Why Generalists Are Successful but Short-Term Entrepreneurs : Evidence from the Global Hedge Fund Industry #

165 words Main Body: 11,092 words (41 pages) Appendix: 1,594 words (5 pages) ABSTRACT Generalists are more likely to become well-performing entrepreneurs. Yet, generalists are also highly mobile in the labor market, transitioning in and out of employment states. Juxtaposing these two facts suggests that generalists who are successful entrepreneurial managers may also be less likely to stay committed to entrepreneurship. This paper explores this paradox by synthesizing two theoretical literatures on generalists as entrepreneurs and generalists as labor market participants. Our central insight is that generalists treat entrepreneurship as a temporary state in a career with abundant options, rather than a final destination. Thus, we should expect to see generalists achieve higher entrepreneurial performance, but also experience higher entrepreneurial exit, conditional on performance. Using detailed longitudinal data on asset managers from 1995 to 2009, we find that generalists, asset managers with MBA degrees in our context, are more likely to have higher entrepreneurial performance yet also higher entrepreneurial exit rates. We address alternative explanations through numerous robustness checks and in-depth interviews with asset (hedge fund) managers and entrepreneurs.Generalists are more likely to become well-performing entrepreneurs. Yet, generalists are also highly mobile in the labor market, transitioning in and out of employment states. Juxtaposing these two facts suggests that generalists who are successful entrepreneurial managers may also be less likely to stay committed to entrepreneurship. This paper explores this paradox by synthesizing two theoretical literatures on generalists as entrepreneurs and generalists as labor market participants. Our central insight is that generalists treat entrepreneurship as a temporary state in a career with abundant options, rather than a final destination. Thus, we should expect to see generalists achieve higher entrepreneurial performance, but also experience higher entrepreneurial exit, conditional on performance. Using detailed longitudinal data on asset managers from 1995 to 2009, we find that generalists, asset managers with MBA degrees in our context, are more likely to have higher entrepreneurial performance yet also higher entrepreneurial exit rates. We address alternative explanations through numerous robustness checks and in-depth interviews with asset (hedge fund) managers and entrepreneurs. # ACKNOWLEDGEMENTS: We thank Ronnie Chatterji, Tiantian Yang, Dan J. Wang, Michael Mauskapf, Sungyong Chang, participants at the 2017 SMS annual meeting, and the participants at seminars at Columbia Business School Management Division and the Eugene Lang Entrepreneurship Center for their helpful comments. We thank Riako Granzier-Nakajima for her outstanding research assistance. This paper benefitted from thirteen interviewees working in the asset management industry. * Kylie Jiwon Hwang (Corresponding author, JHwang20@gsb.columbia.edu) 2 INTRODUCTION There is an interesting tension when considering the fate of generalists as entrepreneurs. Prior entrepreneurship research suggests that generalists – individuals with the mastery of a broad range of skills – are more likely to be successful as entrepreneurs compared to specialists (Lazear, 2004; Kacperczyk and Younkin, 2017). Yet other research has shown that generalists experience higher labor market mobility (Weiss, 1971; Becker, 1975; Merluzzi and Phillips, 2016). Juxtaposing these two streams of research highlights an apparent paradox: generalists are better at being entrepreneurs, yet, despite their success also transition in and out of entrepreneurship at a higher rate. To resolve this paradox, we study whether and why generalists are less likely to stay committed to entrepreneurship despite their advantages in entrepreneurship. Research in entrepreneurship suggests that because entrepreneurs manage diverse tasks and people, generalists are better fit for entrepreneurship (Lazear, 2004). Scholars have empirically supported this claim by showing that generalists are more likely to become successful entrepreneurs, due to their ability to broker between diverse domains of skills and their greater role diversity in the labor market (Åstebro, Chen, and Thompson, 2011; Sørensen and Phillips, 2011). Based on the premise that well-performing individuals commit (Groysberg, Nanda, and Prats, 2007) and successful organizations survive (Alchian, 1950; Williamson, 1991), scholars have anticipated that generalists, with their documented entrepreneurial advantage, will be more likely to persist in their role as entrepreneurs (Lafontaine and Shaw, 2016). At the same time, labor market scholars have proposed that the diversity and breadth of generalists’ skills offer a wide range of occupational alternatives (Weiss, 1971; Becker, 1975). Generalists are more likely to have higher labor market mobility, as their breadth of skills creates