business administration Sonali Shah, and assistant professor of business administration Shinjinee Chattopadhay—all three affiliated with the Gies College of Business at the University of Illinois Urbana-Champlain.
“We know that knowledge sources—the context in which entrants develop the knowledge they bring as they enter an industry—can significantly influence the trajectory of the ventures as well as the development of the industry they are in,” Park said. “However, so far scholars have focused on only a few knowledge sources, which may lead to an inaccurate ‘image’ of industry.”
Past research has primarily focused on employee-founded ventures—started by individuals who used to work in the industry and had new ideas for products—and on diversifying entrants—businesses created in different, often emerging, industries by existing firms.
More recently, some researchers have suggested that additional important knowledge sources should also be considered in order to understand the industry dynamics more comprehensively. These sources encompass academic-founded ventures that grew out of academic work in research institutions; user-founded ventures, started by users of particular products or services to solve a specific problem they experience with those products or services; and various types of diversifying entrants.
To examine the impact of this broad array of knowledge sources in an industry, the authors looked at entry and exit data for more than four decades (1967 to 2013) in the modern medical imaging industry—including the subfields of computed tomography (CT), magnetic resonance imaging (MRI) and positron emission tomography (PET). Using a mixed quantitative and qualitative method, the authors uncovered a counterintuitive result: User-founded ventures did best when it comes to survivability.
In this high-caliber tech, knowledge-intensive industry, the users are typically well-trained doctors, who sometimes recognize good business opportunities. “The user-founded ventures were able to build the first full-body scanners or niche scanners based on their deep knowledge of clinical needs in their subfield, allowing them to develop particular functionalities and differentiate their product offerings for better survival,” Park explained.
Academic-founded ventures, on the other hand, came up with cutting-edge products but had a difficult time finding a market for their solutions. While employee-founded ventures often found a market for good products, they were outcompeted by existing companies. Diversifying entrants struggled with competition and lack of capabilities.
Based on these results, the authors encourage entrepreneurs, investors, and strategists to consider the implications of a wider array of knowledge sources. Moreover, Park highlighted that business opportunities and competitive advantages can originate from users, not just from industry participants and academics. “We need to understand the value of diversity in knowledge sources and to create a regulatory support system to acknowledge and consider it,” he said.
U. David Park, “An image of industry: Exploring the effects of knowledge sources in the medical imaging industry” (with Rha, Y.S., Shah, S.K. and Chattopadhyay, S.), Industrial and Corporate Change, 2024, 33, 64–89.