Entrepreneurial Spawning and Firm Characteristics
AbstractWe analyze the implications of the decision to spawn or to retain a new product for the nature and evolution of the firm. In our model, a new product is spawned if the fit between the product and its parent firm organization is not adequate. We focus on the impact of the firm's history of spawning decisions on firm characteristics such as size, focus, profitability, and innovativeness, and analyze its role in shaping firm dynamics. In accordance with the empirical literature, our model predicts that older firms innovate less, spawn less, are more diversified and less profitable, and that firms with more valuable general or specialized resources innovate and spawn more. Echoing seemingly contradictory empirical findings, our model predicts that small, focused firms (large, diversified firms) innovate and spawn more, and are more profitable when sample heterogeneity is driven by the importance of organizational fit (the value of general resources)
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 984.
Length: 34 pages
Date of creation: 01 Mar 2013
Date of revision:
spawning; spinoffs; spinouts; general and specialized resources; firm organization; organizational fit; firm size; focus; profitability; innovativeness; spawning dynamics;
Find related papers by JEL classification:
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-09 (All new papers)
- NEP-BEC-2013-11-09 (Business Economics)
- NEP-CSE-2013-11-09 (Economics of Strategic Management)
- NEP-INO-2013-11-09 (Innovation)
- NEP-SBM-2013-11-09 (Small Business Management)
- NEP-TID-2013-11-09 (Technology & Industrial Dynamics)
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