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Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success

Author

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  • Rocha, Vera

    (Copenhagen Business School)

  • van Praag, Mirjam C.

    (Copenhagen Business School)

  • Folta, Timothy B.

    (University of Connecticut)

  • Carneiro, Anabela

    (University of Porto)

Abstract

The founder (team)'s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder's choice of the initial workforce's human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

Suggested Citation

  • Rocha, Vera & van Praag, Mirjam C. & Folta, Timothy B. & Carneiro, Anabela, 2016. "Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success," IZA Discussion Papers 9919, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9919
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Startups Most Likely to Succeed Have Technical Founders Who Quickly Hire Businesspeople
      by Martin Murmann in HBR Blog Network on 2017-11-06 19:05:00

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    Cited by:

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    2. Schlepphorst, Susanne & Kay, Rosemarie & Nielen, Sebastian, 2019. "The effect of migrants' resource endowments on business performance," Working Papers 03/19, Institut für Mittelstandsforschung (IfM) Bonn.
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    More about this item

    Keywords

    human capital; entrepreneurship; startups; firm performance;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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