Great Recession babies: How are startups shaped by macro conditions at birth?

We propose a novel identification strategy to estimate the long-term imprinting effects of being born in the Great Recession on innovative startups. After purging ubiquitous selection biases and sorting effects, we find that recession startups experience substantially better long-term outcomes in terms of survival and growth in employment and sales, despite being born when funding is scarce and demand is declining. In contrast to prior work, we find that the recession does not encourage entry into entrepreneurship as job prospects dim; instead, it discourages exit by critical R&D workers who help recession startups out-innovate and out-perform expansion startups.