The main contributions of our study are as follows :
- Considers founders of spin-offs as hybrid entrepreneurs because they still maintain relationships with the parent company but have established their own businesses.
- Presents spin-offs as hybrid organizations that require specific management of network relationships.
- Demonstrates how founders of spin-offs manage their social networks, identifying different sets of relationships that provide different types of resources.
1A spin-off refers to the fact that a new activity or technology is developed by a pre-existing organization to form a new company. A spin-off can also involve intrapreneurs of an existing organization who set up their own start-up. The new company maintains relationships with the parent organization, and the result of this process is a new venture, the spin-off” [1].
2Spin-offs enable adaptability and are frequently used during organizational restructuring. They benefit from the parent company’s support, which is notably provided through financial and technological resources [2] and are also widespread in universities. Academic spin-offs are founded by researchers who have created their own business on the basis of a discovery that originated in the university. As newly-fledged entrepreneurs, these researchers maintain an affiliation with the university. These spin-offs are enablers for technological transfers. However, academic entrepreneurs may lack networking skills to grow their company’s business aspects [3]. In contrast, industrial spin-off founders are able to rely on the parent organization’s relationships to commercialize new products. Consequently, comparing the networking activities of academic and corporate spin-offs provides an opportunity to identify managerial practices that each group should foster to enhance growth.
Spin-offs’ social networks
3Recent works emphasize the ability of entrepreneurs to shape their social networks [4]. Start-ups gain access to essential resources, such as support, legitimacy and information, through their relationships [5]. As their companies require new assets and competences, entrepreneurs must reconfigure their networks. However, spin-offs may be trapped into their initial set of relationships and be unable to reach new contacts and sources of information. Thus, this network inertia acts as a constraint and prevents the company’s development.
4Consequently, our research question aims at understanding how founders of spin-offs can develop their social networks beyond the initial ties with the parent organization. We conduct a social network analysis and a qualitative study based on case studies of spin-offs.
Different types of spin-offs
5Most spin-off projects originate in large entities such as universities and SMEs within the high-tech sector and involve strong relationships between the parent company and the spin-off. The access to competences and resources, such as the development of a business plan, technical support and psychological or financial support, are then available to the project owner through the relationship with the parent company. This description corroborates the hybrid component of spin-offs, which lies between the market relationships that involve independent companies and the hierarchical relationships that characterize integrated companies. [6] Actually, hybrid entrepreneurs are characterized as employees who transition slowly to entrepreneurship while at the same time keeping a link with their current employer. This situation allows these entrepreneurs to manage uncertainty and develop new skills. However, there may be different levels of commitment shown by the parent company to the spin-off. Consequently, we propose that there are different types of hybrid entrepreneurs:
- certain individuals will face less uncertainty when setting up their new venture, as they can draw on supportive ties from their current (or former) employer.
- others will have to rely solely on their own ability to develop contacts to find the required resources for their business.
6The type and nature of the ties as well as the structure of the spin-off’s initial network influence its access to resources as well as to its future growth opportunities. Studies of social networks have proposed several indicators to assess a set of relationships.
The founder’s network
7Structural holes theory explains how the network structure influences resource flows. A structural hole is a bridge between otherwise disconnected actors.
Structural holes and entrepreneurship
Conversely, a high proportion of relationships among the actors of a network indicates that the network is dense. In such structures, as contacts are interconnected, individuals have access to similar information and resources. However, information flows more rapidly, and more complex knowledge can transit into the network.
8We can also differentiate between a homogenous and a heterogeneous network. The latter is characterized by many contacts with individuals working for different companies in different fields. A company that has relationships only in the same sector as the start-up’s activities has a homogenous network. Open networks are both heterogeneous and sparse. Closed networks are composed of redundant contacts in similar fields. Open and closed networks are illustrated in figure 1.
Open vs. closed networks
Open vs. closed networks
9Closed networks provide benefits in terms of support, solidarity and the diffusion of tacit knowledge, whereas open networks are associated with access to new opportunities and information as well as the flow of diversified resources. A start-up requires all of these resources throughout the different stages of its development.
10Furthermore, different types of information characterize network content. We have defined three types of links:
- scientific links, i.e., contacts with individuals or organizations performing basic research;
- technological links, i.e., contacts with individuals or organizations involved in applied research or who are able to provide access to technological equipment;
- business links, i.e., contacts that are related to sales, purchasing, production or subcontracting activities.
11Those relationships can be either weak ties, which are relationships with actors who are emotionally distant and see each other rarely or for a short time, or strong relationships, which are characterized by a strong engagement among the actors [9].
12According to the literature, we can expect different sets of initial ties for corporate and academic spin-offs. Thus, as highlighted in table 2, academic entrepreneurs benefit from a dense and homogeneous scientific network, which facilitates the transfer of complex and tacit research data but lacks heterogeneous business contacts. Corporate spin-offs obtain easier access to funding through relationships with the parent company and use the credibility conveyed by their former employer to obtain new contacts. The parent company may become a client for the new venture [10].
Links mobilized by spin-offs according to the type of parent company
| University | Scientific links | Redundant strong links |
| Technology links | ||
| Business links | Absent | |
| Company | Scientific links | Depends on the type of spin-off |
| Technology links | ||
| Business links | Parent company may become a client for the new venture |
Links mobilized by spin-offs according to the type of parent company
Description of the cases studied
| Case | Set up in | Activity | Contractor type | Mother company | Parent company involvement |
|---|---|---|---|---|---|
| A. | 2013 | System integration | Engineer Commercial | Industry | Low |
| B. | 2013 | Biotechnology | Management | University | Average |
| C. | 2011 | R&D on core materials | Professor Commercial | University | Average |
| D. | 2015 | R&D in biotechnology | Engineer | Industry | Average |
| E. | 2009 | R&D in biotechnology | Doctor | University | Strong |
| F. | 2014 | R&D in biotechnology | CNAM Engineer | Industry | Strong |
| G. | 2009 | Medical devices in ophthalmology | Engineer | Industry | Low |
| H. | 2015 | Development of algorithms | Doctor Commercial | University | Strong |
Description of the cases studied
13Different types of networks are beneficial for new venture creation and development. Consequently, founders should be proactive in reshaping the social network of the new venture to respond to its changing needs (for a review see Lamine et al. (2015) [11]). Strong ties appear necessary for the initiation of entrepreneurial activity, while weak ties are more suited for rapid gestation activities. The content of the ties should also become more multiplexed, with different types of resources transiting in one single relationship. In terms of the content of ties, Lamine et al. (2014) [12] highlight three phases: a scientific phase, with a dominant configuration involving mainly researchers and scientists; a support phase in which technical proof is gathered through relationships with research centres and companies; and a business phase in which access to human and financial resources is obtained.
14Researchers have investigated the relationships between the different types of spin-offs and the growth of spin-offs [13] as described in table 1. In this paper, we take a new perspective and examine the influence of the ties with the parent company or the university in resource mobilization as well as the motives that entice the founders to reshape their social network. Moreover, during the construction of social ties, non-human entities are present and influential in the relations between the actors in the entrepreneurial network. These non-human entities play a fundamental mediation role and occupy a central place between the members of the network [14].
A study based on interviews with spin-off founders and an analysis of their social networks
15We conducted a qualitative study of 8 spin-offs. As described in table 2, the cases vary in terms of the relationships between the parent company and the spin-off, with 4 academic and 4 corporate spin-offs and different levels of engagement.
16Primary data was collected through semi-directed interviews with founders, whereas secondary data was obtained from journals and the Internet websites of the spin-offs. We conducted two series of interviews 6 months apart (table 3). We received data in real time concerning the development of the start-ups and changes in the social networks, particularly with relation to the ties with the parent company, the resources that flowed, and the networking process. From the interviews, we assessed the network structure in terms of the number of alters, the type of network structure (closed versus open network), the content of the ties, and the frequency of the interactions. We focused on changes in the network. Furthermore, we measured network homogeneity according to the diversity of the companies and fields of the members of the network.
Research methodology
| Research methodology | |||
|---|---|---|---|
| Collection of data | 10 interviews | 8 interviews | Additional documents |
| Period of time | 2014-2015 | 2016-2017 | |
| Duration (total) | 10 h | 12 h | |
| Nature of information collected | History of the company, Relationship type | Network construction, constraints | Press review, articles, Business plan, etc. |
Research methodology
17The interviews were fully transcribed and coded using the NVIVO11 software [15]. The codes were defined based on the literature (types of ties and resource flows, networking activities).
18Our results indicate differences in the mobilization of social networks according to the type of spin-offs and the level of embeddedness within the parent company.
19As the construction of networks depends on the stage of the life cycle of the nascent enterprise, we organized the results section into three phases (scientific, support and business) (Lamine et al., 2014) [16].
The constitution of the scientific network by academic spin-offs
20The entrepreneurs began their projects in universities and academic labs, and the spin-off networks correspond to the founder’s personal set of ties. Furthermore, founders rely heavily on the university incubator to develop their first ties. The affiliation with the university provides credibility and preferential access to resources:
“The fact that we are still in this relationship […] allows us to generate positive noise and build our image.”
22The network is first confined and characterized by strong embeddedness in the parent company’s network, which provides idea protection. However, this embeddedness can also contribute to the spin-off lacking its own legitimacy. The following statement demonstrates the lack of contact:
“My professional scientific network stops there. I have no entry into other pharmaceutical industries, such as SANOFI. I do not know anyone.”
24To establish new scientific relationships, academic spin-off founders use artefacts. For example, they publish articles in scientific journals, which are used as references:
“We have an article that will appear in a magazine, which is exclusively for R&D people… it allows us to reach a lot of people… It is a business card.”
26The weak ties then allow for the development of applications in different fields, thus increasing network heterogeneity.
“This is why we have tried to multiply “application factors”, so that we do not put everything in the same basket and then we can find different contacts.”
28These spin-offs also develop strong scientific ties by either hiring researchers for their networking capabilities or setting up scientific councils:
“We have set up a scientific council composed of 5 researchers, 2 working at INRA and 3 at INSERM, to have access to technological platforms, extend our network through them, and introduce ourselves to other contacts that are relevant to our business.”
30These ties are strong and facilitate access to different fields either in terms of geographical dispersion or activity diversity. Such openness in the network allows the spin-off to exploit new and different opportunities.
The constitution of the scientific network by corporate spin-offs
31The relationships of corporate spin-offs with the parent company provide initial legitimization. However, founders are aware that they need to form new ties to grow their company, as described below:
33These founders may have difficulty generating interest from scientists. Consequently, they can be hosted in an incubator, which has strong relationships with universities, as described in case F.
“I had to fight to be recommended. However, the lab here in Toulouse recommended me, and I was hosted on their premises…”
35Then, the spin-off may form strong ties with researchers either by forming a scientists’ committee or by hiring a researcher (for example, in case E).
36We demonstrate that the reshaping of the network during the business phase is quite similar for academic and corporate spin-offs. In contrast, different processes are at work during the support phase, as highlighted in the next section.
The constitution of the support network by academic spin-offs
37Academic spin-offs are not sufficiently prepared in knowing how to develop a support network. In fact, researchers do not have the initial contacts to develop the network through referrals. Two different scenarios were identified to overcome the lack of social capital: reliance on family or an institutional network.
38For example, a founder explains that the father of his co-founder was the director of a public research lab that offered him considerable assistance.
“We need to carry out measures to characterize all the materials that were developed, and it costs a lot; so, without this network, we could not make it.”
40A few months later, the founder had proactively attempted to diversify his network into new applicative domains, and new major clients, such as AIRBUS and AREVA came on board. The social structure thus becomes an open network, which allows for access to numerous technological clusters. The network is then highly centralized and depends on the founder who relies on its previous experience, though this may be a source of weakness if the founder lacks the time to maintain his contacts or decides to leave.
“I am a coordinator in my network. I am the central actor […] I have the ability to expand the network. My experience at the French Embassy in Washington was key because network development is essential.”
42The founders of the two other academic spin-offs were less pro-active and relied on the institutional network of the incubator company. Consequently, they were highly dependent on external actors to develop their network:
“The incubator (university) has enabled institutional networking.”
44To compensate for the lack of competences in networking, spin-off founders may resort to external consultants.
“The consulting company is in the process of interviewing people from all the main pharmaceutical labs and hospitals, and it will draw up a first contacts list that we will have to convince.”
46In summary, academic founders of spin-offs rely on their personal contacts to develop a highly centralized supportive network, which may be difficult to transform.
The constitution of the support network by corporate spin-offs
47The founder identifies relevant expertise in the network and plays a referral role regarding the spin-off’s legitimacy. For example, participation in 2 new clusters allows company D to be visible at the international level:
48In a second stage, the entrepreneur then begins to establish new ties by hiring a business developer specifically for his/her portfolio of contacts and uses recommendations to expand the network.
“The goal is to use his network and make it ours and finally get programmes such as H2O20. It is a European biotechnology research programme. It makes it possible to develop the network at the European level…”
50Then, each founder specializes in developing ties according to their previous professional backgrounds, which allows for the identification of new opportunities in the network:
“Each partner integrates into the networks according to his knowledge and skills […]. That’s how the network expands.”
52One of the founders of Case A told us that he participates in associations to get new contacts. Those contacts then refer him to a final client with whom he set up a new business. Case A’s social network is an open structure, which allows for the diffusion of the expertise of the start-up. The representation of the network shows that it evolves towards a structure with a closed core at the centre and sparse ties at the periphery. Such a structure allows for both a rapid flow of information and exchanges of tacit knowledge and is very beneficial for technological company development.
53In summary, corporate spin-offs rely on the parent company to develop their first contact; however, they also tend to set up new contacts by relying on employees’ social capital or referrals from former contacts. The network then becomes specialized.
The constitution of the business network by the academic spin-offs
54In specific instances, the spin-off company develops a contracting-out strategy with the parent company, which leads to strong synergies between the start-up company and the parent firm. However, this relationship also constrains the entrepreneur in the development of an autonomous strategy for his company.
55Incubator networks allow for the development of the first periphery of relationships with banks and business angels, which can then refer the founders to other contacts. Consequently, private funding contributes to the reshaping of the network and multiplies the effect of referrals in the network, as emphasized by the entrepreneur in Case B.
“We managed to be recognized and identified by a European network. That European network is the biggest one financed by the European pharmaceutical industry worldwide and represents $78,000,000. Currently, this network contributes to our funding and to our recognition. It also opens doors to contact key persons in Europe who work in our field.”
The constitution of the business network by the corporate spin-offs
57Most technological spin-off companies first rely on the parent company’s brand name to establish their first set of customers.
“Having the SANOFI label allows us to have this credibility with our customers…”
59The configuration of networks into an open structure with different clusters linked by more unique ties also facilitates financing, as demonstrated in the following statement. This statement also shows that the ties become multiplexed and that relationships that were developed to exchange scientific information become useful in obtaining funding.
“We also have a technical and scientific network, notably with the lab that we came from. We have already often worked together. We also have developed collaborations with researchers in one CNRS lab that are quite important for our business. We also got funding from the French government along with another lab.”
Differences in the development of social networks between academic and corporate spin-offs
61Despite the heterogeneity of spin-offs, the results obtained show several similarities among the 8 cases with regard to entrepreneurial processes. First, the projects are constantly tested, and artefacts are used to develop the network [17]. Thus, the network is formed of both humans and non-human entities. However, the obstacles faced by academic and corporate spin-offs differ. Academic founders master networking within the scientific community and use artefacts to represent their ideas and enrol other researchers. However, these founders lack weak ties to develop the support and business networks. In contrast, corporate spin-offs leverage the parent company’s legitimacy to develop relationships in new clusters and ties with local companies and clients.
62Then, spin-off founders transform their network as they face new challenges, which may be considered tests [18]. However, the way academic and corporate spin-off founders develop their networks is different, particularly with regard to prototyping and market validation. Whereas corporate spin-offs expand their support and business networks through referrals and by hiring new people, academic spin-off founders tend to rely on institutional actors or family relationships. Consequently, the academic spin-off networks are more dependent on the social capital of the founder. Furthermore, as those founders do not have contacts with clients, they lack opportunities to obtain feedback and learn from the prototypes that they have created. In contrast, the internal network of corporate spin-offs tends to be specialized, with groups of actors integrating external resources and skills specific to different aspects of the project.
63As demonstrated in table 4, the constitution of the network differs for academic and corporate spin-offs regarding the support and business aspects.
Summary of the results
| Constitution of scientific network | Constitution of support network | Constitution of business network | |
|---|---|---|---|
| Academic spin-off |
|
|
|
| Corporate spin-off |
|
|
|
Summary of the results
64Corporate spin-offs are characterized by a development of network heterogeneity. As founders face new challenges, they must establish new relationships in different fields to facilitate the opening of the network. First, the network tends to be homogeneous, but founders leverage referrals and the parent company’s brand to bridge new fields.
The risks of embeddedness for academic spin-offs
65Our research demonstrates that the mobilization of social networks by spin-offs is specific compared to other start-up companies because the initial structure provided by the parent company constrains further development. The latter allows the newly created company to learn how to manage a portfolio of relationships [19], while the degree of embeddedness enhances contacts, promotes information sharing, and facilitates the legitimization of the new company. However, strong embeddedness may also be detrimental for the new company as it strives to develop its own credibility with new customers. Consequently, credibility does not flow easily in all parts of the network and is specific to the type of network considered. Thus, credibility from the employer is specific to the sphere in which the employer operates (either scientific or corporate).
66Our work also shows that companies should simultaneously deploy different tactics to expand their network, such as gathering heterogeneous technical contacts, hiring people based on their portfolio of ties, using recommendations, participating in collaborative projects and leveraging the founder’s social capital. Networks are then both specialized and built in a haphazard way; companies cannot assess which ties will be beneficial in the future.
67Several recommendations stem from our analysis.
68Academic and corporate spin-offs should enhance different networking activities. Whereas corporate spin-offs should strengthen scientific links, academic spin-offs should develop business contacts in different fields, as relationships are needed in the three areas: scientific, support and business. However, scientific ties are mostly strong and embedded relationships, whereas business networks should be more open. The challenge is then to use the legitimacy conveyed by scientific relationships to set up collaborations in new fields and to bridge different clusters.
69Second, since they intend to set up their own business, employees should develop a specialized management of the portfolio of ties, as it allows for the emergence of a network with both a denser core and a sparser periphery. Consequently, dedicated actions to set up new ties should be assigned to different persons in the start-up company.
Notes
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[17]
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Lamine, W., Fayolle, A., & Chebbi, H. (2014). Quel apport de la théorie de l’acteur-réseau pour appréhender la dynamique de construction du réseau entrepreneurial?. Management international, 19(1), 158-176.
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