Abstract

The rejuvenation of a company’s core competences may occur through organic growth or by expansion via spin-offs. Indeed, corporate entrepreneurship often entails opportunity-seeking and advantage-seeking activities, which lead to supra-normal profits in the long run. Usually, the strategic decision to strengthen corporate core competencies either internally or externally must be reached under uncertain investment conditions. However, little is known of the process by which such company-unique competences are deployed from the parent company to the spin-off venture. We examine this unexplored issue by drawing upon effectuation and real option theories and to gain a better understanding of how parent companies create and develop spin-offs under uncertain investment conditions in order to build up organizational core competences (Narayanan et al., 2009). We believe that the foundations of both domains, effectuation and real option theories, are useful to explain whether parent companies show a “pro-active and deterministic” investment behavior or a “re-active and flexible” investment behavior at the time of launching and developing spin-offs (McGrath, 1997; Sarasvathy, 2001;).

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