Knowledge Intensive Entrepreneurship
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Knowledge Intensive Entrepreneurship

The Birth, Growth and Demise of Entrepreneurial Firms

Frédéric Delmar and Karl Wennberg

How and why are firms created, expanded and terminated by entrepreneurs in the knowledge intensive economy? The authors show these entrepreneurship processes are firmly embedded in a given social and economic context, that shapes the process by which some individuals discover entrepreneurial opportunities, creating new firms that sometimes grow to remarkable size, but more often stay mundane or eventually exit.
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Chapter 5: De Novo and Spinout Start-ups: The Organization Connection

Frédéric Delmar and Karl Wennberg


5. De novo and spinout start-ups: the organizational connection Not only the geographical context but also the organizational context from which a new firm emerges will influence its creation as well as its subsequent evolution. A sizeable empirical literature has developed during the past decade dedicated to investigating this “organizational connection” between new and existing or incumbent firms. This literature has developed simultaneously in the fields of population ecology, strategic management, and industrial organization research. These literatures tend to use slightly different terminology, but the focus of interest overlaps significantly. A joint insight into these streams of research is that there are several types of entrants or “birth types” of firms and that the type of entry has a strong effect on firm evolution. The entry forms are: 1) independent start-ups (also called de novo start-ups) – firms founded by independent entrepreneurs; 2) spinouts – also firms founded by one or several independent entrepreneurs but based closely on their prior experiences as employees in an incumbent firm (Agarwal et al., 2004); and 3) spinoffs – firms that used to be a division of an incumbent firm and subsequently achieved the status of independent entities, albeit often still with legal and/or financial ties to the parent firm (Klepper, 2001; Helfat & Lieberman, 2002). Because of this organizational connection, spinout and spinoff benefit from or inherit specific resources from their parent firm and are likely to behave in specific ways. This also affects how the industry itself evolves. The distinction between the three different types of...

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