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Firm Spin-offs in Denmark 1981-2000 - Patterns of Entry and Exit

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Author Info
Eriksson, Tor () (Department of Economics, Aarhus School of Business)
Kuhn, Johan Moritz () (Department of Economics, Aarhus School of Business)

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Abstract

The motivation of this paper is to add new, large sample evidence on the extent to which the

likelihood of business failure or success is related to relationships between parent firms and their

'off-spring'. 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 entries, 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

entries, which have less strong parent-progeny relationships in terms of worker flows.

With respect to entry, poor performance of the parent firm is found to be a key determinant of the

decision to spin off. The spin-offs are shown to have a lower death risk than the comparison group,

also after controlling for a host of firm and employee characteristics. The exit risks of spin-offs and

the comparison group are observed to converge over time. However, when we cater for unobserved

heterogeneity the convergence turns out to be predominantly an outcome of selection rather than the

result of other start-ups catching up via some learning process.

For the entire sample of entries, we find a positive association between size of the entry and

survival probability, and a countercyclical sensitivity of exit risk.

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Publisher Info
Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 04-6.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 35 pages
Date of creation: 28 May 2004
Date of revision:
Handle: RePEc:hhs:aareco:2004_006

Note: Published in: International Journal of Industrial Organization, 24 (2006), pp. 1021-1040
Contact details of provider:
Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Phone: +45 89 486396
Fax: +45 8615 5175
Web page: http://www.asb.dk/departments/nat.aspx
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For technical questions regarding this item, or to correct its listing, contact: (Helle Vinbaek Stenholt).

Related research
Keywords: Entry; Exit; Spin-offs; Duration analysis;

Other versions of this item:

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cooper, Arnold C., 1985. "The role of incubator organizations in the founding of growth-oriented firms," Journal of Business Venturing, Elsevier, vol. 1(1), pages 75-86. [Downloadable!] (restricted)
  2. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February. [Downloadable!] (restricted)
  3. Lazear, Edward P., 2003. "Entrepreneurship," IZA Discussion Papers 760, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Michael S. Dahl & Christian Ø.R. Pedersen & Bent Dalum, 2003. "Entry by Spinoff in a High-tech Cluster," DRUID Working Papers 03-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  5. repec:cup:cbooks:9780521465618 is not listed on IDEAS
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