This working paper from Chicago and Stanford looked at 298,915 U.S. venture-funded startups from 1976 to 2020 and found something that inverts the usual advice.
It compares three strategies: a) invent a new technology, b) swap one component inside an existing system, or c) wire together mature modules from distant parts of the economy into a configuration nobody had tried.
The third one wins, and not narrowly.
Moving from the lowest to the highest level of architectural recombination multiplies the odds of an IPO or a high-priced acquisition by roughly nine, cuts the odds of closure by 94%, and gets a venture from seed to early-round funding almost three years sooner. At the same time, the other two strategies mostly raise the odds of closure.
In other words, for most startups, architecture beats invention.
Since Henderson and Clark’s 1990 paper, this kind of recombination has been considered the riskiest move for an incumbent, which is why it gets left to entrants. This study says it is also the safest one for those entrants.
That inversion, and what it means for companies that are no longer entrants, is what I unpacked in the fifth edition of Through The Boundary →
through-the-boundary.simonec…