Home Sweet Home: Entrepreneurs' Location Choices and the Performance of Their Ventures

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 reflect 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). ∗Generous financial support has been provided by the Rockwool Foundation, the Connaught Fund of the University of Toronto, and the Social Science and Humanities Research Council of Canada (Grant # 410-2007-0920). Three anonymous reviewers, an associate editor, and participants in seminars at Boston University, Copenhagen Business School, Harvard Business School, London Business School, Melbourne Business School, MIT, Rotterdam School of Management, the University of Michigan, UNC Chapel Hill, USC, the University of Virginia, Washington University, and the Yale School of Management provided many valuable comments on earlier versions of this paper. †Fibigerstræde 4, DK-9220 Aalborg Ø, Denmark, [email protected] ‡135 Prospect St, P.O. Box 208200, New Haven, CT 06520, [email protected]