Posted: April 28th, 2015 | Filed under: Front, Research, Working Papers | Tags: Entrepreneurship, Human capital, Prior experiences, Spinoffs, Strategy, Wages | Comments Off on Whom do new firms hire?
Michael S. Dahl and Steven Klepper
This paper was first drafted during my visit at Carnegie Mellon University in the Winter and Spring of 2007. For the following year, Steve and I continuously revised the paper, but never got to submit it to a journal together. When Steve passed away, I updated the paper with new data and analysis, while keeping the paper in the spirit of the theory and ideas that we developed back in 2007. In this process, I received valuable feedback from Peter Thompson, Olav Sorenson, and Guido Buenstorf.
Two versions of this paper now exists:
- The last joint version (September 2008), which is available on SSRN.
- My revised version (April 2015), which has been accepted for publication in Industrial and Corporate Change (out now, June 2015). Download here.
The new version is out in a special issue to be published in the honor of Steve’s work and strong influence on our field.
Abstract: Using the matched employer-employee data set for Denmark and information on the founders of new firms, we analyze the hiring choices of all new firms that entered from 2003 to 2010. We develop a theoretical model in which the quality of a firm’s employees determines its average cost, a firm’s productivity is based on its pre-entry experience and persistent shocks, and over time firms learn about their productivity. The model predicts that more productive firms are larger and hire more talented employees, which gives rise to various predictions about how pre-entry experience, firm growth rates, and firm size influence the wages firms pay to their early hires. We find that beginning with the time of entry, larger firms consistently pay higher wages to their new hires. These are firms with greater survival prospects at the time of entry based on the pre-entry backgrounds of their founders and that grow at greater rates over time, both of which are predictive of the wages paid to new hires from the time of entry onward. Our findings suggest workers are allocated to firms according to their abilities, which can give rise to enduring firm capabilities.
Posted: March 3rd, 2014 | Filed under: Front, Research, Working Papers | Tags: Entrepreneurship, Firm growth, Human capital, Performance, Wages | Comments Off on Entrepreneurial Couples
Michael S. Dahl, Mirjam Van Praag and Peter Thompson
We study possible motivations for co-entrepenurial couples to start up a joint firm, using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010. We compare their pre-entry characteristics, firm performance and post-dissolution private and financial outcomes with a selected set of comparable firms and couples. We find evidence that couples often establish a business together because one spouse – most commonly the female – has limited outside opportunities in the labor market. However, the financial benefits for each of the spouses, and especially the female, are larger in co-entrepreneurial firms, both during the life of the business and post-dissolution. The start-up of co-entrepreneurial firms seems therefore a sound investment in the human capital of both spouses as well as in the reduction of income ine-quality in the household. We find no evidence of non-pecuniary benefits or costs of co-entrepreneurship.
Download working paper on SSRN
Posted: September 16th, 2013 | Filed under: Front, Journal Papers, Research | Comments Off on The Who, Why and How of Spinoffs
Michael S. Dahl and Olav Sorenson
Studies have consistently found that entrepreneurs who enter industries in which they have prior experience as employees perform better than others. We nevertheless know relatively little about what accounts for these differences. The presumed explanation has generally been that these entrepreneurs benefit from the knowledge that they gained in their former jobs. But they might also differ from other entrepreneurs on a variety of other dimensions: Preferential access to resources or differing motivations, for example, may account for their decisions to enter known industries instead of new ones. Combining novel data from a representative survey of entrepreneurs in Denmark with a matched employer- employee database of all residents in Denmark, we examined how entrepreneurs with prior industry experience differed from those without and the extent to which these differences could account for the performance premium associated with prior industry experience. We found that those with industry experience came from younger, smaller and more profitable firms, and that they recruited more experienced employees, worked harder and placed less value on having flexible hours. The recruitment of more experienced employees and the greater effort exerted appeared to account for at least some of the performance advantage associated with prior industry experience.
Industrial and Corporate Change (2014) 23(3) 661-688
Posted: December 9th, 2012 | Filed under: Front, Journal Papers, Research | Comments Off on In Sickness and in Wealth: Psychological and Sexual Costs of Income Comparison in Marriage
Lamar Pierce, Michael S. Dahl and Jimmi Nielsen
As the percentage of wives outearning their husbands grows, the traditional social norm of the male breadwinner is challenged. The upward income comparison of the husband may cause psychological distress that affects both partners’ mental and physical health in ways that impact decisions on marriage, divorce, and careers. This paper studies this impact through sexual and mental health problems. Using wage and prescription medication data from Denmark, we implement a regression discontinuity design to show that men outearned by their wives are more likely to use erectile dysfunction (ED) medication than their male breadwinner counterparts, even when this inequality is small. Breadwinner wives suffer increased insomnia/anxiety medication usage, with similar effects for men. We find no effects for unmarried couples or for men who earned less than their fiancée prior to marriage. Our results suggest that social norms play important roles in dictating how individuals respond to upward social comparisons.
Out now in Personality and Social Psychology Bulletin, 39(3), pp. 359-374.
Posted: July 12th, 2012 | Filed under: Front, Journal Papers, Research | Comments Off on Fatherhood and Managerial Style: How a Male CEO’s Children Affect the Wages of His Employees
Michael S. Dahl, Cristian Dezsö, and David Gaddis Ross
Motivated by a growing literature in the social sciences suggesting that the transition to fatherhood has a profound effect on men’s values, we study how the wages of employees change after a male chief executive officer (CEO) has children, using comprehensive panel data on the employees, CEOs, and families of CEOs in all but the smallest Danish firms between 1996 and 2006. We find that (a) a male CEO generally pays his employees less generously after fathering a child, (b) the birth of a daughter has a less negative influence on wages than does the birth of a son and has a positive influence if the daughter is the CEO’s first, and (c) the wages of female employees are less adversely affected than are those of male employees and positively affected by the CEO’s first child of either gender. We also find that male CEOs pay themselves more after fathering a child, especially after fathering a son. These results are consistent with a desire by the CEO to husband more resources for his family after fathering a child and the psychological priming of the CEO’s generosity after the birth of his first daughter and specifically toward women after the birth of his first child of either gender.
Out now in Administrative Science Quarterly, 57(4), pp. 669-693 (2012)
Posted: June 17th, 2012 | Filed under: Front, Journal Papers, News, Research | Comments Off on Home Sweet Home: Entrepreneurs’ Location Choices and the Performance of Their Ventures – Out in print
Michael S. Dahl and Olav Sorenson
Entrepreneurs, even more than employees, tend to locate in regions in which they have deep roots (“home” regions). Here, we examine the performance implications of these choices. Whereas one might expect entrepreneurs to perform better in these regions because of their richer endowments of regionally embedded social capital, they might also perform worse if their location choices rather reflect a preference for spending time with family and friends. We examine this question using comprehensive data on Danish start-ups. Ventures perform better—survive longer and generate greater annual profits and cash flows—when located in regions in which their founders have lived longer. This effect appears substantial, similar in size to the value of prior experience in the industry (i.e., to being a spin-off).
Management Science, June 2012, vol. 58 no. 6, pp. 1059-1071.
Download here at Informs Online
Posted: December 5th, 2011 | Filed under: Front, Research, Working Papers | Comments Off on Geography, Joint Choices and the Reproduction of Gender Inequality
Olav Sorenson and Michael S. Dahl
We examine the extent to which the gender wage gap may depend on the fact that dual-earner couples must jointly choose a place to live and work. If couples systematically locate in places better suited for the advancement of the husband’s career than to the wife’s, those choices would then tend to depress the wages of married women relative to married men. Examining data from Denmark, our results suggest (i) that Danish couples weight men’s potential wage gains much more heavily than women’s in their decisions of whether to and where to move, (ii) that these intra-couple preferences may account for as much as 36% of the gender wage gap in Denmark, and (iii) that, ultimately, these differential weightings appear to reflect gender roles, to a large extent inherited from the wife’ parents. We therefore demonstrate that systematic gender inequality can emerge from unexpected places and processes.
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Posted: September 30th, 2011 | Filed under: Front, News, Research | Comments Off on Paper accepted for Management Science
My paper with Olav Sorenson on the performance of start-ups relative to their choice of location has been accepted for publication in Management Science, one of the World’s leading management journals.
Read more about the paper
Posted: February 15th, 2011 | Filed under: Front, Journal Papers, Research | Tags: Innovation, Organizational change, Organizational routines, Resistance, Strategy, Stress | 1 Comment »
Michael S. Dahl
This article analyzes the relationship between organizational change and employee health. It illuminates the potentially negative outcomes of change at the level of the employee. In addition, it relates to the ongoing debate over how employees react to and respond to organizational change. I hypothesize that change increases the risk of negative stress, and I test this hypothesis using a comprehensive panel data set of all stress-related medicine prescriptions for 92,860 employees working in 1,517 of the largest Danish organizations. The findings suggest that the risk of receiving stress-related medication increases significantly for employees at organizations that change, especially those that undergo broad simultaneous changes along several dimensions. Thus, organizational changes are associated with significant risks of employee health problems. These effects are further explored with respect to employees at different hierarchical levels as well as at firms of different sizes and from different sectors.
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Posted: January 10th, 2011 | Filed under: Front, Journal Papers, Research | Tags: Entrepreneurship, Stress | Comments Off on The effects of becoming an entrepreneur on the use of psychotropics among entrepreneurs and their spouses
Michael S. Dahl, Jimmi Nielsen (Unit for Psychiatric Research, Aalborg Psychiatric Hospital, Aarhus University Hospital) and Ramin Mojtabai (Department of Mental Health, Johns Hopkins Bloomberg School of Public Health)
Aims: Entering entrepreneurship (i.e. becoming an entrepreneur) is known to be a demanding activity with increased workload, financial uncertainty and increased levels of stress. However, there are no systematic studies on how entering entrepreneurship affects the people involved.
Methods: The authors investigated prescriptions of psychotropics for 6,221 first-time entrepreneurs from 2001—2004 and their 2,381 spouses in the first two years after becoming entrepreneurs in a matched case-control study using linked data from three Danish national registries: The Danish database for Labor Market Research, the Danish Entrepreneurship database and the Danish Prescription database.
Results: Entrepreneurs were more likely to fill prescriptions at pharmacies for sedatives/hypnotics (adjusted odds ratio (AOR): 1.45 [95% CI: 1.26—1.66], p < .0001). However, they were less likely to fill prescriptions for antidepressants (AOR: 0.74 [95% CI: 0.59—0.92] p = 0.007). Spouses of these entrepreneurs were also more likely to fill prescriptions for sedatives/hypnotics (AOR: 1.36 [95% CI: 1.10—1.67], p = 0.005). No difference in prescription of antidepressants was found for spouses.
Conclusions: This study showed that there was a significant relation between entering entrepreneurship and receiving prescriptions for sedative/hypnotics both among the entrepreneurs themselves and their spouses, suggesting that entering entrepreneurship may be associated with increased stress for both the entrepreneurs and their families.
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