A Selection-Based Theory of the Transition from Employment to Entrepreneurship: The Role of Employer Size

Simon Parker ()

No 2071, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A simple occupational choice model is used to predict that entrepreneurs who found new firms are more likely to work for small than for large firms prior to start-up. The mechanism underlying the result is heterogeneous risk aversion. The model also predicts a positive association between new firm formation and previous self-employment experience. These predictions accord with previous empirical findings, but notably self-selection rather than productivity effects can explain them.

Keywords: entrepreneurship; occupational choice; firm size (search for similar items in EconPapers)
JEL-codes: J21 J23 J62 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2006-04
New Economics Papers: this item is included in nep-bec and nep-ent
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Citations: View citations in EconPapers (8)

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