Full Citation
Title: EMPLOYER SIZE AND SPINOUT DYNAMICS
Citation Type: Miscellaneous
Publication Year: 2019
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: Most new firms are founded by former employees of existing firms - spinouts. This paper studies the relationship between employer size and spinout entry, size and growth. Using micro-data from Mexico, we document a negative relationship between employer size and spinout entry. That is, employees from small firms are more likely to form spinouts than those from large firms. Second, we uncover a positive relationship between employer size and spinout size both at entry and over the lifecycle. Spinouts from large employers start at a larger scale and grow faster than spinouts from small employers. Although a qualitatively similar relationship is observed in data from the U.S., there are large quantitative differences in the levels of spinout formation. To understand the impact of these differences on aggregate outcomes, we build a model of occupational choice and firm dynamics in which workers can learn from and adopt the productivity of their employers to form their own firms. In this framework, differences in the rates of spinout formation between Mexico and the U.S. are driven by differences in the efficiency with which employees learn from their employers. We interpret this efficiency as representing a form of managerial quality. The model, calibrated to match spinout entry rates across the two countries, can account for 13 and 19% of the cross-country variation in output per worker and firm growth respectively. These findings highlight the relevance of spinouts for aggregate outcomes, and the potential for managerial quality to not only impact incumbent firms but also future entrants.
Url: https://cpb-us-w2.wpmucdn.com/sites.wustl.edu/dist/d/1097/files/2017/11/SpinoutDynamics-pdip9z.pdf
User Submitted?: No
Authors: Sohail, Faisal
Publisher: Washington University in St. Louis
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure, Other
Countries: