Spin-off Performance in Industry Clusters:
Embodied Knowledge vs. Embedded Firms
Guido Buenstorf
University of Kassel (Germany) and University of Göteborg (Sweden)
Carla Costa
Utrecht University (Netherlands) and University of Lisbon (Portugal)
Workshop
Resurrection or Reinvention:
Industrial Resilience in Traditional Manufacturing Regions
Torino, November 21-22, 2016
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1. THEORETICAL BACKGROUND
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Spin-offs and Industrial Clusters (1)

Conventional wisdom: Agglomeration economies (Marshall, 1890)
•
Firms in clusters benefit from being co-located
– With other firms in same industry
– With firms in related industries
 Firms in clusters outperform isolated competitors
 Policy focus on strengthening clusters
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Spin-offs and Industrial Clusters (2)

Challenge to the conventional wisdom: “Heritage theory”
(Klepper, 2007; 2010; Buenstorf & Klepper, 2009; 2010)
•
Firm heritage drives firm performance
– Diversifiers & spin-offs from industry leaders outperform start-ups
– Success breeds success
•
Diversification in home region & spin-offs locate close to their parent firms
 Specific firms in clusters outperform isolated competitors
 But this need not be due to co-location
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Spin-offs and Industrial Clusters (3)


Klepper (2007, 2010): Detroit as example of heritage theory
•
Old Motor Works as successful early diversifier
•
Olds also related to entry of Buick, Cadillac and Ford
•
Spin-offs from Olds and other early entrants make Detroit auto cluster grow
Some other examples
•
Akron tire cluster (Buenstorf & Klepper, 2009; 2010)
•
Silicon Valley semiconductor cluster (Klepper, 2010; Cheyre et al., 2014; 2015)
•
Fashion clusters in Paris, London, New York and Milano (Wenting, 2008)
•
Amsterdam book publishing cluster (Heebels and Boschma, 2011)
•
…
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The Conundrum of Spin-off Performance (1)

No general theory exist to account for spin-off performance

Nature or nurture?
•

Parent firms as “involuntary training grounds” for spin-off entrepreneurs
- or do better firms hire better employees?
How important are (early) workers relative to entrepreneurs?
•
Spin-offs make better hiring decisions (Carias & Klepper, 2010)
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The Conundrum of Spin-off Performance (2)

Heritage theory – agglomeration economies in disguise?
•
Diversifiers leverage existing knowledge (but: “spillovers” within organization)
•
Knowledge flows from parents to spin-offs (but: highly specific, not “in the air”)
•
Spin-offs benefit from being embedded in regional networks
(Dahl & Sorenson, 2011)
 need to study impact of spin-offs’ network positions in clusters (Boschma, 2015)
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This paper

Agglomeration and spin-off heritage

Embodied knowledge

•
Entrepreneurial industry experience
•
Hirings of employees with industry experience
Embeddedness of firms in the industry network
•
Reconstruct firms’ embeddedness in industry network from labor flows
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2. EMPIRICAL CONTEXT: MOLDS IN PORTUGAL
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Plastic Molds: Simple (1950s)…
Spoon
Doll head
Source: Gomes (2005)
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…and More Complex (Today)
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The Portuguese Molds Clusters



Oliveira
Molds industry among Portugal‘s
successful export industries
•
80-90% of production are exported
•
“one of the world’s principal producers of
precision molds for the plastics industry”
(USITC 2002)
Industry clusters in two regions:
•
Oliveira de Azeméis
•
Marinha Grande
Porto
Marinha
 Lisbon
Marinha Grande also has co-located
plastics industry
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History of the Portuguese Molds Industry


Pioneer firm: A.H.A. (est. 1945 in Marinha)
•
Substantial process innovations (production organization)
•
Training of workers and future entrepreneurs
First customers of the molds industry were local plastics companies
•

Exports to US (1950s) and EU markets (1980s)
Clusters resemble “Italian” industrial districts
•
Network of small specialized firms that subcontract intensively (Mota & Castro 2004)
•
Vertically disintegrated to access external capabilities (Loasby 1998)
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Prior Results on the Portuguese Molds Industry


Costa and Baptista (DRUID, 2015)
•
Both agglomeration and spin-off heritage help explain firm survival
•
Stronger effects of spin-off heritage
•
Also spin-offs from vertically related industries perform well
Costa (under review)
•
Spin-off heritage as driver of co-located molds and plastics industries
•
Weak and asymmetric agglomeration effects (molds firms benefit from co-location
with plastics firms)
•
Plastics firms benefits less from co-location
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3. ANALYSIS
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Data (1)


Portuguese LEED data (Quadros de Pessoal; 1986-2009)
•
Identification of molds producers and molds entrants (in focus here)
•
Location in molds cluster (Marinha Grande; Oliveira de Azeméis)?
Spin-off entrepreneurs: prior employment in molds firms
(5 previous years)
All entrants
(1986-2009)
Marinha Grande
Oliveira
Total
Spin-off entrants
(1986-2009)
459
198
97
55
1066
350
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Data (2)

Labor mobility  embodied knowledge
•
First-year hires with prior employment in molds firms (5 years)
 rationale: stock of employees shapes firm capabilities

Network position  embeddedness
•
Construct annual industry networks of active producers from labor mobility events
in prior 5 years (undirected)
•
Measure betweenness centrality for all entrants – use second year of age
(data limitations)
 rationale: links to other firms enable knowledge flows
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Evolution of the labor mobility network (1): 1992
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Evolution of the labor mobility network (2): 1997
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Evolution of the labor mobility network (3): 2002
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Evolution of the labor mobility network (4): 2007
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Results (1): Spin-offs and embodied knowledge
Cox proportional hazards
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Results (2): Spin-offs and industry embeddedness
Cox proportional hazards / full sample; betweenness = 0 if missing
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Results (3): Restricted sample
Cox proportional hazards / restricted sample (no missing betweenness values)
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4. CONCLUDING REMARKS
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Concluding Remarks



Portuguese molds industry
•
Mature & internationally competitive
•
Clustered in two peripheral regions; clusters resemble Italian industrial districts
•
Heritage alone does not account for performance premium in clusters
Embodied knowledge flows
•
Early within-industry hires related to performance premium in clusters
(but not to spin-off performance)
•
Hires from successful firms related to performance; orthogonal to location/heritage
Embeddedness in industry network
•
New measuring approach based on labor flows in industry (but: data limitations)
•
No evidence that embeddedness related to performance
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