Vertical Spinouts (WITHDRAWN)

Abstract

This paper examines vertical spinouts, which represent a type of organizational structure through which knowledge is shared and transferred between vertically related industries. We define vertical spinouts as new independent ventures that enter a focal industry after spinning-out from an established firm in either an upstream or a downstream industry. We propose that a key determinant of both their formation and their successful performance is the contextual knowledge that they inherit from their pre-entry experience in a vertically related industry. We examine spinout entry and performance in three vertically related industries over a ten-year period: semiconductors, telecommunication equipment and telecommunication networks/connectivity. Our results show that vertical spinouts constitute a significant share of new entrants in these related industries and that they are more likely to survive than other entrants. Our findings have important implications for the literatures on entrepreneurship, industry structure and industry dynamics.