Spin-Offs as the Business Model for Innovation

Firm growth can happen in different forms, including the formation of the business groups through spin-off process (Iacobucci and Rosa, 2010). While traditionally business groups were associated with large firm, recent studies confirm that owning more than one business is also common in small business sector (Birly and Westhead, 1993; Loiseau, 2001). Research on this phenomenon is quite limited, suggesting two lines of the explanation for the reasons for this particular type of business growth - the ability to recognize opportunities by portfolio entrepreneur due to his/her experience, and the need to exploit opportunities by involving partners while remaining the controllable way of growth the business (Lechner and Leyronas, 2009). However, we argue that there is another reason for that type of growth, which is innovation, that fallen outside attention of the entrepreneurship filed of research so far. In the current paper we will take a focus on role of innovation as the important factor contributing to the formation of business groups, or more narrowly leading to the spin-off decision by the founders. Innovation in this study is seen as innovative, entrepreneurial strategy and culture of the firm (Covin, Geene and Slevin, 2006). By spinoff we understand here the formation of the new firm while the mother company remains highly involved either by owning shares in the company or by providing resources, marketing channels or other means of support for the daughter company (Klepper og Sleeper 2005). The question we want to address in the present paper is "What role does innovation plays in spin-off business model?"