We propose that new firm founders locate their firms close to their home region in order to
hire workers they know about through their prior employment, since it is easier to find high
productivity employees among talent pools for which you have significant personal
experience. We test our proposition using a matched employer–employee dataset for
Portugal. Consistent with our predictions, new firms in the same industry as their founder's
prior employer (ie, spinoffs) are more likely to locate in their founder's home region, to hire …

A model of the location choice of new firms is developed in which founders locate their firms
close to their home region in order to hire workers they know about through their prior
employment. The model is tested using a matched employeremployee data set for Portugal.
Consistent with the model, new Portuguese firms in the same industry as their founder's prior
employer were more likely to locate in their founder's home region, to hire workers from the
founder's prior employer and other firms in the same region and industry, to employ them …