Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success

34 Pages Posted: 9 May 2016

See all articles by Vera Rocha

Vera Rocha

Copenhagen Business School

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Timothy B. Folta

Purdue University - Krannert School of Management

Anabela Jesus Moreira Carneiro

Universidade do Porto - Faculdade de Economia (FEP)

Abstract

The founder (team)'s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder's choice of the initial workforce's human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

Keywords: human capital, entrepreneurship, startups, firm performance

JEL Classification: J24, J25, L26, M13

Suggested Citation

Rocha, Vera and van Praag, Mirjam and Folta, Timothy B. and Carneiro, Anabela Jesus Moreira, Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success. IZA Discussion Paper No. 9919. Available at SSRN: https://ssrn.com/abstract=2776924

Vera Rocha (Contact Author)

Copenhagen Business School ( email )

Mirjam Van Praag

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Timothy B. Folta

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-9252 (Phone)

Anabela Jesus Moreira Carneiro

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Register to save articles to
your library

Register

Paper statistics

Downloads
44
Abstract Views
251
PlumX Metrics