Entry by Spinoffs

Authors:
Steven Klepper;Sally Sleeper
Affiliations:
Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213;RAND Corporation, 210 North Craig Street, Suite 202, Pittsburgh, Pennsylvania 15213
Venue:
Management Science
Year:
2005

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Abstract

Entry by spinoffs from incumbent firms is investigated for the laser industry. A model in which spinoffs exploit knowledge from their parents is constructed to explain the market conditions conducive to spinoffs, the types of firms that spawn spinoffs, and the relationship of spinoffs to their parents. The model is tested using detailed data on all laser entrants from the start of the industry through 1994. Our findings support the basic premise of the model that spinoffs inherit knowledge from their parents that shapes their nature at birth. Implications of our findings for organizational behavior, business strategy, entry and industry evolution, and technological change are discussed.