Abstract

This paper examines not only the role played by business owner characteristics in influencing the determination of employees’ wages, but also the human capital characteristics of the employees being hired, as well as the hierarchical structure of the firm. We argue that, in young firms, the background and personal characteristics of the founders are also determinants of personnel policies, affecting the way hierarchies are structured and wages are set. Founders with higher levels of general and specific human capital are more likely to design firms focused on growth, and should hire better quality human capital.

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