The Role of Vacancy Posting and Unemployed Hiring in Start-up Success

Using a unique combination of Austrian administrative data, we show that start-ups' search and hiring decisions matter for their business success. Firms that report vacancies to the Public Employment Service in the early stage of their existence stay longer in the market and grow stronger. Moreover, while hiring the unemployed can benefit start-ups, the timing is crucial. Hiring within the first six months increases exit risk, whereas hiring in the second half-year reduces it. This is probably due to the nature of the positions filled. Key management positions, often filled early, seem to be better suited for other employees. Conversely, once the management team is in place, hiring the unemployed for "regular" positions fosters survival and growth. This pattern holds for different subgroups of the unemployed. Evidence of learning effects suggests that positive experiences with early PES involvement and unemployed hires encourage continued use of these practices later on.