Innovation via Proxy – Benefits of Innovating through Spin-Offs : An Exploratory Case Study
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- Master Thesis 
This thesis explores how an established firm benefit from spinning off and innovate via proxy. Innovation via proxy refers to the benefits that the established firm experienced from the innovation activities of its spin-offs without actively participating in the innovation process. This study was conducted in the setting of a large media firm and six of its spin-off companies. The inductively generated findings are contextualized in the current literature on corporate spin-offs, open innovation and coopetition. This thesis provides an extensive overview on the relationships and resulting benefits between the established firm, its spin-off companies, the media cluster that formed around the spin-offs and the customers of the spin-offs, respectively. The benefits for the established firm are found to be direct cost savings from implementation of the spin-off’s products, reduced acquisition cost of the spin-off’s products and financial gains from the ownership of the spin-offs through annual profits or through their increased valuation at the time of divestment. Additionally, established firm is benefiting from the product improvements and new product innovations that the spin-off generated in inbound open innovation activities with their customers. Contrasting earlier studies, it was found that the spin-offs experience difficulties in reintegrating these benefits in the process of innovation via proxy. The spin-offs benefit from the relationship with established firm through ownership governance and the relationship to established firm as a customer, allowing the spin-offs to test and showroom their products. Lastly, it is found that the spin-offs and other members of the media cluster that evolved around the spin-offs benefit from the cluster in the form of joint representation, their innovation activities and the emerging talent pool. This thesis also developed an inductive model to identify conditions that are best suited to spin-off companies with an intention of benefiting from them and innovate via proxy. The conditions identified are that spin-offs should pursue non-core activities, products or services of the established firm’s business, a complementary rather than competitive mindset and strong relationships between involved parties. These conditions also provide guidance and implications for managers involved in a setting with corporate spin-offs.