www.corporate-spin-offs.com/IRES Piedmont Study

Abburrà, L. et al.: "Quale Spin-Off? Riorganizzazioni aziendali, creazione d’imprese, nuovi imprenditori - Looking into Spin-Offs: Company reorganization, business creation, new entrepreneurs", Codex Development Agency, IRES Piedmont, Turin, 1998 (Italian and English version)

This study was undertaken in the framework of ADAPT, which is the European Community initiative on the adaptation of the workforce to industrial change. The authors present three elements that could constitute a Spin-Off definition at European level. These are:

the creation of a new organisation for economic activity based on an existing one,

the creation of a new core-business or source of activity, and

the setting-up of support measures by the parent company.

The authors state that from the point of view of public bodies, Corporate Spin-Offs are worth supporting because they help creating entrepreneurialism and promise the creation of employment. Potential parent companies might foster Spin-Offs supporting their downsizing/externalisation activities or to resolve a problem of succession.

Based on the above defnition, the situation of Corporate Spin-Offs in the region of Piedmont, the highly industrialised region around Turin in the north-west of Italy, is investigated. Through in-depth interviews, "representative" parent companies were questioned about reorganisational processes and their impacts. In addition to that, Spin-Off entrepreneurs were asked to describe the processe that led to the decision to spin-off. The authors do not comment of the size of the sample nor mention the names of the companies interviewed, but assure that the results are in a way representative for the situation in the region. Apparently there is few Spin-Off activity in the Piedmont industry, and the industrial culture in general does not favour Spin-Offs. The companies within the Piedmont are open to and have experience with Spin-Offs that are restructuring-driven and help avoid direct layoffs. However, the fear of losing know-how and qualified employees makes the companies very little appreciate and support entrepreneurial Spin-Offs. Compared to Northern European countries, the companies in the Piedmont seem much less inclined to support entrepreneurial Spin-Offs. The authors refer this to differences in culture and industrial structure. The entrepreneurs managing the Spin-Off had lengthy work-experience before undertaking the Spin-Off process. They used their mainly technical knowledge and their network of relations to set-up the new enterprise. Almost all of them had secondary or university education. The Spin-Offs were on the great majority vertical and the parent companies did not conside them as core-activities. The parent companies used to support the Spin-Offs through training or mid-term contractual agreements. There was almost no direct management support, neither an equity participation of the parent company. The lack of management and strategy formulation support was considered an obstacle by the Spin-Off entrepreneurs. All Spin-Offs included in the sample reported considerable growth since their foundation and said that they were entering a period of consolidation. Although capital was available at the start of the Spin-Off, problems with finding financing for expansion were reported. This may be due to the fact that the Italian equity financing sector is not as developed as in e.g. the UK.

The study mentions mechanisms that public institutions could use to support Corporate Spin-Offs, e.g. consulting services, financial support and relationship-networking services.

Further, the authors examine the example of Spin-Offs from co-operatives, which are a characteristic part of the Italian economy. Co-operatives are groups of small firms centered around large "parent" companies. The co-operatives employ staff to perform high-volume manual workloads. When needed, these seasonal workers are working for a "parent" at fixed commissions agreements. The parent supports the co-operative by lending machinery or providing management advice. On the other hand, the parent does not need to employ the seasonal workers directly and maybe longer than needed, gaining flexibility. It seems as if Spin-Off processes happen frquently in co-operatives when a new functional activity has to be started or when the co-operative has reached a size that prevents the efficient participation of the members of the co-operative in its management.