Technological and Marketing Capabilities of Incumbent Firms as Sources of Opportunities for Spinouts

Entrepreneurship literature on spin-outs (new ventures by ex-employees of incumbent firms) suggests that increases in either the level of incumbent firms’ technological or market knowledge enhance the likelihood of spin-outs’ entry. Conditional on spawning new ventures, in this paper we examine whether the knowledge structure of incumbent firms would affect the strategic direction of ventures spawned. Analyses of data from the biotech industry supported our hypotheses linking the focus of incumbents’ technological and market portfolio to their spin-outs’ pattern of entry to the same (or different) technological fields or market segments as their parent firms. Our results contribute to the strategy and entrepreneurship literatures by providing a novel perspective on incumbent firms as source of new venture formation and their post-entry strategy.