Business owners, employees, and firm performance
The novel Finnish Longitudinal OWNer-Employer-Employee (FLOWN) database was used to analyze how the characteristics of owners and employees relate to firm performance as determined by labor productivity, survival, and employment growth. Focusing on the role of the employment history, the results show that previous experience in a high-productivity firm strongly predicts high productivity and probability of survival for the entrepreneur’s new firm. This can be interpreted as evidence of knowledge spillovers through labor mobility of both the owners and the employees. The results also show that the owner’s high education in a technical field is positively related to firm performance. Different findings for owner-entrepreneurs and pure owners suggest that the definition of entrepreneurship matters.
KeywordsEntrepreneurship Ownership Firm performance Human capital Diffusion of knowledge
JEL codesL25 L26 J24 J62 O33
We thank Ari Hyytinen, Antti Kauhanen, Pekka Ilmakunnas and Petri Rouvinen as well as participants at the XXXVIII Annual Meeting of the Finnish Economic Association in Pori and the ETLA workshop for invaluable comments and suggestions. Part of the data gathering and analysis was carried out at Statistics Finland under its terms and conditions for confidentiality. For access to the data, contact the Research Services of Statistics Finland, FI-00022 Statistics Finland.
The work was supported by TEKES, the Finnish Funding Agency for Technology and Innovation (project 2867/31/2013) and the TT Foundation.
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