This term was used in the past (mid 20th century) in situations where innovation (usually on the production) developed in the defense industry, originally considered unsuitable in other areas were used in other industries or even in other units of the same company.
In the wider context this term were also used for describing new solutions in sales, finance, or management. Other terms are used in the above situations: fall-out and spill-over.
Despite the fact that the use of the term spin-off in the business changed significantly so far, nowadays it describe the action of extracting the selected units from the organizational structure of the company and create on its basis new economic entity with specified level of autonomy. Unit created in this way, may attract external investors, and provide services for native companies but it can also look for other customers. This can be used as one of the stages of the outsourcing, if outsourcing is considered as the restructuring method. In terms of capital outsourcing as a form of cooperation it can be considered as a spin-off solution.
Effects of application
Most important effects of spin-off are presented in following table. These effects have been grouped according to their characteristics: strategic, operational and financial. They also show the essential conditions of cooperation between the parent company and the newly created business unit, which becomes a contractor.
In addition it should be added that such a solution is often used, in reducing the scale of activity in adverse conditions.
Table 1. Main effects associated with the use of spin-off
|Strategic effects||Effects in operating activities||Financial effects|
- Trebilcock C. (1969), "Spin-Off” in British Economic History: Armaments and Industry, 1760-1914, "The Economic History Review", No. 22: 474–490. doi: 10.1111/j.1468-0289.1969.tb00184.x
- Reiner P. Torres A., Is it time to spin-off?, "The McKinsey Quarterly", No. 1, 2002