Tenure on the Founder-firm Performance Relationship

Our study examines the mediating effect of spin-out team characteristics on the relationship between founder quality and parent and spin-out performance. Since the ability to transfer or recreate complementary assets is a critical determinant of performance, we theorize and show that founders with greater ability impact both parent firm and spin-out performance by assembling teams that represent strong complementary human capital. Using linked employee-employer US Census data from the legal services industry, we find founding team size and tenure mediate the founder quality effect. Our findings have theoretical and practical implications for human resource strategies for both existing and entrepreneurial firms: the factor most salient to performance is not founder quality per se, but the manner in which it impacts the transfer and spillover of complementary human capital. 1 Corresponding author. All authors contributed equally and the names are listed in alphabetical order. We thank the Ewing Marion Kauffman Foundation for support of the project. The research in this paper was conducted under Special Sworn Status of the U.S. Census Bureau at the Chicago Census Research Data Center. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. This research uses data from the Census Bureau's Longitudinal Employer Household Dynamics Program, which was partially supported by the following National Science Foundation Grants: SES-9978093, SES-0339191 and ITR-0427889; National Institute on Aging Grant AG018854; and grants from the Alfred P. Sloan Foundation and the Social Science and Humanities Research Council of Canada. The authors are grateful to Seth Carnahan for able research assistance. The manuscript has benefited from comments received from Gilad Chen, and seminar participants at the 2010 Academy of Management meetings, HBS Strategy Research Conference, University of Illinois, University of Maryland and University of Toronto.