Firm Age, Investment Opportunities, and Job Creation

Manuel Adelino, Song Ma and David Robinson

No 19845, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper asks whether startups react more to changing investment opportunities than more mature firms do. We use the fact that a region's pre-existing industrial structure creates exogenous variation in the severity of its exposure to nation-wide manufacturing shocks to develop an instrument for changing investment opportunities, and examine employment creation in the non-tradable sector as a response to those opportunities. Startups are much more responsive to changing local economic conditions than older firms. Moreover, their responsiveness doubles in areas with better access to small business finance, suggesting that financing constraints are an important brake on job creation in the startup sector. Although we focus mostly on the non-tradable sector for empirical identification, our results extend to other sectors of the economy, indicating that the mechanisms we uncover are economically pervasive. This suggests that factors like organizational flexibility and innovativeness may be important drivers of job creation among startups.

JEL-codes: G21 G3 J2 J21 J23 J63 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-lma
Note: CF PR
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Citations: View citations in EconPapers (21)

Published as MANUEL ADELINO & SONG MA & DAVID ROBINSON, 2017. "Firm Age, Investment Opportunities, and Job Creation," The Journal of Finance, vol 72(3), pages 999-1038.

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