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Labor Rights, Venture Capital, and Firm Performance
Author(s) -
Xing Xuejing,
Howe John S.,
Anderson Randy I.,
Yan Shan
Publication year - 2016
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12137
Subject(s) - endogeneity , venture capital , sample (material) , labour economics , business , economics , monetary economics , finance , chromatography , econometrics , chemistry
We investigate the role of labor unions in the performance of venture capital (VC)‐backed firms. Using a large sample of initial public offering firms from 1983 to 2013, we find that VC‐backed firms in highly unionized industries have lower Tobin's Q and are less likely to survive. This effect is robust to endogeneity concerns and to controlling for industry and firm characteristics. The findings suggest that strong labor rights impede innovative firms’ performance and survival, thereby adversely affecting innovation, economic growth, and employment.