Home Sweet Home: Entrepreneurs’ Location Choices and the Performance of Their Ventures

Management Science, 58(6) 1059-1071

Posted: 29 Apr 2010 Last revised: 23 Jun 2012

See all articles by Michael S. Dahl

Michael S. Dahl

Aarhus University - School of Business and Social Sciences

Olav Sorenson

Yale School of Management

Date Written: 2012

Abstract

Entrepreneurs, even more than employees, tend to locate in regions in which they have deep roots (‘home’ regions). Here, we examine the performance implications of these choices. Whereas one might expect entrepreneurs to perform better in these regions because of their richer endowments of regionally-embedded social capital, they might also perform worse if their location choices rather reflect a preference for spending time with family and friends. We examine this question using comprehensive data on Danish startups. Ventures perform better – survive longer and generate greater annual profits and cash flows – when located in regions in which their founders have lived longer. This effect appears substantial, similar in size to the value of prior experience in the industry (i.e. to being a spinoff).

Keywords: Entrepreneurship, Performance, Location Choice, Social Capital, Human Capital

JEL Classification: M13, O18, J61, J62, J23

Suggested Citation

Dahl, Michael Slavensky and Sorenson, Olav, Home Sweet Home: Entrepreneurs’ Location Choices and the Performance of Their Ventures (2012). Management Science, 58(6) 1059-1071. Available at SSRN: https://ssrn.com/abstract=1596810

Michael Slavensky Dahl (Contact Author)

Aarhus University - School of Business and Social Sciences ( email )

Department of Management
Bartholins Allé 10
Aarhus C, 8000
Denmark

Olav Sorenson

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,496
PlumX Metrics