Abstract

Prior studies emphasize the benefits of parental support for spin-offs (Chatterji, 2009; Semadeni and Cannella, 2011), yet little is known about parental hostility – a parent firm disapproving of the spawning of a spin-off. Our limited understanding of this phenomenon of parental hostility suggests that it happens frequently and is detrimentalforcorporate-spin-offs’ performance (Walter et al., 2014).

If this is indeed the case, an important question becomes whether corporate spin-offs can strategically influence parents’ reaction to their establishment. As literature on competition and retaliation demonstrates, an incumbent’s reaction to a new entrant depends heavily on that entrant’s product strategy. Spin-offs commercializing products or services that are similar to their parents offering embody a greater share of their parents’ tacit knowledge (Klepper and Sleeper, 2005), and therefore present a greater threat to their parents’ viability (Phillips, 2002). Therefore, we propose that a spin-off’s decision to enter the market with a related product strategy will induce parental hostility, and thereby affect spin-off performance. By integrating insights on resources and capabilities, we further argue that this latter effect of parental hostility on performance is not necessarily negative as previously assumed, as hostility may stimulate a spin-off’s autonomous decision-making and the development of novel competences that contribute to performance. Taken together, our study aims to disentangle the factors influencing parents’ negative reaction towards spin-offs’ establishment and its consequences for spin-offs’ performance.

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