Entrepreneurship and employment stability


Are entrepreneurs better matched in self-employment than in wage-work or do they simply persist with their entrepreneurial venture because they are locked-in? This is the question posed in a new publication in Journal of Business Venturing by Virgilio Failla, Francesca Melillo and Toke Reichstein. The paper starts by showing that entrepreneurs persist longer in self-employemnt than they would have if they had chosen a new wage work setting. It then sets out to offer explanations for this empirical finding. 


Abstract of the paper

This paper challenges the conventional belief that entrepreneurship is an unstable career path. Using longitudinal matched employer–employee data from Denmark, the analysis reveals that a transition to entrepreneurship decreases individual's employment turnover tendency. Three explanations are identified and empirically explored: (i) job matching, (ii) labour market value, and (iii) personal commitment. Entrepreneurs appear to be more productive and thus better matched compared to wageworkers. However, they also appear to be locked in entrepreneurship because of their anticipated lower value in the labour market and because of their personal attachment to the venture. The counter-intuitive finding – entrepreneurship yields greater employment stability – only holds with respect to subsequent transitions to wagework and not for new venture founding. The results have implications for our understanding of entrepreneurial entry and labour market dynamics.


Link to Journal of Business Venturing Page