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...ced tosrecombination (Henderson and Clark 1990; Hargadon and Sutton 1997; Tushman and Anderson 1986),sand why recombination is the foundation of theories of transformative social and economic changes(=-=Nelson and Winter 1982-=-; Schumpeter 1934; Van de Ven 1986; Weitzman 1998).sThis suggests recombination will appeal to people who value novelty, breaking down categoricalsbarriers, and risking failure for a chance at transfo...

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...Gruber, Harhoff and Hoisl 2013). Research on recombination is prolific. Studies show that newscombinations of existing components lead to radically new inventions, innovation, and knowledgescreation (=-=Henderson and Clark 1990-=-; Tushman and Anderson 1986; Hargadon and Sutton 1997), resultingsin especially successful outcomes (Fleming 2001; Schoenmakers and Duysters 2010; Nerkar 2003).sThe concept of recombination relies on ...

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...existing market categories and have an interest in retaining the status quo. Establishedsorganizations are unlikely to introduce new developments (Tushman and Anderson 1986; Sørensen andsStuart 2000; =-=Christensen 1997-=-). Compared to private equity firms, CVCs invest in less risky ventures, inslarger syndicates, and many do not award performance pay (Dushnitsky and Shapira 2010). Where privatesequity firms are typic...

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...2013). Research on recombination is prolific. Studies show that newscombinations of existing components lead to radically new inventions, innovation, and knowledgescreation (Henderson and Clark 1990; =-=Tushman and Anderson 1986-=-; Hargadon and Sutton 1997), resultingsin especially successful outcomes (Fleming 2001; Schoenmakers and Duysters 2010; Nerkar 2003).sThe concept of recombination relies on the assumption that some el...

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...ation is prolific. Studies show that newscombinations of existing components lead to radically new inventions, innovation, and knowledgescreation (Henderson and Clark 1990; Tushman and Anderson 1986; =-=Hargadon and Sutton 1997-=-), resultingsin especially successful outcomes (Fleming 2001; Schoenmakers and Duysters 2010; Nerkar 2003).sThe concept of recombination relies on the assumption that some elements are similar and oth...

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... major changes in an industry (Pontikes 2012). Thesventure capitalist investment strategy carries substantial risk, with most investments resulting in lossessand a few generating substantial returns (=-=Sahlman 1990-=-).sThe challenge for venture capitalists is to select promising companies from a set of unprovensorganizations where quality is uncertain (Hall and Lerner 2010; Stuart, Hoang and Hybels 1999). Patents...

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...rature. Exploiting local knowledge is reliable butspredictable, while exploring distant knowledge is riskier but has the potential to be revolutionary (Marchs1991; Nerkar 2003; Kogut and Zander 1992; =-=Katila and Ahuja 2002-=-). Given the importance ofsrecombination, recent research has turned toward investigating individual characteristics, structures, andsprocesses that lead to recombinatory inventions (Gruber, Harhoff a...

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...ased onsnew combinations of existing components (Hargadon and Sutton 1997; Henderson and Clark 1990). Newsorganizational forms emerge when activists blend elements across social boundaries (Rao 1998;s=-=DiMaggio 1991-=-; Clemens 1996; Phillips and Owens 2004; Rindova and Petkova 2007). Many of thesesstudies take an ex post view (Eggers and Kaul 2014), investigating a new development that becamessuccessful and tracin...

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...gies are based onsnew combinations of existing components (Hargadon and Sutton 1997; Henderson and Clark 1990). Newsorganizational forms emerge when activists blend elements across social boundaries (=-=Rao 1998-=-;sDiMaggio 1991; Clemens 1996; Phillips and Owens 2004; Rindova and Petkova 2007). Many of thesesstudies take an ex post view (Eggers and Kaul 2014), investigating a new development that becamessucces...

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...tents that build on similar elements are more useful on average, but those that combinesdistant components have variable outcomes. Distant combinations lead to breakthroughs or failures(Fleming 2001; =-=Fleming and Sorenson 2001-=-). This distinction maps to the concept of exploration andsexploitation in the organizational learning literature. Exploiting local knowledge is reliable butspredictable, while exploring distant knowl...

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...hat recombination has more expansive implications. Novel developments have the potential tosradically change an industry and are the source of value creation (Schumpeter 1934; Nelson and Winters1982; =-=Weitzman 1998-=-). Major technological shifts undermine the position of established competitorsswhile providing opportunities for new upstarts (Tushman and Anderson 1986; Abernathy and Clarks1985). Studies of success...

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...ager 2007). The few studies that investigate a set of start-upssthat have not received prior financing also suggest that patents attract funding: biotechnology start-us withspatents raise more money (=-=Baum and Silverman 2004-=-), and early stage companies with both patents and asprototype are more likely to receive equity financing (Audretsch, Bönte and Mahagaonkar 2012).s7sStudies of how patents influence venture capital f...

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...lossessand a few generating substantial returns (Sahlman 1990).sThe challenge for venture capitalists is to select promising companies from a set of unprovensorganizations where quality is uncertain (=-=Hall and Lerner 2010-=-; Stuart, Hoang and Hybels 1999). Patentssare observable attributes that can signal quality (Hsu and Ziedonis 2013). Qualitative research indicatessthat both investors and entrepreneurs use patents as...

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...n organization’s patents, in four years after thespatent was granted, are included in the model. Patent citations are the best indicator researchers havesidentified to measure the impact of a patent (=-=Trajtenberg 1990-=-). Importance can reliably be measured exspost, but there are not reliable present-time indicators of the future importance of patents (Fleming 2001).sIt is unusual to include future events in a stati...

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... combinations of existing elements, or “recombination,” assthe primary antecedent for novel developments. Recombination is reified as the “ultimate source ofsnovelty” (Schoenmakers and Duysters 2010; =-=Fleming 2001-=-), and “the ‘holy grail’ of innovation research”s(Gruber, Harhoff and Hoisl 2013). Research on recombination is prolific. Studies show that newscombinations of existing components lead to radically ne...

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...se investors look for the next “new, new thing”s(Lewis 1999), investing in organizations with unique products that have the potential to create newsmarkets (MacMillan, Zemann and Subbanarasimha 1987; =-=Hisrich and Jankowicz 1990-=-). As a result, theysembrace companies that do not conform to existing categories. Consumers favor organizations that aresclearly classified. But venture capitalists are “market makers” and prefer org...

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...binations of existing components (Hargadon and Sutton 1997; Henderson and Clark 1990). Newsorganizational forms emerge when activists blend elements across social boundaries (Rao 1998;sDiMaggio 1991; =-=Clemens 1996-=-; Phillips and Owens 2004; Rindova and Petkova 2007). Many of thesesstudies take an ex post view (Eggers and Kaul 2014), investigating a new development that becamessuccessful and tracing it back to i...

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...n a domain.sIn many contexts, venture capitalists are an important constituency who usher in newstechnologies and products that transform a market. These investors look for the next “new, new thing”s(=-=Lewis 1999-=-), investing in organizations with unique products that have the potential to create newsmarkets (MacMillan, Zemann and Subbanarasimha 1987; Hisrich and Jankowicz 1990). As a result, theysembrace comp...

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...t promising companies from a set of unprovensorganizations where quality is uncertain (Hall and Lerner 2010; Stuart, Hoang and Hybels 1999). Patentssare observable attributes that can signal quality (=-=Hsu and Ziedonis 2013-=-). Qualitative research indicatessthat both investors and entrepreneurs use patents as an indicator of technical expertise, branding, orsdifferentiation (Lemley 2000; Mann 2005; Graham and Sichelman 2...

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...Software products are difficult to make sense of, andsas a result market categories are important to helping investors and customers make sense of its manysorganizations and products in this context (=-=Pollock and Williams 2007-=-; Wang 2009; Pontikes 2012).sAlthough products are built on patented technologies, market categories are only loosely coupled withspatent classification. This makes software a good context to study re...

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... on the patenting of software. A 1995 ruling lifted most of the restrictions.sPrevious research shows despite legal barriers, software patents were broadly issued throughout the timesperiod of study (=-=Cohen and Lemley 2001-=-; Mann 2005). Still, it is important to confirm whether resultsshold for the period after restrictions were lifted. Models 17 and 18 are run after 1995. Results continue tosprovide support for hypothe...

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...hman and Anderson 1986; Sørensen andsStuart 2000; Christensen 1997). Compared to private equity firms, CVCs invest in less risky ventures, inslarger syndicates, and many do not award performance pay (=-=Dushnitsky and Shapira 2010-=-). Where privatesequity firms are typical “market makers” who prefer organizations in ambiguous market categories,scorporate venture capital act as “market takers” and avoid organizations that are amb...

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...xisting components (Hargadon and Sutton 1997; Henderson and Clark 1990). Newsorganizational forms emerge when activists blend elements across social boundaries (Rao 1998;sDiMaggio 1991; Clemens 1996; =-=Phillips and Owens 2004-=-; Rindova and Petkova 2007). Many of thesesstudies take an ex post view (Eggers and Kaul 2014), investigating a new development that becamessuccessful and tracing it back to its innovative roots.s4sSt...

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.... Venture capital financing has been critical for softwares10sorganizations. The software industry was the largest or second largest recipient of venture capitalsfinancing for each year in the 1990s (=-=Onorato 1997-=-). In 2002 venture capitalists invested $691 million ins156 different software organizations (Mann 2005). Software products are difficult to make sense of, andsas a result market categories are import...

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...(Hsu and Ziedonis 2013). Qualitative research indicatessthat both investors and entrepreneurs use patents as an indicator of technical expertise, branding, orsdifferentiation (Lemley 2000; Mann 2005; =-=Graham and Sichelman 2008-=-). Quantitative studies of venturescapital backed companies also provide evidence that investors use patents as quality signals. Patents aresmore important at attracting prominent venture capital inve...

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...s emerge when activists blend elements across social boundaries (Rao 1998;sDiMaggio 1991; Clemens 1996; Phillips and Owens 2004; Rindova and Petkova 2007). Many of thesesstudies take an ex post view (=-=Eggers and Kaul 2014-=-), investigating a new development that becamessuccessful and tracing it back to its innovative roots.s4sStudies that take an ex ante approach typically use patent data. Patent data track a wide array...

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... its bringing togethersknowledge associated with market categories it is not in. Areas of knowledge space are mapped to marketscategories based on patenting behavior of organizations in the category (=-=Pontikes and Hannan 2013-=-). It issimportant to ensure that organizations in multiple categories do not have a larger influence thansorganizations in fewer categories. Therefore a grade of membership is computed, which assigns...