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Talent Recruitment and Firm Performance: The Business of Major League Sports

November 2013

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  Authors: J. Daniel Kim

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  This paper investigates the effectiveness of startup acquisitions as a hiring strategy. Unlike conventional hires who choose to join a new firm on their own volition, most acquired employees do not have a voice in the decision to be acquired, much less by whom to be acquired. The lack of worker agency may result in a preference mismatch between the acquired employees and the acquiring firm, leading to elevated rates of turnover. Using comprehensive employee-employer matched data from the US Census, I document that acquired workers are significantly more likely to leave compared to regular hires. By constructing a novel peer-based proxy for worker preferences, I show that acquired employees who prefer to work for startups ' rather than established firms ' are the most likely to leave after the acquisition, lending support to the preference mismatch theory. Moreover, these departures suggest a deeper strategic cost of competitive spawning: upon leaving, acquired workers are more likely to found their own companies, many of which appear to be competitive threats that impair the acquirer's long-run performance.
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  Job creation is one of the most important aspects of entrepreneurship, but we know relatively little about the hiring patterns and decisions of startups. 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 non-employer to employer firm among startups. Several interesting patterns emerge regarding the dynamics of non-employer startups hiring their first employee. Hiring rates among the universe of non-employer startups are very low, but increase when the population of non-employers is focused on more growth-oriented businesses such as incorporated and EIN businesses. If non-employer startups hire, the bulk of hiring occurs in the first few years of existence. After this point in time relatively few non-employer startups hire an employee. Focusing on more growth- and employment-oriented startups in the KFS, we find that Asian-owned and Hispanic-owned startups have higher rates of hiring their first employee than white-owned startups. Female-owned startups are roughly 10 percentage points less likely to hire their first employee by the first, second and seventh years after startup. 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 non-employers hire their first employee.
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  September 1998

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  CES-98-15

  Business merger and acquisition activity has been brisk in the United States in the recent past. Yet very little information has been available to help researchers understand the effects of this activity on jobs, businesses, and the American economy. This paper takes a first look at examining merger and acquisition activity using the newly available Longitudinal Establishment and Enterprise Microdata (LEEM) file. The analysis focuses on industries, establishments, and employment by employment size of firm. A first-time comparison of establishments that were acquired and survived over the 1990-1994 period with those that survived but were not acquired finds that the acquired establishments experienced more job change and, in the end, more net job loss than the nonacquired establishments. Establishments in small firms that were acquired by new or large firms experienced especially rapid job growth; however; job losses in establishments acquired from large firms more than offset these job gains.
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• Working Paper

  
  
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  Registered Report: Exploratory Analysis of Ownership Diversity and Innovation in the Annual Business Survey
  

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  A lack of transparency in specification testing is a major contributor to the replicability crisis that has eroded the credibility of findings for informing policy. How diversity is associated with outcomes of interest is particularly susceptible to the production of nonreplicable findings given the very large number of alternative measures applied to several policy relevant attributes such as race, ethnicity, gender, or foreign-born status. The very large number of alternative measures substantially increases the probability of false discovery where nominally significant parameter estimates'selected through numerous though unreported specification tests'may not be representative of true associations in the population. The purpose of this registered report is to: 1) select a single measure of ownership diversity that satisfies explicit, requisite axioms; 2) split the Annual Business Survey (ABS) into an exploratory sample (35%) used in this analysis and a confirmatory sample (65%) that will be accessed only after the publication of this report; 3) regress self-reported new-to-market innovation on the diversity measure along with industry and firm-size controls; 4) pass through those variables meeting precision and magnitude criteria for hypothesis testing using the confirmatory sample; and 5) document the full set of hypotheses to be tested in the final analysis along with a discussion of the false discovery and family-wise error rate corrections to be applied. The discussion concludes with the added value of implementing split sample designs within the Federal Statistical Research Data Center system where access to data is strictly controlled.
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  Survival Patterns Among Newcomers to Franchising
  

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• Working Paper

  
  
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• Working Paper

  
  
  WHAT DO I TAKE WITH ME?: THE MEDIATING EFFECT OF SPIN-OUT TEAM SIZE AND TENURE ON THE FOUNDER-FIRM PERFORMANCE RELATIONSHIP
  

  April 2013

  Authors: Benjamin Campbell, Martin Ganco, April M. Franco, Rajshree Agarwal

  Working Paper Number:

  CES-13-17

  Our study examines the mediating effect of spin-out team characteristics on the relationship between founder quality and parent and spin-out performance. Since the ability to transfer or recreate complementary assets is a critical determinant of performance, we theorize and show that founders with greater ability impact both parent firm and spin-out performance by assembling teams that represent strong complementary human capital. Using linked employee-employer US Census data from the legal services industry, we find founding team size and tenure mediate the founder quality effect. Our findings have practical implications for both managers of existing firms and aspiring founders as it relates to their human resource strategies: the factor most salient to performance is not the individual quality per se, but the manner in which it impacts the transfer and spillover of complementary human capital.
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