The Missing Link: Analyzing the Effect of Employees on Entrepreneurial Venture
Bram Timmermans
Aalborg University 2nd year Ph.D. student
Studies on entrepreneurial ventures have predominantly focused on the traits and behavior of the entrepreneur itself. Although the importance of this agent is imperative, it is not likely to be the only explaining factor determining firm performance (Katz et al. 2000). As quoted: “the focus on the entrepreneur or founding team as the only source of human capital fails to recognize the important role that other employees in the new venture may play” (Cardon and Stevens 2004). One motivation to focus only on the entrepreneur is related to the priority setting that occurs in the data collection process. However, new sources of data allow us to expand our analyses by including characteristics of the employees and using these as an explanatory factor for firm performance. I will make use of the Danish Integrated Database on Labor Market Research, a matched employer-employee dataset for all of Denmark. Datasets of this nature are a powerful source for entrepreneurship research given that they solve previous data collecting issues (Campbell 2005).
The core of the dissertation will consist of three entrepreneur-employee related issues. The first paper takes its point of departure in Sørensen (2004). He found that the rate of entrepreneurship is dependent on the constraints in the labor market as a result of the competition for qualified employees. One question that arises is how new ventures that manage to recruit employees cope with these labor market pressures. I will use the educational and labor market variables in the database to indicate whether recruitment patterns of new entrepreneurial firms differ with regards to their search space, in terms of skills and location, in regions where there is a high degree of competition on the labor market. The argument by Dahl and Sorenson (2007) that entrepreneurs tend to hire employees from within the same region is one topic to explore further in this respect.
The second paper relates to the literature on social networks and social capital in firms. Because of their lack in organizational awareness, new ventures face problems in recruiting employees (Williamson et al. 2002). Consequently, they rely on their existing network to solve this task (Granovetter 1973, Grebel 2007). An interesting exercise, also suggested by Campbell (2005), would be to assess in what way a high degree of prior joint work experience among co-workers influences the success of the new venture. The presence of such relationships could be a sign of a high incidence of inherited knowledge (Campbell 2005) and the existence of a stronger organizational culture, which could positively influence the success rates of new ventures (Beckman 2007).
In the third paper, I will open up the discussion regarding entrepreneur-employee homophily in entrepreneurial ventures. McPherson et al. (2001) and Ruef et al. (2003) addressed the issue by arguing that the creation of entrepreneurial teams is driven by similarity instead of diversity. One might assume a similar conduct in recruiting employees, which could affect the performance of the new venture. However, two additional issues will be studied. The first issue is the performance of an entrepreneurial venture with a homogeneous workforce relative to a heterogeneous one. The second issue is the use of rather static indicators, i.e. age, gender, ethnicity and education, when measuring homophily. One crucial diversity element, the experience of a recruited individual, is not taken into consideration in the existing studies. This might be an important driver of diversity in an organization even though other characteristics are similar. Focusing on the employee's firm and industry experience, thereby also introducing the concept of related variety (Frenken et al. 2007), might give more insights in how diverse an entrepreneurial venture really is.
References:
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