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Research: The Risks of Founding a Startup Near Big Companies

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An analysis of more than 180 million job ads shows the impact large firm hiring has on local startups’ growth.

When startups are deciding where to locate, many consider setting up shop in “tech clusters” that have developed labor markets for the specialized staff that startups need to grow. Yet these areas are dense with talent for a reason: It’s often due to the presence of large firms with whom these fledgling companies must compete.

Startups often choose to base their fledgling companies in “tech clusters,” seeking to benefit from these areas’ developed labor markets for technical, sales, and managerial staff — typically arising from a significant presence of large firms. Yet while this proximity to talent can provide access to the specialists a startup may need to scale, it also forces these new companies to offer high wages to compete with the offerings of their large firm competitors.

 

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