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Early Work Experience and the Transition into Entrepreneurship

Author

Listed:
  • Enrico Colombatto

    (University of Torino)

  • Arie Melnik

    (University of Haifa)

Abstract

We use a simple model to analyze the founding stage of new firms. Our goal is to characterize the directional causality between the expected rewards from entrepreneurship and the length of prior labor market experience that entrepreneurs possess. We test predictions about the timing of the formation of new firms on a sample of Italian entrepreneurs. We obtain three main results. First, the timing of the foundation of new firms is determined primarily by the expectation of higher income and not so much by the perception of risk. Second, earlier experience of entrepreneurs in full time employment has a positive impact on the size of newly founded firms. Third, founders who work with family partners establish and control larger firms.

Suggested Citation

  • Enrico Colombatto & Arie Melnik, 2007. "Early Work Experience and the Transition into Entrepreneurship," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 12(1), pages 9-26, Spring.
  • Handle: RePEc:pep:journl:v:12:y:2007:i:1:p:9-26
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    References listed on IDEAS

    as
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    2. de Meza, David & Southey, Clive, 1996. "The Borrower's Curse: Optimism, Finance and Entrepreneurship," Economic Journal, Royal Economic Society, vol. 106(435), pages 375-386, March.
    3. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
    4. Camerer, Colin & Weber, Martin, 1992. "Recent Developments in Modeling Preferences: Uncertainty and Ambiguity," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 325-370, October.
    5. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
    6. repec:hrv:faseco:30747162 is not listed on IDEAS
    7. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    8. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    9. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    10. 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.
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    12. Thomas Dunn & Douglas Holtz-Eakin, 1996. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
    13. 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.
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    Citations

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    Cited by:

    1. Willis, David B. & Boys, Kathryn A. & Hughs, David W. & Swindall, Devin C., 2012. "Evaluating the Determinants of Self-Employed Income Across Regional Economies: A Case-Study of the U.S. Southeast," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124912, Agricultural and Applied Economics Association.
    2. Ervin L. Black & F. Greg Burton & Peter M. Johnson, 2009. "Qualitative Factors as Determinants of Continued Success:An Examination of eBusiness Entrepreneurial Firms Using the NewVenture Template," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 13(2), pages 76-102, Fall.

    More about this item

    Keywords

    Early Work Experience; Founder; Entrepreneur; Startup;

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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