Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms

We examine whether startups attract employees with different pecuniary and non-pecuniary motives than small or large established firms. We then explore whether such differences in employee motives lead to differences in innovative performance across firm types. Using data on over 10,000 U.S. R&D employees, we find that startup employees place lower importance on job security and salary but greater importance on independence and responsibility. Startup employees have higher patent output than employees in small and large established firms, and this difference is partly mediated by employee motives – especially startup employees’ greater willingness to bear risk. We discuss implications for research as well as for managers and policy makers concerned with the supply of human capital to entrepreneurship and innovation.