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Disagreements, employee spinoffs and the choice of technology

Author

Listed:
  • Peter Thompson

    (Florida International University)

  • Jing Chen

    (Copenhaguen Business School)

Abstract

Most existing models of employee spinoffs assume they are driven by a desire to implement new ideas. However, history is replete with examples of spinoffs that were launched to continue with old ideas that their parents were in the process of abandoning. We develop a model of technology choice in which spinoffs may form to implement new or old technologies. A team of managers engaged in production using technology x, is considering switching to technology y. The value of y is not known and disagreements may emerge among team members. Managers who develop sufficiently strong disagreements with their colleagues choose to form new companies to implement their preferred strategy. Two distinct classes of spinoffs arise. In the first, a spinoff forms when an employee comes to believe it is worth adopting y but the firm does not. In the second, a spinoff arises when an employee sufficiently disagrees with the firmmodifier letter apostrophes decision to adopt y that he is willing to invest in order to continue with x. We explore the implications of the model for the comparative dynamics of spinoff formation, and the performance of firms. (Copyright: Elsevier)

Suggested Citation

  • Peter Thompson & Jing Chen, 2011. "Disagreements, employee spinoffs and the choice of technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(3), pages 455-474, July.
  • Handle: RePEc:red:issued:09-182
    DOI: 10.1016/j.red.2010.09.003
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    References listed on IDEAS

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    Cited by:

    1. Walter, Sascha & Heinrichs, Simon & Walter, Achim, 2013. "Hostile Parent Firms and Child Firm Performance," EconStor Preprints 68592, ZBW - German National Library of Economics.
    2. SHIMIZU, Hiroshi & WAKUTSU, Naohiko, 2017. "Spin-Outs and Patterns of Subsequent Innovation: Technological Development of Laser Diodes in the US and Japan," IIR Working Paper 17-14, Institute of Innovation Research, Hitotsubashi University.
    3. Lindholm-Dahlstrand, Asa & Andersson, Martin & Carlsson, Bo, 2016. "Entrepreneurial Experimentation: A key function in Entrepreneurial Systems of Innovation," Papers in Innovation Studies 2016/20, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    4. Shimizu, Hiroshi & Wakutsu, Naohiko, 2014. "Entrepreneurial Spin-Outs and Vanishing Technological Trajectory: Laser Diodes in the U.S. and Japan," IIR Working Paper 13-21, Institute of Innovation Research, Hitotsubashi University.
    5. Buenstorf, Guido & Engel, Christoph & Fischer, Sven & Gueth, Werner, 2016. "Non-compete clauses, employee effort and spin-off entrepreneurship: A laboratory experiment," Research Policy, Elsevier, vol. 45(10), pages 2113-2124.
    6. Sascha G. Walter & Simon Heinrichs & Achim Walter, 2014. "Parent hostility and spin-out performance," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 2031-2042, December.
    7. Yeganegi, Sepideh & Laplume, André O. & Dass, Parshotam & Huynh, Cam-Loi, 2016. "Where do spinouts come from? The role of technology relatedness and institutional context," Research Policy, Elsevier, vol. 45(5), pages 1103-1112.
    8. Krasteva, Silvana & Sharma, Priyanka & Wagman, Liad, 2015. "The 80/20 rule: Corporate support for innovation by employees," International Journal of Industrial Organization, Elsevier, vol. 38(C), pages 32-43.

    More about this item

    Keywords

    Spinoffs; Learning; Disagreement; Technology choice;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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