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Are you experienced? Prior experience and the survival of new organizations

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  • Michael S. Dahl
  • Toke Reichstein

Abstract

This paper investigates the relationship between the level of experience of managers and founders, and the likelihood of survival of their new firms. We take advantage of a comprehensive dataset covering the entire Danish labor market from 1980-2000. This is used to trace the activities of top ranked members of start-ups prior to their founding, and follow the fate of these firms. More specifically, we compare the survival of spin-offs from surviving parents, spin-offs from exiting parents, and other start-ups. Moreover, we investigate whether firms managed and founded by more experienced teams with higher levels of industry-specific experience are more likely to survive. Distinguishing between survivors and firms that have been acquired, we find that spin-offs from a surviving parent company combined with and industry-specific experience, positively affects the likelihood of survival. We also find that spin-offs from parent companies that exit are less likely to survive than either spin-offs from surviving parents or other start-ups. These findings support the theoretical arguments that organizational heritage is important for the survival of new organizations. We found no similar significant results when comparing exits with firms that have been acquired.

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Bibliographic Info

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 05-01.

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Date of creation: 2005
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Handle: RePEc:aal:abbswp:05-01

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Web page: http://www.druid.dk/

Related research

Keywords: Organizational routine; Industry-specific experience; Survival of new firms; Spin-offs;

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  1. Bingley, Paul & Westergaard-Nielsen, Niels, 2004. "Personnel policy and profit," Journal of Business Research, Elsevier, vol. 57(5), pages 557-563, May.
  2. Constance E. Helfat & Marvin B. Lieberman, 2002. "The birth of capabilities: market entry and the importance of pre-history," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 725-760, August.
  3. Klepper, Steven, 2001. "Employee Startups in High-Tech Industries," Industrial and Corporate Change, Oxford University Press, vol. 10(3), pages 639-74, September.
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