Great Recession Babies: How Are Startups Shaped by Macro Conditions at Birth?

105 Pages Posted: 22 Dec 2022 Last revised: 26 May 2024

See all articles by Daniel Bias

Daniel Bias

Owen Graduate School of Management at Vanderbilt University

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Date Written: August 27, 2023

Abstract

We combine novel micro data with the quasi-random timing of patent decisions over the business cycle to estimate the effects of being born in the Great Recession on innovative startups. After purging ubiquitous selection biases and sorting effects, we find that recession startups experience better long-term outcomes in terms of employment and sales growth (both driven by lower mortality) and future inventiveness. While funding conditions cannot explain differences in outcomes, a labor market channel can: recession startups are better able to retain their founding inventors and build productive R&D teams around them.

Keywords: Startups, Innovation, Great Recession, Scarring, Patents, R&D, Labor Mobility

JEL Classification: G01, L26, M13, O34, E32, G24, J62

Suggested Citation

Bias, Daniel and Ljungqvist, Alexander and Ljungqvist, Alexander, Great Recession Babies: How Are Startups Shaped by Macro Conditions at Birth? (August 27, 2023). Swedish House of Finance Research Paper No. 23-01, Available at SSRN: https://ssrn.com/abstract=4298934 or http://dx.doi.org/10.2139/ssrn.4298934

Daniel Bias

Owen Graduate School of Management at Vanderbilt University ( email )

2301 Vanderbilt Place
Nashville, TN 37240
United States

Alexander Ljungqvist (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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