Leaving Employment to Entrepreneurship: The Value of Co‐Worker Mobility in Pushed and Pulled‐Driven Start‐Ups

Abstract

By combining insights from the widespread research on entrepreneurial spin‐offs and from the emerging literature on hiring choices in start‐ups, we investigate the role of co‐worker mobility in pushed and pulled spin‐off survival. Using rich register data and a multi‐stage model addressing self‐selection and endogeneity issues, we cover 28,353 spin‐offs launched between 1992 and 2007. We find that spin‐offs hiring co‐workers from the parent firm survive longer. This survival bonus is greater in pushed‐driven start‐ups. We investigate two different mechanisms through which co‐worker mobility may improve spin‐off survival – knowledge transfer and reduced searching costs. While both mechanisms play a role in explaining the survival bonus in pulled spin‐offs, co‐worker mobility seems to help pushed spin‐offs to survive mostly by reducing initial recruitment costs. This work provides novel insights on the role of context surrounding new venture creation and inter‐firm labour mobility.

Keywords: co‐worker mobility, entrepreneurship, new venture survival, pushed and pulled spin‐offs, strategic human capital