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Launching with a parachute: The gig economy and new business formation

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  • Barrios, John M.
  • Hochberg, Yael V.
  • Yi, Hanyi

Abstract

We utilize the staggered arrival of Uber and Lyft—large sources of on-demand, platform-enabled gig opportunities—in U.S. cities to examine the effect of the arrival of flexible gig work opportunities on new business formation. The introduction of gig opportunities is associated with an increase of ∼5% in the number of new business registrations in the local area, and a correspondingly-sized increase in small business lending to newly registered businesses. Internet searches for entrepreneurship-related keywords increase ∼7%. These effects are strongest in locations where proxies for ex ante economic uncertainty regarding the viability of new businesses are larger. Our findings suggest that the introduction of the gig economy creates fallback opportunities for would-be entrepreneurs that reduce risk and encourage new business formation.

Suggested Citation

  • Barrios, John M. & Hochberg, Yael V. & Yi, Hanyi, 2022. "Launching with a parachute: The gig economy and new business formation," Journal of Financial Economics, Elsevier, vol. 144(1), pages 22-43.
    • Handle: RePEc:eee:jfinec:v:144:y:2022:i:1:p:22-43
    DOI: 10.1016/j.jfineco.2021.12.011
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    Cited by:

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    3. Philip Wollborn & David Dornekott & Ulrike Holder, 2023. "Entrepreneurial efforts and opportunity costs: evidence from twitch streamers," International Entrepreneurship and Management Journal, Springer, vol. 19(3), pages 1209-1238, September.
    4. Yu Jeffrey Hu & Jeroen Rombouts & Ines Wilms, 2023. "Fast Forecasting of Unstable Data Streams for On-Demand Service Platforms," Papers 2303.01887, arXiv.org.
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    6. Liu, Mengsha & Jiang, Yan & Wei, Xiaokun & Ruan, Qingsong & Lv, Dayong, 2023. "Effect of high-speed rail on entrepreneurial activities: Evidence from China," Socio-Economic Planning Sciences, Elsevier, vol. 87(PA).
    7. Teltser, Keith & Lennon, Conor & Burgdorf, Jacob, 2021. "Do ridesharing services increase alcohol consumption?," Journal of Health Economics, Elsevier, vol. 77(C).
    8. Minkyu Shin & Jiwoong Shin & Soheil Ghili & Jaehwan Kim, 2023. "The Impact of the Gig Economy on Product Quality Through the Labor Market: Evidence from Ridesharing and Restaurant Quality," Management Science, INFORMS, vol. 69(5), pages 2620-2638, May.
    9. Jinglin Jiang & Hongyu Xiang, 2024. "Leadership and Entrepreneurship: Evidence from a Chinese Household Survey," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(1), pages 1-2.
    10. Cai, Wenjing & Cai, Xinni & Wang, Zehao & Yang, Ge, 2023. "The spillover effect of penalty against peer firm leaders——Evidence from earnings management," Finance Research Letters, Elsevier, vol. 54(C).
    11. Kilström, Matilda & Roth, Paula, 2022. "Risk-Sharing and Entrepreneurship," Working Paper Series 1424, Research Institute of Industrial Economics.

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    More about this item

    Keywords

    Gig economy; Entrepreneurship; New business formation; Rideshare; Entrepreneurial risk;
    All these keywords.

    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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