Entrepreneurial spawning: public corporations and the formation of new ventures

We examine two views of the creation of venture-backed start-ups, or “entrepreneurial spawning. ” In one, young firms prepare employees for entrepreneurship, educating them about the process, and exposing them to relevant networks. In the other, indi-viduals become entrepreneurs when large bureaucratic employers do not fund their ideas. Controlling for firm size, patents, and industry, the most prolific spawners are originally venture-backed companies located in Silicon Valley and Massachusetts. Undiversified firms spawn more firms. Silicon Valley, Massachusetts, and originally venture-backed firms typically spawn firms only peripherally related to their core businesses. Overall, entrepreneurial learning and networks appear important in cre-ating venture-backed firms. THERE IS NOW A LARGE AND GROWING LITERATURE analyzing the factors that deter-mine whether entrepreneurs raise venture capital funding (Hellmann and Puri (2000), Burton, Sørensen, and Beckman (2002)) and the factors that affect the terms of this financing (Gompers (1997), Kaplan and Strömberg (2003)). Ther