Human Capital and the Performance of Firms Over Time

We examine the impact of founders' and employees' general and specific human capital on the performance of new firms (survival and sales) over time. We find that firms founded by more educated business owners are more likely to perform better. Results also indicate that business owners with previous managerial and industry-specific experience are more likely to survive and present better sales performance. This effect persists and indeed gains relevance over time, even if the firm's owners change. While industry-specific and managerial experience are important for entrepreneurs, firm-specific human capital is more important for employees, and the acquisition of old routines and practices from previous firms does not matter so much for employee performance as it does for founders.