Go West Young Firm: The Value of Entrepreneurial Migration for Startups and Their Founders

42 Pages Posted: 23 May 2018 Last revised: 20 Jun 2018

Jorge Guzman

NBER; Columbia University - Columbia Business School

Date Written: May 8, 2018

Abstract

Location is important for firm performance. A new firm choosing a location must trade off the agglomeration benefits of a destination with the loss of local embeddedness from leaving home. I study this tradeoff for a large sample of growth-oriented startups born between 1988 and 2014. I estimate changes in the performance of migrants after migration using both a machine learning approach that accounts for the entrepreneurial quality of firms before moving, and panel data regressions that control for firm and age fixed-effects. The results show migrants improve their performance across a range of outcomes, especially those that move to Silicon Valley. The likelihood of selling the company increases by 4X after migration to Silicon Valley (from 1.4% to 7.1%), and migrants also have higher patenting, commercialization, venture capital financing, and sales. In spite of the important benefits of migration, many potential migrants do not move; a subsample analysis suggests this is due to high personal costs from leaving home that make migration personally unprofitable.

Keywords: entrepreneurship, location, strategy, silicon valley, agglomeration

JEL Classification: L20

Suggested Citation

Guzman, Jorge, Go West Young Firm: The Value of Entrepreneurial Migration for Startups and Their Founders (May 8, 2018). Columbia Business School Research Paper No. 18-49. Available at SSRN: https://ssrn.com/abstract=3175328 or http://dx.doi.org/10.2139/ssrn.3175328

Jorge Guzman (Contact Author)

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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