Innovation and Knowledge: An Explorative Study of Entrepreneurial Firms in Germany

Entrepreneurial firms are considered to be vehicles for employment and growth and as such have become targets for public policy measures in all OECD countries. At the same time there is a lack of micro-level data about these firms, their characteristics, innovation activity, relationships with external sources of knowledge, links with universities, and the role of the entrepreneur in these, which renders public policy analysis difficult. Entrepreneurial firms, following the definition applied in this thesis, have as business foundation purpose the implementation of a radical innovation, and are characterised by an initial lack of existing repository of knowledge and capabilities, and a continuity of their innovation activity. From an exploratory study of 86 entrepreneurial firms, located in the metropolitan areas of Munich and Berlin, and elsewhere in Germany, we found evidence of the dominant presence of the entrepreneur in organising the firm’s innovation activity and in setting the search scope and the repertoire of external knowledge sources. Firms were undertaking multiple innovation projects in parallel, and firm characteristics, such as organisation in subunits, and multiple teams R&D teams spread across the firm, were found to positively influence the combination of new and incremental innovation projects. Firms selectively involved external sources of knowledge in their innovation activity, with involvement in new innovation projects being more frequent than in incremental projects. We found evidence that relationships between firms and universities and other public research organisations differ from inter-firm and market relationships in that the former exhibit a much higher degree of creativity, novelty and reconfiguration. Young firms, in overcoming the double-constraint of organisational and environmental factors were active networkers and likely to revert to the entrepreneur’s own networks to circumvent entry and establishment barriers in existing networks. For this, contacts maintained with the entrepreneur’s alma mater were found to be of salient relevance. We argued that science is organised in epistemic communities, which are built upon shared identities, and in which members share the same tacit and experiential knowledge, which is passed on through personal contacts, eliminating and punishing opportunistic behaviour. We found evidence that membership in these epistemic communities has lasting effects in that members will turn to other members as part of their search for related or new knowledge.