Personal Preferences, Entrepreneurs’ Location Choices, and Firm Performance

Abstract

Whereas early location work established the role of economic factors in entrepreneurs’ location choices, recent studies suggest personal reasons as another factor. However, because the places where entrepreneurs want to live are often the places where they will likely do well, it is difficult to empirically separate the two mechanisms. We focus on entrepreneurs founding firms abroad, allowing us to more effectively isolate the effect of personal location attractiveness. We leverage entrepreneurs’ decisions to relocate and manage their firms personally or to remain in a home country and hire a manager. We find that entrepreneurs who view a host country as an attractive location are more likely to relocate and manage their firms personally. However, such entrepreneur-managers have lower firm performance. These results are consistent with the idea that entrepreneurs are more likely to reside in personally attractive places and are willing to substitute benefits of living there for some firm profit. This paper was accepted by Jesper Sørensen, organizations.

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