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When things get tough do the tough get going? Founders' pre-entry work experience and high-tech start-up survival during an industry crisis

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  • Grilli, Luca

Abstract

This article adds new insights into the relationship between founders' human capital and the survival prospects of startup businesses. The impact of founders' human capital on firm survival is controversial. On one hand, more experienced and skilled individuals are likely to create start-up businesses with a high chance of survival; on the other hand, their opportunity costs to run the firm may be high given the potential returns for investing their efforts in alternative employment opportunities. Analysing a sample of 179 Italian start-up companies created during 1995-early 2000 and operating in ICT services markets, this study provides evidence that, in intense industry crises (early 2000-2003), highly work experienced entrepreneurs may pursue an exit strategy and highlights the importance of distinguishing between different types of work experience and different exit routes. In particular, founding teams with highly specific work experience show higher probability of following the M&A route, while a higher level of generic work experience is more conducive to closure.

Suggested Citation

  • Grilli, Luca, 2009. "When things get tough do the tough get going? Founders' pre-entry work experience and high-tech start-up survival during an industry crisis," CEI Working Paper Series 2008-22, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2008-22
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/29297/WP2008-22.pdf
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    References listed on IDEAS

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    1. C. Mirjam van Praag, 2003. "Business Survival and Success of Young Small Business Owners," Tinbergen Institute Discussion Papers 03-050/3, Tinbergen Institute.
    2. Astebro, Thomas & Bernhardt, Irwin, 2003. "Start-up financing, owner characteristics, and survival," Journal of Economics and Business, Elsevier, vol. 55(4), pages 303-319.
    3. Silviano Pérez & Amparo Llopis & Juan Llopis, 2004. "The Determinants of Survival of Spanish Manufacturing Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 251-273, August.
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    Cited by:

    1. Tristan Boyer & Régis Blazy, 2013. "Born to be alive? The survival of innovative and non," Working Papers 2013-12, Department of Research, Ipag Business School.
    2. Tristan Boyer & Régis Blazy, 2014. "Born to be alive? The survival of innovative and non-innovative French micro-start-ups," Small Business Economics, Springer, vol. 42(4), pages 669-683, April.

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    More about this item

    Keywords

    High-tech entrepreneurship; Start-up exit; Founders' human capital; ICT;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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