Bringing individuals back in-the effects of career experience on new firm founding.pdf

Industrial and Corporate Change, Volume 12, Number 3, pp. 519–543 Bringing individuals back in: the effects of career experience on new firm founding Scott Shane and Rakesh Khurana Because of methodological and theoretical obstacles, research on organizational foundings has largely focused on societal and population-level explanations. This paper takes the view that understanding firm foundings also requires linking to individual-level processes. We suggest that careers are an important mechanism linking individual-level processes to firm foundings. The firm-founding experience of potential founders impacts organizational foundings by influencing expecta- tions of the liability of newness. We test our explanation on the set of inventions patented by the Massachusetts Institute of Technology over the period 1980–1996 by examining the effect of inventors’ career experiences on the likelihood that an invention will be commercialized through the founding of a new organization. 1. Introduction Organization scholars have long been interested in examining the factors that influence firm foundings. Considered from the societal level, general factors such as literacy, specialized schooling, urbanization and a money based economy are argued to affect a society’s capacity to develop and support new organizations (Stinchcombe, 1965). More recent work specifies the role of ecological factors, such as the nature of technological change (Nelson and Winter, 1982) and the dynamics of organizational populations (Hannan and Freeman, 1984), in influencing firm foundings. While considerable insights have been generated from examining the relationship between these macro-level factors and firm foundings, inquiry on this topic has been limited in its ability to incorporate lower levels of analysis in explanations for this phenomenon. One reason for the lack of research on these lower-level fa