Widening the Family Circle: Spin-offs in the Japanese Service Sector

We study a sample of 91 parent-subsidiary pairs in the Japanese service sector. Our analysis of performance in the decade following the subsidiary's listing indicates that the subsidiaries tend to exhibit stronger short-to-medium term growth than their parents. Profitability growth performance after 10 years is diversification-related; subsidiaries operating in the parent's industry tend to underperform the parent, while those operating in a different industry tend to outperform their parents. We suggest a unique organisational approach to ownership decisions and governance modes for corporate subsidaries-creating offspring with improved survival capabilities.