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Mobilizing Social Capital Through Employee Spinoffs

Author

Listed:
  • Marc-Andreas Muendler
  • James E. Rauch

Abstract

Many founding teams of new firms form at a common employer. We model team formation and the entry of employee spinoffs by extending the Jovanovic (1979) theory of job matching and employer learning. In our social-capital model employees learn about their colleagues' characteristics at a faster rate than the employer and recruit suitable colleagues to join the spinoff firm. For spinoff firms, our model predicts that the separation hazard is lower among founding team members than among workers hired from outside at founding, and that this difference shrinks with worker tenure at the firm. For parent firms, our model predicts that a worker's departure hazard to join a spinoff initially increases with worker tenure at the parent, whereas the separation hazard for conventional quits and layoffs decreases with worker tenure as in Jovanovic (1979). All these predictions are clearly supported in Brazilian data for the period 1995-2001. Calibration of our dynamic model indicates that employee spinoffs raise the share of workers in Brazil's private sector known to be of high match quality by 3.2 percent.

Suggested Citation

  • Marc-Andreas Muendler & James E. Rauch, 2012. "Mobilizing Social Capital Through Employee Spinoffs," NBER Working Papers 18459, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18459
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    References listed on IDEAS

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    1. Naércio Aquino Menezes-Filho & Marc-Andreas Muendler & Garey Ramey, 2008. "The Structure of Worker Compensation in Brazil, with a Comparison to France and the United States," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 324-346, May.
    2. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
    3. Abowd, John M. & Kramarz, Francis & Margolis, David N. & Troske, Kenneth R., 2001. "The Relative Importance of Employer and Employee Effects on Compensation: A Comparison of France and the United States," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 419-436, December.
    4. Eriksson, Tor & Moritz Kuhn, Johan, 2006. "Firm spin-offs in Denmark 1981-2000 -- patterns of entry and exit," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 1021-1040, September.
    5. Lazear, Edward, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," IZA Discussion Papers 813, Institute for the Study of Labor (IZA).
    6. Edward P. Lazear, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," NBER Working Papers 9679, National Bureau of Economic Research, Inc.
    7. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2008. "Social capital in the workplace: Evidence on its formation and consequences," Labour Economics, Elsevier, vol. 15(4), pages 724-748, August.
    8. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    9. April Mitchell Franco & Darren Filson, 2000. "Knowledge Diffusion through Employee Mobility," Claremont Colleges Working Papers 2000-61, Claremont Colleges.
    10. April Mitchell Franco & Darren Filson, 2006. "Spin‐outs: knowledge diffusion through employee mobility," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 841-860, December.
    11. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    12. repec:rje:randje:v:37:y:2006:i:4:p:841-860 is not listed on IDEAS
    13. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    14. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, March.
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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