Entrepreneurial Performance and Innovation in the Medical Device Industry

Entrepreneurs in high technology industries often have prior experience at incumbent firms, but we know little about how knowledge obtained at the prior employer impacts entrepreneurial performance. Drawing on previous work from management, economics, and organizational sociology, I assess the impact of prior industry experience on entrepreneurial performance and innovation in medical device start-ups. I find that spawns (ventures started by former employees of incumbent firms) perform better than other new entrants. Interestingly, my findings suggest that this superior performance is not driven by technological spillovers from parent to spawn. Instead, I find that most spawned entrepreneurs do not inherit technical knowledge from the parent firm, contradicting much of the previous literature. To account for the superior performance of spawned ventures, I discuss the different types of non-technical knowledge that are inherited by spawns and explain how these types of knowledge impact new venture performance. These results build on the emerging literature on entrepreneurial spawning and contribute to our understanding of knowledge inheritance between firms. I utilize data from VentureSource, Venture Economics, the NBER patent database, and semistructured interviews.