Employee spinouts, social networks, and family firms

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Recently collected data show that, within any manufacturing industry, vertically integrated firms tend to have larger, higher productivity plants, account for the bulk of sales, and also sell externally most of the inputs they produce. In a weak contracting environment characteristic of developing countries, vertically integrated firms are vulnerable to employee "spinouts": managers of input divisions can start their own firms, making customized inputs formerly provided internally subject to hold-up and capturing the profits formerly made from external sales of generic inputs. This vulnerability is shown to lead to inefficiently low entry. Vertically integrated firms can fight back by hiring managers for their input divisions who are members of networks that informally sanction hold-ups or children who keep profits "in the family" even if they spin out. This is shown to predict the association of co-ethnic networks with high rates of entrepreneurship and the prominence of family-owned business groups in developing country manufacturing. Terms of use: Documents inJEL-Code: L140, L220, L260.

Reviewing the employee spinout literature: A cross‐disciplinary approach

“…Moreover, informal or normative institutions like loyalty may influence an employee's decision to become an entrepreneur. For example, Rauch (2014) On another track, industry and geographic studies are starting to accumulate and may be reaching the point where meta-analysis could be useful for teasing out conflicting findings about spinout creation and performance. In particular, the accumulation of industry studies may allow for meta-analyses that control for industry effects, or where industry factors such as dynamism, complexity, and munificence can be moderators.…”

“…Moreover, informal or normative institutions like loyalty may influence an employee's decision to become an entrepreneur. For example, Rauch (2014) observes that firms in developing countries with weak legal tools hire family members to prevent spinouts and keep the firm's value inside the family. It would be interesting to see what institutions moderate the relationship of spinouts with cluster formation and growth.…”