1. Diana M. Hechavarria University of Cincinnati Department of Management
EMPLOYEE RECRUITMENT IN NASCENT START-UPS: EXPLORATORY ANALYSIS OF THE PANEL STUDY OF ENTREPRENEURIAL DYNAMICS
Diana M. Hechavarria
University of Cincinnati
Department of Management

2. Agenda Overview of PSED I & II research initiative.
What is nascent entrepreneurship
Description of sample
Discuss what we have learned about HRM in nascent firms.
Limitations of PSED
Directions for future research
Questions

3. Why study new firms? Provide half of all net new job creation
Contribution to improved sector productivity
Major source of economic innovation
Associated with economic growth
Significant work career option for individuals
Mechanism for immigrant social integration
Route for upward social mobility for individuals

4. Panel Study of Entrepreneurial Dynamics (PSED)
Cohorts of nascent entrepreneurs and nascent enterprises
Longitudinal data that begins with firm conception and tracks start-up efforts until a new firm has been established
Data that is fully documented and in the public domain:
Representative samples to facilitate extrapolation to the entire US population of adults and nascent enterprises

5. Panel Study of Entrepreneurial Dynamics
PSED I
Initial screening in
Tracked 830 nascent entrepreneurs enterprises over 4 years
PSED II
Initial screening in
Tracking 1,214 nascent entrepreneurs/ enterprises
First follow-up data ready for analysis

6. Define conception the beginning ･ Exclude those with positive monthly cash flow for more than 3 months prior to first interview ･ Those that have completed 2 or more start-up activities ･ Those that completed 2 within a 12 month period ･ Identify the earliest of the two activities ･ Defined that a conception
New Firm PSED I: ･ Is the start-up now an operating business? PSED II: ･ Income in 6 of past 12 months?･ Cover all monthly expenses? ･ Cover owners salaries and wages?
Active start-up ﾐ PSED I ･ Still in active start-up phase? PSED II ･ Devoted more than 160 hours in past 12 months ･ Expect to spend more than 80 hours in next 6 months ･ A major focus of work career over the next 12 months･
Disengagement [Quit] PSED I ･ No longer being worked on by anybody PSED II ･ Not new firm, not active start-up･ Consider self disengaged from the business start-up

7. Identifying “Nascent” Entrepreneurs
Screening Items:
Are you, alone or with others, currently trying to start a new business, including any self-employment or selling any goods or services to others?
Are you, alone or with others, currently trying to start a new business or a new venture for your employer, an effort that is part of your normal work?
Are you, alone or with others, currently the owner of a business you help manage, including self- employment or selling any goods or services to others?

8. Additional Criteria
Yes to any one or more screening item, must meet all following criteria:
Admit to start-up activity in past 12 months
Expect to own all or part of the new firm
No positive monthly cash flow covering all expenses and salaries for 6 of past 12 months
Those that pass are candidate nascent entrepreneurs
Additional questions eliminate those with positive monthly cash flow in prior years, who appear to be reactivating a business

9. Conception to initial detailed interview (months)
PSED I
Minimum= 0.8
Average=19.8
Media=14.4
Maximum=114.1
PSED II
Minimum =0.7
Average=16.4
Median=10.8
Maximum=114.3

10. Nascent Entrepreneurial Participation Estimates from PSEDII

11. Outcome Status @ 2nd Wave

12. Growth Orientation by Gender
When asked about growth aspirations for the nascent venture:
Men
75.3% Small business venture
24.7% High growth business venture
Women
81.7% Small business venture
18.3% High growth business venture

13. Exploring Human Resource Activity in Nascent Start-ups
Nascent ventures face volatile environments when attempting to organize.
Limited resources and capabilities.
So when is the appropriate time to hire?
How do nascent ventures opportunistically exploit human resources to get up and running?

14. Literature on HRM and Nascent Entrepreneurship
Findings suggest that first hire(s) are more likely weak ties.
No pre-established HRM system
More of a needs-fit and values-fit assessment for employee hiring.
Limited scope of scholarly initiatives when unit of analysis is the nascent venture.

15. Start-up Team Participants
Those expecting to own part of the new firm･
Non-owning founders
Active participants in start-up
Not expecting to own part of the new firm
Responsible for a distinctive contribution to the founding of the new business
Helpers:
Not expecting to own part of the firm
Not responsible for distinctive contribution
Provided support, advice, or guidance on a regular basis
Employees

16. Start-up Team Size, Composition, & Characteristics
About 4% of all start-ups share ownershipw with some other legal or financial entity

17. Types of Start-ups
1 in 5 start ups are non-family firms

19. Start-up Activities within PSED I & II
Respondent were queried on 36 possible start-up activities.
On average within 11% of respondents reported hiring an employee.
At the first interview, 23.9% of respondents reported that employees would be hired in the future.
4.3% of respondents had hired a specific employee to oversee human resources by first follow up.
All new firms in PSEDII

20. Employee Hires Before First Interview, by Start-up Actions Sequence

22. Limitations
Know when first person hired, but we don’t know how many employees are hired/fired at each subsequent wave.
Don’t know specific functions for each employee.
Do not know how nascents recruit employee(s).

23. Directions For Future Research
Does conception date and date of initial hire influence outcome status?
Relative to other actions within start-up sequence.
What factors affect the number of non owner founders and helpers?
Strong ties, weak ties, strangers.
How do growth perceptions influence start-up actions?
Are high growth oriented firms more eager to hire?
What influences new firms to hire a specific HRM employee?

24. Entrepreneurial activity, all and high growth initiatives in selected global regions.

25. Questions?