INNOVATION DIFFERENCES BETWEEN NEW VENTURE STARTUPS AND INCUMBENT FIRMS

Innovation is critical to the long term success. Research suggests that new ventures create more innovations than larger established companies. Yet, engineering methods and technical focus areas for new product development are deemed no different from new ventures than established firms. Design to cost, increased functionality and optimized performance for example are all deemed important irrespectively. We empirically compare a sample of 92 award-winning innovative products from either new ventures or incumbent firms with respect to these five categories of product-level characteristics - cost, functionality, user interactions, external interactions and architecture. We show that, on average, award-winning products from the new ventures exhibited more characteristics of innovation than the ones developed by incumbents. This indicates that new ventures need to be more innovative than incumbents. Also interestingly, the distribution of innovation characteristics exhibited by innovative products remained unchanged between new ventures and incumbent firms; most innovations occur in the user interaction, external interaction and architecture categories, irrespective of firm type.