“We Own What you Think”: Institutional Constraints on Hybrid Entrepreneurship and High-Growth Entrepreneurship

Abstract

This article investigates whether institutional conditions that limit employees to pursue hybrid entrepreneurship reduce potential high-growth entrepreneurship. Using the Alcatel v. Brown ruling, as an institutional change that curtailed hybrid entrepreneurial activity, we show that affected states experienced a marked decline in indicators of ventures with high-growth potential. Effects are strongest among early-stage ventures, consistent with hybrid entrepreneurship enabling low-cost experimentation. Venture capital investors also respond to reduced experimentation by increasing syndication and staging. Overall, the results show that institutional arrangements shape experimentation through hybrid entrepreneurship and, consequently, the supply of ventures capable of achieving high growth.