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.


Home Sweet Home: Entrepreneurs’ Location Choices and the Performance of Their Ventures

Posted: April 28th, 2010 | Filed under: Front, Research | Tags: , , , , , , | Comments Off on Home Sweet Home: Entrepreneurs’ Location Choices and the Performance of Their Ventures

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 startups. 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 spinoff).

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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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New book published (in Danish)

Posted: November 19th, 2009 | Filed under: Front, News, Research | Tags: , , , , , , | Comments Off on New book published (in Danish)

Jagten på fremtidens nye vækstvirksomheder

Jagten på fremtidens nye vækstvirksomheder

Jagten på fremtidens nye vækstvirksomheder

Nyetablerede virksomheder bidrager årligt netto med 60.000 nye job til dansk økonomi, mens ældre virksomheder i gennemsnit siger farvel til flere personer, end de ansætter. Det understreger vigtigheden af nye virksomheder på arbejdsmarkedet.

De mest succesfulde iværksættere har typisk stor brancheerfaring. Særligt interessante er de såkaldte spin-off-iværksættere, som kommer direkte fra en eksisterende virksomhed i samme branche. Disse iværksættere står bag omkring 30 % af de nye virksomheder, og de har større sandsynlighed for at overleve i længere tid og blive vækstiværksættere. Dvs. iværksættere, der skaber høj beskæftigelse og værdi til samfundet. Overlevelsen hos de nye virksomheder er central og en vigtig forudsætning for en langvarig positiv effekt på samfundsøkonomien.

Undersøgelsen er finansieret af Rockwool Fonden. Bogens resultater bygger bl.a. på en gennemgang af karakteristika ved mere end 26.000 iværksættere fra 1994-2006, suppleret med en spørgeskemaundersøgelse blandt 10.000 danskere.

Undersøgelsen peger på, at beskæftigelsen kan udbygges, hvis de nye virksomheders potentiale styrkes, så de vokser mere. Vi kan med andre ord øge gevinsten uden, at der nødvendigvis etableres flere virksomheder, hvis vi fokuserer på de virksomheder, som overlever bedre, og hvis ejere har en større sandsynlighed for at blive vækstiværksættere. Bogen går derfor videre med at præsentere de personlige karakteristika hos de iværksættere, som giver den største sandsynlighed for overlevelse og vækst.

Spørgeskemaundersøgelsen viser, at spin-off-iværksætterne udover deres brancheerfaring især adskiller sig fra de øvrige iværksættere på følgende dimensioner: De er yngre, og de har en højere indkomst på det tidspunkt, hvor de bliver iværksættere. De investerer mere tid i deres arbejdsliv, og de lægger væsentligt større vægt på selvstændighed. Derfor starter de oftere virksomheder, som er uafhængige af andre virksomheder. Spin-off-iværksætterne bruger ligeledes deres netværk mere aktivt og har forbindelse til flere iværksættere gennem deres netværk.

Michael S. Dahl, Pernille G. Jensen og Kristian Nielsen. ”Jagten på fremtidens nye vækstvirksomheder”, udkom den 19. november 2009 på DJØF Forlag

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The Embedded Entrepreneur – Out now

Posted: May 13th, 2009 | Filed under: Front, Journal Papers, Research | Tags: , , , , , | Comments Off on The Embedded Entrepreneur – Out now

Michael S. Dahl and Olav Sorenson

Using comprehensive data on the Danish population, this paper examines the determinants of entrepreneurs’ choices of where to locate their new ventures. Our findings suggest that entrepreneurs place much more emphasis on being close to family and friends than on regional characteristics that might influence the performance of their ventures when deciding where to locate those businesses. Two factors could explain our findings: On the one hand, entrepreneurs may simply value proximity to family and friends. On the other hand, these relationships may help them to assemble the assets and to recruit the personnel that they need to succeed in their ventures. Our results suggest that the former plays the greater role in entrepreneurs’ location choices.

Update, May 28: Received the EMR Best Paper Award for 2009

Michael S. Dahl and Olav Sorenson (2009) “The embedded entrepreneur”, European Management Review, Vol. 6, pp. 172-181 [DOI Link]Download here


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.


Are You Experienced? Prior Experience of Managers and the Survival of New Organisations

Posted: November 5th, 2007 | Filed under: Front, Journal Papers, Research | Tags: , , | Comments Off on Are You Experienced? Prior Experience of Managers and the Survival of New Organisations

Michael S. Dahl and Toke Reichstein

This paper investigates the relationship between the experiences of managers and the likelihood of survival of their new firms. We take advantage of a comprehensive data-set covering the entire Danish labour market from 1980-2000. This is used to trace the activities of top ranked members of new firms prior to the founding and follow the fate of their firms after the founding.

Michael S. Dahl and Toke Reichstein (2007), “Are You Experienced? Prior Experience and the Survival of New Organizations“, Industry and Innovation. Vol. 14, No. 5, pp. 497-511. ISSN: 1366-2716. [DOI Link]


Født til Succes? Knopskydninger som kilde til innovation

Posted: October 6th, 2004 | Filed under: Front, Journal Papers | Tags: , , , , | Comments Off on Født til Succes? Knopskydninger som kilde til innovation

Michael S. Dahl

Denne artikel præsenterer den nyeste teoretiske forskning i sammenhængen mellem entreprenørers erfaringsmæssige baggrund og deres fremtidige succes og innovationsevne. En række studier tyder nemlig på, at disse faktorer er tæt forbundet i kraft af nedarvede organisatoriske rutiner, som entreprenøren har med fra sin tidligere arbejdsplads. Denne teoretiske påstand undersøges gennem et detaljeret studie af udviklingen af den trådløse kommunikationsindustri omkring Aalborg samt gennem referencer til et kvantitativt studie af 3.500 opstartsvirksomheder i den danske fremstillingssektor. Begge studier peger i retningen af, at knopskydende virksomheder med erfaringer fra gode virksomheder har større sandsynlighed for succes, samt at disse virksomheder også er mere innovative i deres første tid end andre ældre virksomheder.

Michael S. Dahl (2004), “Født til Succes? Knopskydninger som kilde til innovation [Born for Success? Spin-offs as sources of innovation]“, Ledelse & Erhvervsøkonomi, Vol. 68, No. 4, pp. 285-292. ISSN: 0902-3704. [PDF]