Abstract
Founders often tap their prior professional affiliations—former workplaces and education institutions—to hire, but are there benefits or downsides associated with these affiliation-based hiring (ABH) tactics? Using a large longitudinal sample of Danish ventures, founders, and hires across multiple industries, we study in depth how different ABH strategies relate to new ventures’ profitability, sales, and survival. We generally observe better performance among ventures using ABH tactics, as these seemingly help firms access and retain higher quality employees. However, these relationships vary with the type and proximity of affiliations shared between founders and hires. Ventures perform better when hiring founders’ proximal employment ties in the early stages but less so when hiring their schoolmates. Nonetheless, some of founders’ education ties become valuable as their firms mature.Research Summary
Managerial Summary