The Benefits of Benefits

A pressing but understudied issue is the high incidence of new venture failure. We propose a model of how motivation-enhancing human resource (MHR) practices mediate the effects of initial human and financial resources of a founding team on firms’ decisions to remain in operation. In this model, we also propose that MHR practices have effects on firm survival that change over time. We test our model with a sample of 1,100 firms tracked for 7 years. We found support for a model where MHR practices partially mediate the effects of initial firm resources and human capital on firm survival. We also found that the effects of MHR practices change over time such that their positive effects on survival become stronger. We conclude with a research agenda and recommendations for how nascent firms can promote survival.