According to a recent study conducted by researchers at the University of Illinois at Urbana-Champaign, tech startups are able to attract highly skilled scientists and engineers despite offering lower salaries and having riskier prospects compared to established companies. The research challenges the commonly held belief that top talent in the tech industry is primarily motivated by high salaries and benefits.
The study, co-authored by Michael Roach, a professor of business administration at Gies Business Faculty in Illinois, suggests that non-monetary benefits such as independence, autonomy, and the opportunity to work on innovative technologies play a significant role in attracting talented individuals to startups. Roach explains that certain workers are willing to accept lower salaries in exchange for working for smaller companies where they feel they can contribute to something new and novel. For these high-ability tech workers, being an early employee in a startup holds more appeal than joining an established company with thousands of employees.
The findings of the study were based on a longitudinal survey that followed over 2,300 science and engineering doctoral students from graduate school to their first job. The researchers found that both individual ability and career preferences strongly predicted employment at startups rather than larger companies. Despite paying their employees approximately 20% less than established companies, startups were still able to attract highly skilled workers.
Roach believes that these findings support the idea that working at a startup may be a better fit for certain individuals based on their career preferences. He emphasizes that many people join new companies because they value the expected non-monetary benefits offered by startups.
Contrary to popular belief, Roach argues that working at a startup is not solely driven by the desire for future financial gains through stock options. Instead, employees understand and accept the risks associated with working for startups but choose them for other reasons such as autonomy and interesting work.
On the other hand, those who opt for large companies often prioritize stability, job security, and clear career paths over other factors. Roach acknowledges that some high-ability workers prefer the riskier startup environment and are attracted to the autonomy and more engaging work it offers, despite lower wages.
The study also suggests that startups have a large enough pool of talent to be selective in their hiring process. Additional analysis using data on job applications and offers revealed that startups can extend job offers to the most talented scientists and engineers.
Roach concludes by stating that high-ability workers do not solely seek to maximize their income when choosing a job. By considering both abilities and preferences, the assumptions surrounding high-ability workers’ motivations can be better understood.
The research was supported by the National Science Foundation and the Ewing Marion Kauffman Foundation, highlighting its credibility.
As a result, this study challenges conventional wisdom regarding employment choices in the tech industry. It reveals that highly skilled workers are drawn to startups not only because of financial incentives but also because of non-monetary benefits such as independence, autonomy, and interesting work. These findings shed light on why startups are able to attract top talent despite offering lower salaries compared to established companies.