The study authors compared three types of user entrepreneurs — end-user entrepreneurs (those who developed products or services for personal use); professional-user entrepreneurs (those who developed products or services for business use); and hybrid professional-/end-user entrepreneurs — with other "innovative" U.S. startups that had performed R&D during their first year of operations, and with U.S. startups in general. The findings were based on data a study tracking nearly 5,000 firms.
User entrepreneurship appears to be particularly common among innovative startups, and a high fraction of professional- and end-user entrepreneurs receive venture capital financing, the study found. Almost 6 percent of end-user entrepreneurs across all industries reported receiving venture capital in their first six years of operations.
In addition, professional-user entrepreneurs seem to possess greater amounts of and richer human capital relative to other types of entrepreneurs. Their firms also seem to prosper with respect to revenue generation and were more common in the high-tech industries.
End-user entrepreneurship may be a particularly attractive path for women and some minority groups, the study data showed. Although end-user entrepreneurs do not appear to possess greater human capital compared to other types of entrepreneurs and were different with respect to comparison groups, again a relatively high fraction of these firms reported receiving venture capital financing.
"Users have ignited technological change in industries ranging from medical devices to sports equipment to juvenile products," said study co-author Sonali Shah, an assistant professor at Foster School of Business, University of Washington. "In many cases, users, not producers, have the best information, and their incentive is to build something better for their own use. As a result, they are able to create truly novel innovations. When they commercialize these innovations, we all benefit."