Bridging Knowledge Resources: The Location Choices of Spinouts

Abstract

Research summaryThis study develops a framework that links a typology of spinouts with distinct product/market strategies and the characteristics of localization economies to study location choice. Specifically, we examine focal spinouts and user‐industry spinouts entry into generic and market‐specific product categories and localization economies related to the focal industry and to downstream, user industries. We test our hypotheses on a sample of 413 spinouts in the U.S. semiconductor industry from 1997 to 2007. Our findings show that focal spinouts make different location choices than user‐industry spinouts and that such choices are mediated by product strategy at entry. Our results contribute to the literatures on location choice and strategic entrepreneurship.Managerial summaryThis study concerns the location choices of different types of spinouts at the moment of entry. Our study suggests that location may be a key decision for entrepreneurs to increase their exposure to potential knowledge spillovers. Location, therefore, should not be taken as a given in either studies or business plans related to entrepreneurship. Rather, location needs to be treated as a strategic choice to be exercised by new firms as they enter an industry. Our research also underscores the importance of downstream industries both as a source of entrepreneurship and as a source of knowledge. In some cases, localization economies related to downstream industries might offer greater potential to entrants than localization economies related to the focal industry. Copyright © 2016 Strategic Management Society.