Spin-outs’ knowledge legacies and parent hostility: a competitive dynamics view

This study adopts a competitive dynamics perspective to illuminate how and when different types of knowledge transferred by a spin-out trigger parent hostility. Specifically, I propose based on the awareness-motivation-capability framework that (1) transfers of market-related and technology-related knowledge will yield hostility and that (2) market commonality, resource similarity, and competitive intensity will exacerbate this effect. Findings from 207 spin-outs support several of my hypotheses. The study contributes to the extant literature by providing a more nuanced view on knowledge legacies, in particular regarding their interplay with a spin-out’s competitive positioning. Plain English Summary In a popular view, spin-outs spawn with ‘silver spoons’, i.e., performance boosting knowledge transferred from their parent firms. This study shows that such ‘knowledge legacies’ can turn into liabilities by spurring potentially harmful parent hostility. This was more likely for transfers of market-related knowledge than for transfers of technological knowledge. Moreover, the hostility impact was also contingent on the spin-out’s competitive positioning vis-à-vis the parent. Entering parents’ markets amplified the hostility effect of transferred market-related knowledge. Transferred technological knowledge only posed hostility problems if a spin-out attempted to imitate the resource base of their ‘home’ business unit or operated in a highly competitive industry. This study adds to prior work by demonstrating the flipside of knowledge legacies (thereby suggesting a more nuanced view) and by bridging the relatively disconnected literatures on knowledge-related advantages of spin-outs and on competitive dynamics.