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We advance a theoretical framework of how entrepreneurial ideas of employees are commercialized as a function of their uncertainty, firm-specificity, and appropriability. We argue that as uncertainty increases, the choice of commercialization mode will increasingly be driven by differences in subjective judgments of the idea's value, with firms having an advantage in assessing the true value of their employee's ideas relative to market because of their firm-specific nature. Building on this insight, we develop a formal model of commercialization choice that maps idea characteristics to commercialization outcomes—spinouts, internal commercialization, market mobility, or abandonment—while also predicting how these relationships will be moderated by the cost of startups, the value of the idea, and the institutional context, as well as how value will be created and appropriated within each mode. In particular, the model distinguishes between four different types of employee spinouts, including the previously neglected case where the employer sees value in an idea and wants to commercialize it, but the employee still prefers to start their own firm. We thus offer a more nuanced view of employee entrepreneurship, based on differences in subjective judgment under uncertainty, the firm-specific nature of employee knowledge, and appropriability regimes. [ABSTRACT FROM AUTHOR]

A common finding in the literature on heterogeneity in entrepreneurial entry is that workers of small firms relative to large firms are more likely to become entrepreneurs (i.e. the "small firm effect"). Researchers disagree, however, on how to interpret this relationship, and in which contexts. A traditional argument is that work experience in small firms facilitates the acquisition of knowledge relevant to entrepreneurship, which, in turn, facilitates transitions into entrepreneurship. An alternative explanation argues that, at least in technical domains, the small firm effect derives from the potential for large firms to better integrate ideas internally (i.e. intrapreneurship). We inform this debate by leveraging a unique, nationally representative survey that provides rich details about the emergence of entrepreneurial ideas and their potential implementation inside vs. outside of firms. Consistent with the former explanation of the small firm effect, for the average worker, we find strong evidence that small firms (relative to large firms) are better at providing an environment that facilitates transitions to entrepreneurship. However, we also find that technical workers are more likely to attempt to implement ideas in larger firms relative to non-tech workers. Our results thus imply that while the traditional mechanism drives the small firm effect for non-tech workers, both mechanisms contribute to the effect for the tech workers, thus helping to reconcile competing explanations in prior studies. In addition to unpacking the drivers of the small firm effect, our study has broader implications for the recent discussion on the drivers of entrepreneurial dynamism. [ABSTRACT FROM AUTHOR]

We examine whether equity crowdfunding democratizes access to funding for nontraditional user entrepreneurs. User entrepreneurs start by creating a product to serve their own unmet needs with no expectations of monetary profit, then later decide to commercialize the product through entrepreneurship. In contrast, traditional (producer) entrepreneurs take a more profit-driven path to entrepreneurship and start by identifying an opportunity that has commercial potential. Through a randomized field experiment, we randomly reveal to some investors that a firm producing a product used by musicians is founded by a musician and conceal this founder-related information from other investors. Revealing the information suggests that the firm is a user innovator firm and concealing it suggests that the firm is a traditional producer firm. We find that investors are significantly more interested in the traditional producer firm. Through an additional field experiment, we identify that the bias against user entrepreneurs is statistical (based on a response to limited information) rather than taste based (based on an idiosyncratic dislike). Our findings suggest that user entrepreneurs can mitigate investor bias by displaying signals of quality such as those regarding firm growth and broad product appeal. [ABSTRACT FROM AUTHOR]

Managers and academics are increasingly viewing innovating firms as being interdependent on other firms in the business ecosystem. But how might the structure of interdependencies shape the innovativeness of firms in an ecosystem? To answer this question, we develop a search-based theory that considers a multiplicity of upstream and downstream firms simultaneously innovating in an ecosystem, contributing to and searching for novel combinations of components. We conceptualize two types of structural interdependencies between firms in an ecosystem based on the structure of technological interactions between components and the structure of input–output flows between stages of production. Using a simulation model, we show that downstream firms can benefit from mixing and matching components produced upstream, whereas upstream firms can benefit from optimizing their search more narrowly around their focal components. Importantly, these benefits that accrue to upstream and downstream firms are significantly impacted by the structure of technological and flow interdependencies in the ecosystem. [ABSTRACT FROM AUTHOR]

Research summary: One of the established findings in the spinout literature is that founders with prior industry experience assemble larger entrepreneurial teams and create better‐performing startups. We examine the role of prior industry experience in the startups' next stage—its hiring of new employees. We tackle two empirical challenges—the mutual aspect of hiring and the effect of unobserved variables on employees' earnings using a two‐sided matching model. Our results reveal that even firms founded by entrepreneurs without industry experience can attract new employees with such experience if the founders start with a large entrepreneurial team. Further, startups provide new hires with an earnings premium for their industry experience. Our approach illustrates the benefits of matching models over traditional regressions. Managerial summary: Growing startups face the question of who to hire and how much to compensate the new hires. Simultaneously, prospective new hires ask which startup to join and how much their salary will be. We explore these questions using a novel method that tackles the mutual selection process. In the context of five technological manufacturing industries, we find that having industry experience within founding teams may not be necessary to attract new hires with high quality if the startup can signal its own quality through other means such as having a larger founding team. Our results indicate that startups prefer employees with industry experience for which startups offer a wage premium. Thus, employees seeking startup employment benefit from gaining industry experience prior to joining a startup. A video abstract is available at https://youtu.be/w00YzYi5VqA. [ABSTRACT FROM AUTHOR]