“How do Entrepreneurs Set Wages?” Job Market Paper, please click here for most recent version
Hiring beyond the founding team is essential to scaling a venture, but labor and search are extremely costly. What hiring strategies do entrepreneurs use, and how do they think about setting compensation for their employees? I conduct a novel survey and experiment with 540 founders of growth-capable U.S. startups that have, on average, 18 employees and \$6.8 million of funding. Entrepreneurs initially described hiring and compensation-setting at their own firms and then were asked for their best advice about wages for four fictitious job postings. This paper shows that founders report being involved in all aspects of the hiring process, even at the minority of startups that have human resources staff. Startups are less likely than established firms to use paid consultants or wage benchmarking data, relying instead on word-of-mouth advice and free online services to research compensation. Entrepreneurs’ wage advice is highly dispersed and sensitive to information, particularly when the entrepreneur is a first-time founder or lacks experience with a given job. Finally, soliciting a “fair” wage rather than framing wages as a cost induced non-male entrepreneurs to recommend wages that were \$11,000 higher, on average. Taken together, these results suggest that startup hiring is a founder-centric process and that wages at startups may be influenced both by available information and by founders’ own utility, beliefs, and preferences.
“The Composition and Dynamics of Technology-Enabled Entrepreneurship” with Daniel P. Gross, and Jorge Guzman. [Revise and Resubmit, Strategic Management Journal] SSRN Version
Using data on nearly all U.S. business registrations since the turn of the twentieth century, and a set of 386 major technologies invented over this period, we study the level, composition, and dynamics of entrepreneurial activity around new technology. We find a large, varied entrepreneurial economy rooted in innovation, where the vast majority of startups are not high-growth technology entrepreneurs but rather local, low-growth firms engaged in a wide range of complementary activities. The level and composition of this firm creation varies across technologies and over the technology lifecycle, and can be predicted from a technology’s initial patents. We discuss implications of this evidence for research in entrepreneurial and technology strategy, business ecosystems, and industry dynamics.
“No Mask, No Service: Customer Reaction to Walmart’s 2020 National Mask Mandate” [Revise and Resubmit, the Journal of Economics and Management Strategy]
Multi-location firms face a complex series of economic tradeoffs when deciding whether to implement standard processes or allow processes to vary across establishments. One element of this tradeoff is customer response. This paper explores customer reaction to a prominent standardized policy, Walmart’s national instore mask mandate during the COVID-19 pandemic. I find that, in the two weeks after Walmart’s corporate mask mandate was enacted, foot traffic at stores in counties with no government mask mandates declined by 1-2% relative to stores in other counties. This effect was driven by stores in heavily Republican counties, where the decline was approximately 5%. However, analysis of a spending panel suggests there was little impact on sales conducted via credit and debit cards. This study provides evidence about the scope for customer reaction in response to corporate policies which in turn informs decisions about the relative merits of standardization or variance of policies across establishments.
“The Transformation of Self Employment” with Margaret G. Dalton, Sari Pekkala Kerr, and William R. Kerr. NBER Working Paper w29725. SSRN Version
Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in “hometown” local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-toscale among large businesses, or a worsening of financing conditions and debt levels.