Does mode of transfer matter for business performance? Transfers to employees versus transfers to outsiders

The way in which businesses are transferred does matter. This idea finds strong theoretical support from the theory of information and from the agency approach as applied to the issue of transferring small firms in which both ownership and management are typically transferred together. In this article, we compare two ways of transferring businesses: transfers to outsiders and transfers to employees. After identifying key advantages and disadvantages for each, we turn to a rich panel dataset on start-up and development conditions for new French businesses during the mid-2000s. Our results show that transfers to employees are more frequently long-lasting than transfers to outsiders. Our empirical investigation also shows that transfers to employees are less dynamic in terms of turnover growth than external transfers, but more dynamic in terms of job creation. We conclude the article by providing guidance on public action to promote business transfers.