Startups are created to commercially explore an ideia with innovative potential. To do so, they need a set of technical and business capabilities, efficiently allocating resources to obtain a product with market value. They need, in such an understanding, to become firms and execute a business model. While searching for such a business model, a high percentage of startups fail, while others perform well and reach the initial public offering (IPO), or even sell the business. It seems crucial, then, to identify which capability arrangements are required for the success and the survival of startups. While firms have different arrangements of four innovation capabilities, namely development capability, operation capabillity, management capability and transaction capability, the issue is still under-researched for startups. That being said, this study aims to identify how innovation capabilities are arranged in startups. To accomplish that, an exploratory study with a qualitative approach was performed in Silicon Valley, in which 11 startups and 7 knowledgeable professionals related to the field were interviewed. It was found that startups do not have the four innovation capabilities, but need to develop them in order to transact goods/services in the market, allowing them to become firms. While the development capability and the transaction capability are the first developed by the startup (and also the most developed ones), the operation and management capabilities need to be developed once the business starts to grow. Learning by startups was also identified as relevant to the construction of their innovation capabilities, in which the rich ecosystem in Silicon Valley plays a key role. Although the importance of such an ecosystem, the selection and application of such external information into the construction of such capabilities is a task that can only be performed by the startup. Different arrangements of innovation capabilities were also identified, that might lead a startup to be sold, to turn into a firm or to follow a failure path. The main theoretical contribution was to evaluate, in a single study, not only technological capabilities, but also operational, management and transactional capabilities in startups, highlighting their importance to the startups’ sucess. A second contribution relies in identifying, through the lenses of the theory of the firm, that knowledge widely available in the ecosystem might be irrelevant to the startup if not properly applied in the development of capabilities. As a managerial contribution, the study highlights the need to evaluate the startup performance through metrics, without neglecting the importance of management. It is also suggested that governmental institutions should put a higher emphasis in demanding results from startups.

Author: Dullius, Andréia Cristina

Advisor: Zawislak, Paulo Antonio

Level: Master’s Degree

Published Study:  http://hdl.handle.net/10183/143320