Still the Same: New Venture Job Creation and Workforce Segregation

We propose that new ventures create jobs but also accentuate workforce segregation because demographically-similar people typically found and then shape the evolution of new organizations. Focusing specifically on the tendency of new venture personnel to have worked for the same prior employer (e.g., spinoffs), we analyze the evolution of 280 Danish municipalities’ workforces and two national cohorts of new ventures from 1996 to 2008. Several findings support our arguments. First, the gender and ethnic segregation of a community’s workforce increases with the proportion of local workers employed by new ventures. Second, new ventures are less demographically diverse than established organizations and this is especially true of new ventures staffed by personnel who worked for few prior employers. Third, new ventures tend to maintain demographic homogeneity through differential retention, as opposed to differential hiring. We discuss implications for entrepreneurship research as well as public policies that promote entrepreneurship to create jobs.