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Entrepreneurship, Windfall Gains and Financial Constraints: Evidence from Germany

Author

Listed:
  • Schäfer, Dorothea

    (Jönköping International Business School (JIBS) and DIW Berlin)

  • Talavera, Oleksandr

    (University of East Anglia)

  • Weir, Charlie

    (Aberdeen Business School)

Abstract

We investigate the link between the propensity to become an entrepreneur and exogenous release from nancial constraints in Germany. This is de ned in terms of the movement from employment to self employment on receipt of a nancial windfall. A theoretical framework developing Evans and Jovanovic (1989) is set up and tested with panel data from German households. The results show that nancial constraints do exist given that individuals are more likely to start a personal business after receiving a windfall gain. The value of windfall gains has a signi cant but non linear e ect on the decision to become self employed. The data reveal that di erences in ability and income a ect the change in employment status. We also report that there is no evidence that becoming self employed involves the anticipation of windfall gains.

Suggested Citation

  • Schäfer, Dorothea & Talavera, Oleksandr & Weir, Charlie, 2010. "Entrepreneurship, Windfall Gains and Financial Constraints: Evidence from Germany," JIBS Working Papers 2010-3, Jönköping International Business School.
  • Handle: RePEc:hhb:hjacfi:2010_003
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    Cited by:

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    2. Robert W. Fairlie & Harry A. Krashinsky, 2012. "Liquidity Constraints, Household Wealth, And Entrepreneurship Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(2), pages 279-306, June.
    3. Bella Struminskaya, 2011. "Selbständigkeit von Personen mit Migrationshintergrund in Deutschland: Ursachen ethnischer Unternehmung," SOEPpapers on Multidisciplinary Panel Data Research 418, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Daniel L. Bennett, 2021. "Local institutional heterogeneity & firm dynamism: Decomposing the metropolitan economic freedom index," Small Business Economics, Springer, vol. 57(1), pages 493-511, June.
    5. Hansson, Åsa & Kopsch, Fredrik, 2020. "Property Values and the Likelihood of Self-Employment," Working Paper Series 1376, Research Institute of Industrial Economics.
    6. Pham, Tho & Talavera, Oleksandr & Zhang, Mao, 2018. "Self-employment, financial development, and well-being: Evidence from China, Russia, and Ukraine," Journal of Comparative Economics, Elsevier, vol. 46(3), pages 754-769.
    7. Peters, Heiko & Schwarz, Peter, 2013. "Bequests and labor supply in Germany," TranState Working Papers 173, University of Bremen, Collaborative Research Center 597: Transformations of the State.
    8. Giménez-Nadal, José Ignacio & Molina, José Alberto & Velilla, Jorge, 2022. "Intergenerational correlation of self-employment in Western Europe," Economic Modelling, Elsevier, vol. 108(C).
    9. Robert W. Fairlie, 2013. "Minority and immigrant entrepreneurs: access to financial capital," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 8, pages 153-175, Edward Elgar Publishing.
    10. Polbin, Andrey & Shumilov, Andrei, 2020. "Предпринимательство, Накопление Богатства И Ограничения Заимствования: Обзор Зарубежных Исследований [Entrepreneurship, wealth accumulation and borrowing constraints: Foreign research experience]," MPRA Paper 103675, University Library of Munich, Germany.
    11. Caliendo, Marco & Künn, Steffen & Weissenberger, Martin, 2020. "Catching up or lagging behind? The long-term business and innovation potential of subsidized start-ups out of unemployment," Research Policy, Elsevier, vol. 49(10).
    12. Gutiérrez, Antonio & Velilla, Jorge, 2022. "La transmisión intergeneracional en el autoempleo: El efecto de la situación financiera familiar [The effect of family financial status on intergenerational transmission of self-employment]," MPRA Paper 113619, University Library of Munich, Germany.
    13. Anwar, Sajid & Sun, Sizhong, 2012. "FDI and market entry/exit: Evidence from China," Journal of Asian Economics, Elsevier, vol. 23(5), pages 487-498.
    14. Hansson, Åsa & Kopsch, Fredrik, 2020. "Property Values and the Likelihood of Self-Employment," Working Papers 2020:26, Lund University, Department of Economics.
    15. Mats Håkan Wilhelmsson, 2017. "The effect of house prices on business start-ups: A review and analysis using Swedish regional data," REGION, European Regional Science Association, vol. 4, pages 1-16.
    16. Escudero, Verónica. & Ha, Byung-jin. & Khatiwada, Sameer. & Tobin, Steven., 2011. "Germany : a job-centred approach," Studies on Growth with Equity, International Labour Office, Research Department, number 994634763402676, January.

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    More about this item

    Keywords

    Entrepreneurship; windfall gains; nancial constraints;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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