The Global Competition for Advanced Technology: Market and Technology Risk in Scaling Start-Ups

Using the full population of venture-backed technology firms in eleven advanced and emerging economies from 1980-2014 (China, France, Germany, India, Israel, Italy, Japan, Spain, Netherlands, UK and the United States), I track the growth trajectory of start-ups over the most recent ten years. While regional and national institutional settings are well understood to shape the nature and type of technological start-up, little is known about the growth trajectory of these firms. It is hypothesized that successfully scaling start-ups requires a different mix of institutional policies than successfully gestating them. This project seeks to understand the outcomes of these differential institutional settings by developing an index that measures technology and market risk across sectors within a country and across countries by sector. Preliminary findings indicate that venture capital firms prefer follow on investments in start-ups with either dimension high, but not both. For example, venture firms will make follow on investments in firms with high technological risk or high market risk but not both. As a result, advanced technology firms with both high technological and market risk tend to change national locations to secure sources of follow on funding or contracts that will reduce one of these dimensions, giving rise to a higher degree of technology mobility than previously understood. This phenomenon thus shapes a tacit global competition for advanced technology. Implications for policy will also be discussed.