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Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999

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  • PAUL GOMPERS
  • JOSH LERNER
  • DAVID SCHARFSTEIN

Abstract

We examine two views of the creation of venture-backed start-ups, or "entrepreneurial spawning." In one, young firms prepare employees for entrepreneurship, educating them about the process, and exposing them to relevant networks. In the other, individuals become entrepreneurs when large bureaucratic employers do not fund their ideas. Controlling for firm size, patents, and industry, the most prolific spawners are originally venture-backed companies located in Silicon Valley and Massachusetts. Undiversified firms spawn more firms. Silicon Valley, Massachusetts, and originally venture-backed firms typically spawn firms only peripherally related to their core businesses. Overall, entrepreneurial learning and networks appear important in creating venture-backed firms. Copyright 2005 by The American Finance Association.

Suggested Citation

  • Paul Gompers & Josh Lerner & David Scharfstein, 2005. "Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999," Journal of Finance, American Finance Association, vol. 60(2), pages 577-614, April.
  • Handle: RePEc:bla:jfinan:v:60:y:2005:i:2:p:577-614
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