Are You Experienced? Prior Experience and the Survival of New Organizations

This paper investigates the relationship between the level of pre‐entry experience of managers and founders, and the survival of their new firms. Using a comprehensive dataset covering the entire Danish labor market from 1980 to 2000, we are able to trace prior activities of all employees working in all Danish start‐ups with at least one employee. We examine whether spin‐offs from surviving parents, spin‐offs from exiting parents or other start‐ups are more likely to survive. Moreover, we investigate whether firms managed and founded by teams with higher levels of industry‐specific experience have a higher chance of surviving. We find that spin‐offs from a surviving parent and to a lesser degree industry‐specific experience positively affects the likelihood of survival. We also find that spin‐offs from a parent that exits are less likely to survive than either spin‐offs from surviving parents or other start‐ups.