Human capital can make or break the future of a startup. Founders are usually in the spotlight when this topic is discussed—the success of their businesses depends on their attitude towards risk, personality traits, or professional experience. But who are the ideal first employees?
According to Jara-Figueroa et al., it all depends on the nature of the startup. The authors studied approximately 2 million new firms over a 4 year period in Brazil. Less than one percent of firms were pioneers, those bringing a new industry to their region and, therefore, playing an essential role in economic diversification. The rest were non-pioneer firms, which operated in established industries in their region.
The pioneer firms they studied needed employees with industry-specific knowledge to survive and grow. The impact of occupation-specific skills and general schooling were insignificant. Three explanations are provided for this finding.
- First, early hires of pioneer firms often take up managerial responsibilities where industry-specific knowledge might be more important than occupation-specific knowledge or general schooling.
- Second, industry-specific skills might take longer to acquire than occupation-specific skills, which gives an advantage to companies with employees that already have industry-specific knowledge.
- Third, people with industry-specific knowledge also know the social network in which the industry is embedded. This gives them access to potential clients, customers and employees.
On the other hand, non-pioneer firms had different needs. In their case, occupation-specific knowledge and general years of schooling that first hires brought to the company had significant impact on future performance.
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Contributed by Bence Juhasz.