Not all innovation comes from the lab. One of Forbes’s newest standout billionaires is Sara Blakely, founder of undergarment sensation Spanx. As Blakely explained in a recent Marketplace interview, “I’m just like so many women — I was frustrated, I had these white pants that I had spent a lot of money on, and you get home and you think, ‘What am I really supposed to wear under this?’ So it was a frustrated consumer moment.”
New research from the Ewing Marion Kauffmann Foundation suggests that being a frustrated consumer or business user is a fairly common path toward entrepreneurship, especially more innovative entrepreneurship. “User entrepreneurs” are people who create innovative products or services because they need something that doesn’t exist. They then start businesses to commercialize what they developed to meet their need.
Although user entrepreneurs are responsible for only about 10 percent of all startups, they account for nearly half of innovation-oriented startups that make it to the important five-year birthday. User entrepreneurs appear in all industries. Notable examples represent successes like Ms. Blakely’s or in other industries like medical devices, juvenile products and sporting goods and include such brands as Yahoo!, Black Diamond and Medtronic.
Prior industry-level studies suggest that user entrepreneurs are the first to introduce key innovative products and services to the market, but innovation is not the only distinction of user-founded firms. Firms founded by professional and end users are more likely to receive venture capital financing than both typical startups and R&D conducting firms, the two comparison groups in our study. Both professional- and end- user entrepreneurs more frequently use intellectual property protections such as patents and copyrights.
Like other entrepreneurs, user entrepreneurs also possess rich stocks of human capital, attained through education, work experience and prior experiences founding new ventures. Professional-user entrepreneurs, in particular, draw on rich and deep human capital stocks, even as compared to the founders of R&D conducting firms.
User entrepreneurs appear to have greater educational attainment than the average entrepreneur. Specifically, professional and end-user entrepreneurs are more likely to have undergraduate degrees, and are more likely to have earned post-graduate (Master’s and PhD’s) degrees than the average entrepreneur. The same pattern holds true even when we compare professional-user entrepreneurs to the founders of firms performing R&D. Therefore, budget cuts for post-secondary and graduate education and rapidly increasing tuition seem to present a unique threat to these most innovative startups over the long run.
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SOURCE: The Huffington Post