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The Who, Why and How of Spinoffs

Forthcoming in Industrial and Corporate Change

37 Pages Posted: 22 Jun 2012 Last revised: 26 Apr 2013

Michael S. Dahl

University of Aarhus - School of Business and Social Sciences

Olav Sorenson

Yale School of Management

Date Written: January 14, 2013

Abstract

Studies have consistently found that entrepreneurs who enter industries in which they have prior experience as employees perform better than others. We nevertheless know relatively little about what accounts for these differences. The presumed explanation has generally been that these entrepreneurs benefit from the knowledge that they gained in their former jobs. But they might also differ from other entrepreneurs on a variety of other dimensions: Preferential access to resources or differing motivations, for example, may account for their decisions to enter known industries instead of new ones. Combining novel data from a representative survey of entrepreneurs in Denmark with a matched employer-employee database of all residents in Denmark, we examined how entrepreneurs with prior industry experience differed from those without and the extent to which these differences could account for the performance premium associated with prior industry experience. We found that those with industry experience came from younger, smaller and more profitable firms, and that they recruited more experienced employees, worked harder and placed less value on having flexible hours. The recruitment of more experienced employees and the greater effort exerted appeared to account for at least some of the performance advantage associated with prior industry experience.

Suggested Citation

Dahl, Michael S. and Sorenson, Olav, The Who, Why and How of Spinoffs (January 14, 2013). Forthcoming in Industrial and Corporate Change. Available at SSRN: https://ssrn.com/abstract=2089495 or http://dx.doi.org/10.2139/ssrn.2089495

Michael Dahl (Contact Author)

University of Aarhus - School of Business and Social Sciences ( email )

Department of Management
Bartholins Allé 10
Aarhus C, 8000
Denmark

Olav Sorenson

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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