Spinouts that Originate from Downstrean Users Have Better Prospects
It is well known that spinoffs have a competitive advantage over other types of startups. This is due to the fact that entrepreneurs bring their experience and skills to the new firm. However, there is another type of startup that has not been adequately studied so far, although in many cases it boasts even better performances than spinoffs. We are talking about startups that were founded by former employees of firms in downstream industries. These user-industry spinouts are the object of User-Industry Spinouts: Downstream Industry Knowledge as a Source of New Firm Entry and Survival, a paper co-authored by Pamela Adams, Roberto Fontana, Franco Malerba and recently published by Organization Science.
"This is a relevant category, especially in the electronics industry", says Malerba, Full Professor of Applied Economics and President of ICRIOS (Invernizzi Center for Research on Innovation, Organization, Strategy and Entrepreneurship). The authors have focused on the performance of almost a thousand American startups of the semiconductor industry over a ten-year period. In this sector, user-industry spinouts are firms founded by entrepreneurs who were previously employed in downstream industries that use semiconductors as components in their final products: manufacturers of computers, communication equipment, automobiles, etc.
"Our data suggest that user-industry spinouts often outperform spinoffs from the focal industry. This is due to the combination of two factors: 1) user-industry spinouts master the technology because they have used it; 2) they have a broad knowledge of product applications". These spinouts are more likely both to enter the market and to survive. "It can be said that downstream user-industries – that is the industrial demand – generate startups with strong competitive advantages".
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The Scientific Method and Business: Entrepreneurs Who Emulate Galileo Do Better
Spinoffs: Grow Your Business but Minimize the Risks