Success Among High-Technology Firms

Examines the development patterns for new, high-technology firms and determines factors that relate to the success or failure of these firms. Specifically considered are the extent to which these firms discontinue, become acquired, or achieve unusual sales growth and the founder characteristics (identifiable at time of startup) that relate to the company's success or failure. Prior studies finding high rates of firm discontinuance have not focused on high-tech manufacturers. Data were gathered in 1969 through published sources, and interviews with founders and industry experts, for 250 high-technology firms founded in the San Francisco Peninsula during the 1960s. Follow-up studies--using questionnaires, interviews, and data from the California Secretary of State--were conducted in 1973 and 1976. Findings indicate that the number of discontinued firms rose from 4.8% in 1969 to 24.4% in 1973 and 29.2% in 1976. This rate of discontinuace was lower than that found for non-technical firms in other studies. The level of growth was also higher. The rate of acquisition or merger of the firms was high: 19.6% by 1969, 22.8% by 1973, and 23.3% by 1976. Since both successful and unsuccessful new firms were acquired, this may be a partial explanation of the lower discontinuance rate. Even successful firms underwent frequent changes - of management, ownership, name of firm, product lines. Overall, the 73 firms that had discontinued by 1976 were identified as unsuccessful, and 31 (or 12.4%) were defined as successful in that they had achieved annual sales of more than $5 million - typically achieved by only 5% of American manufacturing firms. Finally, in this study, it was found that high growth firms were more likely to have been started by groups of individuals who came from large corporations and whose new firms used similar technologies and served similar markets as these corporations. (SFL)