Spinoff Entry in High-tech Industries: Motives and Consequences

Abstract

Various theories have been advanced for why employees leave incumbent firms to found firms in the same industry, which we call spinoffs. We review the accumulating evidence about spinoffs in various high-tech industries, highlighting the central role often played by disagreements. Because existing theories have ignored them, we develop the foundations of a model of spinoff formation driven by disagreements. Doing so proves to be rather challenging, because disagreements are not possible among rational actors that talk to each other. We introduce a minimal degree of non-rationality, based on the concept of solipsism, and ask whether such a concept is capable of generating predictions consistent with the empirical literature.Spinoffs, Technological change, learning, disagreements