Are you experienced? Prior experience and the survival of new organizations

This paper investigates the relationship between the level of experience of managers and founders, and the likelihood of survival of their new firms. We take advantage of a comprehensive dataset covering the entire Danish labor market from 1980-2000. This is used to trace the activities of top ranked members of start-ups prior to their founding, and follow the fate of these firms. More specifically, we compare the survival of spin-offs from surviving parents, spin-offs from exiting parents, and other start-ups. Moreover, we investigate whether firms managed and founded by more experienced teams with higher levels of industry-specific experience are more likely to survive. Distinguishing between survivors and firms that have been acquired, we find that spin-offs from a surviving parent company combined with and industry-specific experience, positively affects the likelihood of survival. We also find that spin-offs from parent companies that exit are less likely to survive than either spin-offs from surviving parents or other start-ups. These findings support the theoretical arguments that organizational heritage is important for the survival of new organizations. We found no similar significant results when comparing exits with firms that have been acquired.Organizational routine, Industry-specific experience, Survival of new firms, Spin-offs

Knowledge Flows through Informal Contacts in Industrial Clusters Myths or Realities?

The role of informal networks in the development of regional clusters has received a lot of attention in the literature recently. Informal contact between employees in different firms is argued to be one of the main carriers of knowledge between firms in a cluster. This paper empirically examines the role of informal contacts in a specific cluster. In a recent questionnaire, we ask a sample of engineers in a regional cluster of wireless communication firms in Northern Denmark, a series of questions on informal networks. We analyze whether the engineers actually acquire valuable knowledge through these networks. We find that the engineers do share even valuable knowledge with informal contacts. This shows that informal contacts are important channels of knowledge diffusion.Informal contacts, regional clusters, communication technology

Do Start-Ups Pay Less?

The authors analyze Danish registry data from 1991 to 2006 to determine how firm age and firm size influence wages. Unadjusted statistics suggest that smaller firms paid less than larger firms paid, and that firm age had little or no bearing on wages. After adjusting for differences in the characteristics of employees hired by these firms, however, they observe both firm age and firm size effects. Larger firms paid more than did smaller firms for observationally equivalent individuals but, contrary to conventional wisdom, younger firms paid more than older firms. The size effect, however, dominates the age effect. Thus, although the typical start-up — being both young and small — paid less than a more established employer, the largest start-ups paid a wage premium

Entrepreneurial Founder Effects in the Growth of Regional Clusters How Early Success is a Key Determinant

How can the growth of regional clusters be explained? This paper studies in great detail the growth of the wireless communication cluster in Northern Denmark. Unlike the dominant theories, we argue that initial success of the first firms are the main driving force behind the generation of new firms that eventually lead to the formation of clusters. The success of the first firms tends to generate spin-offs, which become successful themselves due to the background of the founders.Agglomeration, Clusters, Spin-offs, Knowledge Diffusion

Entry by Spinoff in a High-tech Cluster

Recently empirical studies have focused on how capabilities of new entering firms are important for the evolution of industries over time. The performance of new entrants appears to be significantly influenced by their pre-entry background. The general impression of the literature is that firms founded by former employees of successful incumbents have shown larger propensities to survive than other categories of new entrants. In the present paper, we use this approach to study the emergence and growth over the past three decades of a wireless telecommunications cluster around Aalborg in North Jutland, Denmark (NorCOM). The aim is to analyse the dominating forces behind the growth of NorCOM using detailed information about the founding events and organizational background of the individual entrants in the cluster. We show that the technological successes of firms in the region have powered a spinoff process, which can account for the majority of the growth in number of firms and employment in the cluster.Clusters, Spinoffs, Evolution of Industries, Entrepreneurs

The Devil Dwells in the Tails A Quantile Regression Approach to Firm Growth

This paper explores the firm growth rate distribution in a Gibrat’s Law context. The aim is to provide an empirical exploration of the determinants of firm growth. The work is novel in two respects. First, rather than limiting the analysis to focus on the conditional mean growth level, we investigate the complete shape of the distribution. Second, we show that the differences in the firm growth rate process between large and small firms are highly circumstantial. That industry dynamics have a substantial influence on the relationship between firm size and firm growth. The data used includes more than 9000 Danish firms from manufacturing, services and construction. We provide robust evidence indicating that firm growth studies should be less obsessed with explaining means and instead look to other parts of the firm growth rate distribution.Firm growth; quantile regression; distribution shape

The Social Attachment to Place

Many theories either implicitly or explicitly assume that individuals readily move to places that improve their financial well-being. Other forces, however, offset these tendencies; for example, people often wish to remain close to family and friends. We introduce a methodology for determining how individuals weigh these countervail-ing forces, and estimate how both financial and social factors influence geographic mobility in the Danish population. Our results suggest that individuals respond to opportunities for higher pay elsewhere, but that their sensitivity to this factor pales in comparison to their preferences for living near family and friends