Performance Of Spin-offs Research Articles

Value Creation Through Spin-Offs: A Review of the Empirical Evidence

This paper reviews the literature on the factors that influence the wealth effects associated with the announcements of corporate spin-offs. We use meta-analysis to summarize the findings of 26 event studies on spin-off announcements. We find a significantly positive average abnormal return of 3.02% during the event window. Returns are higher for larger spin-offs, for divestments that are tax or regulatory friendly and for spin-offs that lead to the divestiture of a non-related division. We also find that spin-offs that are later completed are associated with lower abnormal returns than non-completed spin-offs. In the second part of the paper we overview studies on the long-run stock price performance of spin-offs. Even though early studies find a long-run superior performance, this effect is no longer found in later studies that use more refined statistical tests.

The operational and stock performance of spinoffs and carveouts: Some evidence from Canada

The purpose of this paper is to examine the financial characteristics and the operating performance of Canadian domiciled parents, before and after a demerger, including an inspection of the financial profile of the divested subsidiaries subsequent to the spinoff or carveout. Additionally, the shareholder wealth impact on parents that demerge is studied including the share volume trading activity.

An empirical approach to the organisational determinants of spin-off creation in European universities

Given the importance in recent years of the phenomenon of academic entrepreneurship in European universities, knowledge about determinants and performance of this technology transfer mechanism may have important managerial and policy implications. Applying the resource-based view at universities, we have tested the influence of five bundles of resources and capabilities on spin-off activity rates as well as on the performance of new spin-offs in a sample of seven European universities. These five bundles are: technology transfer policies and strategies; human capital; stock of technology; resources and capabilities of technology transfer offices; and support measures for academic entrepreneurship. Our results show that excellence of human capital and the presence of university-based financial support measures are strongly associated with both spin-off activity and performance. Another interesting finding is related to the availability of university-based non-economic support measures (training, counselling, etc.), which have no influence on spin-off activity but are significantly associated with performance of new spin-offs. We also discuss some interesting relationships between explanatory variables.

Knowledge conversion capability and the performance of corporate and university spin-offs

Corporate and university spin-offs are often created to commercialize new technologies. Yet, it is not clear how these spin-offs transform their inventions into new products, goods and services that create value. In this article, we use the knowledge-based theory to argue that this transformation requires a conversion capability (KCC) that has three components: conceptualization and visioning of applications of that knowledge; configuration and design of potential products and other applications; and the embodiment and integration of knowledge into products. Using data from 91 corporate and 78 university spin-offs, we find that these two sets of firms differ in their emphasis on the three KCC components, benefit differentially from these three components in terms of their performance, and vary significantly in their performance.

Success of research-based spin-offs. State-of-the-art and guidelines for further research

The topic of this paper is research-based spin-offs from public organisations. The initial point is a discussion about the economic benefit of such companies. The paper investigates factors influencing the generation, development, and growth of research-based spin-offs built on scientific know-how or research results. An analysis of previous empirical studies allows the identification of three main groups of success factors, concerning the founder, the environment, and the later company itself. Based on Gartner’s framework of new venture creation—used as a structure-building tool and substitute of entrepreneurial theory—we give an overview of entrepreneurial success factors. We also identify inconsistencies and gaps in empirical evidence and guidelines for further research. Particular explanation seems to be necessary for incentives, ideas, and incubation environments, all having an impact on formation and performance of spin-offs.

Optimal Project Rejection and New Firm Start-ups

We study the decision of an established firm to commercialize innovations. An innovation can be exploited by the established firm as an internal venture, pursued by a new firm start-up as an external venture, or not commercialized at all. The limited commercialization capacity of the established firm in the short run results in an option value of waiting. In this setup, start-up firms emerge when the established firm is generating many innovations or is selective because the option value of waiting is high, or both. The model predicts that innovations commercialized through internal ventures are characterized by a higher fit with the internal resources of the established firm, a higher cannibalization of the established firm's existing businesses, and a lower profitability than innovations commercialized through external ventures. The model furthermore generates predictions on the relation between firm performance and spin-off performance.

Entrepreneurial orientation, technology transfer and spinoff performance of U.S. universities

This paper adopts a resource-based perspective to understand why some universities are more successful than others at generating technology-based spinoff companies. In this respect, we derive eight hypotheses that link attributes of resources and capabilities, institutional, financial, commercial and human capital, to university spinoff outcomes. Using panel data from 1980 to 2001, our econometric estimators reveal evidence of history dependence for successful technology transfer to occur although faculty quality, size and orientation of science and engineering funding and commercial capability were also found to be predictors of university spinoff activity. We conclude by drawing implications for policy makers and university heads.

The impact of network capabilities and entrepreneurial orientation on university spin-off performance

Drawing on a database of 149 university spin-offs, we investigated the impact of network capability (NC), defined as a firm's ability to develop and utilize inter-organizational relationships, and entrepreneurial orientation (EO) on organizational performance. Not only do the results suggest that a spin-off's performance is positively influenced by its NC, but the findings also indicate that a spin-off's EO fosters competitive advantages. Although no direct relationship is apparent between EO and sales growth, sales per employee, or profit attainment, moderated hierarchical regression analyses reveal that NC strengthens the relationship between EO and spin-off performance. In sum, our research shows that a spin-off's organizational propensities and processes that enhance innovation, constructive risk taking, and proactiveness in dealing with competitors per se do not enhance growth and secure long-term survival. However, we found that NC moderates the relationship between EO and organizational performance.

Demergers and the Hanson experience. Part two: Demerger tactics

Following the first demerger of one of its divisions in the United States in 1995, US Industries, the Hanson conglomerate used the experience of this successful spin-off in preparation for its much larger and complete break-up planned for 1996, into four companies: Hanson, Energy, Imperial Tobacco and Millennium Chemicals. Part Two of this article investigates legal ways of demerging in the UK, and considers aspects of the 1995 USI demerger, which already showed some of the legendary Hanson skill in the management of restructuring. In the run-up to the 1996 demerger, the article looks at all the strategic and management skills that Hanson brought to the demerger operation to strengthen the companies' exit from the conglomerate. These were certainly needed since, as Part One of this article showed, the conglomerate had many weaknesses, which had developed since the late 1980s and which had not gone unnoticed by the stock market. The tactics used by Hanson included an active disposals programme, the reallocation of net debt among the companies and bank funding for them, minimisation of capital gains and income tax, and redemption of part of the conglomerate's bond holdings, a poison pill, and reductions in dividend payouts. A sample of broker valuations, made in early 1996, is observed, where sum-of-the-parts valuations were used. These are compared to actual share trading performance between October 1996 and January 1997, and the divergence examined. Academic evidence on the share performance of spin-offs in the US is considered. Finally, the article examines whether Hanson's and its demerged companies' shares were justifiably over- or under-valued in the three months following the demerger and flotation.