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Founding Teams and Startup Performance

Author

Listed:
  • Joonkyu Choi
  • Nathan Goldschlag
  • John Haltiwanger
  • J. Daniel Kim
Abstract
We explore the role of founding teams in accounting for the post-entry dynamics of startups. While the entrepreneurship literature has largely focused on business founders, we broaden this view by considering founding teams, which include both the founders and the initial employees in the first year of operations. We investigate the idea that the success of a startup may derive from the organizational capital that is created at firm formation and is inalienable from the founding team itself. To test this hypothesis, we exploit premature deaths to identify the causal impact of losing a founding team member on startup performance. We find that the exogenous separation of a founding team member due to premature death has a persistently large, negative, and statistically significant impact on post-entry size, survival, and productivity of startups. While we find that the loss of a key founding team member (e.g. founders) has an especially large adverse effect, the loss of a non-key founding team member still has a significant adverse effect, lending support to our inclusive definition of founding teams. Furthermore, we find that the effects are particularly strong for small founding teams but are not driven by activity in small business-intensive or High Tech industries.

Suggested Citation

  • Joonkyu Choi & Nathan Goldschlag & John Haltiwanger & J. Daniel Kim, 2019. "Founding Teams and Startup Performance," Working Papers 19-32, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:19-32
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    File URL: https://www2.census.gov/ces/wp/2019/CES-WP-19-32.pdf
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    Cited by:

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    2. Grillitsch, Markus & Schubert, Torben, 2020. "Does the Timing of integrating new Skills affect Start-up Growth?," Papers in Innovation Studies 2020/9, Lund University, CIRCLE - Centre for Innovation Research.
    3. Julien Sauvagnat & Fabiano Schivardi, 2024. "Are Executives in Short Supply? Evidence from Death Events," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(1), pages 519-559.
    4. Mauricio Medeiros Jr & Bernardus Van Doornik, 2021. "Human Capital and Startup Financing," Working Papers Series 546, Central Bank of Brazil, Research Department.
    5. Mahieu, Jeroen, 2020. "Creative Destruction? Local Business Conditions and the Earnings of Employees at Startups," MPRA Paper 98557, University Library of Munich, Germany.

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