Turnover Events, Vicarious Information, and the Reduced Likelihood of Outlet-Level Exit Among Small Multiunit Organizations
Posted: 9 Nov 2009
Date Written: 2006
Abstract
Develops and tests a theory about market-levelturnover events, focusing on ownership transfers and outlet exits and entrieswithin the same industry and market. The authors argue that market-levelturnover events create and release "vicarious" information that smallorganizations may use to increase the chances of survival. The focus of the study is on the survival and exit of non-franchised outletsin three industries in Texas between 1991 and 1999, using data provided by theState Comptroller’s Office for (1) drug stores, (2) pizza restaurants, and (3)video rental outlets. These particular industries were chosen for theirextensive turnover, including many entries, exits, and ownership transfers.Using an event history analysis, three hypotheses were tested: (1) the effectsof ownership transfers on the likelihood of exit; (2) ownership transfers withand without changes of business name; and (3) exit-entry pairs within amarket. The findings suggest that outlets of multiunit owners are less likely toexit if ownership transfers or contemporaneous exits and entries happen in theproximity of other outlets in different markets operated by the same multiunitowner. The theory developed stipulates that vicarious information is the causalmechanism that determines the above relationship. Both the theory and theresults point to innovative ways of combining a theory of relationships betweenturnover events in different geographies. (CBS)
Keywords: Drug stores, Vicarious learning, Sale of a business, Market exit, Market entry, Closing firms, Environmental scanning, Firm location, Firm survival, Firm turnover, Geography, Geography, Hospitality industry, Knowledge transfer, Organizational learning, Restaurant industry
Suggested Citation: Suggested Citation