Early-stage start-up hiring: the interplay between start-ups' initial resources and innovation orientation

Start-up firms often operate under high levels of uncertainty and resource constraints, which makes hiring a particularly challenging process. Integrating perspectives from the resource- and competence-based views of the firm and signaling theory, we posit that founders' start-up experience and the initial presence of corporate or university shareholders can mitigate challenges associated with hiring and facilitate the recruitment of employees in the nascent stages of a firm. Moreover, we propose that early-stage hiring will be more likely in start-ups that combine such a strong set of initial competences and resources with a strategic orientation towards innovation. We find support for our hypotheses with a rich dataset of Italian innovative start-ups. Hiring is challenging for start-ups and not all manage to hire personnel beyond the founders in nascent stages. We show that the odds of early-stage hiring are higher when innovation-driven start-ups secure certain competences and resources at entry. We build on the resource- and competence-based views of the firm and on signaling theory to explain how certain competences assembled at entry can explain differences in start-ups' early hiring rates. We show that founders with previous entrepreneurial experience and backed by particular shareholders (incumbent firms or universities) are more likely to hire employees in early stages, especially when running innovation-driven startups. These competences and resources, when coupled with an innovation orientation, can make a difference by either expanding the firm's resources to hire or encouraging prospective employees to join in the early stages of the firm. These findings have important implications for research and practice. They uncover the important role of initial resources in increasing a start-up's hiring propensity, unravel the contingent role of the firm innovation strategy, and shed light on a channel (i.e., early-stage hiring) through which founding conditions may affect start-up performance.