The Consequences of Entrepreneurial Firm Founding on Innovation

Abstract

This paper studies if and how individual-level patenting activity changes as an employee transitions to entrepreneurial firm founder. Using a large database of employment and innovative histories of over 1110 spinoff firm founders, the empirical strategy tracks both founders and her co-inventors who remain at her previous employer. There are significant changes in patenting focus and quality. Founders are relatively more likely to focus on fewer industry patent classes as the lead patent author, while citing their previous work less. Their patent quality increases after spinoff firm founding in several ways. Non-self citations received increase and the types of patent applications point to a move towards longer-term projects. Finally, we interpret a higher probability of producing a patent in both the right and the left tail of the quality distribution as suggestive evidence of the spinoff firm pursuing riskier projects.