Even though they make about 20% less than those working in larger companies, numerous high-skilled scientists and engineers are attracted to startups. They value the distinct workplace environments and non-financial rewards such as freedom and the opportunity to be part of groundbreaking technologies. Recent research indicates that, on average, the competence of employees in startups surpasses that of those in established businesses due to these preferences and the startups’ ability to selectively hire the best.
Startups are often encouraged to hire top-notch scientists and engineers to enhance their possibilities of innovating advanced technologies. However, it raises the question of why skilled workers would decline positions in large corporations like Amazon and Google for less stable startups that might offer lower pay? An increasing amount of research in the entrepreneurial field validates that startup workers usually earn less than their peers in larger, well-established firms, leading some to wonder if startups can attract high-quality talent.
Yet, a recent study published in Management Science by Michael Roach of the University of Illinois at Urbana-Champaign, and Henry Sauermann of ESMT Berlin, shows that top professionals are drawn to startups because of non-monetary benefits, despite possibly earning a smaller paycheck.
The researchers highlighted that many capable scientists and engineers prefer jobs in initial-stage startups over big tech firms because of particular career desires that align more with the startup work culture. Michael Roach noted that many are drawn to the employee role in startups rather than the founder role. He also emphasized that working in startups is attractive to those aspiring to be entrepreneurs, often to gain skills for future entrepreneurial endeavors.
The study, tracking over 2,000 science and engineering PhDs for nearly ten years, linked their career choices in startups or established firms to their preferences while in graduate school. This broad methodology provided a detailed understanding of what influences job choices among talented professionals.
Henry Sauermann stated, “Those working in startups earn about 20% less than their counterparts in traditional firms, which implies that non-financial benefits in startups outweigh the lower compensation and resources.”
In-depth analysis reveals that those joining startups particularly value aspects like autonomy and opportunities to be involved in leading-edge technologies. By assessing both job applications and job offers, it was found that the ability to attract a broad pool of interested candidates allows startups to selectively hire the most gifted, resulting in startup employees having, on average, higher abilities as determined by the Ph.D. program ranking.
The findings from Roach and Sauermann’s study offer important insights for various stakeholders, indicating that early-stage tech startups can surmount the difficulties of recruiting and retaining talented personnel by appealing to those with a marked preference for an entrepreneurial atmosphere.
The authors also note the need for careful management of attractive features like autonomy, as they might entail their own costs. The study’s insights offer guidance for Ph.D. scientists in evaluating their career paths, suggesting that those drawn to startups’ dynamic and creative environment might have to accept lower earnings and greater risks but might find more job satisfaction.
Furthermore, the study emphasizes the broader implications for the technology industry and the economy, showing that the ability of startups to lure high-caliber talent has the potential to fuel innovation and economic expansion. It also underlines the advantage of nurturing an entrepreneurial mindset within established firms to attract and hold top-notch talent.
Reference: “Can Technology Startups Hire Talented Early Employees? Ability, Preferences, and Employee First Job” by Michael Roach and Henry Sauermann, Management Science, published on 8 August 2023.
DOI: 10.1287/mnsc.2023.4868
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Frequently Asked Questions (FAQs) about fokus keyword: startups
Why do many high-ability scientists and engineers choose to work in startups despite earning less than their peers in large firms?
Answer: Many high-skilled scientists and engineers are drawn to startups due to the unique work settings and non-monetary benefits, such as autonomy and opportunities to work on cutting-edge technologies. The study also found that specific career preferences align better with the startup work culture, and the non-financial rewards often outweigh the lower levels of pay compared to established firms.
What is the key insight from the research by Michael Roach and Henry Sauermann regarding startup employment?
Answer: The research emphasizes that many high-ability individuals prefer early-stage startups over large tech companies due to career preferences that align with the unique work environment in startups. Factors such as autonomy and opportunities to work on innovative technologies attract these professionals, even if it comes with smaller salaries.
How do startups manage to attract top-tier professionals despite potentially offering lower compensation?
Answer: Startups attract top-tier professionals by offering non-financial incentives that highly skilled workers value, such as autonomy, unique work settings, and the chance to work on groundbreaking technologies. The ability to selectively hire the best candidates also means that startup employees are, on average, of higher ability than those in established firms.
What advice does the study offer to Ph.D. scientists considering their career paths?
Answer: The study suggests that those attracted to the dynamic and innovative environment of startups may accept lower pay and higher risks but may end up having a more satisfying job. It advises job seekers to carefully consider what each type of job entails, using comparison data on pay and qualitative insights from current and former employees.
How does the ability of startups to attract high-ability human capital affect the broader technology sector and economy?
Answer: By demonstrating that startups can attract high-caliber talent, the study underscores the potential of startups to drive innovation and economic growth. The findings also highlight the benefits of fostering an entrepreneurial culture within established firms to attract and retain top talent, contributing positively to the technology sector and the economy as a whole.
More about fokus keyword: startups
- Management Science
- Gies College of Business, University of Illinois at Urbana-Champaign
- Vali Entrepreneurship Hub of ESMT Berlin
5 comments
Who woulda thought that people want to work for love of the job and not just the paycheck. This article nails it!
I think more needs to be said about the risks involved in working for a startup, its not all rosy. but good insights here.
im a scientist and i can relate to this. the chance to work on cutting edge tech is so tempting, even if the pay’s lower. Great article
This piece was an eye-opener. Startups really seem to be the place for innovation and growth, even if the pay is not up to par with big firms. Makes you think, doesn’t it!
Great read, it’s refreshing to see something on why people choose startups over big companies. Maybe it’s not all about the money after all??