Entrepreneurship, the initial labor force, and the location of new firms

A model of the location choice of new firms is developed in which founders locate their firms close to their home region in order to hire workers they know about through their prior employment. The model is tested using a matched employeremployee data set for Portugal. Consistent with the model, new Portuguese firms in the same industry as their founder’s prior employer were more likely to locate in their founder’s home region, to hire workers from the founder’s prior employer and other firms in the same region and industry, to employ them longer, and to perform better than other new firms. [

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