TY - JOUR AU - Gompers,Paul AU - Lerner,Josh AU - Scharfstein,David TI - Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986-1999 JF - National Bureau of Economic Research Working Paper Series VL - No. 9816 PY - 2003 Y2 - July 2003 UR - http://www.nber.org/papers/w9816 L1 - http://www.nber.org/papers/w9816.pdf N1 - Author contact info: Paul Gompers Harvard Business School Baker Library 263 Soldiers Field Boston, MA 02163 Tel: 617/495-6297 Fax: 617/496-8443 E-Mail: pgompers@hbs.edu Josh Lerner Harvard Business School Rock Center 214 Boston, MA 02163 Tel: 617/495-6065 Fax: 617/496-7357 E-Mail: jlerner@hbs.edu David S. Scharfstein Harvard Business School Baker 239 Soldiers Field Boston, MA 02163 Tel: 617/496-5067 Fax: 617/496-8443 E-Mail: dscharfstein@hbs.edu AB - This paper examines the factors that lead to the creation of venture capital backed start-ups, a process we term entrepreneurial spawning.' We contrast two alternative views of the spawning process. In one view, employees of established firms are trained and conditioned to be entrepreneurs by being exposed to the entrepreneurial process and by working in a network of entrepreneurs and venture capitalists. Alternatively, individuals become entrepreneurs because the large bureaucratic companies for which they work are reluctant to fund their entrepreneurial ideas. Controlling for a firm's size, patent portfolio and industry, we find that the most prolific spawning firms were public companies located in Silicon Valley and Massachusetts that were themselves once venture capital backed. Less diversified firms are also more likely to spawn new firms. Spawning levels for these firms rise as their sales growth declines. Firms based in Silicon Valley and Massachusetts and originally backed by venture capitalists are more likely to spawn firms only peripherally related to their core businesses. Overall, these findings appear to be more consistent with the view that entrepreneurial learning and networks are important factors in the creation of venture capital backed firms. ER -