Necessity and Opportunity Entrepreneurs in Germany: Characteristics and Earnings Differentials

Abstract

In this paper we discuss necessity and opportunity entrepreneurship. We use panel data to analyze how these two types of entrepreneurs differ in general, and in their ability to discover and exploit entrepreneurial opportunities. We find that the opportunities ex-ploited by opportunity entrepreneurs are generally more profitable than are those ex-ploited by necessity entrepreneurs. We also find that the determinants of success differ to a strong degree. Standard wage equations seem to work better for opportunity than for necessity entrepreneurs. Our findings indicate a need to distinguish between the two groups in entrepreneurship theory and practice.

Keywords: opportunity entrepreneurship, necessity entrepreneurship, opportunity discovery, opportunity exploitation, earnings equation

JEL Classification: C23, J23, J24, J31, M13