Do the Costs of Cooperation Drive the Gale of Creative Destruction ? : Commercialization Strategies in the Medical

Theory suggests that an inventor’s choice of commercialization strategy between entrepreneurship and cooperation with an incumbent firm is determined by the intellectual property environment, access to complementary assets, and transaction costs of collaborating with incumbents. However, this literature frames the choice only from the inventor’s perspective, implicitly assuming that incumbents are willing to cooperate in every case where the inventor prefers this strategy. We explore this question from the perspective of the incumbent, and consider how the willingness to cooperate depends on the costs of doing so. We argue that conditions exist under which inventors would prefer cooperation to commercialize their invention, but that incumbents find cooperation too costly, leading to entrepreneurship. Using data from the medical device industry, we empirically demonstrate that when the incumbents’ costs of cooperation are exogenously increased, a subset of inventors are more likely to pursue entrepreneurship and less likely to collaboratively develop new technologies.