Startups are known for thinking outside the box and creating revolutionary products and services. Driven by entrepreneurs who set out to meet consumers’ needs, these smaller businesses are more likely to spark innovation in emerging industries and accelerate the development of new technologies, according to research from Texas McCombs.
For small businesses, this underscores the importance of innovation as a strategic tool for differentiation and growth, demonstrating that even as newcomers with limited resources, small businesses have the potential to significantly influence their industries by introducing new ideas and solutions.
Researcher Francisco Polidoro, Jr., a Professor of Management at the University of Texas at Austin’s McCombs School of Business, outlined three key factors in the level of influence a startup’s innovations can wield:
- Resource disparities. Startups often lack resources in their early stages, which hinders development and can lead to business failure. While they may be unable to move forward, startups’ ideas and patents continue to live on, and when these concepts are particularly promising, more resource-rich companies may build upon their innovations and realize those goals.
- Academic citations. When academic institutions cite startups' patents in their research, it significantly boosts the visibility and credibility of those innovations. This implies the academic community's interest can elevate a startup's contributions, making them more influential in driving innovation.
- Lack of legal history. Established companies, known for their litigious and aggressive approach to protecting patents, may inadvertently discourage other companies from building upon their innovations out of fear of legal repercussions. Startups typically do not pose the same threat, making their patents more appealing for others to cite and build upon.
[Read more: What Every New Startup Can Do to Protect Their Intellectual Property]
Startups with big ideas can leverage the industry know-how and deep pockets of bigger businesses through strategic collaboration to bring their vision to life.
The benefits and challenges of knowledge spillover in emerging industries
According to Polidoro, startup innovations lead to knowledge spillovers, where the developments of one company are utilized by others outside the original entity.
“Other entities can build on their ideas to create subsequent inventions, some of which may eventually benefit consumers in product markets,” said Polidoro in a press release.
Texas McCombs’ research, which analyzed 6,116 patents from the mid-1970s to 2016, demonstrated startups’ influence on innovation, with their patents cited 8.5% more annually — and 21% more over nine years — than those of established businesses.
However, Polidoro notes a downside: Startups’ resource constraints might hinder their ability to profit from their innovations, enabling wealthier companies to capitalize on these ideas. Research shows companies were more inclined to reference and build upon a startup’s patents, particularly when the startup showed limited capability in developing its innovations further.
[Read more: How Three Startups Scored Millions in Funding]
Tips for startups looking to partner with larger businesses
Startups with big ideas can leverage the industry know-how and deep pockets of bigger businesses through strategic collaboration to bring their vision to life. Here are a few tips for forging a successful partnership to move your startup’s ideas forward.
Define your goals and ideal partnership
Before you seek out a partner, determine the goals and key objectives you hope to achieve through the partnership. From there, research businesses in your market that can help you reach those goals. Whoever you work with should have a good track record and ample experience in your specific area.
Establish a partnership agreement
A written agreement between you and your partner company should spell out the terms and conditions of the partnership, define the terms of intellectual property (IP) (including assets brought into the partnership versus those created jointly), and describe each party's responsibilities and expectations. Have both parties review the agreement with legal advisors to ensure it is legally binding and avoid any discrepancies or oversights.
Communicate openly and adapt as needed
Throughout your partnership, ensure consistent communication between both parties. Whether sharing success stories or challenges faced, keeping both entities in the loop about business happenings is key to addressing any problems before they arise.
Be flexible in your partnership, too. Situations can emerge that require sudden shifts, so it’s important to be adaptable and willing to switch gears when necessary.
[Read more: Micro-Business vs. Startup: What’s the Difference?]
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