Where Do Spin-Offs Come From?

Although previous research shows that spin-offs are among the most successful firms in an industry, outperforming de novo entrants, few studies consider the heterogeneity of corporate spin-offs in relation to firm performance or survival. Against this backdrop, the objective of the present chapter is twofold. First, this study aims to add to our knowledge on the relationship between spin-off type and firm survival using a comprehensive matched employer-employee dataset from Portugal. After controlling for their different start-up conditions—namely regarding initial hiring schemes, business-owners’ characteristics, and the industrial and geographical relatedness to the parent firm—and a set of firm, industry, and macroeconomic characteristics, we found no significant survival differences between opportunity and necessity spin-offs. Second, based on the findings, we suggest that necessity spin-offs have not received the attention they deserve. Not only do necessity spin-offs perform an important role in the dynamics of competitive markets, by offering a possible solution for recently displaced individuals, but they also create new jobs and help to prevent the depreciation of workers’ human capital.