Effect of firms' age on their use of highly skilled workers

Abstract

We aim to contribute to the literature on entrepreneurship by examining the relationship between firms’ age and their use of highly skilled workers, measured by employees with higher education. A panel data set of Norwegian firms is used. Based on population‐averaged panel data regression, we find that newly established firms have a higher proportion of highly skilled workers than incumbent firms. A sensitivity analysis shows that this result holds for different correlation structures in the panel data, different calculations of employees’ age, and whether the explanatory variables are lagged in order to reduce the potential endogeneity of these variables. The result can be explained by the fact that the capital intensity is higher in newly founded firms than in incumbent firms and that the proportion of highly skilled workers is positively correlated with the capital intensity in firms.