New Firm Formations and Inherited Organizational Capabilities: Analyzing Modes of Entry in a High-tech Cluster

Recently empirical studies have focused on how capabilities of new entering firms are important for the evolution of industries over time. The performance of new entrants appears to be significantly influenced by their pre-entry background. The general impression of the literature is that firms founded by former employees of successful incumbents have shown larger propensities to survival than other categories of new entrants. We use this approach to study the emergence and growth over the past three decades of a wireless telecommunications cluster (NorCOM). The aim is to analyze the dominating forces behind the growth of NorCOM using detailed information about the founding events, motivations and organizational background of the individual entrants in the cluster. We show that the technological successes of firms in the region have powered a spinoff process, which can account for the majority of the growth in the number of firms and employment in the cluster.