Fledgling technology startups need to hire skilled scientists and engineers to bring their cutting-edge products from the proverbial Silicon Valley garage to the market. But to attract the best and the brightest, startups also must routinely compete with established firms for top talent.

Commonly held views on job-choice decision-making would point to highly sought-after tech workers choosing jobs with established companies that offer the highest pay and benefits, ostensibly leaving resource-constrained startups to sift through a weaker talent pool. But new research co-written by a University of Illinois Urbana-Champaign expert in technology entrepreneurship and scientific labor markets proposes an alternative theory: Some high-ability, in-demand tech workers would prefer to join startup firms despite the lower pay and riskier prospects for the company's long-term survival because they're attracted to the startup culture and environment.

Non-monetary benefits such as independence, autonomy and the ability to work on innovative technologies are among the key selling points for talented scientists and engineers who spurn working for a bigger technology firm in favor of a startup, said Michael Roach, a professor of business administration at the Gies College of Business at Illinois.

"Certain workers are willing to take a job for lower pay in exchange for other benefits such as working for a smaller firm and feeling like they're contributing to the creation of something new and novel," he said. "For some high-ability tech workers, there's more significance to being employee number 20 than employee number 2,000."

The paper, which was published by the journal Management Science, was co-written by Henry Sauermann of the European School of Management and Technology Berlin.

Using a longitudinal survey that followed more than 2,300 science and engineering doctoral students from graduate school through their first job, the researchers found that both an individual's ability and career preferences strongly predicted post-graduate employment with a startup as opposed to a bigger, more-established tech firm.

"There's a lot of evidence using U.S. Census and other administrative data that shows that employees at small firms are paid less, which has been interpreted as startups not being able to attract high-ability people," Roach said. "But we found that startups are able to recruit high-ability workers despite paying their new hires approximately 20% less than established firms."

The findings are consistent with preference-based job sorting in that working at a startup may be a better fit for some workers, Roach said.


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