Technology startups must hire skilled scientists and engineers to bring their cutting-edge products to market from the proverbial Silicon Valley garage. But to attract the best and brightest, startups must also regularly compete with established companies for top talent.
Commonly held views on employment choice decision-making suggest that in-demand tech workers choose jobs at established companies that offer the highest salaries and benefits, apparently bypassing resource-constrained startups. But new research co-authored by an expert in technology entrepreneurship and scientific labor markets at Urbana-Champaign University in Illinois offers an alternative theory: Some highly skilled and in-demand tech workers would prefer to join startups despite higher salaries, prospects. lower and riskier. for the long-term survival of the company, as they are attracted to the startup culture and environment.
Non-monetary benefits such as independence, autonomy, and the ability to work on innovative technologies are among the biggest selling points for talented scientists and engineers who refuse to work for a larger technology company in favor of a startup, said business professor Michael Roach. administration at the Gies College of Business in Illinois.
“Some workers are willing to take a lower-paying job in exchange for other benefits, like working for a small business and feeling like they are contributing to the creation of something new and unprecedented,” he said. “For some high-potential tech workers, being employee number 20 is more important than being employee number 2,000.”
The article, published by the journal Management Science, was co-authored by Henry Sauermann of the European School of Management and Technology in Berlin.
Using a longitudinal survey that followed more than 2,300 science and engineering doctoral students to their first job, the researchers found that an individual’s career skills and preferences strongly predicted graduate employment at a startup, as opposed to a company. bigger and with greater size. Established technology company.
“There is ample evidence from the US Census and other administrative data showing that small business employees are paid less, which has been interpreted as new businesses being unable to attract highly qualified people,” Roach said. “But we found that new companies are able to hire highly skilled workers even though they pay their new employees about 20% less than established companies.”
The results are consistent with preference-based job classification in that working at a new company may be a better fit for some workers, Roach said.
“We found that career preferences expressed during graduate school strongly predicted startup employment after graduation,” he said. “In other words, if you dream of being on the ground floor of the next Google when you’re in grad school, you’re more likely to work at a startup after graduating. All of this suggests that many people join new companies because of the expected non-monetary benefits that compensate them for a lower salary.
Working at a startup might be a better option for some high-ability STEM workers, Roach said.
“It’s probably not because of the stock options,” he said. “There is a common belief that people work at startups to get rich when the company is successful, but we found that employees are aware that working at a startup is risky and choose it for reasons other than future financial gains.” .
In contrast, those who choose to work at a large company may want the stability, job security and a clear career path that an established company can offer, Roach said.
“Some high-potential workers will prefer to work in a very large company where they know what they are going to do and what their job will be,” he said. “But it’s also true that some high-potential workers prefer a riskier startup environment that offers more autonomy and more interesting work despite lower salaries. This research really addresses these assumptions that high-potential workers seek to maximize their income by choosing the highest salaries. ”By looking at both abilities and preferences, we can unravel them. “
Other analyzes using data from job applications and postings suggest that the pool of workers attracted to employment at startups is large enough that startups can be selective and expand job offerings to scientists and engineers. most talented, according to the newspaper.
“The way the evidence above has been interpreted would lead us to believe that startups are really struggling to hire highly competent people because they can’t pay enough to hire them,” Roach said. “But we show that high-potential workers choose entry-level jobs even if they earn less, suggesting that they derive non-financial benefits from their jobs. Some may simply want to work at a startup, while others may have an entrepreneurial spirit and would like to work at a startup. experience it firsthand, or simply don’t want to be a small cog in a larger machine.
The research was supported by the National Science Foundation and the Ewing Marion Kauffman Foundation.