Spawned by opportunity or out of necessity? Organizational antecedents and the choice of industry and technology in employee spinouts

Abstract

I examine how the organizational antecedents of spinouts shape the new firms' industry and technological trajectory choices compared to those of the parent firms. Building on prior research on employee entrepreneurship and integrating insights from the literature on opportunity and necessity entrepreneurship, I hypothesize that spinouts launched to exploit a new business opportunity shunned by the parent firm (i.e., opportunity spinouts) are more likely to enter a different but related industry and technological field to those of the parent firm. I hypothesize also that spinouts triggered by adverse developments in the parent firm (i.e., necessity spinouts) are more likely to target the same industry and technological field as the parent. Analysis of data from the European biotech industry supports these predictions.The prevailing view of employee entrepreneurship is that the established firm's unwillingness to commercialize an employee's ideas leads to the employee leaving to start a new firm. However, evidence suggests that spinout activity (new firm formation by former employees) can be also triggered by adverse developments in the established firm that disrupt an employee's job. This study examines how the organizational antecedents of spinouts shape the new firms' early‐stage strategic choices. Using data from the biotech industry, I show that opportunity driven spinouts are more likely to enter a different but related industry and technological field to those of their founders' prior employer and that necessity driven spinouts are more likely to target the same industry and technological field as the prior employer.