Authors

Erkko Autio and Annaleena Parhankangas

Principal Topic

The paper examines effects of production, technological, and market knowledge relatedness on the outcomes of post-spin-off cooperation between industrial parent firms and their spin-off firms. We draw on knowledge and learning theories of the firm to develop a model that predicts that production, technological, and market knowledge relatedness between the parent firm and its spin-off firm constitute an important determinant of learning, and therefore, of growth in the spin-off firm. According to theory, both knowledge commonality and knowledge diversity are required for organizational learning; knowledge commonality facilitates communication and knowledge assimilation, while knowledge diversity expands the potential for learning through the creation of new associations between diverse items of knowledge. Because knowledge commonality and diversity work to opposite directions (increase in one produces a decrease in the other), the relationship between knowledge relatedness and growth should be curvilinear. Three hypotheses are tested: (1) in a dyadic relationship between a spin-off firm and its parent firm, learning and growth will be a curvilinear -shaped function of the relatedness of the production [(2) technological; (3)-marketing] knowledge bases of the two firms.

Method

The hypotheses were tested using a sample of 54 young, independent, industrial spin-off firms of technology-based parent firms in Finland, representing 87% of the applicable identified population of such firms in Finland. All firms were interviewed personally. Curvilinear relationships are examined by studying the influence of the squared standardized form of the knowledge relatedness variables on sales growth in hierarchical regressions. The findings were confirmed by an analysis of the direct linear effect of knowledge relatedness variables on sales growth in [relatedness]median-split samples. The significance of the findings in spite of using a small multiple-industry sample testifies of the robustness of the predicted influences.

Implications

This is the first empirical study to demonstrate the combined curvilinear effect of knowledge commonality and diversity on learning and growth in dyadic inter-firm relationships. By so doing, we are able to explain conflicting findings in previous research, which has predominantly analyzed direct linear relationships between resource relatedness and growth. Some studies have found no relationship, and others have found both positive and negative influences. Our study also demonstrates the importance of learning on the growth of new firms, testifying of the salience of the knowledge-based and learning views of the firm in the study of entrepreneurial firms.

[click here for the abstract at Babson College]

Citation

Erkko Autio and Annaleena Parhankangas, "Knowledge Relatedness, Learning, and Growth of Young Industrial Spin-Off Firms", Proceedings of the 19th Annual Entrepreneurship Research Conference, (1999), Babson College.