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Ability matching and survival of start-ups


  • Müller, Bettina


In this paper, I analyse how the survival of new firms is affected by the average ability level in the founding team, the team size, team members' homogeneity with respect to ability, and team members' heterogeneity with respect to education. As a theoretical basis, I apply the O-ring theory (Kremer (1993)). Using a rich employer-employee data set on the whole population of Danish firms founded in 1998, I find that the average ability level in a team and the team size have positive effects on firm survival. Having a team at all is the most crucial factor for the probability of survival of young firms. The degree of homogeneity with respect to ability and the degree of heterogeneity with respect to educations have no effect on the survival probability.

Suggested Citation

  • Müller, Bettina, 2009. "Ability matching and survival of start-ups," ZEW Discussion Papers 09-041, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:09041

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    References listed on IDEAS

    1. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-245, September.
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    3. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
    4. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
    5. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-674, August.
    6. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    7. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    8. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
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    10. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    11. Beckman, Christine M. & Burton, M. Diane & O'Reilly, Charles, 2007. "Early teams: The impact of team demography on VC financing and going public," Journal of Business Venturing, Elsevier, vol. 22(2), pages 147-173, March.
    12. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-450, August.
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    More about this item


    Entrepreneurship; firm survival; O-ring theory; start-ups;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • 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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