Spinoffs and the “ Performance Premium ”

The creation of spinoff companies is often promoted as a desirable mechanism for transferring knowledge and technologies from research organizations to the private sector for commercialization. In the promotion process, policymakers typically treat these “university” spinoffs like industry startups. However, when university spinoffs involve an employment transition by a researcher out of the not-for-profit sector, the creation of a university spinoff is likely to impose a higher social cost than the creation of an industry startup. To offset this higher social cost, university spinoffs must produce a larger stream of social benefits than industry startups, a performance premium. This paper outlines the arguments why the social costs of entrepreneurship are likely to be higher for academic entrepreneurs and empirically investigates the existence of a performance premium using a sample of German startup companies. We find that university spinoffs exhibit a performance premium of 3.4 percentage points higher employment growth over industry startups. The analysis also shows that the performance premium varies across types of academic entrepreneurs and founders’ academic disciplines.