Parental endowments versus business acumen: Assessing the fate of low‐tech, service‐sector spinouts. (13th May 2019)

• Record Type: Journal Article
• Authors: Hunt, Richard A.; Lerner, Daniel A.; Townsend, David M.
• Is Part Of: Strategic entrepreneurship journal. Volume 13:Number 4(2019)
• Page Start: 478
• Page End: 506
• Publication Date: 2019-05-13
• Subjects: entrepreneurship -- knowledge spillovers -- market entry -- service sector -- spinouts; Entrepreneurship -- Periodicals; New business enterprises -- Planning -- Periodicals; 338.04
• DOI: 10.1002/sej.1317
• Languages: English
• ISSNs: 1932-4391

Abstract

Abstract: Research Summary : In recent years, scholarship on intraindustry entrepreneurial spinouts has coalesced around a heredity‐focused perspective, propounding the notion that spinouts from high‐quality parent‐firms outperform those emanating from low‐quality parent‐firms. This view has found strong support in high‐tech sectors, but it is unclear whether parental lineage is a determinant of performance and survival in sectors exhibiting low‐technological dynamism, especially when the locus of value creation stems from generalist rather than technical‐specialist knowledge. Applying the knowledge spillover theory of entrepreneurship and jack‐of‐all‐trades framework, we assess the fate of a complete population of 678 service‐sector firms for the entire 32‐year history of an industry. Our study offers explanatory mechanisms that more fully account for the non‐hereditary success factors driving performance heterogeneity among entrepreneurial spinouts. Managerial Summary : In many industries, half or more of the firms are founded by former employees of existing companies (i.e., "entrepreneurial spinouts"). In high‐tech sectors, these "spinouts" often appear to perform better than entrants without prior industry experience. Moreover, spinouts spawned by high‐performing parent‐firms tend to out‐perform spinouts from low‐performing parents, suggesting that spinouts benefit from advantageous parental knowledge and capabilities. However, this does not seem to be the case among spinouts in industries characterized by low‐technological dynamism. Our findings indicate that when technological dynamism is low, general business acumen eclipses parental lineage in determining spinout performance. In these cases, spinout founders with primarily technical experience would be well‐served by partnering with individuals possessing experience in marketing, sales, and day‐to‐day business management.