Can You Gig it? An Empirical Examination of the Gig-Economy and Entrepreneurial Activity

Abstract

We examine how the entry of gig-economy platforms influences local entrepreneurial activity. On one hand, such platforms may reduce entrepreneurial activity by offering stable employment for the un- and under-employed. On the other hand, such platforms may enable entrepreneurial activity by offering work flexibility that allows the entrepreneur to re-deploy resources strategically in order to pursue her nascent venture. To resolve this tension, we exploit a natural experiment, the entry of the ride-sharing platform Uber X and the on-demand delivery platform Postmates into local areas. We examine the effect of each on crowdfunding campaign launches at Kickstarter, the world’s largest reward-based crowdfunding platform. Results indicate a negative and significant effect on crowdfunding campaign launches, and thus local entrepreneurial activity, after entry of Uber X or Postmates. Strikingly, the effect appears to accrue primarily to unfunded and under-funded projects, suggesting that gig-economy platforms predominantly reduce lower quality entrepreneurial activity by offering viable employment for the un- and under-employed. We corroborate our findings with US Census data on self-employment, which indicate similar declines following the entry of Uber X, and with a small scale survey of gig-economy participants.

Keywords: gig economy, digital platforms, innovation, crowdfunding, entrepreneurship, difference in difference, natural experiment