Forced Entrepreneurs

78 Pages Posted: 29 Jun 2016 Last revised: 4 Sep 2020

See all articles by Isaac Hacamo

Isaac Hacamo

Indiana University - Kelley School of Business - Department of Finance

Kristoph Kleiner

Indiana University - Kelley School of Business - Department of Finance

Date Written: September 2, 2020

Abstract

Conventional wisdom suggests labor market declines drive workers towards temporary entrepreneurship and self-employment, lowering the quality of startups. Analyzing the employment histories of 640,000 workers, we document graduating college during a period of high unemployment does increase entry to entrepreneurship. However, based on multiple measures of success, including survival, growth, innovation, and venture capital funding, recession-driven entrepreneurs are equal to or more capable than voluntary entrepreneurs. Explaining these results, we find labor shocks disproportionately impact workers with the greatest wage potential and these same workers start highly-successful firms. Overall, we confirm the prevalence of untapped entrepreneurial potential in the workforce, especially across the top of the income distribution.

Keywords: Entrepreneurship, local labor markets, risk aversion, firm growth, innovation, venture capital

JEL Classification: L26, L25, M13, J23, E32, O31, G02

Suggested Citation

Hacamo, Isaac and Kleiner, Kristoph, Forced Entrepreneurs (September 2, 2020). Kelley School of Business Research Paper No. 16-48, Available at SSRN: https://ssrn.com/abstract=2801637 or http://dx.doi.org/10.2139/ssrn.2801637

Isaac Hacamo

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-7842 (Phone)

HOME PAGE: http://hacamo.weebly.com/

Kristoph Kleiner (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

HOME PAGE: http://sites.google.com/site/kristophkleiner

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