Entry by Spinoffs

TLDR

The study investigates how incumbent firms’ spinoffs enter the laser industry by modeling the exploitation of parent knowledge. A knowledge‑exploitation model of spinoff entry is constructed and tested against detailed data on all laser entrants up to 1994. Results confirm that spinoffs inherit parent knowledge that determines their initial characteristics, with implications for organizational behavior, strategy, and industry evolution.

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.