Turnover Events, Vicarious Information, and the Reduced Likelihood of Outlet-Level Exit Among Small Multiunit Organizations

Posted: 9 Nov 2009

See all articles by Arturs Kalnins

Arturs Kalnins

Cornell University - School of Hotel Administration

Anand Swaminathan

Emory University

Date Written: 2006

Abstract

Develops and tests a theory about market-levelturnover events, focusing on ownership transfers and outlet exits and entrieswithin the same industry and market. The authors argue that market-levelturnover events create and release "vicarious" information that smallorganizations may use to increase the chances of survival. The focus of the study is on the survival and exit of non-franchised outletsin three industries in Texas between 1991 and 1999, using data provided by theState Comptroller’s Office for (1) drug stores, (2) pizza restaurants, and (3)video rental outlets. These particular industries were chosen for theirextensive turnover, including many entries, exits, and ownership transfers.Using an event history analysis, three hypotheses were tested: (1) the effectsof ownership transfers on the likelihood of exit; (2) ownership transfers withand without changes of business name; and (3) exit-entry pairs within amarket. The findings suggest that outlets of multiunit owners are less likely toexit if ownership transfers or contemporaneous exits and entries happen in theproximity of other outlets in different markets operated by the same multiunitowner. The theory developed stipulates that vicarious information is the causalmechanism that determines the above relationship. Both the theory and theresults point to innovative ways of combining a theory of relationships betweenturnover events in different geographies. (CBS)

Keywords: Drug stores, Vicarious learning, Sale of a business, Market exit, Market entry, Closing firms, Environmental scanning, Firm location, Firm survival, Firm turnover, Geography, Geography, Hospitality industry, Knowledge transfer, Organizational learning, Restaurant industry

Suggested Citation

Kalnins, Arturs and Swaminathan, Anand, Turnover Events, Vicarious Information, and the Reduced Likelihood of Outlet-Level Exit Among Small Multiunit Organizations (2006). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1502550

Arturs Kalnins (Contact Author)

Cornell University - School of Hotel Administration ( email )

545D Statler Hall
Ithaca, NY 14853-6902
United States

Anand Swaminathan

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

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