Publications
Publications
- July–August 2021
- Organization Science
Lowering the Bar? External Conditions, Opportunity Costs, and High-Tech Startup Outcomes
By: Annamaria Conti and Maria P. Roche
Abstract
We assess the heterogeneous impact of economic downturns on individuals’ decisions to bring high-technology ideas to the market in the form of new ventures. We thereby examine how worsening labor market conditions influence individuals’ opportunity costs of starting new ventures, the resulting composition of the entrepreneurial pool, and startup performance outcomes. Using a rich dataset of startup founders in the biotechnology and medical device sectors, we find that an increase in the unemployment rate is associated with a substantial rise in the share of entrepreneurs who are most sensitive to worsening labor market conditions. Additionally, we find that startups founded by these entrepreneurs display lower financial and innovative performance than startups founded by entrepreneurs who are relatively insensitive to business cycles. Finally, we provide suggestive evidence that individuals’ heterogeneous response to worsening labor market conditions is a relevant factor in explaining the negative relationship between unemployment and startup performance outcomes.
Keywords
Necessity Entrepreneurship; Economic Conditions; Recessions; High-tech Startups; Opportunity Costs; Entrepreneurship; Economic Slowdown and Stagnation; Business Startups; Technology; Performance; Labor
Citation
Conti, Annamaria, and Maria P. Roche. "Lowering the Bar? External Conditions, Opportunity Costs, and High-Tech Startup Outcomes." Organization Science 32, no. 4 (July–August 2021): 965–986.