Leaving Employment to Entrepreneurship: The Value of Co‐worker Mobility in Pushed and Pulled‐Driven Start‐ups

Abstract

By combining insights from the widespread research on entrepreneurial spin-offs and from the emerging literature on hiring choices in start-ups, we investigate the role of co-worker mobility in pushed and pulled spin-off survival. Using rich register data and a multi-stage model addressing self-selection and endogeneity issues, we cover 28,353 spin-offs launched between 1992 and 2007. We find that spin-offs hiring co-workers from the parent firm survive longer. This survival bonus is greater in pushed-driven start-ups. We investigate two different mechanisms through which co-worker mobility may improve spin-off survival -knowledge transfer and reduced searching costs. While both mechanisms play a role in explaining the survival bonus in pulled spin-offs, co-worker mobility seems to help pushed spin-offs to survive mostly by reducing initial recruitment costs. This work provides novel insights on the role of context surrounding new venture creation and inter-firm labour mobility.

Networks, geography and the survival of the firm

“…Firms with employees of higher levels of education attainment are expected to have a higher chance of survival, as seen in the previous literature (Andersson and Klepper 2013;Eriksson and Kuhn 2006). Prior Anticipated effects on hazard of firm exit in parentheses research has found that spinoff firms (both pulled and pushed) have a lower hazard of exit with higher percentages of male employees (Rocha et al 2018;Andersson and Klepper 2013;Eriksson and Kuhn 2006). This is largely a contextual factor, as male employees tend to exhibit longer tenure with their previous firm (Rocha et al 2018).…”

“…Prior Anticipated effects on hazard of firm exit in parentheses research has found that spinoff firms (both pulled and pushed) have a lower hazard of exit with higher percentages of male employees (Rocha et al 2018;Andersson and Klepper 2013;Eriksson and Kuhn 2006). This is largely a contextual factor, as male employees tend to exhibit longer tenure with their previous firm (Rocha et al 2018). We employ time period dummies to account for any external effects pertaining to general macroeconomic performance.…”

Knowledge Worker Mobility in Context: Pushing the Boundaries of Theory and Methods

“…We summarize the papers in the Special Issue in Table I. The papers reflect the different contextual dimensions of mobility, sometimes covering more than one aspect: organizational (Rocha, Carneiro and Varum, 2017;Park, Howard, and Gomulya, 2017;Brymer and Sirmon, 2017); geographical and spatial (Franzoni, Scellato and Stephan, 2017); social (Brymer and Sirmon, 2017;Daniel, DiDomenico and Nunan, 2017); and institutional and cultural (Rocha, Carneiro and Varum, 2017;Ejermo and Schubert, 2017;Franzoni, Scellato and Stephan, 2017).…”

“…These results suggest that, in certain contexts (e.g., pusheddriven startups), hiring former coworkers may be a choice partly driven by necessity, which may reduce the quality of initial human resources, and, consequently, limit future growth prospects, especially in rigid labor markets. learning-by-hiring theory (Franzoni, Scellato and Stephan, 2017;Park, Howard, and Gomulya, 2017), theory on mobility to spinoffs (Rocha, Carneiro and Varum, 2017), utility theory and matching theory in labour markets (Ejermo and Schubert, 2017), and context-emergent turnover (CET) theory (Brymer and Sirmon, 2017). The articles that we publish here also provide strong methodological contributions by incorporating a variety of methods and datasets including econometric modelling of firmlevel spin-off data (Rocha, Carneiro and Varum, 2017) or post-acquisition patent data (Park, Howard, and Gomulya, 2017), and large team-level, cross-country survey datasets (Franzoni, Scellato and Stephan, 2017).…”

“…learning-by-hiring theory (Franzoni, Scellato and Stephan, 2017;Park, Howard, and Gomulya, 2017), theory on mobility to spinoffs (Rocha, Carneiro and Varum, 2017), utility theory and matching theory in labour markets (Ejermo and Schubert, 2017), and context-emergent turnover (CET) theory (Brymer and Sirmon, 2017). The articles that we publish here also provide strong methodological contributions by incorporating a variety of methods and datasets including econometric modelling of firmlevel spin-off data (Rocha, Carneiro and Varum, 2017) or post-acquisition patent data (Park, Howard, and Gomulya, 2017), and large team-level, cross-country survey datasets (Franzoni, Scellato and Stephan, 2017). In addition to analyses of novel firm-level and team-level data, other studies in this special issue investigate their research questions using individual-level data such as the employer-employee dataset of Swedish inventors (Ejermo and Schubert, 2017), and the data of partners in US based law firms (Brymer and Sirmon, 2017).…”