The Effect of Parent Firm Location on the Performance of Entrepreneurial Spawns: Evidence from Hedge Funds

We examine how parent firm location influences the performance of subsequent entrepreneurial spawns into the hedge fund industry. We find that hedge fund managers who previously worked for parent firms located in the industry hubs—New York and London—outperform their peers, regardless of where the hedge fund is located. These results are robust to controls for selection into job spells in New York/London based on all observable individual and parent firm characteristics. The evidence suggests that agglomeration effects influence entrepreneurial spawns’ performance by increasing the value of individuals’ human and social capital when they are still nascent entrepreneurs working for established firms. * We thank Raffi Amit for helpful suggestions. We are grateful to the Wharton Center for Leadership and Change Management, the Rodney L. White Center for Financial Research at The Wharton School, and the Kauffman foundation for financial support. 2