The Consequences of Entrepreneurial Firm Founding on Innovation

How does the innovative activity of an inventor at an entrepreneurial and established firm differ? With data on entrepreneurial firm founder mobility and patenting, we compare their inventions to a select set of inventors with whom they have strong co-inventor and co-worker connections. Founders and past co-inventors have very similar pre-trends in major patent vari-ables. Five years after founding, difference-in-difference estimates show that the entrepreneurial founder continues to work on similar technology classes albeit with an increased focus on a smaller subset. Under this new innovation strategy, the founder produces 30 % more patents that are of higher quality and more likely to be commercialized. The founder’s post-exit patents cite pre-exit patents at a relatively higher rate, demonstrating close connections between the en-trepreneurial and established firm. Comparing founders in hot and cold startup markets reveals no difference in results, suggesting the changes are unique to the high-growth entrepreneurial firm rather than quality ideas simply leaving established firms