Abstract

Through the discovery and exploitation of a natural experiment comprised of a complete industry population, this paper presents empirical evidence challenging widely held beliefs related to intraindustry entrepreneurial spinoffs. Extant spinoff theory holds that knowledge and capabilities are transferred from parent-firms to spinoffs in hereditary fashion, endowing spinoffs with a performance advantage over de novo entrants. Our analysis of all 612 industry entrants, including 448 spinoffs, paints a dramatically different picture. In the context of a complete population, we find that: (a) de novo entrants actually outperform spinoffs; (b) parent-firm quality exerts no discernible influence on spinoff quality; and, (c) founder-specific experience, not parental lineage, is the primary driver of spinoff performance heterogeneity.

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