Does Career Risk Deter Potential Entrepreneurs?

69 Pages Posted: 14 Jan 2016 Last revised: 23 Jul 2018

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 19, 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 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

Suggested Citation

Gottlieb, Joshua D. and Townsend, Richard R. and Xu, Ting, Does Career Risk Deter Potential Entrepreneurs? (July 19, 2018). Tuck School of Business Working Paper No. 2714577. Available at SSRN: https://ssrn.com/abstract=2714577 or http://dx.doi.org/10.2139/ssrn.2714577

Joshua D. Gottlieb

University of Chicago ( email )

1307 E. 60th St.
Chicago, IL 60637
United States

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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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