Does Career Risk Deter Potential Entrepreneurs?
69 Pages Posted: 14 Jan 2016 Last revised: 13 Nov 2019
Date Written: July 26, 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 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
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