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Taking the Leap: The Determinants of Entrepreneurs Hiring their First Employee

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  • Robert W. Fairlie
  • Javier Miranda

Abstract

Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of startups. Longitudinal data from the Integrated Longitudinal Business Database (iLBD), Kauffman Firm Survey (KFS), and the Growing America through Entrepreneurship (GATE) experiment are used to provide some of the first evidence in the literature on the determinants of taking the leap from a non-employer to employer firm among startups. Several interesting patterns emerge regarding the dynamics of non-employer startups hiring their first employee. Hiring rates among the universe of non-employer startups are very low, but increase when the population of non-employers is focused on more growth-oriented businesses such as incorporated and EIN businesses. If non-employer startups hire, the bulk of hiring occurs in the first few years of existence. After this point in time relatively few non-employer startups hire an employee. Focusing on more growth- and employment-oriented startups in the KFS, we find that Asian-owned and Hispanic-owned startups have higher rates of hiring their first employee than white-owned startups. Female-owned startups are roughly 10 percentage points less likely to hire their first employee by the first, second and seventh years after startup. The education level of the owner, however, is not found to be associated with the probability of hiring an employee. Among business characteristics, we find evidence that business assets and intellectual property are associated with hiring the first employee. Using data from the largest random experiment providing entrepreneurship training in the United States ever conducted, we do not find evidence that entrepreneurship training increases the likelihood that non-employers hire their first employee.

Suggested Citation

  • Robert W. Fairlie & Javier Miranda, 2016. "Taking the Leap: The Determinants of Entrepreneurs Hiring their First Employee," NBER Working Papers 22428, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22428
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    Cited by:

    1. Daniel Fackler & Michaela Fuchs & Lisa Hölscher & Claus Schnabel, 2019. "Do Start-ups Provide Employment Opportunities for Disadvantaged Workers?," ILR Review, Cornell University, ILR School, vol. 72(5), pages 1123-1148, October.
    2. Robert W. Fairlie & Javier Miranda, 2017. "Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(1), pages 3-34, February.
    3. Pietro Santoleri, 2020. "Innovation and job creation in (high-growth) new firms [An international cohort comparison of size effects on job growth]," Industrial and Corporate Change, Oxford University Press, vol. 29(3), pages 731-756.
    4. Bellmann, Lisa & Brixy, Udo, 2018. "Hiring by start-ups and regional labor supply," IAB-Discussion Paper 201818, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Sitnicki Maksym, 2018. "Exploration of the role of business schools in the development of world-class research universities," Technology audit and production reserves, 1(39) 2018, Socionet;Technology audit and production reserves, vol. 1(5(39)), pages 36-45.
    6. Åstebro, Thomas & Tåg, Joacim, 2017. "Gross, net, and new job creation by entrepreneurs," Journal of Business Venturing Insights, Elsevier, vol. 8(C), pages 64-70.
    7. Mats Hammarstedt & Chizheng Miao, 2020. "Self-employed immigrants and their employees: evidence from Swedish employer-employee data," Review of Economics of the Household, Springer, vol. 18(1), pages 35-68, March.
    8. J. David Brown & John S. Earle & Mee Jung Kim & Kyung Min Lee, 2017. "High-Growth Entrepreneurship," Working Papers 17-53, Center for Economic Studies, U.S. Census Bureau.
    9. Richard Fabling, 2018. "Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs," Working Papers 18_12, Motu Economic and Public Policy Research.
    10. Robert W. Fairlie & Javier Miranda & Nikolas Zolas, 2019. "Measuring Job Creation, Growth, and Survival among the Universe of Start-ups in the United States Using a Combined Start-up Panel Data Set," ILR Review, Cornell University, ILR School, vol. 72(5), pages 1262-1277, October.
    11. Michael J. Pisani & Joseph M. Guzman & Chad Richardson & Carlos Sepulveda & Lyonel Laulié, 2017. "“Small business enterprises and Latino entrepreneurship: An enclave or mainstream activity in South Texas?”," Journal of International Entrepreneurship, Springer, vol. 15(3), pages 295-323, September.
    12. Javier Miranda & Nikolas Zolas, 2017. "Measuring the Impact of Household Innovation Using Administrative Data," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 61-102, National Bureau of Economic Research, Inc.
    13. Kathryn L. Shaw & Anders Sørensen, 2017. "The Productivity Advantage of Serial Entrepreneurs," NBER Working Papers 23320, National Bureau of Economic Research, Inc.
    14. Kalenkoski, Charlene Marie & Pabilonia, Sabrina Wulff, 2021. "Impacts of COVID-19 on the Self-employed," GLO Discussion Paper Series 843, Global Labor Organization (GLO).
    15. Coad, Alexander & Domnick, Clemens & Flachenecker, Florian & Harasztosi, Peter & Janiri, Mario Lorenzo & Pál, Rozália & Teruel Carrizosa, Mercedes, 2021. "Do capacity constraints trigger high growth for enterprises?," EIB Working Papers 2021/08, European Investment Bank (EIB).
    16. Fossen, Frank M. & Sorgner, Alina, 2021. "Digitalization of work and entry into entrepreneurship," Journal of Business Research, Elsevier, vol. 125(C), pages 548-563.
    17. Sari Pekkala Kerr & William R. Kerr, 2021. "Whose Job Is It Anyway? Co-Ethnic Hiring in New U.S. Ventures," Working Papers 21-05, Center for Economic Studies, U.S. Census Bureau.
    18. Arnaldo Camuffo & Alessandro Cordova & Alfonso Gambardella & Chiara Spina, 2020. "A Scientific Approach to Entrepreneurial Decision Making: Evidence from a Randomized Control Trial," Management Science, INFORMS, vol. 66(2), pages 564-586, February.
    19. Patel, Pankaj C., 2019. "Minimum wage and transition of non-employer firms intending to hire employees into employer firms: State-level evidence from the US," Journal of Business Venturing Insights, Elsevier, vol. 12(C).
    20. Mark Granberg & Niklas Ottosson & Ali Ahmed, 2020. "Do ethnicity and sex of employers affect applicants’ job interest? An experimental exploration," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-10, December.
    21. Dvouletý, Ondřej, 2020. "Classifying self-employed persons using segmentation criteria available in the Labour Force Survey (LFS) data," Journal of Business Venturing Insights, Elsevier, vol. 14(C).
    22. Ken Clark & Stephen Drinkwater & Catherine Robinson, 2017. "Self-employment amongst migrant groups: new evidence from England and Wales," Small Business Economics, Springer, vol. 48(4), pages 1047-1069, April.
    23. Ergete Ferede, 2021. "Entrepreneurship and personal income tax: evidence from Canadian provinces," Small Business Economics, Springer, vol. 56(4), pages 1765-1781, April.
    24. Emma Neuman, 2021. "Performance and job creation among self-employed immigrants and natives in Sweden," Small Business Economics, Springer, vol. 56(1), pages 403-425, January.

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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