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

Research paper by Cheng Shu, Sharon A. Simmons

Indexed on: 18 Feb '18Published on: 25 Jul '17Published in: Small Business Economics



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.