Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success

Vera Rocha, Mirjam Praag, Timothy B. Folta () and Anabela Carneiro
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Timothy B. Folta: University of Connecticut

No 9919, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The founder (team)'s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder's choice of the initial workforce's human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

Keywords: human capital; entrepreneurship; startups; firm performance (search for similar items in EconPapers)
JEL-codes: J24 L26 M13 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-04
New Economics Papers: this item is included in nep-bec, nep-ent, nep-hrm, nep-ino, nep-lma and nep-sbm
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Citations: View citations in EconPapers (6)

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Working Paper: Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success (2016)
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