The Effect of Top-Employee Migration and Spin-Offs on Incumbent Firms

“Don’t leave me this way!” Drivers of parental hostility and employee spin-offs’ performance

“…These endowments at birth are known to have long-term effects for spin-offs' development and performance (Agarwal et al 2004;Ganco and Agarwal 2009;Klepper 2015). On the other hand, this transfer can take place also after the spin-off's foundation, when the spin-off can, for example, exploit parents' customer and supplier networks (Gjerløv-Juel and Dahl 2012;Phillips 2002;Hallen 2008), or benefit from parents' technological, managerial and financial support (e.g., Moncada et al 1999;Parhankangas and Arenius 2003;Semadeni and Cannella 2011;Tübke 2004;Zahra and George 1999). However, the extent to which employee spin-offs can access and exploit these resources depends on their parents' goodwill (e.g., Furlan and Grandinetti 2016;Garvin 1983;Hellmann 2007;Parhankangas and Arenius 2003;Semadeni and Cannella 2011), and not all parent organizations are equally supportive.…”

“…When a spin-off hires employees from its parent, that parent firm's competitive advantage is reduced, as it loses not only the tacit knowledge embedded in each employee, but also the concomitant resources such as personal relationships with customers, suppliers, and complementors (Agarwal et al 2016;Corredoira and Rosenkopf 2010;Wezel et al 2006). This loss in turn disturbs a parent's organizational routines (e.g., hiring and training new employees) and decreases its viability (e.g., taking away key customers) (Colombo et al 2017;Gjerløv-Juel and Dahl 2012;Klepper 2007Klepper , 2009McKendrick et al 2009;Phillips 2002). Moreover, the more employees of its parent a spin-off hires, the more technological and complementary knowledge and resources it can incorporate, and the greater the competitive threat it poses to the parent (Agarwal et al 2016;Campbell et al 2014;Wezel et al 2006).…”

It's all about Timing: Age–Dependent Consequences of Founder Exits and New Member Additions

“…Although our study is based on a comprehensive data set, we do not have in-depth information on the entrepreneurs themselves or the reasons for their exit. Consequently, according to the "sinking ship hypothesis" (see Gjerløv-Juel & Dahl, 2012, for example), we might actually observe founders leaving the venture because of anticipated or actual poor performance, instead of their departure being the source of this performance decline. Even though recent research shows that the exit decision of founders is often not induced by firm performance (for instance, McGrath [2006] shows that only 25% of exits are caused by poor performance) and that founders also exit when business is running well (Wennberg et al, 2010), we used 14 ENTREPRENEURSHIP THEORY and PRACTICE a two-step approach to rule out the possibility of the "sinking ship hypothesis."…”