Events

Dr. Waverly Ding
Associate Professor of Management & Organization
Robert H. Smith School of Business
University of Maryland

ABSTRACT

Young technology firms grow by adding human capital, yet large-scale, longitudinal studies of how young technology firms grow their human capital capabilities remain scare. We combined Crunchbase data of young technology firms with the LinkUp data of 3.2 million historical job postings of these firms to construct a dataset of 1,826 firms founded between 2007 and 2021 (with firm-year observations spanning 2009 to 2022). We analyzed these firms’ job postings to understand antecedents of young firms’ internal capability growth strategy though the hiring of human capital. Young firms may follow a focused strategy to grow their capabilities when they concentrate their resources to hire in one or a few functional areas. In contrast, young firms may also follow a broad-scoped strategy to add human-capital capabilities in broader functional areas and grow their organization in a more balanced way. We propose a three-pronged framework for understanding where young firms fall in this spectrum. Empirical analysis reveals suggestive evidence for the influence of serial entrepreneurs, though the stronger and more robust antecedent factor appears to be related to the characteristics of the firms’ lead VC investors. Firms backed by more pro-IPO-exit VC investors are more likely to utilize a broad-scoped internal capability growth strategy via hiring while firms backed by more pro-acquisition-exit VC investors are more likely to follow a focused strategy and hire people into narrow functional areas. Financial market conditions (whether or not a young firm is operating in a hot versus cold financial market) do not have any direct effect on the firm’s capability growth scope, though they moderate the effect of VC investors.