How do policy instruments shape the potential to become solo or employer entrepreneurs?

Entrepreneurial potential is an important concept in the field of entrepreneurship that precedes entrepreneurial intentions. In this paper, we investigate the antecedents of entrepreneurial potential of individuals who are currently not in self-employment using data from a large-scale survey of the adult population. We make the following contributions to extant literature. First, we distinguish between entrepreneurial potential to hire employees (i.e., to become an employer entrepreneur) and entrepreneurial potential to work alone (i.e., to become a solo entrepreneur). Second, we focus specifically on policy-related determinants of entrepreneurial potential, while distinguishing between perceptions of institutional conditions and direct support variables. Our empirical analysis reveals that respondents who indicate that the receipt of direct support with setting-up their business idea (over other types of direct support) would help them start a business are significantly more likely to have (strong) potential to become a solo entrepreneur (i.e., without employees), but significantly less likely to have (strong) potential to become an employer entrepreneur (i.e., with employees). Our results therefore suggest that policy programmes designed to stimulate new business formation may indeed lead to more entrepreneurs but not necessarily to more employer entrepreneurs creating additional wage jobs.