Listen to this article
When deciding where to locate their fledgling venture, entrepreneurs tend to opt for their home regions. But does this choice help or hinder the development of their start-ups?
While some might consider it a good idea because the entrepreneurs understand the locality and the social connections around, others suggest that by remaining close to family and friends an entrepreneur hurts his or her performance because these social ties dissuade them from locating where there are other, more favourable economic locations.
But research by Olav Sorenson, a professor of management at the Yale School of Management, and Michael Dahl, of the department of business studies at Aalborg University, has found that establishing a start-up where you were born, or where you have lived for a long time, wins hands down.
“Ventures perform better – survive longer, generate greater annual profits and cash flows – when their founders locate them in their home regions where they have deep roots of family and friends,” says Prof Sorenson.
The pair suggest that the effect is similar to that of having prior industry experience. They suspect that having deep roots in a region can benefit entrepreneurs in a number of ways, principally in helping to raise capital and also in recruiting the personnel needed to begin these ventures.
The paper, Home sweet home: entrepreneurs’ location choices and the performance of their ventures is published in Management Science.
● And still with a working theme in mind academics have taken a look at working from home. Increasing numbers of employees today find themselves able to work from home – at least part of the time. The benefits – saving time and money and also less environmental wear and tear as commuting is reduced – are well known. However academics point out that there is a downside.
Home workers may find that they received lower performance evaluations, fewer promotions and that their salary increases may not be so substantial. The reason, say Kimberly Elsbach and Daniel Cable, is something that they describe as passive face time. Passive face time, they say, does not refer to interacting with either your work colleagues or clients, it is merely being seen to be at work, regardless of what you are doing or how well your are performing.
Prof Elsbach – a professor of management at the Graduate School of Management at the University of California, Davis and Prof Cable, a professor of organisational behaviour at London Business School, say that even when a home worker and an office worker are equally productive they may be evaluated differently due to differences in passive face time.
The academics describe two types of passive face time – expected, being seen at work during normal office hours and extracurricular face time – working outside normal working hours and at weekends. Expected face time they say attracts descriptions such as responsible and dependable.
“Just being seen at work without any information about what you are actually doing leads people to think more highly of you.” However, those workers who invest in extracurricular face time are considered to be “committed and dedicated”.
From their research the academics say that managers were more likely to attribute, albeit unconsciously, the term dependable to those workers who put in expected face time and attribute the terms committed and dedicated to those who put in extracurricular face time. They suggest that as a result home workers might be handicapped by perceptions that they are not as responsible or committed as other employees because they are not seen in the workplace.
Why showing your face at work matters is published in the MIT Sloan Management Review
Get alerts on Business education when a new story is published