Endnotes

Chapter 1

1. For example, Michael Schrage and Matthew Boyle. "Getting beyond the innovation fetish." Fortune. November 13, 2000.

2. A great overview of the entire saga is Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkind (2003).

3. "Business: Hatching a new plan." The Economist. August 12, 2000.

Chapter 2

1. Corporate venturing is not synonymous with corporate innovation in general, or with more specific but traditional and integrated functions such as new business development. In theory and practice, corporate venturing specifically refers to the founding and funding of distinct internal structures and processes, different from those of the established core organization, yet ultimately still part of the parent firm.

2. For example, Gary Hamel. "Bringing Silicon Valley Inside." Harvard Business Review. September 1999; Heidi Mason and Tim Rohner. The Venture Imperative. 2002; Clayton Christensen. The Innovator's Dilemma. 1997.

3. In fact, corporate venture capital has historically tended to follow a boom-and-bust wave that tracks the rise and fall of independent venture capital funds. A good historical overview of corporate venture capital is by Paul A. Gompers, "Corporations and the financing of innovation: The corporate venturing experience." Economic Review—Federal Reserve Bank of Atlanta. Fourth Quarter 2002.

4. Brent Schendler. "How the chips were won." Business 2.0, January/February 2004.

5. In addition to our own analyses, other studies are also consistent with this finding. For example, Paul A. Gompers. "Corporations and the financing of innovation: The corporate venturing experience." Economic Review—Federal Reserve Bank of Atlanta. Fourth Quarter 2002.

Chapter 3

1. For example, Dyan Machan. "An Edison for a new age?" Forbes. May 17, 1999; Kevin G. Rivette and David Kline. Rembrandts in the Attic: Unlocking the Hidden Value of Patents. 2000.

2. For example, Thomas A. Stewart. Intellectual Capital: The New Wealth of Organizations. 1998.

3. "It was my idea." The Economist. August 15, 1998.

4. Holman W. Jenkins, Jr. "Busting the intellectual property bubble." The Wall Street Journal. March 29, 2000.

5. Eric von Hippel. The Sources of Innovation. 1997–1998.

6. Microsoft generated enormous revenues from product licensing but not from IP licensing. A critical distinction exists between product licensing (finished products) and the licensing of "unfinished" IP (the building blocks of innovation). Product licensing is more of a manufacturing and/or distribution concern, not a core R&D issue.

7. John Carey. "The genome gold rush: Who will be the first to hit pay dirt?" Business Week. June 12, 2000.

8. Declan Butler. "Drive for patent-free innovation gathers pace." Nature. July 10, 2003.

Chapter 4

1. For example, Yves Doz and Gary Hamel. The Alliance Advantage. 1998.

2. For example, James F. Moore. The Death of Competition. 1997; Adam M. Brandenburger and Barry J. Nalebuff. Co-opetition. 1997, and "The Right Game: Use Game Theory to Shape Strategy." Harvard Business Review. July 1995; Morten T. Hansen, Henry W. Chesbrough, Nitin Nohria, and Donald Sull. "Networked Incubators: Hothouses of the New Economy." Harvard Business Review. September 2000.

3. Leslie Cauley. "Losses in Space—Iridium's Downfall." The Wall Street Journal. August 18, 1999 (p. A1).

4. Iridium was revived in December 2000 when a group of investors paid $25 million for its assets and repositioned it as a lower cost, specialty provider of global communications for military and commercial applications. In contrast to Motorola's previous multiyear, multibillion-dollar contract to operate Iridium's satellite network, a revamped and slimmed-down Iridium Satellite signed a new operating agreement with Boeing, with monthly operating costs less than 10 percent of the previous contract.

5. Lee Gomes. "Linux Companies Turn to a 'Dot-Com' Pitch to Sidestep Hitch That the Software Is Free." The Wall Street Journal. November 8, 1999.

Chapter 5

1. "Why an acquisition? Often, it's the people," Bernard Wysocki. The Wall Street Journal. October 6, 1997.

2. Thomas Zizzo. "The high cost of optical networking talent." Electronic Business. September 2000; Julie Creswell. "Cold Front." Fortune. February 5, 2001.

3. Henry Goldblatt. "Cisco's secrets." Fortune. November 8, 1999.

4. Siara and Cerent had more in common than just their astronomical deal valuations. Both companies had been split out of what had been Fiberlane Communications, founded in part by Kleiner Perkins venture capital partner Vinod Khosla, just a couple years earlier. Cyras, another optical-networking company, also emerged out of Fiberlane, but by the time Ciena acquired it in December 2000, the optical market had started to droop and it could fetch "only" $2 billion.

5. Creswell. ibid.

6. Zizzo. ibid.

7. Ed Michaels, Helen Handfield-Jones, and Beth Axelrod. The War for Talent. 2001.

8. Ben Elgin. "A Do-It-Yourself Plan at Cisco: No more reliance on acquisitions." Business Week. September 10, 2001.

9. Goodwill is the difference between the price an acquirer pays for an acquisition and the fair book value of the acquired company's net assets. A price premium above net-asset value represents "goodwill," a catch-all term meant to capture the difficult-to-measure, intangible worth of an acquired company. Historically, under U.S. accounting standards, the cost of this M&A goodwill usually was amortized and written off over a period of up to 40 years. Under new accounting rules pushed by the U.S. SEC and taking effect at the end of 2001, goodwill no longer had to be amortized. Instead, it was simply to be carried forward on the books of the acquirer as an intangible asset. If the goodwill became "impaired," however—of lower value than that recorded on the books—companies had to recognize this and reflect the impairment by taking a one-time accounting charge (loss).

10. Chris Sewell. "When boom goes bust." Telephony. October 22, 2001.

11. For example, David J. Teece. "Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy." Research Policy. Volume 15, Issue 6. 1996.

12. For example, Gerard J. Tellis and Peter N. Golder. "First to market, first to fail? Real causes of enduring market leadership." Sloan Management Review. Volume 37, Issue 2. 1996.

13. Annette L. Ranft and Michael D. Lord. "Acquiring new knowledge: The role of retaining human capital in acquisitions of high-tech firms." Journal of High Technology Management Research. Volume 11, Issue 2. 2000.

14. John A. Byrne and Ben Elgin. "Cisco Shopped Till It Nearly Dropped." Business Week. January 21, 2002.

15. Ranft and Lord, 2000. ibid.

16. Palm paid just $170 million in stock, or a very modest multiple of only seven-tenths times sales; Handspring's original IPO day close had left it with a market capitalization of $3.4 billion. Of course, by the time of the deal, Palm itself was down to about $300 million in market capitalization, after having peaked ever-so-briefly at more than $90 billion on its own IPO day.

17. Annette L. Ranft and Michael D. Lord. "Acquiring new technologies and capabilities: A grounded model of acquisition implementation." Organization Science. July/August 2002.

18. Jeff Walsh and Ed Scannell. "Tivoli-IBM union yields fruit, but integration work remains." InfoWorld. March 3, 1997.

Chapter 6

1. For example, Adrian J. Slywotzsky and David J. Morrison. "The Spin-Out Business Design." The Profit Zone. 1997.

2. Jeffrey W. Allen. "Capital markets and corporate structure: The equity carve-outs of Thermo Electron." Journal of Financial Economics. April 1998.

3. Slywotzsky and Morrison, ibid.