Spin-outs—start-ups by ex-employees—are said to start with a partial copy of their parent firms’ knowledge base. This knowledge “legacy” can be a key advantage over de novo start-ups but “piggybacking” on parent’s knowledge can also result in key disadvantages, such as insufficient spin-out differentiation, lawsuits over intellectual property, and retaliation by the parent. This raises the important questions of whether and, if so, when spin-outs should exploit their knowledge “legacy” or explore their own ways of doing business. While a mix of exploitation and exploration has been suggested for established firms, surprisingly little is known about organizational learning in a spin-out context. We argue that spin-outs’ sales growth suffers from exploitation (H1) but benefits from exploration (H2) because exploration helps develop competitive advantage via a differentiated knowledge base, whereas exploitation is susceptible to structural inertia. Moreover, networking by the spin-out moderates the learning-performance relationships: collaboration with the parent mitigates the negative performance effect of exploitation (H3a) and reduces the positive effect of exploration (H3b). Network development increases the negative effect of exploitation (H4a) and the positive effect of exploration (H4b).
Walter, Sascha G.; Heinrichs, Simon; and Walter, Achim
"COPYCAT OR INNOVATOR? LEARNING STRATEGIES OF SPIN-OUT FOUNDERS AND FIRM GROWTH (SUMMARY),"
Frontiers of Entrepreneurship Research: Vol. 35
, Article 13.
Available at: https://digitalknowledge.babson.edu/fer/vol35/iss6/13