Turnover events, vicarious information, and the reduced likelihood of outlet-level exit among small multiunit organizations

Abstract

A key question for organizational learning research is to identify opportunities and constraints for firms to gain useful information from the activities and performance of other firms. We argue that market-level turnover events generate and release vicarious information that small multiunit organizations can use to enhance their likelihood of survival. We focus on two specific turnover events, ownership transfers and contemporaneous exit-entry pairs (cases in which both outlet entry and outlet exit occur within the same market within the same time period), because these events are likely to generate and release information without altering the total number of outlets in a market. We find that the likelihood of a multiunit owner's outlet exit declines when there are many ownership transfers and exit-entry pairs in other markets where the owner also operates outlets. We conclude that these turnover events, even in just one market where a small multiunit organization is present, generate vicarious information substantial enough to increase the survival likelihood of all outlets of that multiunit organization. Our theory and supporting results show how organizational learning-based arguments can be combined with our knowledge of multiunit organizations to build a theory of relationships between geographically separated turnover events.