DEATH HURTS, BUT IT ISN'T FATAL: THE POSTEXIT DIFFUSION OF KNOWLEDGE CREATED BY INNOVATIVE COMPANIES.

By Glenn Hoetker, Rajshree Agarwal. 2005

291 citations recorded by the source corpus.

There is little understanding of whether a firm’s innovative knowledge dies with it or if instead significant diffusion of knowledge occurs even after a firm exits an industry. Theoretical predictions about the differing effects of firm exit on private and public knowledge and implications for interfirm knowledge transfer are forwarded. We investigated main and moderating effects of a firm’s exit from the disk drive industry on knowledge diffusion to other firms, finding evidence that the ability to use a firm as a template plays a critical role in successfully replicating its knowledge. Absent this template, knowledge “stickiness” reduces knowledge diffusion. In 1999, despite millions of dollars of investment and a portfolio of innovative technologies, flat panel display manufacturer Optical Information Systems (OIS) shut down operations, unable to achieve commercial success. Although OIS failed, its technology lived on. A letter by the firm’s former director of advanced technologies to the editors of the magazine Information Display reported that even after the firm’s exit, OIS technology continued to make waves in the flat panel industry, with many of its patents covering processes that became mainstream technology. The letter then cited specific innovations by other firms that had built on OIS breakthroughs. Although the firm had exited the industry in spite of its technological strength, it left a lasting legacy for the industry’s technology. Is the OIS story unusual, or does it highlight a regular occurrence? Since technological expertise is an important determinant of firm success (Jovanovic & MacDonald, 1994; Teece, 1986), it could be argued that firms that exit an industry are typically lacking in this important area and thus have little impact on the technological progress in the industry. This formulation would imply that firms like OIS are outliers and that diffusion of the knowledge they create is generally low, both before

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/ffcf6bfdc321a7d8d5b33649f008ad30e5fc2d4c

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Citations in the corpus

How do bankruptcy laws affect entrepreneurship development around the world (2011, background): “Because many of these institutional elements reflect the evolution of values and beliefs in a country over long periods of time, they are both relatively stable (Hofstede, 2007) and difficult to alter with changes in public policy (North, 1990).”
Entrepreneurial Failure: A Synthesis and Conceptual Framework of its Effects (2020, background): “The effects of EF experienced by an entrepreneur (Eggers and Song, 2015; Hoetker and Agarwal, 2007; Knott and Posen, 2005; McGrath, 1999) in time are different.”
What is entrepreneurial failure? Implications for future research (2016, background): “Second, the literature on knowledge diffusion (Hoetker and Agarwal, 2007) after firm failure could inform this line of research to help inform which opportunities are worth continuing to exploit and which opportunities are not worth continuing to pursue.”
Does Patent Strategy Shape the Long-Run Supply of Public Knowledge? Evidence from Human Genetics (2009, background): “Likewise, management scholars have used the exit of a firm from a product line or sector to explore whether a firm’s innovative knowledge dies with it, even though the knowledge is already disclosed in patents ( Hoetker & Agarwal, 2007 ).”
Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe (2017, unknown): “…recycle the assets of defunct firms across a range of activities.2 While this typically reflects the reallocation of tangible inputs, there is also scope for the post-exit diffusion of codified knowledge to new entrants via employee mobility and the sales of patents (Hoetker & Agarwal 2007).”
Count-Based Research in Management (2015, background): “Hoetker and Agarwal (2007) propose that when the ratio of the standard deviation exceeds 130% of the mean, overdispersion is likely a problem.”
Is Failure Good (2005, background): “This expropriation takes place in the same manner as spillovers between surviving firms—through employee turnover across firms, interactions with suppliers and customers, publications in the trade literature, and patents (Hoetker and Agarwal 2003).”
Bankruptcy Laws and Entrepreneur– Friendliness (2010, unknown): “Similar to the saying “No pain, no gain,” an economy unwilling to shoulder the costs of certain entrepreneurial failures is not likely to reap the benefits of a strong entrepreneurial sector and the economic growth it may bring (Hoetker & Agarwal, 2007; Knott & Posen, 2005).”
Different Strokes for Different Folks: Entrepreneurial Narratives of Emotion, Cognition, and Making Sense of Business Failure (2015, background): “As entrepreneurs take risks, learn from failures, and act on their new knowledge, economies advance (Hoetker & Agarwal, 2007; Knott & Posen, 2005; Mason & Harrison, 2006).”
The Process of Creative Construction: Knowledge Spillovers, Entrepreneurship and Economic Growth (2007, unknown): “If entrant fi rms exhibit pattern D, which is characteristic of liability of newness or adolescence, their experimentation and failure provides for knowledge that continues to live on past their exit from the industry (Hoetker and Agarwal, 2007).”