Survival advantage of worker buyouts over newly created worker-owned firms

Purpose Various theories predict that firm buyouts survive longer than newly created firms. The study aims to know whether it is the case for worker-owned firms (WOFs), i.e. firms owned and controlled mostly by their workers. Design/methodology/approach The author conducted a comparative survival analysis of French WOFs distinguished by their entry mode (i.e. newly created, worker buyouts (WBOs) of sound conventional firms, WBOs of conventional firms in difficulty or WBOs of non-profit organizations). Findings The hazard of exit is 32% lower for WBOs of sound conventional firms than newly created WOFs, 18% for WBOs of conventional firms in difficulty and 64% for WBOs of non-profit organizations. The current study confirms that WBOs, even of conventional firms in difficulty, have on average a survival advantage over newly created WOFs. Surprisingly, the author also shows that this survival advantage is similar across sectors with different knowledge intensity but is lower in high capital-intensive sectors than in low capital-intensive ones. Research limitations/implications Endogeneity issues limit the scope of the results and should be tackled in future research. Overall, these findings show that WOFs are composed of groups with different survival likelihoods that are obscured if one only looks at the aggregate population. Practical implications With caution, support agencies could foster WBOs of firms in difficulty and of non-profit organizations as viable forms of entrepreneurship. Originality/value The current study offers the first survival analysis distinguishing four modes of entry among WOFs.