Firm spin-offs in Denmark 1981-2000 - patterns of entry and exit

This paper adds large sample evidence on the extent to which the likelihood of business failure or success is related to relationships between parent firms and their 'off-spring'. For this purpose we make use of an exhaustive matched employer-employee data set covering the entire Danish private sector in years 1981 to 2000 to study firm entry and exit. Special focus is on spin-offs, a particular group of small entrants, which are founded by groups of persons originating from the same former workplace. We estimate a multinomial logit model in order to examine which characteristics of the founders and the parent firms increase the probability of spinning off. Next, we carry out a duration analysis of the subsequent transitions of the spin-offs, and compare their exit risks with those of other entrant firms, which have less strong parent-progeny relationships in terms of worker flows.