Dahl Sorenson (2011) - Home Sweet Home Entrepreneurs Location Choices And The Performance Of Their Ventures

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Reference(s)

• Dahl, Michael S., and Olav Sorenson (2011), 'Home sweet home: Entrepreneurs' location choices and the performance of their ventures" pdf

Abstract

Entrepreneurs, even more than employees, tend to locate in regions in which they have deep roots (`home' regions). Here, we examine the performance implications of these choices. Whereas one might expect entrepreneurs to perform better in these regions because of their richer endowments of regionally-embedded social capital, they might also perform worse if their location choices rather refl ect a preference for spending time with family and friends. We examine this question using comprehensive data on Danish startups. Ventures perform better - survive longer and generate greater annual profits and cash flows - when located in regions in which their founders have lived longer. This effect appears substantial, similar in size to the value of prior experience in the industry (i.e. to being a spinoff).