Firm Age, Investment Opportunities, and Job Creation / Manuel Adelino, Song Ma, David T. Robinson.

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Adelino, Manuel

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w19845.Publication details: Cambridge, Mass. National Bureau of Economic Research 2014.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper asks whether startups react more to changing investment opportunities than more mature firms do. We use the fact that a region's pre-existing industrial structure creates exogenous variation in the severity of its exposure to nation-wide manufacturing shocks to develop an instrument for changing investment opportunities, and examine employment creation in the non-tradable sector as a response to those opportunities. Startups are much more responsive to changing local economic conditions than older firms. Moreover, their responsiveness doubles in areas with better access to small business finance, suggesting that financing constraints are an important brake on job creation in the startup sector. Although we focus mostly on the non-tradable sector for empirical identification, our results extend to other sectors of the economy, indicating that the mechanisms we uncover are economically pervasive. This suggests that factors like organizational flexibility and innovativeness may be important drivers of job creation among startups.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w19845 (Browse shelf(Opens below))	Not For Loan

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January 2014.

This paper asks whether startups react more to changing investment opportunities than more mature firms do. We use the fact that a region's pre-existing industrial structure creates exogenous variation in the severity of its exposure to nation-wide manufacturing shocks to develop an instrument for changing investment opportunities, and examine employment creation in the non-tradable sector as a response to those opportunities. Startups are much more responsive to changing local economic conditions than older firms. Moreover, their responsiveness doubles in areas with better access to small business finance, suggesting that financing constraints are an important brake on job creation in the startup sector. Although we focus mostly on the non-tradable sector for empirical identification, our results extend to other sectors of the economy, indicating that the mechanisms we uncover are economically pervasive. This suggests that factors like organizational flexibility and innovativeness may be important drivers of job creation among startups.