MAPPING THE SCOPE AND CONTENT OF TECHNOLOGY-BASED RISK IN TECHNOLOGY-BASED FIRMS
Wayne
King, Memorial University of Newfoundland
Dennis Hanlon, Memorial University of Newfoundland
Principal Topic
The business plan constitutes a core means of risk assessment. While the current business plan model excels at leading an entrepreneur through the steps of assessing market risk and financial risk, its approach to the evaluation of potential risks associated with the development and commercialization of new technologies tends to be ad hoc. In an earlier work the authors investigated the literature associated with the manner in which technology-based firms identify and deal with technology-based risks. From this work a nine-factor framework was developed. This paper builds on the prior work by comparing the results of an exploratory field investigation into the nature and sources of “unique” technology-based risks actually faced by technology-driven small firms with the literature-based findings.
Method
A two-stage process was employed. In-depth interviews initially were held with 15 small firms in four technology-based industries: biotechnology, telecommunications, information technology, and software development. These interviews focused on the risks actually encountered by firms during the course of developing new technologies for the marketplace as well as the tools employed for their assessment and the methods adopted to minimize these risks. The results of the interviews were incorporated into a survey instrument that was faxed to each of the interviewees as a confirmation of our interpretation of the interview results, and to assist in the identification of additional issues.
Results and Implications
The technology-based risks faced by technological firms are considerably broader than common notions of “technical risk” would have us believe. We identified 29 sources of technology-based risk, which can be represented within a nine-factor framework comprising three broad categories: organizational factors, engineering factors and societal factors. Technology-based risks are highly important and remarkably prevalent in commercialization projects, with firms facing 13.86 unique sources of risk on average. Entrepreneurs and investors are unlikely to give adequate consideration to these risks if they rely on traditional business planning methods. Furthermore, many of the risk assessment tools appearing in the literature appear inappropriate for smaller technology-based firms and start-ups.
CONTACT: Wayne King, Memorial University of Newfoundland, St. John’s, NF, Canada, A1B 3X5; (T) 709-737-7937; (F) 709-737-7680; wking@mun.ca
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