Entrepreneurial human capital and the survival of new firms in high- and low-tech sectors

This paper explores the role of entrepreneurial human capital in the post-entry performance of firms in high- and low-tech sectors. Using a dataset from the Japanese manufacturing industry, we examine the determinants of new-firm survival, taking into account exit routes to differentiate ‘failure’ (bankruptcy) and ‘nonfailure’ (voluntary liquidation and merger) outcomes. Our results show that entrepreneurial human capital, measured as educational background, is important in reducing the probability of bankruptcy in high-tech sectors, although it does not help significantly in this regard in low-tech sectors. By contrast, we provide evidence that entrepreneurs with high levels of human capital are more likely to voluntarily close businesses both in high- and low-tech sectors. Furthermore, we find that firms managed by entrepreneurs with high levels of human capital are more likely to exit via merger than others, particularly in high-tech sectors. We provide evidence that entrepreneurs with scientific backgrounds are less likely to voluntarily exit than those with humanistic backgrounds, particularly in low-tech sectors.