Liu Presents Entrepreneurship Research at SIBR Hong Kong Conference

Yong Liu, the Gary M. Munsinger Chair in Entrepreneurship & Innovation, presented research at the Society of Interdisciplinary Business Research (SIBR) Hong Kong Conference on Interdisciplinary Business and Economics Research in October 2015. 

"Effects of Competition in Start-ups and Business Incubation"

Coauthors:  Yong Liu and Professor Weihe Gao of Shanghai University of Finance and Economics

Abstract: Innovation and entrepreneurial activities have taken a central stage in economic and business development across the globe. This paper examines the effects of competition in the early stage of business development—how start-ups react to competitive pressure and how these reactions generate important impacts on young companies' survival and growth. Our data contain more than 100 incubators and the thousands of start-ups that these incubators fostered from 2010 to 2012 in Shanghai, China. Key characteristics such as the location, physical characteristics, the number of start-ups being fostered, the number of entrepreneurial mentors, and annual incubation spending are available for the incubators. For the start-ups, we have information about the founders, employees, tax treatment, the utilization of mentors, the number of patents applied and granted, sales revenue, and so on. Our study show that, when facing more similar start-ups and greater competition for sales and venture capital, start-up companies often reduce their R&D investment. This is in many ways undesirable since R&D fosters competitive advantage and the long term growth for these young companies. Similarly, greater competition reduces the number of intellectual properties that the start-ups apply for. Furthermore, and contrary to what conventional wisdom prescribes, a larger number of start-ups in the same industries in the same incubator does not help attract greater investor attention. For the incubators, these results point to the need of maintaining a healthy balance between the specialization and diversity of start-ups. Our analysis also provides insights on the start-ups' entry into incubation.