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Table 2. Interpreting worker flows Firm condition
Worker condition Possible interpretation
Predecessor category 1
F1 True : Firm exit
W1 True : 80 of workers go to successor
ID change or mergeracquisition 2
F1 True : Firm exit
W1 False : 80 of workers go to successor
Spinoffbreakout or reason unclear 3
F1 False : Firm continues
W1 True : 80 of workers go to successor
ID change or mergeracquisition 4
F1 False : Firm continues
W1 False : 80 of workers go to successor
Spinoffbreakout or reason unclear Successor category
1 F2 True
: Firm entry W2 True
: 80 of workers come from predecessor ID change or spinoffbreakout
2 F2 True
: Firm entry W2 False
: 80 of workers come from predecessor Mergeracquisition or reason unclear
3 F2 False
: Firm continues W2 True
: 80 of workers come from predecessor ID change or spinoffbreakout
4 F2 False
: Firm continues W2 False
: 80 of workers come from predecessor Mergeracquisition or reason unclear
1. The original administrative entity shut down. 2. More than 80 of the workers in the predecessor firm
moved to the successor firm. 3. The successor firm was a new entrant.
4. More than 80 of the workers in the successor firm came from the predecessor firm.
This sequence of events strongly suggests that the factors of production in the two firms are virtually the same, and that the
flows are the result of either an unlinked administrative edit or a change in ownership. The evidence is less strong for the 1, 3
category, where the successor firm was already in existence, but this is included because of the timing issue noted by Pivetz et al.
2001, and also because it is possible that the few employees in the successor firm before the event form part of a shell cor-
poration United States Department of Labor, Employment and Training Administration 2002. It is, of course, possible to in-
vent alternative scenarios, such as in the 1, 3 cell, whereby a startup firm is able to woo and attract large numbers of work-
ers from another firm. Similar arguments can be made for the combination of events in the 3, 1 and 3, 3 categories.
Some of the combinations identified in Table 3 are consistent with the sequence of events that occur during a merger or acqui-
sition. The 1, 2 cell, for example, identifies a firm shutdown combined with the move of 80 of workers into a newly born
firm, where those workers represent 80 of the new firm’s workforce. The 1, 4 cell represents the same transition, al-
beit for a successor that is an existing firm. Similarly, the 3, 2 and 3, 4 cells identify a continuing firm that has 80 of its
workers transitioning to a newly born firm column 2 or a con- tinuing firm column 4 also suggesting that either a merger or
an acquisition took place.
The final task involves identifying insourcing and outsourc- ing relationships. Typically, these types of arrangements in-
volve peripheral firm functions, such as payroll or human re- sources, and thus are not likely to make up 80 of either
the predecessor or successor firm’s employment. Therefore, the best candidates for these types of transitions are likely to be
found in the “reason unclear” cells. In each of these cells, a sub- stantial cluster of workers at least 5, but 80, move from the
predecessor to the successor firm and account for 80 of the
Table 3. Successorpredecessor flow and firm birthdeath combinations
Link description Successor category