Whom do new firms hire?

Michael S. Dahl, Steven Klepper

Research output: Contribution to journalJournal articleResearchpeer-review

21 Citations (Scopus)

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.
Original languageEnglish
JournalIndustrial and Corporate Change
Volume24
Issue number4
Pages (from-to)819-836
ISSN0960-6491
DOIs
Publication statusPublished - 27 Jun 2015

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New firms
Wages
Employees
Large firms
Firm capabilities
Prediction
Average cost
Firm productivity
Firm size
Matched employer-employee data
Firm growth
Denmark
Productivity
Hiring
Workers

Keywords

  • Hiring choices
  • Employees
  • Productivity
  • Theoretical model

Cite this

Dahl, Michael S. ; Klepper, Steven. / Whom do new firms hire?. In: Industrial and Corporate Change. 2015 ; Vol. 24, No. 4. pp. 819-836.
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Dahl, MS & Klepper, S 2015, 'Whom do new firms hire?' Industrial and Corporate Change, vol. 24, no. 4, pp. 819-836. https://doi.org/10.1093/icc/dtv026

Whom do new firms hire? / Dahl, Michael S.; Klepper, Steven.

In: Industrial and Corporate Change, Vol. 24, No. 4, 27.06.2015, p. 819-836.

Research output: Contribution to journalJournal articleResearchpeer-review

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