Spinoffs’ alliance network growth beyond parental ties: performance diminishing, then performance enhancing

Spinoff firms are a common phenomenon in entrepreneurship where employees leave incumbent parent firms to found their own. Like other types of new firms, such new spinoffs face liabilities of newness and smallness. Previous research has emphasised the role of the initial endowments from their parent firm to overcome such liabilities. In this study, we argue and are the first to show, that, in addition to such endowments, growing an alliance network with firms other than their parents’ is also critical for spinoff performance. Specifically, we investigate the performance effect of alliance network growth in newly founded spinoffs using a longitudinal sample of 248 spinoffs and 3370 strategic alliances in the mining industry. Drawing on theory based on the resource adjustment costs of forming alliances, we posit and find a U-shaped relationship between the alliance network growth and spinoff performance, above and beyond the parent firm’s influence. We further hypothesise and find that performance effects become stronger with increased time lags between alliance network growth and spinoff performance, and when spinoffs delay growing their alliance networks. Implications for theory and practice are discussed.

Former Employer’s Prestige, the TMT’s Post-Migration Rewards in the Biopharma Industry

Recruiters and researchers of TMT (top management teams) tend to emphasize the human capital and social capital of the executive in the interfirm migration, but they ignore the role of the former employer’s prestige. We address this issue to argue that the former employer’s organizational prestige attracts the recruiter’s attention to the TMT, and we propose that the TMT from high-prestige organization attracts high rewards than the TMT from a low-prestige organization. We used data from the biotechnology sector on 1,468 TMTs, their 1,482 hiring events, 783 recruiters, 168 source employers—in the interfirm movement of the TMTs from 1997 to 2005. We used three measures for predictors of the organizational prestige of the former employer, and the regression analysis shows some reflections of those predictors of rewards of the hired executive. The result shows that the organizational age, size, and alliance network of the former employer emit value signals to the recruiter. These components of organizational prestige predict increase in the rewards after controlling for the human capital of the TMT. The study contributes to organizational context as a predictor of value, institutional theory, and general implications for practice and policy.