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Firm survival in traded industries: does localization moderate the effects of founding team experience?

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Abstract

Prior studies of the impact of founder team industry and start-up experience on firm survival have paid little attention to location decisions or cluster effects. In this paper, we focus on young firms doing business in industries that compete for customers in geographically dispersed markets (traded industries). We examine whether regional concentrations (localization) of related industrial firms moderate the effects of founder team industry and start-up experience on firm survival. The study draws on firm-level data from the Kauffman Firm Survey and on county business patterns data from the US Census Bureau. We found that localization negatively moderates the positive effects of founder team prior industry experience on firm survival. We did not find significant moderating effects of localization on founder team prior start-up experience. Our findings highlight the importance of accounting for location decisions and cluster effects when evaluating the human capital inputs of founder teams.

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Notes

  1. The KFS data is publicly available at http://www1.kauffman.org/kfs/. The geographic and detailed financial variables in this study were accessed with restrictions from the National Opinion Research Center (NORC).

  2. The statistics in this paper are weighted results. See Farhat and Robb (2014) for details on the sampling process and weight calculations.

  3. See also http://clustermapping.us

  4. See http://www.census.gov/programs-surveys/cbp/data/datasets.html

  5. See http://www.ers.usda.gov/data-products/commuting-zones-and-labor-market-areas.aspx

  6. The means for industry experience, start-up experience, and team age discussed here are different from Table 2, which shows the log transformed values.

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Acknowledgements

We are grateful to the Ewing Marion Kauffman Foundation for providing access to the NORC Enclave. We deeply appreciate the encouragement and insight provided by Joseph Farhat, Sharon Matusik, Alicia Robb, and David Robinson. Earlier versions of the paper have been read at the Kauffman Firm Survey (KFS) Conference in Durham, North Carolina, December 2015 and Second KFS Conference in Boulder Colorado, June 2016. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the Ewing Marion Kauffman Foundation.

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  1. Henry W. Bloch School of Management, University of Missouri Kansas City, 5110 Cherry Street, Kansas City, MO, 64110, USA

    Cheng Shu & Sharon A. Simmons

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  1. Cheng Shu
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Correspondence to Cheng Shu.

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Shu, C., Simmons, S.A. Firm survival in traded industries: does localization moderate the effects of founding team experience?. Small Bus Econ 50, 643–655 (2018). https://doi.org/10.1007/s11187-017-9912-4

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