Corporate Spin-offs and the Significance of Founders’ Informal Relations

Abstract Research on corporate spin-offs has suggested that spin-off firms have advantages over other new entrants in an industry because of their origin. These advantages have been argued to lie with the founders’ prior industry experience, and with the opportunity to form sourcing agreements with the parent firms. This paper inquires into an additional aspect of prior experience, founders’ informal relations. The use and benefits of such informal relations to source resources necessary for growth were analysed in three spin-offs in the Swedish telecommunications industry. The findings show that the spin-offs derived a variety of benefits from the use of founders’ informal relations, in particular in staffing the spin-offs, but also to acquire resources when other means of sourcing were unavailable. The results indicate that future research on corporate spin-offs as well as corporate spin-outs may need to account better for this variable in order to explain spin-off growth, and hence success.

[1]  I. MacMillan,et al.  Resource Cooptation Via Social Contracting: Resource Acquisition Strategies for New Ventures , 1990 .

[2]  Jesper B. Sørensen Recruitment-based competition between industries: a community ecology , 2004 .

[3]  M. Dowling,et al.  Firm networks: external relationships as sources for the growth and competitiveness of entrepreneurial firms , 2003 .

[4]  Mark S. Granovetter The Strength of Weak Ties , 1973, American Journal of Sociology.

[5]  David A. Garvin,et al.  Spin-offs and the New Firm Formation Process , 1983 .

[6]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[7]  R. Stake The art of case study research , 1995 .

[8]  M. Diane Burton,et al.  7. Coming from good stock: Career histories and new venture formation , 2002 .

[9]  Ronald S. Burt,et al.  Structural Holes: The Social Structure of Competition. , 1994 .

[10]  J. R. Moore,et al.  The theory of the growth of the firm twenty-five years after , 1960 .

[11]  Karel Cool,et al.  Asset stock accumulation and sustainability of competitive advantage , 1989 .

[12]  A. Zaheer,et al.  Bridging ties: a source of firm heterogeneity in competitive capabilities , 1999 .

[13]  Damon J. Phillips A Genealogical Approach to Organizational Life Chances: The Parent-Progeny Transfer among Silicon Valley Law Firms, 1946–1996 , 2002 .

[14]  E. Autio,et al.  Knowledge relatedness and post-spin-off growth , 2004 .

[15]  Lori Rosenkopf,et al.  Startup size and the mechanisms of external learning: increasing opportunity and decreasing ability? , 2003 .

[16]  S. Klepper Employee Startups in High‐Tech Industries , 2001 .

[17]  Annaleena Parhankangas,et al.  From a corporate venture to an independent company: a base for a taxonomy for corporate spin-off firms , 2003 .

[18]  B. Uzzi,et al.  Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness , 1997 .

[19]  Stephen Hill,et al.  The theory of the growth of the firm , 1981 .

[20]  H. Chesbrough The Governance and Performance of Xerox's Technology Spin-Off Companies , 2003 .

[21]  April Franco,et al.  KNOWLEDGE TRANSFER THROUGH INHERITANCE: SPIN- OUT GENERATION, DEVELOPMENT, AND SURVIVAL , 2004 .

[22]  Julie M. Hite,et al.  The evolution of firm networks: from emergence to early growth of the firm , 2001 .

[23]  P. Schoemaker,et al.  Strategic assets and organizational rent , 1993 .

[24]  A. Cooper,et al.  Technical entrepreneurship: what do we know? , 1973 .

[25]  P. Ring,et al.  Developmental Processes of Cooperative Interorganizational Relationships , 1994 .

[26]  S. Ghoshal,et al.  Social Capital, Intellectual Capital, and the Organizational Advantage , 1998 .

[27]  R. Grant The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation , 1991 .

[28]  Steven Klepper,et al.  The capabilities of new firms and the evolution of the US automobile industry , 2002 .