Social Safety Nets and New Venture Performance: The Role of Employee Access to Paid Family Leave Benefits

Jiayi Bao, University of North Carolina at Chapel Hill

Strategic Management Journal, May 2022

Abstract: This study examines how social safety nets providing paid family leave (PFL) benefits to employees influence subsequent business performance for entrepreneurial ventures. A multilevel framework guided by qualitative interviews proposes two competing mechanisms (pre-hiring recruitment gains via prospective employees and post-hiring operation losses via incumbent employees) and a firm-level contingency (venture innovation type). Leveraging the 2009-implemented New Jersey PFL program in a difference-in-differences design, I show that employee access to state-provided PFL benefits adversely affects the profitability for noninnovative new ventures but increases profitability for innovative ventures. Exploration of treatment timing and intermediate venture outcomes supports a dominating pre-hiring mechanism for innovative ventures (in which the ventures become more attractive to joiners) but a dominating post-hiring mechanism for noninnovative ventures (due to employee leave).

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