How Hiring Former Founders As Employees Shapes Incumbent Firms’ Creative Performance
03 Nov 2022 (Thu)
LSK Rm1034
Mr. Hang-Jun Cho, INSEAD

Individuals earn invaluable skills and knowledge through their entrepreneurial experiences, which makes them sought-after human capital. Although firms searching for novel and useful information often hire them, little research has addressed how such hiring will affect the incumbent firm’s performance. In this paper, I explore when and how people with entrepreneurial experiences can hurt or benefit the hiring firm’s creative performance. Drawing on the inter- organizational fit and the entrepreneurial identity literatures, I theorize that the influence of the newcomers with entrepreneurial experiences may be overly amplified to the incumbents, yet what they bring into may not be useful because of the idiosyncrasy of their experience. Examining firms’ hiring decisions on entrepreneurship-experienced individuals in global fashion industry from 2001 to 2019, I find that fashion firms that recently hired employees who have founding experiences yield a negative return for their creative performance. However, this effect is mitigated when the hiring firm holds strong identity by having its own founder in its operation, and when more hierarchical structure of its creative team presents. I also find that the former founders’ spanning structural hole in the industry-affiliation network has an unexpected negative association with the firm’s creative performance. Overall, the findings suggest that firms can suffer from hiring employees with entrepreneurial experiences, but they can buffer this effect when they have their own anchor of their identity and a design of ordered decision structure. The findings also show that the former founders’ social capital- driven information benefit may not play much in the context of hiring former founders.