Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee
Robert W. Fairlie, Javier Miranda
Journal of Economics and Management Strategy,
No. 1,
2017
Abstract
Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of start‐ups. Longitudinal data from the Integrated Longitudinal Business Database (iLBD), Kauffman Firm Survey (KFS), and the Growing America through Entrepreneurship (GATE) experiment are used to provide some of the first evidence in the literature on the determinants of taking the leap from a nonemployer to employer firm among start‐ups. Several interesting patterns emerge regarding the dynamics of nonemployer start‐ups hiring their first employee. Hiring rates among the universe of nonemployer start‐ups are very low, but increase when the population of nonemployers is focused on more growth‐oriented businesses such as incorporated and employer identification number businesses. If nonemployer start‐ups hire, the bulk of hiring occurs in the first few years of existence. After this point in time, relatively few nonemployer start‐ups hire an employee. Focusing on more growth‐ and employment‐oriented start‐ups in the KFS, we find that Asian‐owned and Hispanic‐owned start‐ups have higher rates of hiring their first employee than white‐owned start‐ups. Female‐owned start‐ups are roughly 10 percentage points less likely to hire their first employee by the first, second, and seventh years after start‐up. The education level of the owner, however, is not found to be associated with the probability of hiring an employee. Among business characteristics, we find evidence that business assets and intellectual property are associated with hiring the first employee. Using data from the largest random experiment providing entrepreneurship training in the United States ever conducted, we do not find evidence that entrepreneurship training increases the likelihood that nonemployers hire their first employee.
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Spinoffs in Germany: Characteristics, Survival, and the Role of their Parents
Daniel Fackler, A. Schmucker, Claus Schnabel
Small Business Economics,
No. 1,
2016
Abstract
Using a 50 % sample of all private sector establishments in Germany, we report that spinoffs are larger, initially employ more skilled and more experienced workers, and pay higher wages than other startups. We investigate whether spinoffs are more likely to survive than other startups, and whether spinoff survival depends on the quality and size of their parent companies, as suggested in some of the theoretical and empirical literature. Our estimated survival models confirm that spinoffs are generally less likely to exit than other startups. We also distinguish between pulled spinoffs, where the parent company continues after they are founded, and pushed spinoffs, where the parent company stops operations. Our results indicate that in western and eastern Germany and in all sectors investigated, pulled spinoffs have a higher probability of survival than pushed spinoffs. Concerning the parent connection, we find that intra-industry spinoffs and spinoffs emerging from better-performing or smaller parent companies are generally less likely to exit.
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Economic Failure and the Role of Plant Age and Size
Steffen Müller, Jens Stegmaier
Small Business Economics,
No. 3,
2015
Abstract
This paper introduces a large-scale administrative panel data set on corporate bankruptcy in Germany that allows for an econometric analysis of involuntary exits where previous studies mixed voluntary and involuntary exits. Approximately 83 % of all bankruptcies occur in plants with not more than 10 employees, and 61 % of all bankrupt plants are not older than 5 years. The descriptive statistics and regression analysis indicate substantial negative age dependence with respect to bankruptcy risk but confirm negative size dependence for mature plants only. Our results corroborate hypotheses stressing increasing capabilities and positional advantage, both predicting negative age dependence with respect to bankruptcy risk due to productivity improvements. The results are not consistent with the theories explaining age dependence via imprinting or structural inertia.
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Establishment Survival in East and West Germany: A Comparative Analysis
Daniel Fackler
Schmollers Jahrbuch,
No. 2,
2014
Abstract
Using a large administrative dataset, this paper compares the development of new establishments’ survival chances in East and West Germany for the period 1994 – 2008. A central question is whether convergence with respect to survival rates between East and West Germany can be observed. Using methods of survival analysis, I find that new establishments’ survival chances do not differ strongly between East and West Germany at the beginning of the observation period. In 1998 and 1999 the exit hazard increases strongly in East but not in West Germany, which is likely to be due to a change in the subsidy policy affecting East Germany. Since the turn of the millennium, the difference in establishments’ exit hazard between East and West Germany becomes smaller, indicating that there is convergence with respect to establishments’ survival chances.
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Survival of Spinoffs and Other Startups: First Evidence for the Private Sector in Germany, 1976-2008
Daniel Fackler, Claus Schnabel
Abstract
Using a 50 percent sample of all establishments in the German private sector, we report that spinoffs are larger and initially employ more skilled and more experienced workers than other startups. Controlling for these and other differences, we find that spinoffs are less likely to exit than other startups. We show that in West and East Germany and in all sectors investigated pulled spinoffs (where the parent company continues after they are founded) generally have the lowest exit hazards, followed by pushed spinoffs (where the parent company stops operations). The difference between both types of spinoffs is particularly pronounced in the first three years. Contrary to expectations, intra-industry spinoffs are not found to have lower exit hazards in our sample.
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A Control Group Study of Incubators’ Impact to Promote Firm Survival
Michael Schwartz
Journal of Technology Transfer,
No. 3,
2013
Abstract
It is widely unclear as to whether start-up firms supported by publicly-initiated incubator initiatives have higher survival rates than comparable start-up firms that have not received support by such initiatives. This paper contributes to the underlying discussion by performing a large-scale matched-pairs analysis of the long-term survival of 371 incubator firms (after their graduation) from five German incubators and a control group of 371 comparable non-incubated firms. The analysis covers a 10-year time span. To account for the problem of selection bias, a non-parametric matching approach is applied to identify an appropriate control group. For neither of the five incubator locations, we find statistically significant higher survival probabilities for firms located in incubators compared to firms located outside those incubator organizations. For three incubator locations the analysis reveals statistically significant lower chances of survival for those start-ups receiving support by an incubator. The empirical results, therefore, raise some doubts regarding the impacts of incubation on long-term firm survival.
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Who Creates Jobs? Small versus Large versus Young
John Haltiwanger, Ron S. Jarmin, Javier Miranda
Review of Economics and Statistics,
No. 2,
2013
Abstract
The view that small businesses create the most jobs remains appealing to policymakers and small business advocates. Using data from the Census Bureau's Business Dynamics Statistics and Longitudinal Business Database, we explore the many issues at the core of this ongoing debate. We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age, there is no systematic relationship between firm size and growth. Our findings highlight the important role of business start-ups and young businesses in U.S. job creation.
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Regional Entrepreneurial Opportunities in the Biotech Industry: Exploring the Transition from Award-winning Nascent Entrepreneurs to Real Start-ups
Claus Michelsen, H. Wolf, Michael Schwartz
European Planning Studies,
2013
Abstract
Knowledge of factors that determine the transition from nascent entrepreneurship into real entrepreneurship is of major importance for policies aiming to effectively stimulate start-ups. Whereas scholars concentrated on person-specific factors to explain transition probabilities, environmental characteristics have been fairly neglected. Given that entrepreneurship is a strongly localized phenomenon, this paper argues that regional entrepreneurial opportunities are a driving force behind the transition from nascent entrepreneurship to new venture creation. Based on unique data on 103 nascent entrepreneurs in the German biotechnology industry, we empirically assess the importance of regional entrepreneurial opportunities on transition probabilities. Further, we introduce a new approach to measure nascent entrepreneurship by capturing individuals that actively participate in start-up competitions and have won at least one competition. Controlling for technology and individual characteristics, we find strong support for our hypotheses relating to the significant impact of general regional opportunities, specific regional opportunities and the entrepreneurial environment for the probability of transition from award-winning nascent entrepreneurs to real start-ups.
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Regional Entrepreneurial Opportunities in the Biotech Industry: Exploring the Transition from Award-winning Nascent Entrepreneurs to Real Start-ups
H. Wolf, Claus Michelsen, Michael Schwartz
Abstract
Knowledge of factors that determine the transition from nascent entrepreneurship into real entrepreneurship is of major importance for policies aiming to effectively stimulate start-ups. Whereas scholars concentrated on person-specific factors to explain transition probabilities, environmental characteristics have been fairly neglected. Given that entrepreneurship is a strongly localized phenomenon, this paper argues that regional entrepreneurial opportunities are a driving force behind the transition from nascent entrepreneurship to new venture creation. Based on unique data on 103 nascent entrepreneurs in the German biotechnology industry, we empirically assess the importance of regional entrepreneurial opportunities on transition probabilities. Further, we introduce a new
approach to measure nascent entrepreneurship by capturing individuals that actively participate in start-up competitions and have won at least one competition. Controlling for technology and individual characteristics, we find strong support for our hypotheses relating to the significant impact of general regional opportunities, specific regional opportunities and the entrepreneurial environment for the probability of transition from award-winning nascent entrepreneurs to real start-ups.
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Von der Intention zur Gründung - Gründerwettbewerbe in Deutschland
N. Waldmann, Michael Schwartz, Claus Michelsen
List Forum für Wirtschafts- und Finanzpolitik,
No. 4,
2010
Abstract
The number of aspiring entrepreneurs in high-tech industries that succeed in completing the transition from nascent entrepreneurship to new venture creation is too low in Germany. Responding to this unsatisfactory situation, since the mid 1990s, numerous start-up competitions (or business plan competitions) have been established to stimulate the transition from nascent to real entrepreneurship. Those competitions have too major objectives: Increasing start-up probabilities by mobilizing potential entrepreneurs while simultaneously increasing the probability of start-up success of the prospective start-ups. Despite their importance as (policy) measure to encourage entrepreneurship, a discussion of their effectiveness is missing so far. The present article tries to contribute to the understanding of start-up competitions by providing broad empirical evidence on the development, on the regional distribution and on the most important characteristics of existing start-up competitions in Germany. Further, the article presents and discusses most important empirical results regarding the effectiveness of those start-up competitions (and other important factors as well) to act as a driving force behind the transition from nascent entrepreneurship to new venture creation in high-technology industries. Finally, we derive conclusions for an agenda of main future research questions.
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