Voltage build up in induction generator and its working principle
It is similar in theory, but in reality, design measures intended to minimize losses in the magnetic circuit result in reducing the residual magnetism in an induction motor to the point that an induction generator can not build up voltage from residual magnetism.

Induction motor designs are not compatible with connecting the stator winding in series with the rotor winding. In addition, wound rotor machines are very rare compared to squirrel-cage machines.

In reality, self-excited induction generators that are really useful and easy to operate have not been developed. Such machines have been demonstrated, but they generally need to be manually started and manually adjusted for load changes. The voltage tends to vary with load changes. There are people who have found them useful, but their usefulness is quite limited.


The Need For Capacitors
The rotating magnetic fields in an AC motor are the result of alternating current changing the polarity of electromagnets with every cycle of the waveform. That means that the magnetic energy of each magnetic pole must be removed from the electromagnet and replaced with the reverse polarity. That energy is transferred back to the power source and then returned to the motor with the opposite polarity. That means that the power source must have a complementary energy storage capacity, also known as capacitance. The continuous energy transfer is called reactive power.
Capacitors alone can serve that purpose, but the required capacitance varies with load and speed variations. Since starting the motor involves the speed increasing from zero to rated speed, starting is difficult. Starting also represents a big load variation. Other load variations, like switching individual loads on and off, also present a problem. The problems can be seen as voltage variations. It is also possible for an induction generator to loose its field and quit generating. If the generator is pushing power into grid that is capable of regulating the voltage under conditions of varying reactive power, most of the required power can be provided by capacitors at the induction generator location. Induction generators perform well under those conditions.