Previous empirical research has focused on the suitability of technological inventions for exploitation through firm formation (Henderson, 1993; Shane, 2001a). These studies point out that technological radicalness brings favorable conditions for firm formations. But bringing radical technologies into successful commercial application is a complex and risky process not yet fully understood (Jensen & Thursby, 2001; Prebble, de Waal & de Groot, 2008). It is therefore unclear if radical technologies provide performance advantages for firm formation.
Entrepreneurship literature states that start-ups need appropriate environmental conditions to successfully exploit technological inventions (Agarwal & Bayus, 2002; Bstieler, 2005; Gans & Stern, 2003; Wiklund & Shepherd, 2003). Dynamic phases of the technology field are expected to be favorable since technological standards are not yet established and niche markets provide opportunities for firm formation (Shane, 2001b; Tushman & Anderson, 1986). Moreover, start-ups face the threat of uncontrolled leakage of technological know-how which holds especially true for radical technologies since finding suitable applications is then a highly uncertain and time-consuming process (Bond & Houston, 2003; Jensen & Thursby, 2001).
We therefore posit that performance of technology-based start-ups is a function of its technological radicalness, and that this relationship is moderated by the pace of development in the start-up’s technological field and by the scope of its patent protection.