Whose nepot should we hire? The influence of kin of initial employees on the survival of new firms
Abstract
We examine how the presence of kinship ties of initial employees of a new firm influences its survival. Our research focuses on two benefits -- screening of employees and solidarity within the firm -- as well as a cost -- reduced diversity in knowledge -- that arise from the presence of kin ties of initial employees. Specifically, we examine the presence and the direction, to founders or to other initial employees, of kin ties of initial employees to create a typology of firm structures. This categorization allows us differentiate new firms by the expected magnitude of the benefits and costs that relate to kin ties of initial employees, thus allowing us to derive predictions about firm survival. We use data on the population of 4,996 new firms founded between 1998 and 2003 in Stockholm to test the predictions.