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Start-ups, Spin-offs, and Internal Projects

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Author Info
Anton, James J
Yao, Dennis A

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Abstract

We examine the incentive problem confronting a firm and employee when the employee privately discovers a significant invention and faces a choice between keeping the invention private and leaving the firm to form a new company (start-up), or transferring knowledge and attempting to gain compensation from the firm (spin-off). We focus on inventions that require little start-up capital and for which property rights are either missing or very weak. In such settings, the employee will sometimes form a new company even though joint profits would have been greater had the invention been developed with the original firm. We also identify when the firm has an incentive to pay a substantial sum to the employee via a spin-off, thereby deterring a start-up. Finally, the basic analysis is applied to examine several issues including specific versus general innovations, trade secret laws, and legal "shop rights." Copyright 1995 by Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal Journal of Law, Economics and Organization.

Volume (Year): 11 (1995)
Issue (Month): 2 (October)
Pages: 362-78
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:jleorg:v:11:y:1995:i:2:p:362-78

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Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
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  2. Yvonne Bernardt & Joris Meijaard & Richard Kerste, 2002. "Spin-off start-ups in the Netherlands," Scales Research Reports B200106, EIM Business and Policy Research. [Downloadable!]
  3. Bharant N. Anand & Alexander Galetovic, 1998. "Weak Property Rights and hold-up in R&D," Documentos de Trabajo 39, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  4. Michael S. Dahl & Christian Ø.R. Pedersen & Bent Dalum, 2003. "Entry by Spinoff in a High-tech Cluster," DRUID Working Papers 03-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  5. Hvide, Hans K., 2004. "Firm Size and the Quality of Entrepreneurs," Discussion Papers 2004/9, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  6. G. Bünstorf, 2007. "Opportunity Spin-offs and Necessity Spin-offs," Papers on Economics and Evolution 2007-18, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  7. Mariagiovanna Baccara & Ronny Razin, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," Levine's Working Paper Archive 122247000000000194, David K. Levine. [Downloadable!]
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  8. Cassiman, Bruno & Ueda, Masako, 2002. "Optimal Project Rejection and New Firm Start-Ups," CEPR Discussion Papers 3429, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Peter Thompson & Steven Klepper, 2006. "Intra-Industry Spinoffs," Working Papers 0605, Florida International University, Department of Economics. [Downloadable!]
  10. Satyajit Chatterjee & Esteban Rossi-Hansberg, 2008. "Spinoffs and the market for ideas," Working Papers 08-26, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  11. Diego Rodriguez Palenzuela, 2001. "Sources of economic renewal - from the traditional firm to the knowledge firm," Working Paper Series 43, European Central Bank. [Downloadable!]
  12. Hvide, Hans K, 2005. "The Quality of Entrepreneurs," CEPR Discussion Papers 4979, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Joshua S. Gans & David H. Hsu & Scott Stern, 2000. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," NBER Working Papers 7851, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Stefan ARPING, 2002. "Cannibalization & Incentives in Venture Financing," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 02.07, Université de Lausanne, Faculté des HEC, DEEP, revised May 2002. [Downloadable!]
  15. Stewart, Geoff, 2004. "Innovation, Appropriation and Entrepreneurial Strategy," Discussion Paper Series In Economics And Econometrics 0403, Economics Division, School of Social Sciences, University of Southampton. [Downloadable!]
  16. Ashish Arora & Anand Nandkumar, 2007. "Securing Their Future? Entry And Survival In The Information Security Industry," NBER Working Papers 13634, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Albert Guangzhou Hu, 2003. "R&D Organization, Monitoring Intensity, And Innovation Performance In Chinese Industry," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(2), pages 117-144, January. [Downloadable!] (restricted)
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