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Regional Corporate Spawning and the Role of Homegrown Companies

Gil Avnimelech and Maryann Feldman

Review of Policy Research, 2010, vol. 27, issue 4, 475-489

Abstract: This paper presents the results and policy implications of a study that examined the spawning of founders who had previously been employed at large corporations. We found that spawning of founders is positively associated with the parent companies' productivity, innovativeness, and headquarter location. Furthermore, we found that the spin‐off per employee rate is higher in smaller establishments. We also found that the local entrepreneurial culture is significant in explaining local spawning of founders. Finally, we present new empirical evidence on the crucial role of successful homegrown companies in regional cluster development. More specifically, we found that the existence of successful homegrown companies is significantly correlated with the level of the regional entrepreneurial activity. This finding is consistent with the finding of many cluster development case studies. Thus, we argue that successful homegrown companies have a unique role in cluster development. This role can seldom be replaced by nonhomegrown companies. This is related to the notion that prior to the development of an entrepreneurial cluster, some intangible precondition should be realized such as the appearance of local role models and a shift toward a more entrepreneurial culture. In a more general perspective, these results support the notion that knowledge‐based regional development is a complex process that requires a long‐term and continuously adjusting supporting policy rather than being based mainly on attracting established companies' R&D centers to the region.

Date: 2010
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Handle: RePEc:bla:revpol:v:27:y:2010:i:4:p:475-489