Abstract
In this article, we examine the effects of knowledge relatedness on the post-spin-off growth of firms spun off from industrial parent firms. We predict that growth is maximized when the knowledge base of the spin-off firm partially overlaps with that of its parent. This effect is due to learning: both too small and too great an overlap will inhibit growth, the first because limited knowledge overlap hampers local search and knowledge assimilation and the second because great knowledge overlap hampers the creation of novel knowledge combinations. The propositions are tested and confirmed using a sample of 54 industrial spin-off firms from Finland.
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