Abstract

This paper examines how the composition of human capital that workers acquire on-the-job determines the decision to found spinoffs. Due to different degrees of specialisation in small and large firms, entrepreneurs emerging from small firms transfer knowledge from more aspects of the business. Workers in large firms, however, benefit from higher returns to human capital that increase their opportunity costs to switch to an occupation that requires a different combination of skills. Since entrepreneurship requires performing multiple tasks and makes part of their specialised skills unutilised those coming from large firms are of highest quality.

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