Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms

39 Pages Posted: 28 Jan 2013 Last revised: 29 Oct 2015

See all articles by Henry Sauermann

Henry Sauermann

ESMT European School of Management and Technology

Date Written: June 27, 2015

Abstract

Scholars have long sought to understand the advantages different types of firms may have in generating innovation. A popular notion is that startup companies are able to attract employees with “fire in the belly,” allowing them to be more productive. Yet research has paid little attention to the motives and incentives of startup employees. This paper compares startup employees’ pecuniary and non-pecuniary motives with those of employees working in small and large established firms and examines the extent to which existing differences in motives distinguish employees’ innovative performance. Using data on over 10,000 U.S. R&D employees, we find significant differences across firm types with respect to motives, although these differences are more nuanced than commonly thought. We also observe that startup employees have higher patent output, an effect that is associated primarily with firm age, not size. Moreover, we find evidence that differences in employee motives may indeed be an important factor distinguishing the innovative performance in startups versus established firms. Rather than intrinsic motives or the quest for money, however, it is employees’ willingness to bear risk that appears to play the most important role. We discuss implications for future research as well as for entrepreneurs, managers, and policy makers.

Keywords: startups, employee motives, innovation, organizational structure, sorting

JEL Classification: O3, O38, O31, O32

Suggested Citation

Sauermann, Henry, Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms (June 27, 2015). Available at SSRN: https://ssrn.com/abstract=2207715 or http://dx.doi.org/10.2139/ssrn.2207715

Henry Sauermann (Contact Author)

ESMT European School of Management and Technology ( email )

Schlossplatz 1
10117 Berlin
Germany

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