Founding Teams and Startup Performance

53 Pages Posted: 14 Nov 2019

See all articles by Joonkyu Choi

Joonkyu Choi

Board of Governors of the Federal Reserve System

Nathan Goldschlag

Center for Economic Studies, U.S. Census Bureau

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

J. Daniel Kim

The Wharton School

Multiple version iconThere are 2 versions of this paper

Date Written: November 6, 2019

Abstract

We explore the role of founding teams in accounting for the post-entry dynamics of startups. While the entrepreneurship literature has largely focused on business founders, we broaden this view by considering founding teams, which include both the founders and the initial employees in the first year of operations. We investigate the idea that the success of a startup may derive from the organizational capital that is created at firm formation and is inalienable from the founding team itself. To test this hypothesis, we exploit premature deaths to identify the causal impact of losing a founding team member on startup performance. We find that the exogenous separation of a founding team member due to premature death has a persistently large, negative, and statistically significant impact on post-entry size, survival, and productivity of startups. While we find that the loss of a key founding team member (e.g. founders) has an especially large adverse effect, the loss of a non-key founding team member still has a significant adverse effect, lending support to our inclusive definition of founding teams. Furthermore, we find that the effects are particularly strong for small founding teams but are not driven by activity in small business-intensive or High Tech industries.

Keywords: Entrepreneurs; Post-Entry Growth; Founding Teams

JEL Classification: L26, M13

Suggested Citation

Choi, Joonkyu and Goldschlag, Nathan and Haltiwanger, John C. and Kim, J. Daniel, Founding Teams and Startup Performance (November 6, 2019). Available at SSRN: https://ssrn.com/abstract=3481850 or http://dx.doi.org/10.2139/ssrn.3481850

Joonkyu Choi

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
+1 (202) 973-6884 (Phone)

HOME PAGE: http://sites.google.com/site/jooonkyuc/

Nathan Goldschlag

Center for Economic Studies, U.S. Census Bureau ( email )

4600 Silver Hill Road
Washington, DC 20233-9100
United States

John C. Haltiwanger (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

J. Daniel Kim

The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
303
Abstract Views
1,483
rank
111,451
PlumX Metrics