Firm spin-offs in Denmark 1981–2000 — patterns of entry and exit

Abstract

This paper adds large sample evidence on the extent to which the likelihood of business failure or success is related to relationships between parent firms and their doff-springT. For this purpose we make use of an exhaustive matched employer-employee data set covering the entire Danish private sector in years 1981 to 2000 to study firm entry and exit. Special focus is on spin-offs, a particular group of small entrants, which are founded by groups of persons originating from the same former workplace. We estimate a multinomial logit model in order to examine which characteristics of the founders and the parent firms increase the probability of spinning off. Next, we carry out a duration analysis of the subsequent transitions of the spin-offs, and compare their exit risks with those of other entrant firms, which have less strong parent-progeny relationships in terms of worker flows. D

Patterns of innovation and collaboration in small and large firms

“…The lack of bureaucracy provides them with the freedom in mind and action which allows for far-reaching specialization and an extensive flexibility. In fact, we frequently observe that larger firms prefer to organize innovative activities in the form of small firm spin-offs (Eriksson and Moritz Kuhn 2006).…”

B2C—bubble to cluster: the dot-com boom, spin-off entrepreneurship, and regional agglomeration

“…While on-the-job-learning enables employees to discover entrepreneurial opportunities and exploit them through spin-off companies, the empirical evidence suggests that actual spin-off formation is frequently related to events in the parent firm, such as changes in leadership and mergers or acquisitions (Brittain and Freeman 1986;Eriksson and Kuhn 2006). Such events often induce strategy conflicts (Klepper and Thompson 2006) and/or lead to disruptions in the individual employee's working environment.…”

A corporation’s culture as an impetus for spinoffs and a driving force of industry evolution

“…12 This relates to the important stylized empirical fact that market entry by spinoffs is superior to other forms of entry (e.g., Eriksson and Kuhn, 2006;Dahl and Reichstein, 2007). We suggest the following proposition: Proposition 2.…”

“…10 Moreover, also leadership changes can be a trigger for spinoffs mediated by changes in a corporation's culture: a new CEO may have a lower influence in socialization than her predecessor causing a decline in intraorganizational cooperation thus motivating employees to leave to start their own firms. Indeed, empirical evidence shows that spinoffs are more likely in firms whose CEO has recently changed (Eriksson and Kuhn, 2006). 9 In a dynamic business environment, these spinoffs enjoy competitive advantages from their high levels of cooperation.…”

“…Empirical evidence indicates that employees of larger firms are less likely than those of smaller organizations to found spinoffs (e.g., Elfenbein et al, 2010). Eriksson and Kuhn (2006) and Sørensen (2007) found that larger ventures adapted to mature business environments spawn less spinoffs than smaller firms due to a negative effect of bureaucratic structures on innovation and managerial flexibility (see also Arrow, 1974, p. 49;Teece et al, 1997). What is more, several empirical studies show that the performance of spinoffs is better for those founded by employees of smaller firms (e.g., Sørensen, 2007;Elfenbein et al, 2010).…”