IDEAS home Printed from https://ideas.repec.org/a/eee/jbvent/v37y2022i6s0883902622000611.html
   My bibliography  Save this article

When do spinouts benefit from market overlap with parent firms?

Author

Listed:
  • Bahoo-Torodi, Aliasghar
  • Torrisi, Salvatore

Abstract

We examine how market overlap with parent organizations impacts the performance of startups founded by the former employees of these incumbent firms. Building on knowledge inheritance and competitive dynamics theories, we propose that the degree to which the operating markets of spinouts overlap with their parent organizations has a curvilinear relationship with their likelihood of survival. Market overlap is beneficial to spinouts because it reduces uncertainty during the early stages of new venture development. However, substantial market overlap may spark hostile actions by the parent organizations, thereby creating disruptive competition that may lower the likelihood of spinouts' survival. Furthermore, we hypothesize that the previous hierarchical position of founders in parent organizations moderates the overlap–performance relationship. Using a sample of European biotech spinouts and their parent firms, we find support for our hypotheses.

Suggested Citation

  • Bahoo-Torodi, Aliasghar & Torrisi, Salvatore, 2022. "When do spinouts benefit from market overlap with parent firms?," Journal of Business Venturing, Elsevier, vol. 37(6).
    • Handle: RePEc:eee:jbvent:v:37:y:2022:i:6:s0883902622000611
    DOI: 10.1016/j.jbusvent.2022.106249
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0883902622000611
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusvent.2022.106249?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bruno Cirillo, 2019. "External Learning Strategies and Technological Search Output: Spinout Strategy and Corporate Invention Quality," Organization Science, INFORMS, vol. 30(2), pages 361-382, March.
    2. Evan Starr & Natarajan Balasubramanian & Natarajan Balasubramanian, 2018. "Screening Spinouts? How Noncompete Enforceability Affects the Creation, Growth, and Survival of New Firms," Management Science, INFORMS, vol. 64(2), pages 552-572, February.
    3. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 805-851.
    4. Bruno Cirillo, 2019. "External learning strategies and technological search output: Spinout strategy and corporate invention quality," Post-Print halshs-01948180, HAL.
    5. Richard A. Bettis & C. K. Prahalad, 1995. "The dominant logic: Retrospective and extension," Strategic Management Journal, Wiley Blackwell, vol. 16(1), pages 5-14.
    6. Sonali K. Shah & Rajshree Agarwal & Raj Echambadi, 2019. "Jewels in the crown: Exploring the motivations and team building processes of employee entrepreneurs," Strategic Management Journal, Wiley Blackwell, vol. 40(9), pages 1417-1452, September.
    7. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    8. Bruno Cirillo & Stefano Brusoni & Giovanni Valentini, 2014. "The Rejuvenation of Inventors Through Corporate Spinouts," Organization Science, INFORMS, vol. 25(6), pages 1764-1784, December.
    9. Warren Boeker & Jerry Goodstein & John Stephan & Johann Peter Murmann, 1997. "Competition in a Multimarket Environment: The Case of Market Exit," Organization Science, INFORMS, vol. 8(2), pages 126-142, April.
    10. Filippo Carlo Wezel & Gino Cattani & Johannes M. Pennings, 2006. "Competitive Implications of Interfirm Mobility," Organization Science, INFORMS, vol. 17(6), pages 691-709, December.
    11. Sapienza, Harry J. & Parhankangas, Annaleena & Autio, Erkko, 2004. "Knowledge relatedness and post-spin-off growth," Journal of Business Venturing, Elsevier, vol. 19(6), pages 809-829, November.
    12. April Mitchell Franco & Darren Filson, 2006. "Spin‐outs: knowledge diffusion through employee mobility," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 841-860, December.
    13. Pamela Adams & Roberto Fontana & Franco Malerba, 2016. "User-Industry Spinouts: Downstream Industry Knowledge as a Source of New Firm Entry and Survival," Organization Science, INFORMS, vol. 27(1), pages 18-35, February.
    14. Frank T. Rothaermel & David L. Deeds, 2004. "Exploration and exploitation alliances in biotechnology: a system of new product development," Strategic Management Journal, Wiley Blackwell, vol. 25(3), pages 201-221, March.
    15. Thomas Hellmann, 2007. "When Do Employees Become Entrepreneurs?," Management Science, INFORMS, vol. 53(6), pages 919-933, June.
    16. Sidney G. Winter & Gino Cattani & Alex Dorsch, 2007. "The Value of Moderate Obsession: Insights from a New Model of Organizational Search," Organization Science, INFORMS, vol. 18(3), pages 403-419, June.
    17. Ji Youn (Rose) Kim & H. Kevin Steensma, 2017. "Employee mobility, spin-outs, and knowledge spill-in: How incumbent firms can learn from new ventures," Strategic Management Journal, Wiley Blackwell, vol. 38(8), pages 1626-1645, August.
    18. Basu, Sandip & Sahaym, Arvin & Howard, Michael D. & Boeker, Warren, 2015. "Parent inheritance, founder expertise, and venture strategy: Determinants of new venture knowledge impact," Journal of Business Venturing, Elsevier, vol. 30(2), pages 322-337.
    19. Martin Ganco & Rosemarie H. Ziedonis & Rajshree Agarwal, 2015. "More stars stay, but the brightest ones still leave: Job hopping in the shadow of patent enforcement," Strategic Management Journal, Wiley Blackwell, vol. 36(5), pages 659-685, May.
    20. Sayan Chatterjee & Birger Wernerfelt, 1991. "The link between resources and type of diversification: Theory and evidence," Strategic Management Journal, Wiley Blackwell, vol. 12(1), pages 33-48, January.
    21. George P. Huber, 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science, INFORMS, vol. 2(1), pages 88-115, February.
    22. Karen A. Bantel & Susan E. Jackson, 1989. "Top management and innovations in banking: Does the composition of the top team make a difference?," Strategic Management Journal, Wiley Blackwell, vol. 10(S1), pages 107-124, June.
    23. Helena Yli‐Renko & Erkko Autio & Harry J. Sapienza, 2001. "Social capital, knowledge acquisition, and knowledge exploitation in young technology‐based firms," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 587-613, June.
    24. Steve Bennett, 1983. "Log‐Logistic Regression Models for Survival Data," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 32(2), pages 165-171, June.
    25. Paul Gompers & Josh Lerner & David Scharfstein, 2005. "Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999," Journal of Finance, American Finance Association, vol. 60(2), pages 577-614, April.
    26. Steven Klepper, 2002. "The capabilities of new firms and the evolution of the US automobile industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(4), pages 645-666, August.
    27. Gideon D. Markman & Phillip H. Phan (ed.), 2011. "The Competitive Dynamics of Entrepreneurial Market Entry," Books, Edward Elgar Publishing, number 14026.
    28. Maryann P. Feldman & Serden Ozcan & Toke Reichstein, 2019. "Falling Not Far from the Tree: Entrepreneurs and Organizational Heritage," Organization Science, INFORMS, vol. 30(2), pages 337-360, March.
    29. Javier Gimeno, 1999. "Reciprocal threats in multimarket rivalry: staking out ‘spheres of influence’ in the U.S. airline industry," Strategic Management Journal, Wiley Blackwell, vol. 20(2), pages 101-128, February.
    30. Bruno Cassiman & Masako Ueda, 2006. "Optimal Project Rejection and New Firm Start-ups," Management Science, INFORMS, vol. 52(2), pages 262-275, February.
    31. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    32. Mariko Sakakibara & Natarajan Balasubramanian, 2020. "Human capital, parent size, and the destination industry of spinouts," Strategic Management Journal, Wiley Blackwell, vol. 41(5), pages 815-840, May.
    33. Simone Ferriani & Elizabeth Garnsey & Gianni Lorenzoni, 2012. "Continuity and change in a spin-off venture: the process of reimprinting," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 21(4), pages 1011-1048, August.
    34. Egle Vaznyte & Petra Andries & Sarah Demeulemeester, 2021. "“Don’t leave me this way!” Drivers of parental hostility and employee spin-offs’ performance," Small Business Economics, Springer, vol. 57(1), pages 265-293, June.
    35. Benjamin A. Campbell & Martin Ganco & April M. Franco & Rajshree Agarwal, 2012. "Who leaves, where to, and why worry? employee mobility, entrepreneurship and effects on source firm performance," Strategic Management Journal, Wiley Blackwell, vol. 33(1), pages 65-87, January.
    36. April Mitchell Franco & Darren Filson, 2006. "Spin‐outs: knowledge diffusion through employee mobility," RAND Journal of Economics, The RAND Corporation, vol. 37(4), pages 841-860, December.
    37. Jesper B. Sørensen & Magali A. Fassiotto, 2011. "Organizations as Fonts of Entrepreneurship," Organization Science, INFORMS, vol. 22(5), pages 1322-1331, October.
    38. Scott Shane & Toby Stuart, 2002. "Organizational Endowments and the Performance of University Start-ups," Management Science, INFORMS, vol. 48(1), pages 154-170, January.
    39. Constance E. Helfat & Marvin B. Lieberman, 2002. "The birth of capabilities: market entry and the importance of pre-history," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(4), pages 725-760, August.
    40. Peter J. Lane & Michael Lubatkin, 1998. "Relative absorptive capacity and interorganizational learning," Post-Print hal-02311860, HAL.
    41. Joanne E. Oxley & Rachelle C. Sampson, 2004. "The scope and governance of international R&D alliances," Strategic Management Journal, Wiley Blackwell, vol. 25(8‐9), pages 723-749, August.
    42. Ioannis Ioannou, 2014. "When Do Spinouts Enhance Parent Firm Performance? Evidence from the U.S. Automobile Industry, 1890–1986," Organization Science, INFORMS, vol. 25(2), pages 529-551, April.
    43. Peter Thompson & Jing Chen, 2011. "Disagreements, employee spinoffs and the choice of technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(3), pages 455-474, July.
    44. David J. Bryce & Sidney G. Winter, 2009. "A General Interindustry Relatedness Index," Management Science, INFORMS, vol. 55(9), pages 1570-1585, September.
    45. Aaron K. Chatterji, 2009. "Spawned with a silver spoon? Entrepreneurial performance and innovation in the medical device industry," Strategic Management Journal, Wiley Blackwell, vol. 30(2), pages 185-206, February.
    46. Sascha G. Walter & Simon Heinrichs & Achim Walter, 2014. "Parent hostility and spin-out performance," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 2031-2042, December.
    47. Herbert A. Simon, 1993. "Strategy and organizational evolution," Strategic Management Journal, Wiley Blackwell, vol. 14(S2), pages 131-142, December.
    48. Daniel A. Levinthal & James G. March, 1993. "The myopia of learning," Strategic Management Journal, Wiley Blackwell, vol. 14(S2), pages 95-112, December.
    49. Klepper, Steven & Thompson, Peter, 2010. "Disagreements and intra-industry spinoffs," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 526-538, September.
    50. John C. Dencker & Marc Gruber & Sonali K. Shah, 2009. "Pre-Entry Knowledge, Learning, and the Survival of New Firms," Organization Science, INFORMS, vol. 20(3), pages 516-537, June.
    51. Megan Lawrence, 2018. "Taking Stock of the Ability to Change: The Effect of Prior Experience," Organization Science, INFORMS, vol. 29(3), pages 489-506, June.
    52. David G. McKendrick & James B. Wade & Jonathan Jaffee, 2009. "A Good Riddance? Spin-Offs and the Technological Performance of Parent Firms," Organization Science, INFORMS, vol. 20(6), pages 979-992, December.
    53. Marco Corsino & Myriam Mariani & Salvatore Torrisi, 2019. "Firm strategic behavior and the measurement of knowledge flows with patent citations," Strategic Management Journal, Wiley Blackwell, vol. 40(7), pages 1040-1069, July.
    54. Agarwal, Rajshree & Shah, Sonali K., 2014. "Knowledge sources of entrepreneurship: Firm formation by academic, user and employee innovators," Research Policy, Elsevier, vol. 43(7), pages 1109-1133.
    55. Javier Gimeno & Carolyn Y. Woo, 1996. "Hypercompetition in a Multimarket Environment: The Role of Strategic Similarity and Multimarket Contact in Competitive De-Escalation," Organization Science, INFORMS, vol. 7(3), pages 322-341, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chila, Vilma, 2021. "Knowledge dynamics in employee entrepreneurship : Implications for parents and offspring," Other publications TiSEM a1f5d18c-783b-4af6-8414-6, Tilburg University, School of Economics and Management.
    2. Egle Vaznyte & Petra Andries & Sarah Demeulemeester, 2021. "“Don’t leave me this way!” Drivers of parental hostility and employee spin-offs’ performance," Small Business Economics, Springer, vol. 57(1), pages 265-293, June.
    3. Criaco, Giuseppe & van Oosterhout, J. (Hans) & Nordqvist, Mattias, 2021. "Is blood always thicker than water? Family firm parents, kinship ties, and the survival of spawns," Journal of Business Venturing, Elsevier, vol. 36(6).
    4. Yeganegi, Sepideh & Laplume, André O. & Dass, Parshotam & Huynh, Cam-Loi, 2016. "Where do spinouts come from? The role of technology relatedness and institutional context," Research Policy, Elsevier, vol. 45(5), pages 1103-1112.
    5. Boeker, Warren & Howard, Michael D. & Basu, Sandip & Sahaym, Arvin, 2021. "Interpersonal relationships, digital technologies, and innovation in entrepreneurial ventures," Journal of Business Research, Elsevier, vol. 125(C), pages 495-507.
    6. Fontana, Roberto & Zirulia, Lorenzo, 2023. "How far from the tree does the (good) apple fall? Spinout creation and the survival of high-tech firms," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 26-49.
    7. Mariko Sakakibara & Natarajan Balasubramanian, 2020. "Human capital, parent size, and the destination industry of spinouts," Strategic Management Journal, Wiley Blackwell, vol. 41(5), pages 815-840, May.
    8. Shweta Gaonkar & Mahka Moeen, 2023. "Standing on the parent's shoulder or in its shadow? Alliance partner overlap between employee spinouts and their parents," Strategic Management Journal, Wiley Blackwell, vol. 44(2), pages 415-440, February.
    9. Heinrichs, Simon & Walter, Sascha, 2013. "Don’t Step Into Your Parent’s Shoes – How Exploitation and Exploration Affect Spin-out Growth," EconStor Preprints 68591, ZBW - Leibniz Information Centre for Economics.
    10. Walter, Sascha & Heinrichs, Simon & Walter, Achim, 2013. "Hostile Parent Firms and Child Firm Performance," EconStor Preprints 68592, ZBW - Leibniz Information Centre for Economics.
    11. Bruno Cirillo, 2019. "External Learning Strategies and Technological Search Output: Spinout Strategy and Corporate Invention Quality," Organization Science, INFORMS, vol. 30(2), pages 361-382, March.
    12. Maryann P. Feldman & Serden Ozcan & Toke Reichstein, 2019. "Falling Not Far from the Tree: Entrepreneurs and Organizational Heritage," Organization Science, INFORMS, vol. 30(2), pages 337-360, March.
    13. Natarajan Balasubramanian & Mariko Sakakibara, 2021. "Incidence and Performance of Spinouts and Incumbent New Ventures: Role of Selection and Redeployability within Parent Firms," Working Papers 21-27, Center for Economic Studies, U.S. Census Bureau.
    14. Pamela Adams & Roberto Fontana & Franco Malerba, 2022. "Knowledge resources and the acquisition of spinouts," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(2), pages 277-313, June.
    15. Chila, Vilma & Devarakonda, Shivaram, 2024. "The effects of firm-specific incentives (stock options) on mobility and employee entrepreneurship," Journal of Business Venturing, Elsevier, vol. 39(3).
    16. Coad, Alex & Kaiser, Ulrich & Kuhn, Johan, 2021. "Spin doctors vs the spawn of capitalism: Who founds university and corporate startups?," Research Policy, Elsevier, vol. 50(10).
    17. Andrea Morrison, 2018. "Spinoffs, parents, and institutions: Evidence from the Italian motorcycle industry," Papers in Evolutionary Economic Geography (PEEG) 1840, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2018.
    18. Urbig, Diemo & Reif, Karina & Lengsfeld, Stephan & Procher, Vivien D., 2021. "Promoting or preventing entrepreneurship? Employers’ perceptions of and reactions to employees’ entrepreneurial side jobs," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    19. Stijn Kelchtermans & Francesca Melillo, 2023. "Taking a Full Career Perspective on the Formation of Co-Founding Teams," GREDEG Working Papers 2023-22, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    20. Sahaym, Arvin & Howard, Michael D. & Basu, Sandip & Boeker, Warren, 2016. "The parent's legacy: Firm founders and technological choice," Journal of Business Research, Elsevier, vol. 69(8), pages 2624-2633.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbvent:v:37:y:2022:i:6:s0883902622000611. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusvent .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.