Advertisement

Journal of Evolutionary Economics

, Volume 25, Issue 5, pp 925–957 | Cite as

Entrepreneurial human capital and the survival of new firms in high- and low-tech sectors

  • Masatoshi KatoEmail author
  • Yuji Honjo
Regular Article

Abstract

This paper explores the role of entrepreneurial human capital in the post-entry performance of firms in high- and low-tech sectors. Using a dataset from the Japanese manufacturing industry, we examine the determinants of new-firm survival, taking into account exit routes to differentiate ‘failure’ (bankruptcy) and ‘nonfailure’ (voluntary liquidation and merger) outcomes. Our results show that entrepreneurial human capital, measured as educational background, is important in reducing the probability of bankruptcy in high-tech sectors, although it does not help significantly in this regard in low-tech sectors. By contrast, we provide evidence that entrepreneurs with high levels of human capital are more likely to voluntarily close businesses both in high- and low-tech sectors. Furthermore, we find that firms managed by entrepreneurs with high levels of human capital are more likely to exit via merger than others, particularly in high-tech sectors. We provide evidence that entrepreneurs with scientific backgrounds are less likely to voluntarily exit than those with humanistic backgrounds, particularly in low-tech sectors.

Keywords

New firm Entrepreneurial human capital Survival Exit High-tech Low-tech 

JEL Classification

M13 L26 J24 G33 G34 

Notes

Acknowledgments

We extend our thanks for comments from Alex Coad, Kim Huynh, Francine Lafontaine, Jose Mata, Jose Maria Millan, Masayuki Morikawa, Sadao Nagaoka, Hiroyuki Odagiri, Hiroyuki Okamuro, and the participants in seminars at Hitotsubashi University, Erasmus University Rotterdam, the University of Groningen, and the University of Frankfurt, and in the EARIE Annual Conference (Istanbul), the JEA Autumn Meeting (Hyogo), the CAED Conference (London), the RENT Annual Conference (Maastricht), the Competition Policy Research Center Conference (Tokyo), and the Japan Productivity Center Workshop (Tokyo). We also thank the editors (Uwe Cantner and Roberto Fontana) and two anonymous referees for their useful comments. Financial supports from Kwansei Gakuin University Special Grant for Individual Research (A) for the first author and Grant-in-Aid for Scientific Research (B) (No. 26285060) for the first and second authors are gratefully acknowledged. Needless to say, any remaining errors are our own.

References

  1. Acs ZJ, Armington C, Zhang T (2007) The determinants of new-firm survival across regional economies: the role of human capital stock and knowledge spillover. Pap Reg Sci 86:367–391CrossRefGoogle Scholar
  2. Arora A, Nandkumar A (2011) Cash-out or flameout! Opportunity cost and entrepreneurial strategy: theory, and evidence from the information security industry. Manage Sci 57:1844–1860CrossRefGoogle Scholar
  3. Åstebro T, Bernhardt I (2005) The winner’s curse of human capital. Small Bus Econ 24:63–87CrossRefGoogle Scholar
  4. Audretsch DB (1991) New-firm survival and the technological regime. Rev Econ Stat 68:520–526Google Scholar
  5. Audretsch DB (1995) Innovation, growth and survival. Int J Ind Organ 13:441–457CrossRefGoogle Scholar
  6. Audretsch DB, Mahmood T (1991) The hazard rate of new establishments: a first report. Econ Lett 36:409–412CrossRefGoogle Scholar
  7. Audretsch DB, Mahmood T (1995) New firm survival: new results using a hazard function. Rev Econ Stat 64:97–103CrossRefGoogle Scholar
  8. Audretsch DB, Menkveld AJ, Thurik R (1996) The decision between internal and external R & D. J Inst Theor Econ 152:519–530Google Scholar
  9. Bartelsman E, Scarpetta S, Schivardi F (2005) Comparative analysis of firm demographics and survival: evidence from micro-level sources in OECD countries. Ind Corp Change 14:365–391CrossRefGoogle Scholar
  10. Bates T (1990) Entrepreneur human capital inputs and small business longevity. Rev Econ Stat 72:551–559CrossRefGoogle Scholar
  11. Bates T (2005) Analysis of young, small firms that have closed: delineating successful from unsuccessful closures. J Bus Ventur 20:343–358MathSciNetCrossRefGoogle Scholar
  12. Bradburd R, Caves RE (1982) A closer look at the effect of market growth on industries profits. Rev Econ Stat 64:635–645CrossRefGoogle Scholar
  13. Branstetter L, Lima F, Taylor LJ, Venâncio A (2014) Do entry regulations deter entrepreneurship and job creation? Evidence from recent reforms in Portugal. Econ J 124:805–832CrossRefGoogle Scholar
  14. Buddelmeyer H, Jensen PH, Webster E (2010) Innovation and the determinants of company survival. Oxford Econ Pap 62:261–285CrossRefGoogle Scholar
  15. Buehler S, Kaiser C, Jaeger F (2006) Merge or fail? The determinants of mergers and bankruptcies in Switzerland, 1995–2000. Econ Lett 90:88–95CrossRefGoogle Scholar
  16. Carter NM, Williams M, Reynolds PD (1997) Discontinuance among new firms in retail: the influence of initial resources, strategy, and gender. J Bus Ventur 12:125–145CrossRefGoogle Scholar
  17. Cassar G (2006) Entrepreneur opportunity costs and intended venture growth. J Bus Ventur 21:610–632CrossRefGoogle Scholar
  18. Caves RE (1998) Industrial organization and new findings on the turnover and mobility of firms. J Econ Lit 36:1947–1982Google Scholar
  19. Cefis E, Marsili O (2011) Born to flip. Exit decisions of entrepreneurial firms in high-tech and low-tech industries. J Evol Econ 14:1167–1192Google Scholar
  20. Cefis E, Marsili O (2012) Going, going, gone. Exit forms and the innovative capabilities of firms. Res Policy 41:795–807CrossRefGoogle Scholar
  21. Coad A (2013) Death is not a success: reflections on business exits. Int Small Bus J. forthcomingGoogle Scholar
  22. Colombo MG, Grilli L (2005) Founders’ human capital and the growth of new technology-based firms: a competence-based view. Res Policy 34:795–816CrossRefGoogle Scholar
  23. Cressy R (1996) Are business startups debt-rationed? Econ J 106:1253–1270CrossRefGoogle Scholar
  24. Cueto B, Mato J (2006) An analysis of self-employment subsidies with duration models. Appl Econ 38:23–32CrossRefGoogle Scholar
  25. Disney R, Haskel J, Heden Y (2003) Entry, exit and establishment survival in UK manufacturing. J Ind Econ 51:91–112CrossRefGoogle Scholar
  26. Doi N (1999) The determinants of firm exit in Japanese manufacturing industries. Small Bus Econ 13:331–337CrossRefGoogle Scholar
  27. Dunne T, Roberts MJ, Samuelson L (1988) Patterns of firm entry and exit in U.S. manufacturing industries. Rand J Econ 19:495–515CrossRefGoogle Scholar
  28. Esteve-Pérez S, Sanchis-Llopis A, Sanchis-Llopis J (2010) A competing risks analysis of firms’ exit. Empir Econ 38:281–304CrossRefGoogle Scholar
  29. Evans DS (1987) The relationship between firm growth, size, and age: estimates for 100 manufacturing industries. J Ind Econ 35:567–581CrossRefGoogle Scholar
  30. Evans DS, Jovanovic B (1989) An estimated model of entrepreneurial choice under liquidity constraints. J Polit Econ 97:808–827CrossRefGoogle Scholar
  31. Fairlie RW, Robb AM (2009) Gender differences in business performance: evidence from the characteristics of business owners survey. Small Bus Econ 33:375–395CrossRefGoogle Scholar
  32. Fontana R, Nesta L (2009) Product innovation and survival in a high-tech industry. Rev Ind Organ 34:287–306CrossRefGoogle Scholar
  33. Fontana R, Nesta L (2010) Pre-entry experience, post-entry learning and firm survival: evidence from the local area networking switch industry. Struct. Change. Econ Dynam 21:41–49Google Scholar
  34. Fotopoulos G, Louri H (2000) Determinants of hazard confronting new entry: does financial structure matter? Rev Ind Organ 17:285–300CrossRefGoogle Scholar
  35. Geroski PA (1995) What do we know about entry? Int J Ind Organ 13:421–440CrossRefGoogle Scholar
  36. Gimeno J, Folta TB, Cooper AC, Woo CY (1997) Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Adm Sci Q 42:750–783CrossRefGoogle Scholar
  37. Grilli L, Piva E, Lamastra CR (2010) Firm dissolution in high-tech sectors: an analysis of closure and M&A. Econ Lett 109:14–16CrossRefGoogle Scholar
  38. Guiso L (1998) High-tech firms and credit rationing. J Econ Behav Organ 35:39–59CrossRefGoogle Scholar
  39. Hall B, Lerner J (2010) The financing of R&D and innovation. In: Hall B., Rosenberg N. (eds) Handbook of the economics of innovation, vol 1, North-Holland, pp 609–639Google Scholar
  40. Harada N (2003) Who succeeds as an entrepreneur? An analysis of the post-entry performance of new firms in Japan. Jpn World Econ 15:211–222CrossRefGoogle Scholar
  41. Harada N (2007) Which firms exit and why? An analysis of small firm exits in Japan. Small Bus Econ 29:401–414CrossRefGoogle Scholar
  42. Harhoff D, Stahl K, Woywode M (1998) Legal form, growth and exit of West German firms—empirical results for manufacturing, construction, trade and service industries. J Ind Econ 46:453–488CrossRefGoogle Scholar
  43. Himmelberg CP, Petersen BC (1994) R&D and internal finance: a panel study of small firms in high-tech industries. Rev Econ Stat 76:38–51CrossRefGoogle Scholar
  44. Honjo Y (2000a) Business failure of new software firms. Appl Econ Lett 7:575–579CrossRefGoogle Scholar
  45. Honjo Y (2000b) Business failure of new firms: an empirical analysis using a multiplicative hazards model. Int J Ind Organ 18:557–574CrossRefGoogle Scholar
  46. Honjo Y, Kato M, Okamuro H (2014) R&D investment of start-up firms: does founders’ human capital matter? Small Bus Econ 42:207–220CrossRefGoogle Scholar
  47. Huynh KP, Petrunia RJ, Voia M (2010) The impact of initial financial state on firm duration across entry cohorts. J Ind Econ 58:661–689CrossRefGoogle Scholar
  48. Jenkins SP (2005) Survival analysis. unpublished manuscriptGoogle Scholar
  49. Kalleberg AL, Leicht KT (1991) Gender and organizational performance: determinants of small business survival and success. Acad Manage J 34:136–161CrossRefGoogle Scholar
  50. Kato M, Odagiri H (2012) Development of university life-science programs and university–industry joint research in Japan. Res Policy 41:939–952CrossRefGoogle Scholar
  51. Kato M, Okamuro H, Honjo Y (2015) Does founders’ human capital matter for innovation? Evidence from Japanese start-ups. J Small Bus Manage 53:114–128CrossRefGoogle Scholar
  52. Malerba F, Nelson R, Orsenigo L, Winter S (2007) Demand, innovation, and the dynamics of market structure: the role of experimental users and diverse preferences. J Evol Econ 17:371–399CrossRefGoogle Scholar
  53. Malerba F, Orsenigo L (1997) Technological regimes and sectoral patterns of innovative activities. Ind Corp Change 6:83–118CrossRefGoogle Scholar
  54. Mata J, Antunes A, Portugal P (2007) Borrowing patterns, bankruptcy and voluntary liquidation. Working paper, Universidade Nova de LisboaGoogle Scholar
  55. Mata J, Portugal P (1994) Life duration of new firms. J Ind Econ 42:227–245CrossRefGoogle Scholar
  56. Mata J, Portugal P, Guimarães P (1995) The survival of new plants: start-up conditions and post-entry evolution. Int J Ind Organ 13:459–481CrossRefGoogle Scholar
  57. Organisation for Economic Co-operation and Development (2011) Technology intensity definition: classification of manufacturing industries into categories based on R&D intensities. Directorate for Science, Technology and Industry, ParisGoogle Scholar
  58. Okamuro H, Kato M, Honjo Y (2011) Determinants of R&D cooperation in Japanese start-ups. Res Policy 40:728–738CrossRefGoogle Scholar
  59. Santarelli E, Vivarelli M (2002) Is subsidizing entry an optimal policy? Ind Corp Change 11:39–52CrossRefGoogle Scholar
  60. Santarelli E, Vivarelli M (2007) Entrepreneurship and the process of firms’ entry, survival and growth. Ind Corp Change 16:455–488CrossRefGoogle Scholar
  61. Schary MA (1991) The probability of exit. Rand J Econ 22:339–353CrossRefGoogle Scholar
  62. Schumpeter JA (1934) The theory of economic development: an inquiry into profits, capital, interest, and the business cycle. Harvard University Press, CambridgeGoogle Scholar
  63. Schumpeter JA (1943) Capitalism, socialism and democracy. Harper, New YorkGoogle Scholar
  64. Shane S (2009) Why encouraging more people to become entrepreneurs is bad public policy. Small Bus Econ 33:141–149CrossRefGoogle Scholar
  65. Storey DJ (1994) Understanding the small business sector. Routledge, LondonGoogle Scholar
  66. Storey DJ, Greene F (2010) Small Business and Entrepreneurship. Pearson Education, Upper Saddle RiverGoogle Scholar
  67. Taylor M (1999) Survival of the fittest? an analysis of self-employment duration in Britain. Econ J 109:C140–C155CrossRefGoogle Scholar
  68. Unger JM, Rauch A, Frese M, Rosenbusch N (2011) Human capital and entrepreneurial success: a meta-analytical review. J Bus Ventur 26:341–358CrossRefGoogle Scholar
  69. Van Praag CM (2003) Business survival and success of young small business owners. Small Bus Econ 21:1–17CrossRefGoogle Scholar
  70. Wagner J (1994) The post-entry performance of new small firms in German manufacturing industries. J Ind Econ 42:141–154CrossRefGoogle Scholar
  71. Wagner S, Cockburn I (2010) Patents and the survival of internet-related IPOs. Res Policy 39:214–228CrossRefGoogle Scholar
  72. Wennberg K, Wiklund J, DeTienne DR, Cardon MS (2010) Reconceptualizing entrepreneurial exit: divergent exit routes and their drivers. J Bus Ventur 25:361–375CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.School of EconomicsKwansei Gakuin UniversityHyogoJapan
  2. 2.Faculty of CommerceChuo UniversityTokyoJapan

Personalised recommendations