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Are you experienced? Prior experience and the survival of new organizations

Michael Dahl and Toke Reichstein ()

No 05-01, DRUID Working Papers from DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies

Abstract: This paper investigates the relationship between the level of experience of managers and founders, and the likelihood of survival of their new firms. We take advantage of a comprehensive dataset covering the entire Danish labor market from 1980-2000. This is used to trace the activities of top ranked members of start-ups prior to their founding, and follow the fate of these firms. More specifically, we compare the survival of spin-offs from surviving parents, spin-offs from exiting parents, and other start-ups. Moreover, we investigate whether firms managed and founded by more experienced teams with higher levels of industry-specific experience are more likely to survive. Distinguishing between survivors and firms that have been acquired, we find that spin-offs from a surviving parent company combined with and industry-specific experience, positively affects the likelihood of survival. We also find that spin-offs from parent companies that exit are less likely to survive than either spin-offs from surviving parents or other start-ups. These findings support the theoretical arguments that organizational heritage is important for the survival of new organizations. We found no similar significant results when comparing exits with firms that have been acquired.

Keywords: Organizational routine; Industry-specific experience; Survival of new firms; Spin-offs (search for similar items in EconPapers)
JEL-codes: L25 L60 M13 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-bec, nep-ent and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Journal Article: Are You Experienced? Prior Experience and the Survival of New Organizations (2007) Downloads
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