Innovation Outcomes : Spin-off Processes in Family Firms

Abstract: The purpose of this thesis was to analyse the relationship between being an employee of a family firm and transition to self-employment. It was ascertained empirically whether being employees of family firms have a positive influence on the phenomenon of spin-offs in Sweden. Using a data set of individuals as well as firms for the whole of Sweden, the thesis applied a logistic regression model to analyse the influence of family firms on spin-off processes. Specifically I examined how employees of firms as at 2007 transitioned to self-employment in 2008. I also examined the characteristics of employees who spin-off and the choice of industry of operation of spin-offs. Disagreements between owners of family firms and employees about the strategic focus of the business arise as a result of the long-term horizon of family firms, coupled with agency issues as well as organisational culture that encourages the direct involvement of owners of family firms in the routines. Employees who discover innovative and risky ideas are likely to exploit them outside the company due to the reluctance of the family firm to implement them, due to its long-term orientation. The paper established a nexus between family firms and spin-off processes. The results suggest that being an employee of a family firm has a positive and significant influence on the decision to transition to self-employment. The results also indicate that employees in relatively higher occupational categories are less likely to spin-off as compared to employees in relatively lower occupational classifications. In terms of the choice of industries of operation, it is found that spin-offs are less likely to be established in the same industry as their parent firms. Increasingly, spin-offs are carving their own images in their respective new industries. Last but not least, contrary to evidence that employees of smaller firms are more likely to spin-off, our results show otherwise.