Human Capital and Spinout Growth: Linking Relatedness, Redeployment, and Performance

Abstract

Established firms use spinouts as corporate venturing strategy to build-up novel businesses. For that end, they redeploy resources such as equity and human capital to the newly founded entities. Prior studies analyze the effect of resource redeployment on spinout performance with parent-spinout relatedness as a proxy, however come to conflicting results. Using unique microdata of the population of firms and employees in Norway from 2005 to 2015, we disaggregate the relationship between knowledge relatedness, human capital redeployment and spinout performance. Relying on resource-based theory and the knowledge-based view of the firm, we find that there is a positive and direct effect between relatedness and redeployment, as well as between redeployment and spinout performance. However, we do not find evidence for a direct effect of relatedness on performance. We further find that parents’ majority ownership of the spinout moderates the likelihood of human capital redeployment negatively and redeployment’s effect on performance positively. Similarly, moderate parent-spinout social ties the effect of human capital redeployment on spinout performance positively. Our results contribute to resource redeployment theory by testing novel boundary conditions of human capital redeployment and to research on spinout performance elucidating the link between relatedness, resource redeployment and performance.