Inherited causes of new firm performance: Parent firm location and the performance of spawns

We explore how the performance of entrepreneurial spawns is affected by resources that they inherit from attributes of their parent firms via their founders' employment with those parent firms pre-founding. Focusing on the location of the parent firm for which the founder worked pre-founding as an important determinant of the human and social capital that the founder can instill into the spawn at founding, we examine how the location of the parent firm influences the post-founding performance of entrepreneurial spawns in the hedge fund sector. We find that hedge fund managers who previously worked for parent firms located in the industry hubs- New York and London-outperform their peers, regardless of the employer quality and where the actual hedge fund is located. We also find that this effect is greater if the entrepreneur worked in a job pre-founding that is highly related to hedge fund management. Our results are robust to controls for selection into job spells in New York/London. The evidence suggests that working in the industry's geographical hub pre-founding increases the nascent entrepreneurs' human and social capital which critically "imprints" the new spawns, and thereby lastingly influences the spawns' capabilities and post-founding performance. Further, it also suggests that entrepreneurs who pre-founding worked in a more related job to the new venture's industry are more likely to benefit from the spillover of relevant knowledge and accumulation of relevant social capital in the industry hub prefounding. This means that the performance of spawns is critically dependent on resources that they inherit from attributes of their parent firms.