Transitions to Entrepreneurship and Industry-Specific Barriers

46 Pages Posted: 20 Nov 2011

See all articles by Magnus Lofstrom

Magnus Lofstrom

Public Policy Institute of California; Institute for the Study of Labor (IZA)

Timothy Bates

Wayne State University - College of Urban, Labor, & Metropolitan Affairs; University of Vermont - College of Arts and Sciences

Simon C. Parker

University of Western Ontario; Durham University - Department of Economics and Finance; IZA Institute of Labor Economics

Abstract

Drivers of entrepreneurial entry are investigated in this study by examining how entry into small-business ownership is shaped by industry-specific constraints. The human- and financial-capital endowments of potential entrepreneurs entering firms in various industries are shown to differ profoundly, depending on the type of venture entered. The educational credentials of highly educated potential entrepreneurs, in particular, predict avoidance of small-firm ownership in some industries as well as attraction to others. Recognizing that individuals choose an industry sector jointly with their decision to enter entrepreneurship, we find that the conventional practice of conflating different industry types in empirical analyses of transitions to entrepreneurship generates misleading findings about the determinants of entrepreneurship.

Keywords: entrepreneurship, self-employment, capital constraints, transitions, entry barriers, business start-ups

JEL Classification: J24, L26, M13

Suggested Citation

Lofstrom, Magnus and Bates, Timothy and Parker, Simon C., Transitions to Entrepreneurship and Industry-Specific Barriers. IZA Discussion Paper No. 6103. Available at SSRN: https://ssrn.com/abstract=1962161

Magnus Lofstrom (Contact Author)

Public Policy Institute of California ( email )

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United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 303 (Phone)
+49 228 3894 210 (Fax)

Timothy Bates

Wayne State University - College of Urban, Labor, & Metropolitan Affairs ( email )

Detroit, MI 48202
United States

University of Vermont - College of Arts and Sciences ( email )

United States

Simon C. Parker

University of Western Ontario ( email )

1151 Richmond Street
Suite 2
London, Ontario N6A 5B8
Canada

Durham University - Department of Economics and Finance ( email )

23/26 Old Elvet
Durham DH1 3HY
United Kingdom
+44 191 3747271 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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