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1. Missing Novelty in Drug Development

   https://doi.org/10.1093/rfs/hhab024  

   Krieger, Joshua; Li, Danielle; Papanikolaou, Dimitris (March 2021, The Review of Financial Studies)

   Koijen, Ralph (Ed.)

   Abstract We provide evidence that risk aversion leads pharmaceutical firms to underinvest in radical innovation. We introduce a new measure of drug novelty based on chemical similarity and show that firms face a risk-reward trade-off: novel drug candidates are less likely to obtain FDA approval but are based on more valuable patents. Consistent with a simple model of costly external finance, we show that a positive shock to firms’ net worth leads firms to develop more novel drugs. This suggests that even large firms may behave as though they are risk averse, reducing their willingness to investment in potentially valuable radical innovation. 

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2. The role of the organization in the entrepreneur–opportunity nexus

   https://doi.org/10.1108/IJEBR-03-2018-0169  

   Zanella, Gianluca; Castro Solano, Dante B.; Hallam, Cory R.A.; Guda, Teja (November 2019, International Journal of Entrepreneurial Behavior & Research)

   Purpose Entrepreneurial and strategic actions are crucial for wealth creation, and the business opportunity is a critical factor in this process. The purpose of this paper is to explore the role of the firm’s strategic posture in the relationship between individual alertness and opportunity identification within an existing firm. This approach contributes to entrepreneurship theory building through a multilevel study. Design/methodology/approach The quantitative research focuses on understanding the mediating role of an organization’s strategic posture in the opportunity identification process. Using a sample of 276 firms, this study tests a two-level model to explain opportunity identification. Findings The findings provide empirical evidence that a firm’s strategic posture mediates the relationship between individual alertness and opportunity identification. Furthermore, this study finds differences in the mediating role of a firm’s strategic posture through which entrepreneurs and managers affect opportunity identification. Years after the creation of startup, the entrepreneurs still exhibit entrepreneurial characteristics that affect opportunity identification. The findings provide evidence that entrepreneurs foster an internal culture and set of values that are more favorable to radical innovation, compared to managers who favor incremental and less risky projects. Practical implications The findings suggest the possibility for new theory building that can improve the fields of entrepreneurship and management research. Moreover, the proposed model constitutes a new approach to analyze the mediating role of an organization’s strategic posture in the opportunity identification process. Originality/value This paper provides an original approach to literature in exploring the relationship between entrepreneurial alertness and firm’s strategic posture in explaining the opportunity identification process. This work will help expand the theory building that explores differences between managers and entrepreneurs in organizations. 

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3. Lack of Selection and Limits to Delegation: Firm Dynamics in Developing Countries

   https://doi.org/10.1257/aer.20180555  

   Akcigit, Ufuk; Alp, Harun; Peters, Michael (January 2021, American Economic Review)

   null (Ed.)

   Delegating managerial tasks is essential for firm growth. Most firms in developing countries, however, do not hire outside managers but instead rely on family members. In this paper, we ask if this lack of managerial delegation can explain why firms in poor countries are small and whether it has important aggregate consequences. We construct a model of firm growth where entrepreneurs have a fixed time endowment to run their daily operations. As firms grow large, the need to hire outside managers increases. Firms’ willingness to expand therefore depends on the ease with which delegation can take place. We calibrate the model to plant-level data from the United States and India. We identify the key parameters of our theory by targeting the experimental evidence on the effect of managerial practices on firm performance from Bloom et al. (2013). We find that inefficiencies in the delegation environment account for 11 percent of the income per capita difference between the United States and India. They also contribute to the small size of Indian producers, but would cause substantially more harm for US firms. The reason is that US firms are larger on average and managerial delegation is especially valuable for large firms, thus making delegation efficiency and other factors affecting firm growth complements. (JEL D22, G32, L25, L26, O14) 

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4. Love and Discord: Creating Passion Through Leadership

   Goldstein, Bruce Evan (March 2021, Social innovations journal)

   How can a social innovation enhance diversity in ways that maximize its social benefits and minimize its social costs? This challenge was explored in a dialogue series convened from 2018 to 2020, where highly experienced network designers and facilitators (or “netweavers”) explored how to maintain lively, generative innovation communities. This paper provides advice from the netweavers in their own words, combined with my commentary on their ideas for benefiting from diverse membership and building and maintaining connection within social innovations organizations that may have limited face-to-face interaction. I first explore how to bring love to your leadership by engaging selflessly, telling the truth, and cultivating a mind and body connection. I recount how the netweavers engaged in ritual, storytelling, and other creative techniques for enhancing intuition and imagination, and how they maintained brief personal connections that were individually tailored to their community member’s needs. Second, I explore how to embrace diversity and disruption. A creative community contains many kinds of diversity, and these differences are useful for innovation work since they cause people to question and broaden their ideas and assumptions. I recount the netweavers’ ideas about how to weave this capacity for creative disruption within a culture of safety and reassurance without letting things get too comfortable and complacent. They concluded that social innovation communities should not cultivate consensus, but rather should create an environment where people see each other as legitimate participants and feel safe to share their differences. 

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5. Immigrant Entrepreneurs and Innovation in the U.S. High-Tech Sector

   https://doi.org/10.3386/w25565  

   Brown, J. David; Earle, John S.; Kim, Mee Jung; Lee, Kyung Min (January 2020, The Roles of Immigrants and Foreign Students in US Science, Innovation, and Entrepreneurship edited by Ina Ganguli, Shulamit Kahn and Megan MacGarvie University of Chicago Press, 2020)

   We estimate differences in innovation behavior between foreign versus U.S.-born entrepreneurs in high-tech industries. Our data come from the Annual Survey of Entrepreneurs, a random sample of firms with detailed information on owner characteristics and innovation activities. We find uniformly higher rates of innovation in immigrant-owned firms for 15 of 16 different innovation measures; the only exception is for copyright/trademark. The immigrant advantage holds for older firms as well as for recent start-ups and for every level of the entrepreneur’s education. The size of the estimated immigrant-native differences in product and process innovation activities rises with detailed controls for demographic and human capital characteristics but falls for R&D and patenting. Controlling for finance, motivations, and industry reduces all coefficients, but for most measures and specifications immigrants are estimated to have a sizable advantage in innovation. 

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