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Mobilizing Social Capital Through Employee Spinoffs

  • Marc-Andreas Muendler
  • James E. Rauch

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18459.

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Date of creation: Oct 2012
Date of revision:
Handle: RePEc:nbr:nberwo:18459
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  1. April Mitchell Franco & Darren Filson, 2000. "Knowledge Diffusion through Employee Mobility," Claremont Colleges Working Papers 2000-61, Claremont Colleges.
  2. 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.
  3. Menezes Filho, N. A. & Menezes Filho, N. A., 2007. "The Structure of Worker Compensation in Brazil, With a Comparison to France and the United States," Insper Working Papers wpe_78, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  4. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
  5. John M. Abowd & Francis Kramarz & David Margolis & Kenneth R. Troske, 1996. "The Relative Importance of Employer and Employee Effects on Compensation: A Comparison of France and the United States," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00378212, HAL.
  6. 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.
  7. Lazear, Edward, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," IZA Discussion Papers 813, Institute for the Study of Labor (IZA).
  8. Filho, Naerico Aquino Menezes & Muendler, Marc-Andreas & Ramey, Garey, 2006. "The Structure of Worker Compensation in Brazil, With a Comparison to France and the United States," University of California at San Diego, Economics Working Paper Series qt8pr105rg, Department of Economics, UC San Diego.
  9. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
  10. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  11. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  13. repec:rje:randje:v:37:y:2006:i:4:p:841-860 is not listed on IDEAS
  14. Edward P. Lazear, 2003. "Firm-Specific Human Capital: A Skill-Weights Approach," NBER Working Papers 9679, National Bureau of Economic Research, Inc.
  15. 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.
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