Deviating From the Benchmarks: Human Capital Inputs and the Survival of New Startups

Vera Rocha, Mirjam Van Praag, Anabela Carneiro

    Research output: Contribution to conferencePaperResearchpeer-review

    Abstract

    This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.
    This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.

    Conference

    ConferenceThe DRUID Society Conference 2015
    Number37
    LocationLUISS Business School
    CountryItaly
    CityRome
    Period15/06/201517/06/2015
    SponsorLUISS Guido Carli - Libera Università Internazionale degli Studi Sociali Guido Carli
    Internet address

    Keywords

      Cite this

      Rocha, V., Van Praag, M., & Carneiro, A. (2015). Deviating From the Benchmarks: Human Capital Inputs and the Survival of New Startups. Paper presented at The DRUID Society Conference 2015, Rome, Italy.
      Rocha, Vera ; Van Praag, Mirjam ; Carneiro, Anabela. / Deviating From the Benchmarks : Human Capital Inputs and the Survival of New Startups. Paper presented at The DRUID Society Conference 2015, Rome, Italy.30 p.
      @conference{f5464f5307c5404ba1a7487a20280868,
      title = "Deviating From the Benchmarks: Human Capital Inputs and the Survival of New Startups",
      abstract = "This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.",
      keywords = "Human resources, Human capital, Startup conditions, New ventures, Firm survival, Entrepreneurs, Intra-industry dynamics",
      author = "Vera Rocha and {Van Praag}, Mirjam and Anabela Carneiro",
      year = "2015",
      language = "English",
      note = "null ; Conference date: 15-06-2015 Through 17-06-2015",
      url = "http://druid8.sit.aau.dk/druid/registrant/index/login/cid/16",

      }

      Rocha, V, Van Praag, M & Carneiro, A 2015, 'Deviating From the Benchmarks: Human Capital Inputs and the Survival of New Startups' Paper presented at, Rome, Italy, 15/06/2015 - 17/06/2015, .

      Deviating From the Benchmarks : Human Capital Inputs and the Survival of New Startups. / Rocha, Vera; Van Praag, Mirjam; Carneiro, Anabela.

      2015. Paper presented at The DRUID Society Conference 2015, Rome, Italy.

      Research output: Contribution to conferencePaperResearchpeer-review

      TY - CONF

      T1 - Deviating From the Benchmarks

      T2 - Human Capital Inputs and the Survival of New Startups

      AU - Rocha,Vera

      AU - Van Praag,Mirjam

      AU - Carneiro,Anabela

      PY - 2015

      Y1 - 2015

      N2 - This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.

      AB - This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders human capital, and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.

      KW - Human resources

      KW - Human capital

      KW - Startup conditions

      KW - New ventures

      KW - Firm survival

      KW - Entrepreneurs

      KW - Intra-industry dynamics

      M3 - Paper

      ER -

      Rocha V, Van Praag M, Carneiro A. Deviating From the Benchmarks: Human Capital Inputs and the Survival of New Startups. 2015. Paper presented at The DRUID Society Conference 2015, Rome, Italy.