Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999

Posted: 17 Nov 2009

See all articles by David S. Scharfstein

David S. Scharfstein

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Paul A. Gompers

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Date Written: 2005

Abstract

Two views of the entrepreneurial spawning process areexamined— that young firms prepare employees to be entrepreneurs by educatingthem about the entrepreneurial process and by exposing them to a network ofentrepreneurs and venture capitalists; and that individuals becomeentrepreneurs because the large bureaucratic companies for which they work arereluctant to fund their entrepreneurial ideas. Analysis of data from VentureOne, on firms that have obtained venturecapital financing, indicates that both types of firms contribute to thecreation of venture capital-backed startups. Young venture-backed companies inSilicon Valley and along Route 128 in Massachusetts appear as large sources ofnew venture capital-backed companies, as do large bureaucratic firms. Also,diversified firms appear to spawn less entrepreneurial activity, notmore. Additional determinants of overall spawning, and of characteristicsof those firms that spawn others are identified.Additional NBER patentcitation data on patent counts, and measures of patent quality and originality,for a sample of firms from the COMPUSTAT database of US public firms, is alsoused to assess overall and technology spawning, in the areas of either computerand communications, or drugs and medical devices, and the relatedness of thestartup to the industry of the spawning parent. (JSD)

Keywords: VentureOne dataset, Patent citations, Entrepreneurial activity, Corporate spinoffs, Entrepreneurial environment, Firm diversification, Venture capital, Startups

Suggested Citation

Scharfstein, David S. and Gompers, Paul A. and Lerner, Josh, Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999 (2005). The Journal of Finance, Vol. 60, Issue 2, p. 577-614 2005. Available at SSRN: https://ssrn.com/abstract=1506804

David S. Scharfstein

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-496-5067 (Phone)
617-496-8443 (Fax)

HOME PAGE: http://www.people.hbs.edu/dscharfstein/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul A. Gompers

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)

Harvard University - Entrepreneurial Management Unit ( email )

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Josh Lerner

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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