Fewer and Less Skilled? Human Capital, Competition, and Entrepreneurial Success in Manufacturing

81 Pages Posted: 3 Jan 2018

See all articles by Meghana Ayyagari

Meghana Ayyagari

University of Maryland - Robert H. Smith School of Business; George Washington University - School of Business

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Date Written: December 26, 2017

Abstract

We use micro data on skills to analyze the human capital of entrepreneurial and incumbent plants in U.S. manufacturing over 2005-2013. We find a large drop in cognitive skills in entrepreneurial plants. This has long-term implications since initial cognitive skills at the plant level predict future skills and growth rates. The gap between entrant and incumbent skills increases with exposure to Chinese imports, with entrants' skills falling and those of incumbents increasing. Import competition explains between 17%-60% of the skill differential between entrants and incumbents. While high skilled incumbents grow faster than low skilled establishments in exposed industries, the evidence for entrants is weaker. Overall, we find that entrepreneurial firms and incumbents are acquiring different skill sets, leaving entrants more exposed to the risk of automation or offshoring.

Keywords: Entrepreneurship, Human Capital, Skills, Competitive Shock, Firm Entry

JEL Classification: F61, G39, J24, L25, L1, L26

Suggested Citation

Ayyagari, Meghana and Ayyagari, Meghana and Maksimovic, Vojislav, Fewer and Less Skilled? Human Capital, Competition, and Entrepreneurial Success in Manufacturing (December 26, 2017). Available at SSRN: https://ssrn.com/abstract=3093443 or http://dx.doi.org/10.2139/ssrn.3093443

Meghana Ayyagari

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Vojislav Maksimovic (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

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