The Spawning of Ecosystems: How Cohort Effects Benefit New Ventures

Research has examined the process of "entrepreneurial migration," whereby employees from successful industry incumbents move to new ventures. This phenomenon has been linked to direct benefits to entrepreneurial firms, offering valuable knowledge and routines obtained by employees during their tenure at incumbent firms. We propose a theoretical framework in which shared experience—a common background in beneficial knowledge management practices—creates a "cohort effect," facilitating direct ties and innovation benefits to new ventures receiving inventors from the same incumbent firms. Analyzing longitudinal data on inventor migration to 658 new biotech ventures tracked from 1990 to 2013, we find shared migration ties increase knowledge and market overlap between firms, enhancing their likelihood of direct engagement through alliances and employee hiring as well as the quality of knowledge they develop. Our core theoretical contribution is the identification of a migration cohort effect, in which inventors who share contemporaneous experiences at incumbent firms and migrate to new ventures create unique relationships between those ventures. Where prior research on spawning and migration has focused primarily on the direct benefit of human capital transfer from incumbents to new ventures, we explore the broader network implications of similarities and interactions between firms receiving this human capital.