This paper contributes to the literature of academic entrepreneurship by investigating the effect of a possible depreciation of academic knowledge after leaving the university. The possibility of a person's human capital depreciation has up to now mainly been used to explain forgone earnings due to career interruption spells. Since the human capital endowment of a firm’s founder has been shown to be a major determinant of new firm’s success, human capital depreciation might matter for young firm’s early growth prospects. This study is a first attempt in investigating if academic knowledge depreciates after leaving university and affects a start-up's employment growth in early years. The empirical analysis is based on a comprehensive firm level data-set of more than 4,000 academic start-ups founded between 2001 and 2006 in the research- and knowledge-intensive industries in Germany. The depreciation of academic knowledge is investigated by quantifying the effect of the time period which elapses after the founder has left university until the start-up is founded. During that time professional experience and industry knowledge is accumulated while academic knowledge depreciates. Using quantile regressions, human capital is found to be of crucial importance for both ordinary academic start-ups and academic spin-offs (i.e. new firms commercializing academic research results), the founders of the latter suffering even more from human capital depreciation. Additionally, further determinants of young firms’ employment growth are examined along the whole distribution of growth rates. Initial size and age is found to determine employment growth in most of the quantile regressions. This means that Gibrat's Law, stating that the initial size of a firm and its growth rate are independent, can be rejected along wide parts of the distribution of young firm's employment growth. This result is a material contribution to the literature of young firm’s growth since the validity of Gibrat's Law was mainly tested in the conditional mean framework. I find that some factors, e.g. founding a firm in a team or having been hosted in a science park, are of higher relevance for firms in the lower part of the growth distribution, while other prominent factors, such as exporting, continuous R&D and a limitation of liability, are most important for high- growing firms.


human capital depreciation, employment growth, academic entrepreneurship