Abstract
We analyze the recruitment strategies and the survival of newly created establishments that are affiliated with pre-established _rms. For the new establishments, the existence of ports of entry as well as the importance of internal and external recruitment is assessed. Being affiliated with a pre-established firm may be a source of competitive advantage and improve the new plant’s chances of survival as the parent firm may supply the newly created unit with expertise and firm-specific knowledge. In this research we suggest a channel for knowledge transfer that has been little addressed in previous literature: within firm and across establishments mobility of workers. As firm-specific knowledge is mainly embodied and non-tradable, we suggest that it can be successfully transferred to the new unit embodied in the workers that are internally recruited. We find that internally transferred workers, particularly skilled workers hired at high-rank jobs play an important role in improving the survival of new establishments.
Highlights
The determinants of new plants survival has been the subject of extensive previous research
Our findings show that external hires seem to prevail for occupations that are closer to the bottom of the hierarchy, which sustains the existence of ports of entry, while internal hires prevail at the top
A central issue in entries by pre-established firms is that the parent firm can supply expertise in management and operational knowledge which may aid the new plant developing a successful entry strategy
Summary
The determinants of new plants survival has been the subject of extensive previous research. While some previous research takes for granted that the affiliation to an existing firm brings increased and easier access to knowledge, in this paper we extend the study of the channels by which the parent firm (or other units in the same group) can transfer knowledge to the newly opened branch. The second objective of this paper is to asses if internal hires, specially at higher hierarchical levels, affect the survival of new establishments. This is an indirect way to test if intra-firm mobility is motivated by the need to transfer firm-specific knowledge to the new unit. Our main hypothesis is that the share of internal hires positively affects survival because it works as a channel for knowledge transfer.
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