Founders Who Worked for Entrepreneurial Companies Before are Building More Successful Companies
Are founders with specific types of previous employment more likely to create successful entrepreneurial companies? A recent study published by Sage Journal titled “Local Prior Employment and Ecosystem Dynamics” aimed to answer this question. In this study, the success of a company was measured by the number of jobs a company created over a nine-year period.
The authors of the study collected data on entrepreneurs leading life-science companies founded between 1980 and 2012 in the North Carolina research triangle region. The 460 companies included in the study were linked to 872 founders with known work experience. The analysis explored four employment pathways among the local founders. These were previous employment at:
- one of the region’s three large research universities;
- one of the region’s prominent pharmaceutical corporations;
- a local branch of one of 19 non-pharmaceutical multinational corporations; and
- one of the region’s previously established entrepreneurial life science companies.
The analysis suggests two key findings:
- There was a more statistically significant correlation between founders who previously worked in at least one of the four local employment pathways and high job creation at their life-science companies when compared to founders who did not have previous local work experience.
- The factor that had the most statistically significant correlation with high levels of job creation was a founder who had work experience at a previously established local entrepreneurial life-science company.
The findings of this study suggest that regions hoping to realize immediate job growth may benefit from reorienting public resources and policy attention to supporting second-generation entrepreneurial companies. Endeavor Insight’s previous research supported by the Bill & Melinda Gates Foundation parallels these implications. Those findings suggest that founders with experience via previous employment at firms that had successfully scaled were more likely to scale their own companies to 50 or more employees.
Employees at successful entrepreneurial organizations benefit from intellectual and social capital, including knowledge of certain technologies, company organizational practices, and access to professional and peer networks. The employees who then go on to start their own spinoff companies are imprinted with this knowledge, which can help them scale and subsequently contribute to local job creation. Therefore, previous employment, among other key factors, may play an instrumental role in broader entrepreneurial economic development goals.
The full report can be accessed here.
Contributed by Penmai Chongtoua.