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Who leaves, where to, and why worry? employee mobility, entrepreneurship and effects on source firm performance

Authors

  • Benjamin A. Campbell,

    1. Fisher College of Business, Ohio State University, Columbus, Ohio, U.S.A.
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  • Martin Ganco,

    1. Carlson School of Management, University of Minnesota, Minneapolis, Minnesota, U.S.A.
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  • April M. Franco,

    1. Rotman School of Management, University of Toronto, and Department of Management, University of Toronto at Scarborough, Toronto, Ontario, Canada
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  • Rajshree Agarwal

    Corresponding author
    1. Robert H. Smith School of Business, University of Maryland, College Park, Maryland, U.S.A.
    • Rajshree Agarwal, Robert H. Smith School of Business, Department of Management and Organization, University of Maryland, 4512 Van Munching Hall, College Park, MD 20742, U.S.A.
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  • All authors contributed equally.

Abstract

We theorize that the value provided by the firm's complementary assets has important implications for the exit decisions of employees and their subsequent effects on the firm's performance. Using linked employee-employer data from the U.S. Census Bureau on legal services, we find that employees with higher earnings are less likely to leave relative to employees with lower earnings, but if they do, are more likely to create a new venture than join another firm. Employee entrepreneurship has a larger adverse impact on source firm performance than moves to established firms, even controlling for observable employee quality. Our findings suggest that in knowledge intensive settings, managers should focus on tailoring compensation packages to help minimize the adverse impact of employee entrepreneurship, particularly among high performing individuals. Copyright © 2011 John Wiley & Sons, Ltd.

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