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Opportunity versus Necessity: Understanding the Heterogeneity of Female Micro-Entrepreneurs

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  • Gabriela Calderon
  • Leonardo Iacovone
  • Laura Juarez

Abstract

Entrepreneurs that voluntarily choose to start a business because they are able to identify a good business opportunity and act on it—opportunity entrepreneurs—might be different along various dimensions from those who are forced to become entrepreneurs because of lack of other alternatives—necessity entrepreneurs. To provide evidence on these differences, this article exploits a unique data set covering a wide array of characteristics, including cognitive skills, noncognitive skills, and managerial practices, for a large sample of female entrepreneurs in Mexico. Descriptive results show that on average opportunity entrepreneurs have better performance and higher skills than necessity entrepreneurs. A discriminant analysis reveals that discrimination is difficult to achieve based on these observables, which suggests the existence of unobservables driving both the decision to become an opportunity entrepreneur and performance. Thus, an instrumental variables estimation is conducted, using state economic growth in the year the business was set up as an instrument for opportunity, to confirm that opportunity entrepreneurs have higher performance and better management practices.

Suggested Citation

  • Gabriela Calderon & Leonardo Iacovone & Laura Juarez, 2017. "Opportunity versus Necessity: Understanding the Heterogeneity of Female Micro-Entrepreneurs," World Bank Economic Review, World Bank Group, vol. 30(Supplemen), pages 86-96.
  • Handle: RePEc:oup:wbecrv:v:30:y:2017:i:supplement_1:p:s86-s96.
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    File URL: http://hdl.handle.net/10.1093/wber/lhw010
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    4. Gabriela Calderon & Jesse M. Cunha & Giacomo De Giorgi, 2020. "Business Literacy and Development: Evidence from a Randomized Controlled Trial in Rural Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 507-540.
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    Cited by:

    1. David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, INFORMS, vol. 63(9), pages 2967-2981, September.
    2. Kasper Brandt & Longinus Rutasitara & Onesmo Selejio & Neda Trifkovic, 2017. "Entrepreneurship and human capital development in children," WIDER Working Paper Series 198, World Institute for Development Economic Research (UNU-WIDER).
    3. Mayra Buvinic & Megan O’Donnell, 2017. "Gender Matters in Economic Empowerment Interventions: A Research Review," Working Papers id:11926, eSocialSciences.
    4. Lennard Hohl & Peter M. Bican & Carsten C. Guderian & Frederik J. Riar, 2021. "Gender Diversity Effects in Investment Decisions," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 30(1), pages 134-152, March.
    5. Amorós, José Ernesto & Cristi, Oscar & Naudé, Wim, 2021. "Entrepreneurship and subjective well-being: Does the motivation to start-up a firm matter?," Journal of Business Research, Elsevier, vol. 127(C), pages 389-398.
    6. Cyn-Young Park & Rogelio Mercado Jr., 2018. "Financial Inclusion: New Measurement and Cross-Country Impact Assessment," Working Papers wp29, South East Asian Central Banks (SEACEN) Research and Training Centre.
    7. Kasper Brandt & Longinus Rutasitara & Onesmo Selejio & Neda Trifkovi?, 2017. "Entrepreneurship and human capital development in children," WIDER Working Paper Series wp-2017-198, World Institute for Development Economic Research (UNU-WIDER).
    8. Mayra Buvinic & Megan O’Donnell, 2017. "Gender Matters in Economic Empowerment Interventions: A Research Review - Working Paper 456," Working Papers 456, Center for Global Development.
    9. Robert W. Fairlie & Frank M. Fossen, 2018. "Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation," SOEPpapers on Multidisciplinary Panel Data Research 959, DIW Berlin, The German Socio-Economic Panel (SOEP).
    10. Zulaicha Parastuty & Dieter Bögenhold, 2019. "Paving the Way for Self-Employment: Does Society Matter?," Sustainability, MDPI, Open Access Journal, vol. 11(3), pages 1-16, January.
    11. Robert W. Fairlie & Frank M. Fossen, 2019. "Defining Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation," NBER Working Papers 26377, National Bureau of Economic Research, Inc.
    12. Nava Ashraf & Alexia Delfino & Edward L. Glaeser, 2019. "Rule of Law and Female Entrepreneurship," NBER Working Papers 26366, National Bureau of Economic Research, Inc.
    13. Rodriguez Torres, Omar, 2021. "How different are necessity and opportunity firms? Evidence from a quantile analysis of the Colombian microenterprise sector," MERIT Working Papers 2021-019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. Pérez-Centeno, Víctor, 2017. ""It takes three to tango": Brain, cognition and entrepreneurial enhancement," Working Papers 02/17, Institut für Mittelstandsforschung (IfM) Bonn.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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