Public-private collaborations increasingly rely on startups to jointly develop innovative solutions. While startups can contribute flexibility and new perspectives, their integration remains a challenge. Existing public-private collaboration literature typically treats private-sector companies as a uniform group, overlooking key differences between startups and incumbents along with their implications for their governance in joint innovation efforts. This study addresses this gap by examining how startups can be effectively involved in public-private innovation projects alongside incumbents. Based on 46 semi-structured interviews and extensive secondary data, two governance approaches are identified: the iterative approach, orchestrated by public actors with gradual involvement of startups, and the funnel approach, orchestrated by incumbents who initially involve many startups and then narrow the pool. However, both approaches can lead to unintended dynamics that curb the innovativeness of startups, preventing them from contributing innovative impulses: public-actor-induced path dependence and incumbent-induced innovation protectionism. To mitigate these dynamics, this study proposes a third, hybrid governance approach. It thus provides actionable insights into the governance of startups alongside incumbents in public-private innovation projects, which is a topic that is largely underexplored in both public-private collaboration and entrepreneurship literature.
