Does Career Risk Deter Potential Entrepreneurs?
69 Pages Posted: 14 Jan 2016 Last revised: 23 Jul 2018
Date Written: July 19, 2018
Do potential entrepreneurs remain in wage employment because of concerns that they will face worse job opportunities should their entrepreneurial ventures fail? Using a Canadian reform that extended job-protected leave to one year for women giving birth after a cutoff date, we study whether the option to return to a previous job increases entrepreneurship. A regression discontinuity design reveals that longer job-protected leave increases entrepreneurship by 1.9 percentage points. These entrepreneurs start incorporated businesses that hire employees—in industries where experimentation before entry has low costs and high benefits. The effects are concentrated among those with more human and financial capital.
Keywords: Entrepreneurship, Risk-Aversion, Job-Protected Leave, Career, Real Option, Experimentation
JEL Classification: L26, J13, J16, J65, J88, H50
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