Knowledge transfer through inheritance affects the generation, development, and survival of spin-outs—entrepreneurial ventures started by former employees of incumbent firms. This study investigates how the knowledge capabilities of incumbents influence spin-out outcomes. Using data from the disk drive industry (1977–1997), the research finds that incumbents with strong technological and market pioneering know-how generate fewer spin-outs than those with expertise in only one area. Incumbents' capabilities at the time of a spin-out's founding positively affect the spin-out's knowledge capabilities and survival probability. Spin-outs are significant in high-technology industries, often inheriting knowledge from incumbents. They compete in the same industry but lack equity relationships with incumbents. Spin-outs pose a threat to incumbents by capitalizing on knowledge from their founders' previous work. The study addresses gaps in understanding how knowledge is inherited and how it affects spin-out performance. The research develops a theoretical framework linking knowledge inheritance to spin-out formation, development, and survival. It considers two types of know-how: technological and market pioneering. Firms with both types of know-how are less likely to generate spin-outs, as they may not effectively utilize their knowledge. Spin-outs benefit from inherited knowledge, which influences their knowledge capabilities and survival. The study also examines how pre-entry affiliations with incumbents affect spin-out survival. The study uses data on the disk drive industry, known for rapid technological changes. It categorizes entrants into four groups: spin-outs, incumbent-backed ventures, diversifying entrants, and non-spin-out de novo entrants. Spin-outs are more likely to survive due to inherited knowledge, entrepreneurial origin, and access to industry-specific information. Incumbent-backed ventures and diversifying entrants face challenges due to organizational inertia and limited access to knowledge. The study's findings contribute to the understanding of the resource-based view of the firm and strategic entrepreneurship. It highlights the importance of knowledge organization and utilization in spin-out performance. The research suggests that while abundant knowledge can lead to spin-outs, effective use of knowledge is crucial for their success. The study also emphasizes the role of inherited knowledge in shaping spin-out capabilities and survival.Knowledge transfer through inheritance affects the generation, development, and survival of spin-outs—entrepreneurial ventures started by former employees of incumbent firms. This study investigates how the knowledge capabilities of incumbents influence spin-out outcomes. Using data from the disk drive industry (1977–1997), the research finds that incumbents with strong technological and market pioneering know-how generate fewer spin-outs than those with expertise in only one area. Incumbents' capabilities at the time of a spin-out's founding positively affect the spin-out's knowledge capabilities and survival probability. Spin-outs are significant in high-technology industries, often inheriting knowledge from incumbents. They compete in the same industry but lack equity relationships with incumbents. Spin-outs pose a threat to incumbents by capitalizing on knowledge from their founders' previous work. The study addresses gaps in understanding how knowledge is inherited and how it affects spin-out performance. The research develops a theoretical framework linking knowledge inheritance to spin-out formation, development, and survival. It considers two types of know-how: technological and market pioneering. Firms with both types of know-how are less likely to generate spin-outs, as they may not effectively utilize their knowledge. Spin-outs benefit from inherited knowledge, which influences their knowledge capabilities and survival. The study also examines how pre-entry affiliations with incumbents affect spin-out survival. The study uses data on the disk drive industry, known for rapid technological changes. It categorizes entrants into four groups: spin-outs, incumbent-backed ventures, diversifying entrants, and non-spin-out de novo entrants. Spin-outs are more likely to survive due to inherited knowledge, entrepreneurial origin, and access to industry-specific information. Incumbent-backed ventures and diversifying entrants face challenges due to organizational inertia and limited access to knowledge. The study's findings contribute to the understanding of the resource-based view of the firm and strategic entrepreneurship. It highlights the importance of knowledge organization and utilization in spin-out performance. The research suggests that while abundant knowledge can lead to spin-outs, effective use of knowledge is crucial for their success. The study also emphasizes the role of inherited knowledge in shaping spin-out capabilities and survival.