Skip to main content
Top
Published in:

27-03-2018

Business owners, employees, and firm performance

Authors: Mika Maliranta, Satu Nurmi

Published in: Small Business Economics | Issue 1/2019

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

The novel Finnish Longitudinal OWNer-Employer-Employee (FLOWN) database was used to analyze how the characteristics of owners and employees relate to firm performance as determined by labor productivity, survival, and employment growth. Focusing on the role of the employment history, the results show that previous experience in a high-productivity firm strongly predicts high productivity and probability of survival for the entrepreneur’s new firm. This can be interpreted as evidence of knowledge spillovers through labor mobility of both the owners and the employees. The results also show that the owner’s high education in a technical field is positively related to firm performance. Different findings for owner-entrepreneurs and pure owners suggest that the definition of entrepreneurship matters.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Footnotes
1

The FLOWN database is available via Statistics Finland’s FIONA remote access system. The database links information on the owners of limited liability companies to their firms, with information on dividends by firm and by owner.

 
2

In other words, we measured the relative productivity level within industries classified at about two-digit industry level.

 
3

Note that productivity is estimated in log so that the percentage effect is 25.7% = exp(0.229)-1.

 
4

The estimate from the unweighted regression is 24.0% = exp(0.215)-1.

 
5

The estimate from the unweighted regression is 18.1% = exp(0.166)-1 but not statistically significant.

 
6

The estimate from the unweighted regression is 12.4% = exp(0.117)-1.

 
7

The estimate from the unweighted regression is 14.3% = exp(0.134)-1.

 
8

The estimate from the unweighted regression is 29.2% = exp(0.256)-1.

 
9

But the estimate from the unweighted regression is only 30.2% = exp(0.264)-1.

 
10

But the estimate from the unweighted regression is only 33.9% = exp(0.292)-1.

 
11

Using analytic weights is equivalent to estimating a model multiplied by the square root of w where w is the weight variable. Instead of using individual-level data, our data presents enterprise-level averages so the coefficients and covariance matrix from the transformed regression are obtained using this procedure. See more information: https://​www.​stata.​com/​support/​faqs/​statistics/​analytical-weights-with-linear-regression/​

 
12

We thank one of our anonymous referees for this suggestion.

 
Literature
  1. Aghion, P., Akcigit, U. & Howitt, P. (2014). Chapter 1—What do we learn from Schumpeterian growth theory? In A. Philippe & N. D. Steven (Eds.), Handbook of economic growth (Vol. Volume 2, pp. 515–563): Elsevier.
  2. Ali-Yrkkö, J., Pajarinen, M., Rouvinen, P. & Ylä-Anttila, P. 2007. Family businesses and globalization in Finland. Available at SSRN 981129.
  3. Andersson, M., Baltzopoulos, A., & Lööf, H. (2012). R&D strategies and entrepreneurial spawning. Research Policy, 41(1), 54–68. https://​doi.​org/​10.​1016/​j.​respol.​2011.​08.​005.View Article
  4. Anyadike-Danes, M., Bjuggren, C.-M., Gottschalk, S., Hölzl, W., Johansson, D., Maliranta, M., et al. (2015). An international cohort comparison of size effects on job growth. Small Business Economics, 44(4), 821–844. https://​doi.​org/​10.​1007/​s11187-014-9622-0.View Article
  5. Balsvik, R. (2011). Is labor mobility a channel for spillovers from multinationals? Evidence from Norwegian manufacturing. The Review of Economics and Statistics, 93(1), 285–297. https://​doi.​org/​10.​1162/​REST_​a_​00061.View Article
  6. Bates, T. (1990). Entrepreneur human capital inputs and small business longevity. The Review of Economics and Statistics, https://​doi.​org/​10.​2307/​2109594 551-559.
  7. Berglann, H., Moen, E. R., Røed, K., & Skogstrøm, J. F. (2011). Entrepreneurship: origins and returns. Labour Economics, 18(2), 180–193. https://​doi.​org/​10.​1016/​j.​labeco.​2010.​10.​002.View Article
  8. Bloom, N., Genakos, C., Sadun, R., & Van Reenen, J. (2012). Management practices across firms and countries. Academy of Management Perspectives, 26(1), 12–33. https://​doi.​org/​10.​5465/​amp.​2011.​0077.View Article
  9. Bloom, N., Sadun, R. & Van Reenen, J. (2016). Management as a technology? , Harvard Business School Strategy Unit Working Paper No. 16–133.
  10. Carree, M., & Klomp, L. (1996). Small business and job creation: a comment. Small Business Economics, 8(4), 317–322.View Article
  11. Claessens, S., Djankov, S., & Lang, L. H. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58(1), 81–112. https://​doi.​org/​10.​1016/​S0304-405X(00)00067-2.View Article
  12. Colombo, M. G., & Grilli, L. (2005). Founders’ human capital and the growth of new technology-based firms: a competence-based view. Research Policy, 34(6), 795–816. https://​doi.​org/​10.​1016/​j.​respol.​2005.​03.​010.View Article
  13. Cooper, A. C., Gimeno-Gascon, F. J., & Woo, C. Y. (1994). Initial human and financial capital as predictors of new venture performance. Journal of Business Venturing, 9(5), 371–395. https://​doi.​org/​10.​1016/​0883-9026(94)90013-2.View Article
  14. Dahlqvist, J., Davidsson, P., & Wiklund, J. (2000). Initial conditions as predictors of new venture performance: a replication and extension of the Cooper et al. study. Enterprise and Innovation Management Studies, 1(1), 1–17. https://​doi.​org/​10.​1080/​146324400363491.View Article
  15. Davis, S. J. & Haltiwanger, J. 1999. Gross job flows. In O. C. Ashenfelter & D. Card (Eds.), Handbook of labor economics, Volume 3b: Elsevier.
  16. Davis, S. J., Haltiwanger, J., & Schuh, S. (1996). Small business and job creation: dissecting the myth and reassessing the facts. Small Business Economics, 8(4), 297–315 http://​www.​jstor.​org/​stable/​40228707.View Article
  17. Davis, J. S., Haltiwanger, J., Handley, K., Jarmin, R., Lerner, J., & Miranda, J. (2014). Private equity, jobs, and productivity. American Economic Review, 104(12), 3956–3990. https://​doi.​org/​10.​1257/​aer.​104.​12.​3956.View Article
  18. Dumont, M., Rayp, G., Verschelde, M. & Merlevede, B. 2016. The contribution of start-ups and young firms to industry-level efficiency growth. Applied Economics, https://​doi.​org/​10.​1080/​00036846.​2016.​1184381, 1–16.
  19. Ehrl, P. (2014). High-wage workers and high-productivity firms—a regional view on matching in Germany. BGPE Discussion Paper, No. 149.
  20. Elfenbein, D. W., Hamilton, B. H., & Zenger, T. R. (2010). The small firm effect and the entrepreneurial spawning of scientists and engineers. Management Science, 56(4), 659–681. https://​doi.​org/​10.​1287/​mnsc.​1090.​1130.View Article
  21. Faccio, M., & Lang, L. H. (2002). The ultimate ownership of Western European corporations. Journal of Financial Economics, 65(3), 365–395. https://​doi.​org/​10.​1016/​S0304-405X(02)00146-0.View Article
  22. Goetz, C., Hyatt, H. R., McEntarfer, E. & Sandusky, K. 2017. The promise and potential of linked employer-employee data for entrepreneurship research. In J. Haltiwanger, E. Hurst, J. Miranda & A. Schoar (Eds.), Measuring entrepreneurial businesses: current knowledge and challenges (Vol. Studies in Income and Wealth, Volume 75, pp. 433–462): University of Chicago Press.
  23. Haltiwanger, J. C., Lane, J. I., & Spletzer, J. R. (1999). Productivity differences across employers: the roles of employer size, age, and human capital. American Economic Review, 89(2), 94–98 http://​www.​jstor.​org/​stable/​117087.View Article
  24. Haltiwanger, J. C., Lane, J. I., & Spletzer, J. R. (2007). Wages, productivity, and the dynamic interaction of businesses and workers. Labour Economics, 14(3), 575–602. https://​doi.​org/​10.​1016/​j.​labeco.​2005.​10.​005.View Article
  25. Haltiwanger, J., Jarmin, R. S., & Miranda, J. (2013). Who creates jobs? Small versus large versus young. Review of Economics and Statistics, 95(2), 347–361. https://​doi.​org/​10.​1162/​REST_​a_​00288.View Article
  26. Haltiwanger, J., Jarmin, R. S., Kulick, R. & Miranda, J. 2017. High growth young firms: contribution to job, output, and productivity growth. In J. Haltiwanger, E. Hurst, J. Miranda & A. Schoar (Eds.), Measuring entrepreneurial businesses: current knowledge and challenges (pp. 11–62): University of Chicago Press (available at http://​www.​nber.​org/​chapters/​c13492.​pdf ).
  27. Hyytinen, A., & Maliranta, M. (2008). When do employees leave their job for entrepreneurship? Scandinavian Journal of Economics, 110(1), 1–21. https://​doi.​org/​10.​1111/​j.​l467-9442.​2008.​00522.​x.View Article
  28. Hyytinen, A., & Maliranta, M. (2013). Firm lifecycles and evolution of industry productivity. Research Policy, 42(5), 1080–1098. https://​doi.​org/​10.​1016/​j.​respol.​2013.​01.​008.View Article
  29. Hyytinen, A., Lahtonen, J., & Pajarinen, M. (2014). Forecasting errors of new venture survival. Strategic Entrepreneurship Journal, 8(4), 283–302. https://​doi.​org/​10.​1002/​sej.​1187.View Article
  30. Ilmakunnas, P., & Maliranta, M. (2005). Technology, labour characteristics and wage-productivity gaps. Oxford Bulletin of Economics and Statistics, 67(5), 623–644. https://​doi.​org/​10.​1111/​j.​1468-0084.​2005.​00134.​x.View Article
  31. Ilmakunnas, P. & Maliranta, M. 2016. How does the age structure of worker flows affect firm performance? Journal of Productivity Analysis, https://​doi.​org/​10.​1007/​s11123-016-0471-5, 1–20.
  32. Ilmakunnas, P., Maliranta, M. & Vainiomäki, J. 2001. Linked employer-employee data on Finnish plants for the analysis of productivity, wages and turnover. In T. Jensen & A. Holm (Eds.), Nordic labour market research on register data (pp. 205–246). Copenhagen: Nordic Council of Ministers. TemaNord 2001:593.
  33. Kerr, W. R., Nanda, R., & Rhodes-Kropf, M. (2014). Entrepreneurship as experimentation. Journal of Economic Perspectives, 28(3), 25–48. https://​doi.​org/​10.​1257/​jep.​28.​3.​25.View Article
  34. Kontinen, T., & Ojala, A. (2010). Internationalization pathways of family Smes: psychic distance as a focal point. Journal of Small Business and Enterprise Development, 17(3), 437–454. https://​doi.​org/​10.​1108/​1462600101106872​5.View Article
  35. Lazear, E. P. (2005). Entrepreneurship. Journal of Labor Economics, 23(4), 649–680. https://​doi.​org/​10.​1086/​491605.View Article
  36. Levine, R., & Rubinstein, Y. (2016). Smart and illicit: who becomes an entrepreneur and do they earn more? Quarterly Journal of Economics, 132(2), 963–1018. https://​doi.​org/​10.​1093/​qje/​qjw044.View Article
  37. Lofstrom, M., Bates, T., & Parker, S. C. (2014). Why are some people more likely to become small-businesses owners than others: entrepreneurship entry and industry-specific barriers. Journal of Business Venturing, 29(2), 232–251. https://​doi.​org/​10.​1016/​j.​jbusvent.​2013.​01.​004.View Article
  38. Maliranta, M. & Hurri, P. (2018). Micro-level dynamics of output, employment and productivity growth: the role of high-growth firms. Unpublished manuscript, January 2018, Helsinki.
  39. Maliranta, M. & Nurmi, S. (2004). Analyzing entrepreneurship with the Finnish linked employer-employee data Fleed. Matching and qualitative properties of the data. The Research Institute of the Finnish Economy (ETLA), Discussion papers No. 920. Helsinki.
  40. Maliranta, M., Mohnen, P., & Rouvinen, P. (2009). Is inter-firm labor mobility a channel of knowledge spillovers? Evidence form a linked employer-employee panel. Industrial and Corporate Change, 18(6), 1161–1191. https://​doi.​org/​10.​1093/​icc/​dtp031.View Article
  41. Murray, G., Hyytinen, A. & Maula, M. 2009. Growth entrepreneurship and finance. Chapters, 147–202.
  42. Nanda, R., & Sørensen, J. B. (2010). Workplace peers and entrepreneurship. Management Science, 56(7), 1116–1126. https://​doi.​org/​10.​1287/​mnsc.​1100.​1179.View Article
  43. Pajarinen, M., Rouvinen, P. & Ylä-Anttila, P. (2006). Uusyrittäjien Kasvuhakuisuus. ETLA discussion papers, The Research Institute of the Finnish Economy (ETLA).
  44. Pajarinen, M., Rouvinen, P. & Ylä-Anttila, P. (2011). Omistajuuden Vaikutus Suomalaisen Työllisyyden Kasvuun Ja Pysyvyyteen. The Research Institute of the Finnish Economy, Discussion Papers No. 1242.
  45. Rocha, V., Van Praag, M., Folta, T. B. & Carneiro, A. J. M. (2016). Entrepreneurial choices of initial human capital endowments and new venture success. IZA, DP No. 9919.
  46. Sahaym, A., Howard, M. D., Basu, S., & Boeker, W. (2016). The parent’s legacy: firm founders and technological choice. Journal of Business Research, 69(8), 2624–2633. https://​doi.​org/​10.​1016/​j.​jbusres.​2016.​04.​012.View Article
  47. Shane, S., & Stuart, T. (2002). Organizational endowments and the performance of university start-ups. Management Science, 48(1), 154–170. https://​doi.​org/​10.​1287/​mnsc.​48.​1.​154.​14280.View Article
  48. Stoyanov, A., & Zubanov, N. (2012). Productivity spillovers across firms through worker mobility. American Economic Journal: Applied Economics, 4(2), 168–198. https://​doi.​org/​10.​1257/​app.​4.​2.​168.View Article
  49. Stuetzer, M., Obschonka, M., & Schmitt-Rodermund, E. (2013). Balanced skills among nascent entrepreneurs. Small Business Economics, 41(1), 93–114. https://​doi.​org/​10.​1007/​s11187-012-9423-2.View Article
  50. Tourunen, K. & Laaksonen, S. (2009). The significance of business ownership and governance: contribution and profitability of family businesses in Finland. Unpublished manuscript, June 23 2009.
  51. Van Biesebroeck, J. (2003). Productivity dynamics with technology choice: an application to automobile assembly. Review of Economic Studies, 70(1), 167–198 http://​www.​jstor.​org/​stable/​3648615.View Article
Metadata
Title
Business owners, employees, and firm performance
Authors
Mika Maliranta
Satu Nurmi
Publication date
27-03-2018
Publisher
Springer US
Published in
Small Business Economics / Issue 1/2019
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI
https://doi.org/10.1007/s11187-018-0029-1

Premium Partner