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Founder nativity, founding team formation, and firm performance in the U.S. high-tech sector

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Abstract

This paper is motivated by the movement of foreign-born entrepreneurs out of ethnic enclaves and into the mainstream, globally-connected economies of the countries of immigration, and from necessity to opportunity entrepreneurship. The theoretical contribution of the paper is to integrate the emerging literature on foreign-born entrepreneurship with work on the composition and impact of founding teams. Empirically, we draw on original quantitative and qualitative data on the U.S. high-tech sector. We find that homophily drives team formation and that nationality diversity in founding teams has a modest impact on firm performance.

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Notes

  1. The Corporate Research Board’s American Corporate Statistical Library (ACSL) contains more than 140 variables on all business establishments in the country. The ACSL links each establishment over time from its birth through any physical moves it makes, capturing changes in ownership along the way, and recording the establishment’s death if it occurs. The result is a unique longitudinal business file that allows for micro- and macroeconomic analysis of the U.S. economy. Corporate Research Board updates the ACSL every 6 months, drawing on hundreds of public and private sector data sources. Its principal data sources are Dun and Bradstreet’s DMI file, Bureau of Labor Statistics’s Industry Occupation Mix, and Census Bureau’s PUMS file.

  2. The employment growth quantifier (EGQ) is the product of the absolute and percent change in employment over a 4-year period of time, expressed as a decimal. EGQ is used to mitigate the unfavorable impact of measuring employment change solely in either percent or absolute terms, since the former favors small companies and the latter large businesses.

  3. In order to maintain historical continuity, our database uses SIC codes rather than NAICS codes. We dropped SIC 874, management and public relations, which met the BLS definition, but was so large that it would have dominated our results.

  4. If we omit educational level of the founders in this regression, the significance of the work tie variable drops below statistical significance, although none of the education variables is significant, either. If we think of the education variable as a proxy for positive selection among immigrants (in other words, the U.S. chooses them because of their academic prowess), we may hypothesize that higher and graduate education can substitute to a limited degree for prior shared work experience in the development of team trust.

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Acknowledgments

The author gratefully acknowledges financial support from the U.S. Small Business Administration Office of Advocacy (contract SBAHQ-09-M-0455), data and insights from Spencer Tracy of the Corporate Research Board, expert advice from Zoltan Acs and Paul Reynolds, research assistance from Fangmeng Tian and Jitendra Parajuli, and comments offered by participants at the Industry Studies Association 2010 annual meeting. Some of the data and descriptive analysis in this paper have previously been released by the SBA in research summary 349, July 2009.

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  1. School of Public Policy, George Mason University, 3351 Fairfax Drive, Arlington, VA, 22201, USA

    David M. Hart

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Correspondence to David M. Hart.

Appendix A

Appendix A

Table 12 High-Technology SICs (3 Digit)
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Hart, D.M. Founder nativity, founding team formation, and firm performance in the U.S. high-tech sector. Int Entrep Manag J 10, 1–22 (2014). https://doi.org/10.1007/s11365-011-0188-x

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