IDEAS home Printed from https://ideas.repec.org/a/sae/entthe/v40y2016i2p401-420.html
   My bibliography  Save this article

Individual Entrepreneurial Exit and Earnings in Subsequent Paid Employment

Author

Listed:
  • Alessandra Luzzi
  • Amir Sasson

Abstract

We study earnings of individuals who exit entrepreneurship for paid employment. We find mean (median) positive rewards from entrepreneurship in subsequent paid employment relative to matched employees. Rewards are higher for former entrepreneurs hired in highly innovative sectors. We also find that the performance of the exited firm is a strong predictor of the earnings premium for former entrepreneurs when the firm performed well, while we do not find median discounts for entrepreneurs exiting low performing firms. We use registry data that encompass the population of firms and individuals in the Norwegian economy.

Suggested Citation

  • Alessandra Luzzi & Amir Sasson, 2016. "Individual Entrepreneurial Exit and Earnings in Subsequent Paid Employment," Entrepreneurship Theory and Practice, , vol. 40(2), pages 401-420, March.
    • Handle: RePEc:sae:entthe:v:40:y:2016:i:2:p:401-420
    DOI: 10.1111/etap.12225
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1111/etap.12225
    Download Restriction: no
    File URL: https://libkey.io/10.1111/etap.12225?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Marco Cagetti & Mariacristina De Nardi, 2006. "Entrepreneurship, Frictions, and Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 835-870, October.
    2. Hyytinen, Ari & Ilmakunnas, Pekka & Toivanen, Otto, 2013. "The return-to-entrepreneurship puzzle," Labour Economics, Elsevier, vol. 20(C), pages 57-67.
    3. Thomas Åstebro & Jing Chen & Peter Thompson, 2011. "Stars and Misfits: Self-Employment and Labor Market Frictions," Management Science, INFORMS, vol. 57(11), pages 1999-2017, November.
    4. Vincenzo Quadrini, 2000. "Entrepreneurship, Saving and Social Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 1-40, January.
    5. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-535, June.
    6. Benjamin A. Campbell, 2013. "Earnings Effects of Entrepreneurial Experience: Evidence from the Semiconductor Industry," Management Science, INFORMS, vol. 59(2), pages 286-304, February.
    7. Williams, Donald R., 2000. "Consequences of self-employment for women and men in the United States," Labour Economics, Elsevier, vol. 7(5), pages 665-687, September.
    8. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.
    9. J. Wagner, 2003. "Testing Lazear's jack-of-all-trades view of entrepreneurship with German micro data," Applied Economics Letters, Taylor & Francis Journals, vol. 10(11), pages 687-689.
    10. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-266, May.
    11. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
    12. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 80-108, January.
    13. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    14. Alberto Abadie & Guido W. Imbens, 2011. "Bias-Corrected Matching Estimators for Average Treatment Effects," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 1-11, January.
    15. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    16. Currie, Janet & McConnell, Sheena, 1992. "Firm-Specific Determinants of the Real Wage," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 297-304, May.
    17. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
    18. Berglann, Helge & Moen, Espen R. & Røed, Knut & Skogstrøm, Jens Fredrik, 2011. "Entrepreneurship: Origins and returns," Labour Economics, Elsevier, vol. 18(2), pages 180-193, April.
    19. Åstebro, Thomas & Thompson, Peter, 2011. "Entrepreneurs, Jacks of all trades or Hobos?," Research Policy, Elsevier, vol. 40(5), pages 637-649, June.
    20. Jolanda Hessels & Isabel Grilo & Roy Thurik & Peter Zwan, 2011. "Entrepreneurial exit and entrepreneurial engagement," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 447-471, August.
    21. Busenitz, Lowell W. & Barney, Jay B., 1997. "Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making," Journal of Business Venturing, Elsevier, vol. 12(1), pages 9-30, January.
    22. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
    23. Baptista, Rui & Lima, Francisco & Preto, Miguel Torres, 2012. "How former business owners fare in the labor market? Job assignment and earnings," European Economic Review, Elsevier, vol. 56(2), pages 263-276.
    24. Wennberg, Karl & Wiklund, Johan & DeTienne, Dawn R. & Cardon, Melissa S., 2010. "Reconceptualizing entrepreneurial exit: Divergent exit routes and their drivers," Journal of Business Venturing, Elsevier, vol. 25(4), pages 361-375, July.
    25. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December.
    26. Kaiser, Ulrich & Malchow-Møller, Nikolaj, 2011. "Is self-employment really a bad experience?: The effects of previous self-employment on subsequent wage-employment wages," Journal of Business Venturing, Elsevier, vol. 26(5), pages 572-588, September.
    27. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    28. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Emma Lappi, 2023. "Help from the past—coworker ties and entry wages after self-employment," Small Business Economics, Springer, vol. 60(3), pages 1171-1196, March.
    2. Natee Amornsiripanitch & Paul Gompers & George Hu & Will Levinson & Vladimir Mukharlyamov, 2022. "Failing Just Fine: Assessing Careers of Venture Capital-backed Entrepreneurs Via a Non-Wage Measure," NBER Working Papers 30179, National Bureau of Economic Research, Inc.
    3. Aleksandra Bujacz & Constanze Eib & Susanna Toivanen, 2020. "Not All Are Equal: A Latent Profile Analysis of Well-Being Among the Self-Employed," Journal of Happiness Studies, Springer, vol. 21(5), pages 1661-1680, June.
    4. Koch, Michael & Park, Sarah & Zahra, Shaker A., 2021. "Career patterns in self-employment and career success," Journal of Business Venturing, Elsevier, vol. 36(1).
    5. Merida, Adrian L. & Rocha, Vera, 2021. "It's about time: The timing of entrepreneurial experience and the career dynamics of university graduates," Research Policy, Elsevier, vol. 50(1).
    6. Louise Lindbjerg & Theodor Vladasel, 2021. "Hiring Entrepreneurs for Innovation," Working Papers 1309, Barcelona School of Economics.
    7. Kristina Nyström, 2021. "Working for an entrepreneur: heaven or hell?," Small Business Economics, Springer, vol. 56(2), pages 919-931, February.
    8. Francesca Melillo, 2023. "Going From Entrepreneur Back to Employee: Employer Type, Task Variety, and Job Satisfaction," GREDEG Working Papers 2023-21, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    9. Aaron H. Anglin & Christopher Courtney & Thomas H. Allison, 2022. "Venturing for Others, Subject to Role Expectations? A Role Congruity Theory Approach to Social Venture Crowd Funding," Entrepreneurship Theory and Practice, , vol. 46(2), pages 421-448, March.
    10. Sanguineti, Francesca & Majocchi, Antonio & Cavusgil, S. Tamer, 2022. "Founding entrepreneur’s dilemma: Stay or exit the firm following an acquisition? An international comparison," International Business Review, Elsevier, vol. 31(1).
    11. Matthew J. Lindquist & Theodor Vladasel, 2022. "Are entrepreneurs more upwardly mobile?," Economics Working Papers 1841, Department of Economics and Business, Universitat Pompeu Fabra.
    12. Jeroen Mahieu & Francesca Melillo & Peter Thompson, 2022. "The long‐term consequences of entrepreneurship: Earnings trajectories of former entrepreneurs," Strategic Management Journal, Wiley Blackwell, vol. 43(2), pages 213-236, February.
    13. Küsshauer, Alexander & Baum, Matthias, 2023. "The good, the bad and the uncertain: Employers' perceptions of former entrepreneurs," Journal of Business Venturing, Elsevier, vol. 38(2).
    14. Siepel, Josh & Cowling, Marc & Coad, Alex, 2017. "Non-founder human capital and the long-run growth and survival of high-tech ventures," Technovation, Elsevier, vol. 59(C), pages 34-43.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Failla, Virgilio & Melillo, Francesca & Reichstein, Toke, 2017. "Entrepreneurship and employment stability — Job matching, labour market value, and personal commitment," Journal of Business Venturing, Elsevier, vol. 32(2), pages 162-177.
    2. Emma Lappi & Johan E. Eklund & Johan Klaesson, 2022. "Does education matter for the earnings of former entrepreneurs? Longitudinal evidence using entry and exit dynamics," Journal of Evolutionary Economics, Springer, vol. 32(3), pages 827-865, July.
    3. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    4. Baptista, Rui & Lima, Francisco & Preto, Miguel Torres, 2012. "How former business owners fare in the labor market? Job assignment and earnings," European Economic Review, Elsevier, vol. 56(2), pages 263-276.
    5. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.
    6. Felipe Balmaceda, 2018. "Entrepreneurship: skills and financing," Small Business Economics, Springer, vol. 50(4), pages 871-886, April.
    7. Hårsman, Björn & Mattsson, Lars-Göran, 2019. "Reconsidering the returns to entrepreneurship: Applying a modified version of Lazear’s occupational choice model," Working Paper Series in Economics and Institutions of Innovation 478, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    8. Björn Hårsman & Lars-Göran Mattsson, 2021. "Analyzing the returns to entrepreneurship by a modified Lazear model," Small Business Economics, Springer, vol. 57(4), pages 1875-1892, December.
    9. Braunerhjelm, Pontus & Lappi, Emma, 2023. "Employees' entrepreneurial human capital and firm performance," Research Policy, Elsevier, vol. 52(2).
    10. Bebonchu Atems & Grayden Shand, 2018. "An empirical analysis of the relationship between entrepreneurship and income inequality," Small Business Economics, Springer, vol. 51(4), pages 905-922, December.
    11. Louise Lindbjerg & Theodor Vladasel, 2021. "Hiring Entrepreneurs for Innovation," Working Papers 1309, Barcelona School of Economics.
    12. Merida, Adrian L. & Rocha, Vera, 2021. "It's about time: The timing of entrepreneurial experience and the career dynamics of university graduates," Research Policy, Elsevier, vol. 50(1).
    13. Emma Lappi, 2023. "Help from the past—coworker ties and entry wages after self-employment," Small Business Economics, Springer, vol. 60(3), pages 1171-1196, March.
    14. Paul A. Coomes & Jose Fernandez & Stephan F. Gohmann, 2013. "The Rate of Proprietorship Among Metropolitan Areas: The Impact of the Local Economic Environment and Capital Resources," Entrepreneurship Theory and Practice, , vol. 37(4), pages 745-770, July.
    15. Matthew J. Lindquist & Theodor Vladasel, 2022. "Are entrepreneurs more upwardly mobile?," Economics Working Papers 1841, Department of Economics and Business, Universitat Pompeu Fabra.
    16. Ross Levine & Yona Rubinstein, 2018. "Selection into Entrepreneurship and Self-Employment," NBER Working Papers 25350, National Bureau of Economic Research, Inc.
    17. Stefano Corradin, 2013. "House Prices, Household Leverage, and Entrepreneurship," 2013 Meeting Papers 631, Society for Economic Dynamics.
    18. Laffineur, Catherine & Dubard Barbosa, Saulo & Fayolle, Alain & Montmartin, Benjamin, 2020. "The unshackled entrepreneur: Occupational determinants of entrepreneurial effort," Journal of Business Venturing, Elsevier, vol. 35(5).
    19. Alina Sorgner & Michael Fritsch & Alexander Kritikos, 2017. "Do entrepreneurs really earn less?," Small Business Economics, Springer, vol. 49(2), pages 251-272, August.
    20. Daly, Moira, 2015. "The long term returns of attempting self-employment with regular employment as a fall back option," Labour Economics, Elsevier, vol. 35(C), pages 26-52.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:entthe:v:40:y:2016:i:2:p:401-420. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.