Which Individuals Create Jobs? Managerial Talent and Occupational Skills

We consider founders of limited liability firms who previously held jobs in the formal sector of Brazil. Managers are five percent of former job holders but their startups account for 27 percent of new firm employment. Relatively little of their overrepresentation as founders or the larger size of their startups is explained by their previous wages or other standard human capital variables. Among non-managerial former occupations we examined those clearly connected to demand (sales) and to supply (technology, purchasing). Only purchasing was comparable to managerial occupations in entrepreneurship and new firm size. Further examination suggests that a key to greater entrepreneurship and larger initial firm size is that workers’ former jobs entailed building relationships with other businesses: in demand-side occupations, they sold to other businesses; in supply-side occupations, they bought from other businesses.