As the baby is born, the head may be forced one direction and the arm the other direction. This can stretch the brachial plexus to the point of injury to these nerves. When the nerves are injured, the baby will not move the arm normally. The typical position of an arm in a baby with Erb's palsy is to hold the elbow straight, and the hand clenched. The exact position depends on which nerves of the brachial plexus were injured.
Fortunately, most cases of Erb's palsy involve the nerves being stretched too far (not torn or detached), and will therefore heal spontaneously with time. It is important that parents stretch their baby's joints to prevent problems while the nerves are not working properly. If the problem is not improving within about 3 to 6 months, surgery may be recommended to determine if there is a tear in the nerves that needs to be repaired.
Sources:
"Erb's Palsy (Brachial Plexus Birth Injury)" American Academy of Orthopaedic Surgeons. October 2007.

