Human Capital of Spinouts

27 Pages Posted: 6 Mar 2015

See all articles by Natarajan Balasubramanian

Natarajan Balasubramanian

Syracuse University - Whitman School of Management

Mariko Sakakibara

University of California, Los Angeles (UCLA) - Policy Area

Date Written: January 01, 2015

Abstract

This study examines how the human capital of spinout founders and the performance of parent firms affect the success of spinouts by using a matched employer-employee dataset of new ventures covering 7 SIC 1-digit sectors in the United States. Our data cover 29,100 spinouts and 379,800 new ventures formed by lone entrepreneurs in 23 states between 1992 and 2005. We evaluate several components of human capital: outcomes of human capital investments vs. human capital investments, task-related human capital vs. non-task-related human capital, and individual human capital vs. group capital, and examine whether these types of human capital affect spinout performance differently. We find that spinout founder’s earnings (an outcome of human capital investment) and industry experience (task-related human capital) prior to spinout formation have strong positive correlations with spinout performance, as measured by size, wage and growth rate. We also find that group experience of spinout founders prior to spinout formation has a positive correlation with spinout performance, though this effect is slightly weaker and smaller than those of spinout founder’s earnings and industry experience. The effects of these three measures of human capital are mostly present after controlling for parent firm establishment fixed effects. We find some evidence that the size of parent firm establishments has a positive correlation with spinout performance, but this effect does not hold after controlling for parent firm fixed effects. Finally, we find that founder’s earnings, industry experience, group experience and parent firm size are more important during the early stage of spinout formation.

Suggested Citation

Balasubramanian, Natarajan and Sakakibara, Mariko, Human Capital of Spinouts (January 01, 2015). US Census Bureau Center for Economic Studies Paper No. CES-WP- 15-06, Available at SSRN: https://ssrn.com/abstract=2573756 or http://dx.doi.org/10.2139/ssrn.2573756

Natarajan Balasubramanian (Contact Author)

Syracuse University - Whitman School of Management ( email )

United States

Mariko Sakakibara

University of California, Los Angeles (UCLA) - Policy Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States
310-825-7831 (Phone)
310-206-3337 (Fax)

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