Spin-off Growth and Job Creation: Empirical Evidence on Denmark

Employment is often the primary motivation behind entrepreneurial and industrial policy. But, new firms are known to differ greatly in performance. Not everyone survives and fewer achieve high growth rates. It is established that spin-offs - firms founded by employees from incumbent firms in the same industry - outlive other entrants. Survival of new firms is a requisite for a long-term contribution to employment but, does this spell increased employment growth for spin-offs as well? Or does a trade-off between growth and survival exists, as it tends to be the case with older firms? Exploring a comprehensive dataset covering all entrants in the Danish economy from 1995 to 2004, this paper investigates how spin-off job creation differs from that of other entrants in terms of growth rates, variation and sustainability. We find that spin-offs are not only surviving longer, as the existing literature suggests, they also constitute a more homogeneous group, show increased stability in growth patterns and not least are they relatively more important for job creation in the economy.