Survival Advantage of Worker Buyouts over Newly Created Worker-Owned Firms

Survival Advantage of Worker Buyouts over Newly Created  Worker-Owned Firms
Thibault Mirabel

Best PhD Paper Award 2021 / ESCP-8EMES-2- Mirabel 2021


In France, the share of firm owners aged 50 or older has steadily increased during
the last decades (from 42% in 1982 to 46% in 2012). In 2019, almost half of the firms employing at least 10 employees are owned by baby boomers aged 50 or older (Charond et al., 2021). These firms will either change owners or disappear in the near future.

This so-called “silver tsunami” that is common across western developed countries offers a window of opportunity for employee ownership that will not be seen again for many decades. Moreover, the current economic crisis due to the Covid-19 pandemic has dramatically increased the number of “zombie firms,” i.e., firms that should have exited during the year but are kept alive by safeguard measures implemented by states. In France, the number of firm failures was 29% lower in 2020 than in 2019 for small businesses (Cros et al., 2020). When those state protections cease, the number of firms to be bought out must increase.

The worker-owned firm movement could benefit from this twofold increase in demand of firm buyouts. Worker-owned firms are small business enterprises (e.g., the biggest French worker-owned firm counts 963 worker-members in 2019) representing a minute proportion of firms in any country (e.g., 1 for 10,000 in France). In the case of buyouts, worker-owned firms have the advantage over conventional firms of ensuring to the entrepreneur-seller of the firm that the firm’s legacy and activity will continue and to the worker-members that their job will be secured. Even if various theories have put into question the viability of worker-owned firms, empirical evidence accumulated in the last decades shows that worker-owned firms are viable entrepreneurial forms that present high survival rates. A better understanding of the survival of worker-owned firms, distinguishing those that are newly created and those that are converted, would bring valuable insights on the role that worker-owned firms could play in the next years and decades.

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