Does Career Risk Deter Potential Entrepreneurs?

69 Pages Posted: 14 Jan 2016 Last revised: 13 Nov 2019

See all articles by Joshua D. Gottlieb

Joshua D. Gottlieb

University of Chicago; National Bureau of Economic Research (NBER)

Richard R. Townsend

University of California, San Diego (UCSD) - Rady School of Management

Ting Xu

University of Virginia - Darden School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 26, 2018

Abstract

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 e˙ects 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

Suggested Citation

Gottlieb, Joshua D. and Townsend, Richard R. and Xu, Ting, Does Career Risk Deter Potential Entrepreneurs? (July 26, 2018). Available at SSRN: https://ssrn.com/abstract=2714577 or http://dx.doi.org/10.2139/ssrn.2714577

Joshua D. Gottlieb

University of Chicago ( email )

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HOME PAGE: http://www.gottlieb.ca/

National Bureau of Economic Research (NBER)

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HOME PAGE: http://papers.nber.org/authors/joshua_gottlieb

Richard R. Townsend (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Ting Xu

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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