Working Paper: NBER ID: w27787
Authors: Thomas Astebro; Serguey Braguinsky; Yuheng Ding
Abstract: We document that since 1997, the rate of startup formation has precipitously declined for firms operated by U.S. PhD recipients in science and engineering. These are supposedly the source of some of our best new technological and business opportunities. We link this to an increasing burden of knowledge by documenting a long-term earnings decline by founders, especially less experienced founders, greater work complexity in R&D, and more administrative work. The results suggest that established firms are better positioned to cope with the increasing burden of knowledge, in particular through the design of knowledge hierarchies, explaining why new firm entry has declined for high-tech, high-opportunity startups.
Keywords: business dynamism; startup formation; burden of knowledge; high-tech startups
JEL Codes: J24; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| burden of knowledge (D80) | decline in startup rates among PhD recipients (M13) |
| increasing burden of knowledge (D80) | fewer high-tech startups (M13) |
| scientific knowledge increases (D80) | greater complexity and administrative burdens on startup founders (M13) |
| greater complexity and administrative burdens on startup founders (M13) | decrease in the number of high-tech startups being formed (O39) |
| established firms (L26) | better positioned to manage burden of knowledge (D83) |
| organizational advantages of established firms (L25) | cope more effectively with increasing burden of knowledge (D83) |
| founders taking on more research and development tasks (O32) | burden of knowledge not being compensated adequately (J32) |