Attracting Knowledge Workers to High-tech Ventures: A Signaling Perspective on Employee Mobility

Abstract

Strategy and entrepreneurship scholars have identified many benefits of signaling for new ventures to access resources in financial and other factor markets. However, scholars have not studied the extent to which new ventures can employ signals to hire new talent. This chapter investigates inventor mobility across biopharmaceutical new ventures and examines the effects of two signals, venture capitalist (VC) prominence and alliance network prominence. We suggest that VC prominence and alliance network prominence can provide assurances to prospective employees about a venture's resources and prospects, thereby facilitating inventor mobility owing to enhanced labor market efficiency. Empirical evidence from biopharmaceutical startups shows that new ventures can benefit from signals emanating from their ties to VCs and alliance partners and attract inventors to join them. We also find that these signaling effects attenuate as information asymmetry diminishes.