Incidence and Performance of Spinouts and Incumbent New Establishments: Role of Selection and Redeployability within Parent Firms.

Research Summary: Using matched employer-employee data from 30 U.S. states covering a wide range of industries, we compare spinouts with new establishments formed by incumbents (INEs). We propose a selection-based framework comprising idea selection by parents to internally implement ideas as INEs, entrepreneurial selection by founders to form spinouts, and exit selection to close ventures. Consistent with parents choosing better ideas in the idea selection stage, we find that INEs perform relatively better than spinouts, and more so with larger parents. Regarding the entrepreneurial selection stage, we find evidence consistent with resource requirements being a greater entry barrier to spinouts. Parents' resource redeployment opportunities are associated with lower relative survival of INEs, consistent with their being subject to greater selection pressures in the exit selection stage. Managerial Summary: Spinouts, or new ventures started by employees leaving a parent firm, have received special attention because spinouts tend to outperform other types of new firms. This superior performance is typically attributed to the better knowledge and higher-quality ideas developed by founders at the parent firms. However, parent firms can also select and implement such ideas internally, particularly if they are good quality ideas. We compare spinouts with new establishments formed within parent firms and find that consistent with such a process of selection, the latter outperform spinouts, more so in the case of larger parents. Interestingly, new establishments of parent firms tend to close at a greater rate than spinouts, consistent with parent firms being able to redeploy resources elsewhere within their firms.

Forgetting the learning curve for a moment: how much performance is unrelated to own experience?

Volume-outcome relationships are of clear importance for most participants in the health-care industry; research and appropriate policy implications are of critical importance. In this letter we critique the prevailing 'learning-by-doing' view in cardiac surgery. We illustrate the very wide disparity in empirical findings on volume-outcome relationships there, in the context of broader open issues in 'learning curves' in general. Potential complementary mechanisms, e.g. 'social learning by knowledge spillovers' are introduced; these cast into doubt the prevailing policy recommendations of simple regionalization and volume smoothing.