LEARNING AND LETTING GO: RELATEDNESS, COMPLEXITY, AND THE ADVANTAGE OF ENTREPRENEURIAL SPINOUTS

In this study, we examine the comparative advantage of different types of new market entrants. We distinguish between three types of entrants-diversifying entrants, entrepreneurial spinouts, and de novo startups-and use a simulation model to study their relative performance as a function of market relatedness and complexity. We find that diversifying entrants have superior initial performance, but are eventually dominated by entrepreneurial spinouts, especially if relatedness is moderate and complexity is moderate to high. Our study thus offers a contingent theory of new entrant advantage, while highlighting the unique advantage of entrepreneurial spinouts in new markets.