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Death Hurts, But It Isn't Fatal: The Postexit Diffusion of Knowledge Created by Innovative Companies

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  • Hoetker, Glenn

    (U of Illinois at Urbana-Champaign)

  • Agarwal, Rajshree

    (U of Illinois at Urbana-Champaign)

Abstract

The innovative knowledge created by firms that ultimately exit their industries represents a source of technology that existing firms may build on. However, no empirical work has examined if such knowledge dies with an innovating firm or if significant diffusion of knowledge occurs even after a firm exits an industry. We base our theoretical predictions about the differing effects of firm exit on private and public knowledge and discuss implications for interfirm knowledge transfer. Using the disk drive industry as our empirical setting, we investigated the main and moderating effects of firm exit on the rate of knowledge diffusion to other firms. Our findings are consistent with prior work highlighting the importance of location and employee mobility in knowledge transfer. We also found evidence that the ability to use a firm as a template plays a critical role in successfully replicating its knowledge. Absent this template, knowledge "stickiness" reduces knowledge diffusion.

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File URL: http://www.business.illinois.edu/Working_Papers/papers/05-0100.pdf
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Bibliographic Info

Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 05-0100.

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Date of creation: 2005
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Handle: RePEc:ecl:illbus:05-0100

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Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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  1. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, December.
  2. Boyan Jovanovic & Glenn MacDonald, 1994. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
  3. Ajay Agrawal & Iain Cockburn & John McHale, 2003. "Gone But Not Forgotten: Labor Flows, Knowledge Spillovers, and Enduring Social Capital," NBER Working Papers 9950, National Bureau of Economic Research, Inc.
  4. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
  5. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
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  8. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
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Cited by:
  1. Erik Stam & Karl Wennberg, 2009. "The roles of R&D in new firm growth," Small Business Economics, Springer, vol. 33(1), pages 77-89, June.
  2. Vanhaverbeke, Wim & Li, Ying & Van de Vrande, Vareska, 2009. "The dual role of external corporate venturing in technological exploration," MPRA Paper 26488, University Library of Munich, Germany, revised 2010.
  3. Kulvik, Martti & Tähtinen, Marja & Ylä-Anttila, Pekka, 2013. "Business and Intellectual Capital Development in Financial Riptide - Case Studies of Finnish Biotechnology and Pharmaceutical Companies Dispersing into Global Value Chains," ETLA Reports 17, The Research Institute of the Finnish Economy.
  4. Rui Baptista & Miguel Preto, 2011. "New firm formation and employment growth: regional and business dynamics," Small Business Economics, Springer, vol. 36(4), pages 419-442, May.

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