Diffusers of Entrepreneurship

We examine an emerging phenomenon that talented employees leave successful entrepreneurial firms to join less mature ones. Using a unique person-level dataset and a comprehensive sample of private firms from the U.S. Census Bureau, we find that these “entrepreneurial diffusers”, by potentially passing on entrepreneurial knowledge and institutional wisdom, can enhance their new colleagues’ innovation productivity and help their new employers successfully exit. We further find that these diffusers are motivated by an entrepreneurial culture that prizes risk-taking rather than by the prospect of monetary gain. Finally, the departure of entrepreneurial diffusers contributes to the well-documented long-run IPO underperformance in accounting and stock returns. Our paper offers new insights into a labor market channel of the cross-firm diffusion of entrepreneurship, which is critical to the sustainability of a vibrant entrepreneurial ecosystem