2014/06/25 by Emily Cox Pahnke, Rory McDonald, Dan Wang +2 · 210 citations
Business, Management and Accounting · #Business #Competitive advantage #Competitor analysis #Corporate Finance and Governance #Economics #Entrepreneurship #Entrepreneurship Studies and Influences #Finance #Industrial organization #Intermediary #Leakage (economics) #Marketing #Private Equity and Venture Capital #Venture capital
paper · open access · doi:10.5465/amj.2012.0777
published in Academy of Management Journal 58(5), 1334-1360 (Academy of Management)
openalex publication_date 2014/06/25 · openalex created_date 2016/06/24 · openalex updated_date 2026/08/04
This study investigates the impact of early relationships on innovation at entrepreneurial firms. Prior research has largely focused on the benefits of network ties, documenting the many advantages that accrue to firms embedded in a rich network of interorganizational relationships. In contrast, we build on research emphasizing potential drawbacks to examine how competitive exposure, enabled by powerful intermediaries, can inhibit innovation. We develop the concept of “competitive information leakage,” which occurs when firms are indirectly tied to their competitors via shared intermediary organizations. To test our theory, we examine every relationship between entrepreneurial firms and their venture capital investors in the minimally invasive surgical device segment of the medical device industry over a 22-year period. We find that indirect ties to competitors impede innovation, and that this effect is moderated by several factors related to the intermediary’s opportunities and motivation to leak important information.