Whom do new firms hire?

Posted: April 28th, 2015 | Filed under: Front, Research, Working Papers | Tags: , , , , , | 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.


Entrepreneurial Couples

Posted: March 3rd, 2014 | Filed under: Front, Research, Working Papers | Tags: , , , , | 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


Geography, Joint Choices and the Reproduction of Gender Inequality

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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Growth and Job Creation of Spin-offs

Posted: April 2nd, 2010 | Filed under: Front, News, Research, Working Papers | Tags: , , , , , | Comments Off on Growth and Job Creation of Spin-offs

Pernille G. Jensen and I have written a small paper on the performance of spin-offs in Denmark in terms of job creation and employment growth. It is an explorative, simple paper presentating findings on the potential of spin-offs as a particularly significant type of entrepreneurial entrant relative to other types of entrants. The paper has been submitted to an edited volume and is based on research from a project financed by the Rockwool Foundation.

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Whom do new firms hire?

Posted: September 4th, 2008 | Filed under: Front, Research, Working Papers | Tags: , , , , | Comments Off on Whom do new firms hire?

Michael S. Dahl and Steven Klepper

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 in 1995-2001. 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.