Early Joiners and Startup Performance

RePEc Short ID: pgo742
ORCID iD: 0000-0003-4655-8985

Choi, Joonkyu; Goldschlag, Nathan; Haltiwanger, John; Kim, J. Daniel

doi:10.17016/FEDS.2023.012

Working Paper

Early Joiners and Startup Performance

Abstract: We show that early joiners---non-founder employees in the first year of a startup---play a critical role in explaining firm performance. We use administrative employee-employer matched data on all US startups and utilize the premature death of workers as a natural experiment exogenously separating talent from young firms. We find that losing an early joiner has a large negative effect on firm size that persists for at least ten years. When compared to that of a founder, losing an early joiner has a smaller effect on firm death but intensive margin effects on firm size are similar in magnitude. We also find that early joiners become relatively more important with the age of the firm. In contrast, losing a later joiner yields only a small and temporary decline in firm performance. We provide evidence that is consistent with the idea that organization capital, an important driver of startup success, is embodied in early joiners.

Keywords: Founding teams; Premature death; Firm dynamics; Young firm growth; Organization capital;

JEL Classification: ;

https://doi.org/10.17016/FEDS.2023.012