Persistence in Entrepreneurship With and Without Personnel: The Role of Human Capital and Previous Unemployment

Abstract

By considering entrepreneurs who hire employees – employers – and entrepreneurs without personnel – own-account workers – as related but distinct groups within entrepreneurship, this work analyzes the roles of different factors in entrepreneurship survival from a new perspective: contrasting the determinants of own-account workers’ survival with those affecting employers’ survival. Toward this end, discrete choice models under competing risks frameworks are applied to data drawn from the European Community Household Panel for the EU-15 (EUROSTAT). Our results suggest that survival chances are markedly higher for employers than for own-account workers, especially when non-employment exits are considered. We also observe that high qualifications have positive and statistically significant effects on survival rates of employers, whatever exit route, while have no significant effect on survival of own-account workers. Finally, we find that entering entrepreneurship (with and without personnel) from unemployment – i.e., the target group for entrepreneurship incentives – strongly increases the probability of switching back to unemployment. Thus, entrepreneurship and higher education policies should be considered together in order to develop high quality entrepreneurial businesses.

Keywords: Entrepreneurship, Employers, Own-Account Workers, Persistence, Formal Education, Unemployment

JEL Classification: J24, J28, J38, J64, J68