Entrepreneurial Hiring Strategies in Standalone and Portfolio Ventures

Abstract

Acquiring talent is a central decision for new ventures. Yet recruiting decisions are made under demand uncertainty, making the optimal hiring strategy unclear. We argue that such strategy depends on the type of entrepreneurship pursued: whether entrepreneurship entails founding a standalone venture or a portfolio of ventures. We predict that standalone ventures will prioritize size flexibility by minimizing the number of initial hires. By contrast, portfolio ventures will make greater investments because they can redeploy unused labor within the portfolio. Thus, portfolio entrepreneurs will prioritize resource flexibility by hiring non-specialized workers, who are easier to redeploy. Finally, we expect differences between hiring strategies to diminish with labor market flexibility. We test our predictions on the population of Finnish entrepreneurs between 2007 and 2017.