Entrepreneurs versus Incumbents : Who Creates the Better Jobs?

What are the characteristics of jobs in entrepreneurial firms as compared to jobs in incumbent firms? Even though this question has been addressed by many researchers before us, we provide new evidence to the field since we measure the entrepreneur as the organic new firm. In the literature, the majority of studies have focused on entrepreneurs as measured by small or new firms. By organic new firms, we mean new firms that are not the result of restructurings or organizing existing or additional activities in a formally new firm. Moreover, we distinguish entrepreneurial firms by different types and distinguish between growing and declining industry-region clusters. Our results differ from the findings in the existing literature. Specifically, we find that compared to incumbents, entrepreneurial firms have higher total factor productivity, are more skill intensive, and pay higher wages. The differences are more pronounced in growing clusters. Moreover, the results show important differences between different types of entrepreneurial firms. Specifically, spin-offs are found to enjoy the largest productivity advantage. The wage and skill premiums at the firm level disappear at the job level, as larger incumbents are both more skill intensive and pay higher wages than smaller incumbents.