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Experience and Entrepreneurship: A Career Transition Perspective

Author

Listed:
  • Rider, Christopher I.

    (Goizueta Business School)

  • Thompson, Peter

    (Goizueta Business School)

  • Kacperczyk, Aleksandra

    (Sloan School of Management)

  • Tåg, Joacim

    () (Research Institute of Industrial Economics (IFN))

Abstract

We cast entrepreneurship as one of three career choices – remaining with one’s employer, changing employers, or engaging in entrepreneurship – and theorize how the likelihood of entrepreneurship evolves over one’s career. We empirically demonstrate an inverted U-shaped relationship between accumulated experience and entrepreneurship across various industries and jobs. Despite detailed career history data and job displacement shocks that eliminate the current employer choice, we highlight the difficulty of inferring the mechanism underlying the observed relationship. These analyses motivate a formal career transitions model in which employer-specific and general skills accumulate with experience but potential employers observe only total skill. The upshot of our model is that entrepreneurial career transitions vary with two relative costs: (1) to an individual of forming a business and (2) to a potential employer of utilizing the individual’s employer-specific skills. We discuss how this model contributes new insights into entrepreneurial careers.

Suggested Citation

  • Rider, Christopher I. & Thompson, Peter & Kacperczyk, Aleksandra & Tåg, Joacim, 2013. "Experience and Entrepreneurship: A Career Transition Perspective," Working Paper Series 970, Research Institute of Industrial Economics, revised 02 Oct 2018.
  • Handle: RePEc:hhs:iuiwop:0970
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    File URL: http://www.ifn.se/wfiles/wp/wp970.pdf
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    References listed on IDEAS

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    1. Henrekson, Magnus & Sanandaji, Tino, 2013. "Small Business Activity Does not Measure Entrepreneurship," Working Paper Series 959, Research Institute of Industrial Economics, revised 26 Jan 2014.
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    3. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    4. Daniel W. Elfenbein & Barton H. Hamilton & Todd R. Zenger, 2010. "The Small Firm Effect and the Entrepreneurial Spawning of Scientists and Engineers," Management Science, INFORMS, vol. 56(4), pages 659-681, April.
    5. Farber, Henry S, 1994. "The Analysis of Interfirm Worker Mobility," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 554-593, October.
    6. Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-724, September.
    7. Agarwal, Rajshree & Echambadi, Raj & Franco, April M. & Sarkar, M. B., 2002. "Knowledge Transfer through Congenital Learning: Spin-Out Generation, Growth and Survival," Working Papers 02-0101, University of Illinois at Urbana-Champaign, College of Business.
    8. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    9. Akerlof, George A & Main, Brian G M, 1981. "An Experience-Weighted Measure of Employment and Unemployment Durations," American Economic Review, American Economic Association, vol. 71(5), pages 1003-1011, December.
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    12. Aleksandra J. Kacperczyk, 2013. "Social Influence and Entrepreneurship: The Effect of University Peers on Entrepreneurial Entry," Organization Science, INFORMS, vol. 24(3), pages 664-683, June.
    13. Benjamin Campbell & Martin Ganco & April Franco & Rajshree Agarwal, 2009. "Who Leaves, Where to, and Why Worrry? Employee Mobility, Employee Entrepreneurship, and Effects on Source Firm Performance," Working Papers 09-32, Center for Economic Studies, U.S. Census Bureau.
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    1. repec:kap:sbusec:v:49:y:2017:i:2:d:10.1007_s11187-017-9842-1 is not listed on IDEAS

    More about this item

    Keywords

    Entrepreneurship; Employee mobility; Experience;

    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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