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Hierarchies and Entrepreneurship

Author

Listed:
  • Tåg, Joacim

    (Research Institute of Industrial Economics (IFN))

  • Åstebro, Thomas

    (HEC Paris)

  • Thompson, Peter

    (Goizueta Business School)

Abstract

We establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees, using a sample of 16 million observations of Swedish workers and a novel proxy for hierarchies based on occupation data. Conditional on firm size and many other variables, employees in firms with more layers are less likely to enter entrepreneurship, to become selfemployed, and to switch to another employer. The effects of layers are much stronger for business creation than for jobswitching and they are stronger for entrepreneurship than for selfemployment. We discuss two potential explanations for the distinctive hierarchy effect we find. Part of the effect could be to be due to preference sorting by employees, and part due to employees in firms with fewer layers having a broader range of skills. One test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting.

Suggested Citation

  • Tåg, Joacim & Åstebro, Thomas & Thompson, Peter, 2013. "Hierarchies and Entrepreneurship," Working Paper Series 954, Research Institute of Industrial Economics, revised 28 Nov 2016.
  • Handle: RePEc:hhs:iuiwop:0954
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    Cited by:

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    2. Åstebro, Thomas & Tåg, Joacim, 2017. "Gross, net, and new job creation by entrepreneurs," Journal of Business Venturing Insights, Elsevier, vol. 8(C), pages 64-70.
    3. Louise Lindbjerg & Theodor Vladasel, 2021. "Hiring Entrepreneurs for Innovation," Working Papers 1309, Barcelona School of Economics.
    4. Vera Rocha & Anabela Carneiro & Celeste Varum, 2015. "Entry and exit dynamics of nascent business owners," Small Business Economics, Springer, vol. 45(1), pages 63-84, June.
    5. Aleksandra Kacperczyk & Chanchal Balachandran, 2018. "Vertical and Horizontal Wage Dispersion and Mobility Outcomes: Evidence from the Swedish Microdata," Organization Science, INFORMS, vol. 29(1), pages 17-38, February.
    6. Åstebro, Thomas & Tåg, Joacim, 2015. "Jobs Incorporated: Incorporation Status and Job Creation," Working Paper Series 1059, Research Institute of Industrial Economics.
    7. 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).
    8. Kurosh Rezaei-Moghaddam & Hoda Izadi, 2019. "Entrepreneurship in small agricultural quick-impact enterprises in Iran: development of an index, effective factors and obstacles," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 9(1), pages 1-21, December.
    9. Michael S. Dahl & Mirjam van Praag & Peter Thompson, 2014. "Entrepreneurial Couples," Tinbergen Institute Discussion Papers 14-055/V, Tinbergen Institute.
    10. Bonilla, Santiago & Polanec, Sašo, 2020. "Organizational Hierarchies in the Slovenian Manufacturing Sector," MPRA Paper 103009, University Library of Munich, Germany.
    11. Catherine Laffineur & Benjamin Montmartin & Fayolle Alain & Saulo Dubard Barbosa, 2020. "The unshackled entrepreneur: Occupational determinants of entrepreneurial effort," Post-Print hal-02349480, HAL.

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    More about this item

    Keywords

    Entrepreneurship; Employee mobility; Hierarchy; Rank; Small firm effect;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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