No place like home? Spin-offs' strategy and location choice

Previous studies suggest that spin-offs will locate in close proximity to the firm from which they spawned. As a result of this process, clusters of entrepreneurial activity tend to develop around a few strong parent firms. But do all spin-offs really stay close to home? In this article, we investigate which firms choose to stay nearby and which tend to leave. We test the predictive power of existing theories of location choice, and we develop a new theory particular to spin-off firms. We demonstrate that spin-off firms choose heterogeneous technological and market strategies, and we hypothesize that firms with more aggressive strategies have a greater need to maintain relationships that allow access to knowledge and facilitate coordination with complementors. We find supporting evidences of our arguments by analyzing the location and strategy decisions of intra-industry spin-offs in the disk drive industry.

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