© Evanston Photographic
Research: Scott Stern, M&S
professor mines high-tech idea marketplace
startups in intellectual property-rich fields such as biotechnology
and pharmaceuticals succeed by letting their scientists be
scientists and by partnering with established firms to develop
and market their brainstorms, says Kellogg School Associate
Professor of Management and Strategy Scott
Stern, whose research into technology entrepreneurship
and innovation has earned him a foundation award.
have going for them is their intellectual property," Stern
says. "They let their researchers do active publication in
the scientific literature, which, in some sense, is spilling
the company's secrets. And, rather than serve as competition
for established pharmaceutical companies, biotechnology firms
essentially have embedded most of their innovation in the
value-chains of larger firms."
insights and others, garnered through more than a decade of
statistical research and case studies, won Stern recognition
in January with the Ewing
Marion Kauffman Prize Medal for Distinguished Research in
Entrepreneurship. Based on the body of his research, the
biennial award will go to a researcher under age 40 who focuses
on entrepreneurship and innovation.
delighted to have been selected," Stern says. "The Kauffman
Foundation is doing great work in this area and funding a
variety of initiatives around entrepreneurship and innovation
that are encouraging high-quality research in an area we know
too little about."
has focused in that area for his entire career, writing his
doctoral dissertation at Stanford University in 1996 on the
early commercialization activities of Genentech, which partnered
with pharmaceutical giant Eli Lilly to develop synthetic insulin.
"That pattern plays out over and over again in the biotech
industry," he says.
firms must tackle a basic market failure when it comes to
intellectual property. "If I want to sell you an idea, but
you don't know what it is, you're unwilling to pay me," Stern
explains. "But once I tell you my idea, you no longer need
to pay me."
start-up firms could try to market ideas themselves, "Often
you don't have the resources, leverage, distribution channels
or brand name to run very far," Stern says. "While established
firms will often have access to better resources, those are
precisely the firms who are most likely to expropriate your
idea, or take advantage of it without full compensation."
research has found that some companies, such as Cisco Systems,
take a longer view. "To encourage entrepreneurship over time,
they choose a more cooperative commercialization strategy
with these entrepreneurs."
a long-term reputation as innovators, startups in fields such
as biotechnology must recruit and hire cutting-edge scientists
- but to do so, firms must be willing to give such highly
talented people leeway that, on the surface, might seem disadvantageous
to their companies.
firms allow their scientists to be full-fledged members of
the scientific community, publishing in the scientific literature,
co-authoring with university researchers - and even potentially
with researchers from other firms, who might be competitors
in other dimensions," Stern says.
his research has found, is that firms that encourage this
kind of scientific environment can pay 15 to 25 percent less
and expect productivity gains of similar magnitude - erasing
any disadvantage from spilling their secrets. "These are not
just profit-maximizing automatons," he says. "These companies
are run by and for scientists, and scientists care deeply
about their scientific reputation, respecting the rules of
scientific inquiry, and participating in scientific debate."
of his core research, Stern, who joined the Kellogg School
three years ago from M.I.T., teaches both Management of Technology
for MBAs and, this year, began a first-year doctoral course
on applied econometrics. He serves as academic director of
the Kellogg Biotechnology
Center, which hosts conferences and encourages research,
and which he says was "one of the great attractions of Kellogg."
campus, Stern serves as a research associate at the National
Bureau of Economic Research and co-organizer of its Innovation
Policy and the Economy Program, which provides a forum for
researchers in that area.
forward, Stern sees the management of innovation becoming
increasingly important, as more traditional sources of advantage
erode. "I hope my research and teaching help innovation-driven
companies position themselves to protect their ideas and create
a foundation for future innovation," he says.