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Derek Holloman

DBA Graduate - 2008

Thesis title

Corporate Spin-Offs: Examining the Effects on the Entrenpreneurial Orientation Extraction-Financial Performance Relationship

Supervisor(s)

Sylvie Blanco
This research examines the process by which a corporate parent company spins off its subsidiary, as well as the level of corporate entrepreneurship extracted from the strategic management of the parent company and the performance of the corporate spinoff during the post-separation phase. Some existing literature considers the value creation of spinoffs from the parent company’s perspective and predictors of their financial performance, but little attention has addressed the potential positive impact of corporate entrepreneurship on the financial performance of the spinoff. This gap raises questions about portion of a spinoff’s financial performance correlates with the parent company’s level of corporate entrepreneurship. As projects or business units of diversified firms, spinoffs previously were under the influence of their corporate parents, but when a spinoff becomes completely independent, it can adjust its strategic profiles to compete with its industry peers. The likelihood of the spinoff’s financial success increases when it can match its own strengths and weaknesses with industry opportunity and threats. Agency theory suggests that a spin-off event provides substantial motivation for the spinoff’s top management to take strategic action, because of the better market performance incentives after the separation. However, a spinoff’s positive market performance is predicated on the alignment of shareholder and managerial interests, and top management may be influenced to take proper strategic action by the pressure of scrutiny by shareholders, investors, analysts, and boards of directors.