The Career Dynamics of Self-Employment

Abstract

Using retrospective career life-history data from West Germany, the process by which individuals move into and out of self-employment is studied by separately examining the rates of movement into self-employment and family employment. A general framework of how the self-employment process operates is established -- first, by recognizing that self-employment is episodic and second, by identifying the various ways by which one can become formally self-employed. This general framework is used to study the effects of three types of substantive variables thought to be important for understanding self-employment and entrepreneurship: religion, parental self-employment, and individual experience in self-employment. The rates of movement into self-employment-related first jobs, the rates of movement into self-employment at later stages in the career, and how self-employment affects later labor-market experiences are analyzed. For entry into self-employment as a first-job, only occupational education shows a statistically significant effect and this effect is negative -- those with higher levels of occupational education are less likely to become self-employed at labor-force entry. By contrast, initial movement into family employment is shown to be positively statistically significant and it improves considerably over a constant-rate model. It is also demonstrated that experience in self- and family-employment is one of the most stable positions in the labor force, despite high rates of business failure, because the self- and family employed have significantly lower rates of job change than the conventionally employed. (SFL)

Keywords: Religion, Social structures, Operator ownership, Family firms, Educational background, Parent background, Individual traits, Work experience, Self-employment, Career choices