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.


Organizational Change and Employee Stress – Out now

Posted: February 15th, 2011 | Filed under: Front, Journal Papers, Research | Tags: , , , , , | 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.

Read the rest of this entry »


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.