Difference-in-differences

The timing of talent acquisition is a central decision for new ventures. On one hand, hiring after demand is proven minimizes losses. On the other hand, hiring before demand is proven allows new ventures to start developing unique capabilities. We resolve this tension by proposing that the timing depends on human resource redeployability. We test our theory with the population of Finnish ventures, showing that portfolio entrepreneurs hire more employees early on because of higher redeployment potential and that they hire employees with more transferable skills in order to benefit from the redeployment option. To probe our mechanisms, we examine how talent acquisition strategies in portfolio and standalone ventures vary with external conditions that reduce or amplify the benefits of redeployment.

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We use census data on all Finnish firms during the period from 1996 to 2020 to study the impact of within-family CEO transitions on firm productivity. More specifically, we investigate how successions by the previous CEO’s children and other relatives affect productivity compared to successions by nonfamily CEOs. We further explore how top management team human capital (excluding the CEO) interacts with within-family CEO transitions to affect productivity. In line with prior research, we find a negative effect of family succession on productivity. Extending prior literature, we find the productivity penalty is only significant in the first two years after the transition. We further find that management team work experience is a critical ingredient in successful within-family CEO transitions. Meanwhile, we find no effect of the CEO’s education or experience, or the management team’s education, on productivity following within-family CEO succession. Finally, we explore the mechanisms, specifically management practice changes, behind the family CEO succession penalty.

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