there may be room in the market for a new, smaller firm that creates value in a way that established players can’t
Maybe this is what startups are about. When a few people start a company and invent a product… well, hypothetically you could have a big company like Microsoft select a few employees, give them salary and complete freedom, and let them invent a new product for the company… but for various reasons that rarely happens. So it is better to wait until someone outside of the company develops the stuff and then try to buy it.
An alternative explanation is that by buying external startups that succeed, you save money by not having to finance all those other startups that failed, so for a big company buying a startup is cheaper than trying to create one at home. But I feel this explanation is probably wrong. -- You could do some preselection about whom you allow to try making an “internal startup”. And if one in a hundred succeeds, the price of a successful startup is probably higher than salaries for a few hundred employees; and a sufficiently big company has enough resources to play this game. To sufficiently motivate people, you could promise half or maybe even 10% of the “internal startup” profits to the employees who created it, and the company would still be profitable.
Maybe this is what startups are about. When a few people start a company and invent a product… well, hypothetically you could have a big company like Microsoft select a few employees, give them salary and complete freedom, and let them invent a new product for the company… but for various reasons that rarely happens. So it is better to wait until someone outside of the company develops the stuff and then try to buy it.
An alternative explanation is that by buying external startups that succeed, you save money by not having to finance all those other startups that failed, so for a big company buying a startup is cheaper than trying to create one at home. But I feel this explanation is probably wrong. -- You could do some preselection about whom you allow to try making an “internal startup”. And if one in a hundred succeeds, the price of a successful startup is probably higher than salaries for a few hundred employees; and a sufficiently big company has enough resources to play this game. To sufficiently motivate people, you could promise half or maybe even 10% of the “internal startup” profits to the employees who created it, and the company would still be profitable.