Abstract:
The medical device is of great societal value developing innovative new medical devices with promise to reduce costs and improve patient outcomes. However much of this innovation occurs within start-ups who are poorly positioned for commercialisation relative to established firms. The decision to either vertical integrate or co-operate with existing established companies has been highlighted as a significant determinant for the allocation of profits that are generated from a technological innovation. This decision is critically important to start-ups who must maximize value for the shareholder whilst beginning the commercial process with limited resources and commercial assets. However there is a gap in the literature examining this decision with a focus on start-ups in the medical device industry. This study aims to explore how this decision is made by identifying factors considered by managers and how they are aggregated to produce a decision. To achieve this, a multiple case study methodology is chosen drawing upon five cases. In all cases secondary data and semi-structured interviews were utilized and in one case elements of participant observation are used as an additional source of evidence. It is evident that managers look at a wide ranging of factors, the majority of which appeared to result from the resource constrained nature of being a start-up and tend to favour co-operation. Factors identified offered support for the applicability of existing academic concepts such as Tecce’s PFTI for use in context of the medical device start-up. However the findings highlight the incompleteness of existing decision frameworks that fail to capture the nuances of the start-up environment and medical device industry, which appears to have a strong appropriability regime within the sector. No formal process or tool for assimilating factors was identified with Managers citing a pragmatic and logical approach to decision-making in conjunction with discussion with the board of directors. This may be due to the complexity and uncertainty characteristic of strategic decisions and may demonstrate the use of heuristics by managers in an effort to cope with the multitude of consideration factors that are not easily qualified or assimilated and the dynamic environment inherent in commercialisation.