Human Capital of Spinoffs

Abstract

This study examines how the human capital of spinoff founders and the performance of parent firms affect the success of spinoffs by using a matched employer-employee dataset of new ventures covering 7 SIC 1-digit sectors in the United States. Our data cover 29,100 spinoffs and 379,800 new ventures formed by lone entrepreneurs in 23 states between 1992 and 2005. We evaluate several components of human capital: outcomes of human capital investments vs. human capital investments, task-related human capital vs. non-task-related human capital, and individual human capital vs. group capital, and examine whether these types of human capital affect spinoff performance differently. We find that spinoff founder’s earnings (an outcome of human capital investment) and industry experience (task-related human capital) prior to spinoff formation have strong positive correlations with spinoff performance, as measured by size, wage and growth rate. We also find that group experience of spinoff founders prior to spinoff fo...