How far from the tree does the (good) apple fall? Spin-out generation and the survival of high-tech firms

Roberto Fontana, Pavia University & CRIOS-Bocconi University

One of the most important determinants of economic growth and competitiveness is the speed at which firms react to innovative opportunities. In this respect, the existing research has highlighted the role of new start-ups as important engines of growth and development at both the industry and country level. Among the factors that explain this performance the ‘pre-entry experience’ of new entrants has been receiving much attention lately. In several industries entrepreneurs with previous experience in the same or in related industries have successfully seized new opportunities and entered new markets by creating spin-outs. Underlying this evidence lays the idea that spin-outs are relatively more successful than other entrants because they take advantage of industry-specific knowledge which is embodied in their founder(s) and which has been inherited from the parent firm. This paper will focus on entry and innovation in the Local Area Networking industry a high tech industry which has experienced phenomenal growth during the 1990s. In this context we disentangle two aspects.

The first aspect concerns the identification of the factors that create the preconditions for successfully start and enhance the transfer of knowledge from the parent company to the spin-off. The second aspect concerns the identification of the factors that contribute to the expansion and growth of the new entrants.

Our results highlight the following. Concerning the role of heritage as a mean of knowledge transfer in the LAN industry: i) More knowledgeable parents have generated more spin-outs; ii) More innovative parents have generated more innovative spin-outs; iii) The richer the know-how of the parent, the greater the number of expected spin-outs. Concerning the performance of the new firms: i) Path breaking innovations and/or innovations that opened up new submarkets were the most likely to lead to spin-outs formation; ii) Spin-outs generally used the same technology of the parents and produce identical products or a close variant.

About the speaker
Roberto Fontana is currently Associate Professor in Applied Economics at the University of Pavia, Italy and Research Fellow at CRIOS (former KITeS) at Bocconi University. He received his PhD in Science and Technology Policy Studies at SPRU University of Sussex, UK in 2002 and his Master of Science in Science and Technology Policy Studies from SPRU University of Sussex in 1998. His main interests are in the field of innovation diffusion and standardisation, product innovation, variety and its implications for the dynamics and structural evolution of industries with particular reference to high technology industries.

Venue: Room H0.06 (Tongersestraat 53)

Date: 21 March 2013

Time: 12:15 - 13:45