Capability building leading to commercialization: a study of product based Indian telecom start-ups

Abstract

New ventures, especially in high-tech domain {defined by OECD as sectors with high R&D intensity, such as aerospace, biotech, etc.), have received wide recognition for their important contributions to the economy. Prior research suggests that high-tech new ventures create more net jobs, distribute wealth more effectively, and innovate much more than established firms. In India, product based high-tech companies are a rare phenomenon. Product based start-ups face greater problems due to resource intensiveness and higher techno-commercial uncertainty. Therefore such start-ups take longer time to commercialize as compared to other start-ups especially those focused on services. Even though high-tech new ventures play a pivotal role in growth of the economy, few scholars have attempted to understand the trajectory of evolution of various capabilities among such start-ups in India. With the larger objective of understanding possible pathways that enable creation of successful technology start-ups at the core, present work is primarily aimed at studying capabilities enabling commercialization among product based high-tech start-ups. We chose telecom start-ups as the context for our study as they are high in knowledge intensity vis-a-vis other start-ups in the !CT domain. Moreover, telecom start - ups are marked by active regulatory interventions, which play a major role in the way these firms evolve, making commercialization more challenging for such firms. Our work is aimed at identifying the technological and marketing capabilities that enable product based business to business (B2B) telecom start-ups to commercialize as well as understanding the evolution of these capabilities. After an extensive review of extant literature on entrepreneurship and resource based view (RBV), we identified two primary research questions to be addressed in the present work. Research Questions: 1.What are the technological capabilities of product-based telecom start-ups that enable them to commercialize and how do these capabilities evolve? 2.What are the marketing capabilities of product-based telecom start-ups that enable them to commercialize and how do these capabilities evolve? Additionally, we also look at two sub-questions within the process of capability evolution: a) What role does the entrepreneur / founding team and their social network play in this capability building process? b) What role do the external environmental interventions regulatory policies and competition) play in this capability building process? Given the exploratory nature of work, rarity of product start-ups and multiple complex linkages that drive the capability development and commercialization processes, we chose to analyze the above problem by multiple case based methods employing inductive generalization to generate mid-range theory. The theoretical underpinnings for analysis emerge from strategic management literature focused on capability building and organizational learning. Four product based B2B telecom start-ups were identified for detailed study based on purposive sampling. Data collection was based on semi-structured interviews of entrepreneurs as well as available secondary data sources which were subsequently used to prepare case histories. The case studies were analyzed across three broad themes, i.e. entrepreneurial characteristics, technological activities and marketing activities of the start-ups on their trajectory of evolution. For identifying capabilities, we established a criterion with three attributes (contribution to commercialization, consistent performance as per expectations, reutilization) based on extant literature. Technological and marketing activities were analyzed based on the above criteria to identify If the activity could be referred to as a capability and explore the identified capability further. Existing literature on established firms focuses on substantive and dynamic capabilities and further emphasizes their segregation. We however, posit that in a start-up context, such segregation is artificial. We therefore, classify the identified capabilities as a set of interdependent nucleating capabilities, that act as sources for further maturation of existing capabilities and development of newer capabilities. We then develop a framework explaining the evolution of nucleating technological and marketing capabilities and also dwell on the co - evolution among these capabilities. Among the product- based Indian telecom start-ups, we identified architectural design algorithmic implementation and product adaptation as the nucleating technological capabilities. Further analysis reveals ability to evaluate and visualize alternate configurations, make appropriate hardware / software platform choice within the standards constraints, logical design of performance enhancing algorithms, logical design of protocol stack, implementation of various algorithms and protocols and ability to manage tradeoff between customer driven and self-driven adaptation as constituents of nucleating technological capabilities. Nucleating marketing capabilities identified include market orientation, positioning and segmentation, selling and after sales services. Further analysis here reveals the ability to develop shared mental models to identify latent needs, evaluate existing opportunities and recognize new opportunities, develop flexible product offerings, adapt to new business models, utilize social network to mitigate liability of newness and establish proactive after sales service with appropriate policies as constituents of nucleating marketing capabilities. The evolution of these capabilities was mapped as a three-staged framework linking knowledge acquisition and capability lifecycle approach. Within each of the stages ,we discuss three aspects, knowledge acquired, people involved and processes in existence to give a holistic picture of the overall capability development process. Our work also presents rich evidence regarding co-evolution of marketing and technological capabilities as the firm evolves to the next stage in its lifecycle. Contributions: This work is a first attempt to present a snapshot of product based telecom start-ups in India and the issues faced by such firms. We highlight the specificity of telecom related knowledge especially related to telecom protocols as barriers to entry to the sector and map technology knowledge acquisition among the Indian telecom start-ups. We identify technological capabilities and marketing capabilities among the telecom start-ups and present stage based solution frameworks in a knowledge intensive and regulated environment. We also introduce the idea that the start-ups need to be examined through a lens of nucleating capabilities as it offer a richer and theoretically sound paradigm. This work enables better understanding of the impact of regulatory body and standard making bodies on the capability building process among technology- based start-ups, especially their role in creating new business opportunities through deregulation and acting as sources of information for the startups respectively. This work also identifies facilitating role of social network and competitive activities in the development of technological and marketing capabilities among the telecom start-ups. From a practitioner's perspective, we can say that a product with a dominant software component is much more likely to reach commercialization, as it imparts flexibility to the product. Close interaction with customers in customizing the product to their needs irrespective of the project size differentiates the smaller startups from established firms. Also, convincing customers of constant upgrades in technology and maintaining a dedicated after sales team goes a long way in acquiring customers. From a public policy perspective, our work has highlighted the deficiency among start-ups with respect to testing infrastructure and access to telecom-specific knowledge. The Government could provide support to start-ups regarding both aspects by setting up test beds and providing access to R&D labs/other such institutes of excellence focusing on telecom research and education.