IDEAS home Printed from https://ideas.repec.org/p/por/cetedp/1310.html
   My bibliography  Save this paper

Entrepreneurship Dynamics: Entry Routes, Business-Owner's Persistence and Exit Modes

Author

Listed:
  • Vera Rocha

    (Universidade do Porto, cef.up and CIPES)

  • Anabela Carneiro

    (Universidade do Porto and cef.up)

  • Celeste Amorim Varum

    (Universidade de Aveiro, DEGEI and GOVCOPP)

Abstract

This paper conducts a comprehensive study on entrepreneurship dynamics using a large longitudinal matched employer-employee dataset. We identify the transition of over 200,000 nascent business-owners and follow their survival patterns in the respective businesses using discrete time competing risks models. Different profiles of new business-owners are identified, taking into account their entry routes and how such entry choices impact on their persistence in the firm. Exits by dissolution are distinguished from exits by ownership transfer. We also analyze how previous labor market experiences and macroeconomic environment shape the individuals' decision to become and persist as business-owners. Controlling for a set of individual and previous job characteristics, we found that those experiencing a recent displacement are more likely to become entrepreneurs and to persist longer in the business. Concerning macroeconomic conditions, nascent entrepreneurs entering via start-up enter counter-cyclically, while all other nascent business-owners behave in line with the "prosperity-pull" hypothesis. Business-owners' entry choices significantly affect their post-entry persistence and exit modes. Particular experiences in the labor market while paid employees are also found to significantly influence the way individuals enter into and exit from entrepreneurship.

Suggested Citation

  • Vera Rocha & Anabela Carneiro & Celeste Amorim Varum, 2013. "Entrepreneurship Dynamics: Entry Routes, Business-Owner's Persistence and Exit Modes," CEF.UP Working Papers 1310, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:cetedp:1310
    as

    Download full text from publisher

    File URL: http://cefup.fep.up.pt/uploads/WorkingPapers/wp1310.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher Fleming & Parvinder Kler, 2008. "I'm too clever for this job: a bivariate probit analysis on overeducation and job satisfaction in Australia," Applied Economics, Taylor & Francis Journals, vol. 40(9), pages 1123-1138.
    2. Pernilla Andersson & Eskil Wadensjö, 2007. "Do the unemployed become successful entrepreneurs?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 28(7), pages 604-626, October.
    3. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    4. Allen, Jim & van der Velden, Rolf, 2001. "Educational Mismatches versus Skill Mismatches: Effects on Wages, Job Satisfaction, and On-the-Job Search," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 434-452, July.
    5. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-138, February.
    6. Ornella Tarola & Jean Gabszewicz & Didier Laussel, 2011. "To Acquire, or To Compete? An Entry Dilemma," Journal of Industry, Competition and Trade, Springer, vol. 11(4), pages 369-383, December.
    7. Kiker, B. F. & Santos, Maria C. & de Oliveira, M. Mendes, 1997. "Overeducation and undereducation: Evidence for Portugal," Economics of Education Review, Elsevier, vol. 16(2), pages 111-125, April.
    8. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
    9. DeTienne, Dawn R., 2010. "Entrepreneurial exit as a critical component of the entrepreneurial process: Theoretical development," Journal of Business Venturing, Elsevier, vol. 25(2), pages 203-215, March.
    10. Román, Concepción & Congregado, Emilio & Millán, José María, 2013. "Start-up incentives: Entrepreneurship policy or active labour market programme?," Journal of Business Venturing, Elsevier, vol. 28(1), pages 151-175.
    11. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521728355, March.
    12. Ilias Livanos, 2009. "What determines self-employment? A comparative study," Applied Economics Letters, Taylor & Francis Journals, vol. 16(3), pages 227-232.
    13. Roy Thurik, 2014. "Entrepreneurship and the business cycle," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-90, October.
    14. Berglann, Helge & Moen, Espen R. & Røed, Knut & Skogstrøm, Jens Fredrik, 2011. "Entrepreneurship: Origins and returns," Labour Economics, Elsevier, vol. 18(2), pages 180-193, April.
    15. Jose Plehn-Dujowich, 2010. "A theory of serial entrepreneurship," Small Business Economics, Springer, vol. 35(4), pages 377-398, November.
    16. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
    17. Mika Haapanen & Hannu Tervo, 2009. "Self-employment duration in urban and rural locations," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2449-2461.
    18. Reize, Frank, 2000. "Leaving unemployment for self-employment: a discrete duration analysis of determinants and stability of self-employment among former unemployed," ZEW Discussion Papers 00-26, ZEW - Leibniz Centre for European Economic Research.
    19. Jörn Block & Philipp Sandner, 2009. "Necessity and Opportunity Entrepreneurs and Their Duration in Self-employment: Evidence from German Micro Data," Journal of Industry, Competition and Trade, Springer, vol. 9(2), pages 117-137, June.
    20. Wennberg, Karl & Wiklund, Johan & DeTienne, Dawn R. & Cardon, Melissa S., 2010. "Reconceptualizing entrepreneurial exit: Divergent exit routes and their drivers," Journal of Business Venturing, Elsevier, vol. 25(4), pages 361-375, July.
    21. José Millán & Emilio Congregado & Concepción Román, 2012. "Erratum to: Determinants of self-employment survival in Europe," Small Business Economics, Springer, vol. 38(2), pages 259-263, February.
    22. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-559, November.
    23. Scott Shane, 2009. "Why encouraging more people to become entrepreneurs is bad public policy," Small Business Economics, Springer, vol. 33(2), pages 141-149, August.
    24. Fotopoulos, Georgios & Louri, Helen, 2000. "Location and Survival of New Entry," Small Business Economics, Springer, vol. 14(4), pages 311-321, June.
    25. Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September.
    26. Ari Hyytinen & Mika Maliranta, 2008. "When Do Employees Leave Their Job for Entrepreneurship?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 1-21, March.
    27. Arnold C. Cooper & William C. Dunkelberg, 1986. "Entrepreneurship and paths to business ownership," Strategic Management Journal, Wiley Blackwell, vol. 7(1), pages 53-68, January.
    28. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    29. Erik Stam & Roy Thurik & Peter van der Zwan, 2010. "Entrepreneurial exit in real and imagined markets," Industrial and Corporate Change, Oxford University Press, vol. 19(4), pages 1109-1139, August.
    30. Murray Z. Frank, 1988. "An Intertemporal Model of Industrial Exit," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 333-344.
    31. Dawn DeTienne & Melissa Cardon, 2012. "Impact of founder experience on exit intentions," Small Business Economics, Springer, vol. 38(4), pages 351-374, May.
    32. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521899604, March.
    33. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, September.
    34. Parker, Simon C., 2011. "Intrapreneurship or entrepreneurship?," Journal of Business Venturing, Elsevier, vol. 26(1), pages 19-34, January.
    35. Aloña Martiarena, 2013. "What’s so entrepreneurial about intrapreneurs?," Small Business Economics, Springer, vol. 40(1), pages 27-39, January.
    36. Georgarakos, Dimitris & Tatsiramos, Konstantinos, 2009. "Entrepreneurship and survival dynamics of immigrants to the U.S. and their descendants," Labour Economics, Elsevier, vol. 16(2), pages 161-170, April.
    37. Block, J.H. & Thurik, A.R. & van der Zwan, P.W. & Walter, S., 2010. "Business Takeover or New Venture? Individual and Environmental Determinants from a Cross-Country Study," ERIM Report Series Research in Management ERS-2010-042-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    38. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    39. Ragnhild Balsvik, 2011. "Is Labor Mobility a Channel for Spillovers from Multinationals? Evidence from Norwegian Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 285-297, February.
    40. Ari Hyytinen & Pekka Ilmakunnas, 2007. "What distinguishes a serial entrepreneur?," Industrial and Corporate Change, Oxford University Press, vol. 16(5), pages 793-821, October.
    41. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
    42. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    43. Burke, Andrew E & FitzRoy, Felix R & Nolan, Michael A, 2002. "Self-Employment Wealth and Job Creation: The Roles of Gender, Non-pecuniary Motivation and Entrepreneurial Ability," Small Business Economics, Springer, vol. 19(3), pages 255-270, November.
    44. José Millán & Emilio Congregado & Concepción Román, 2012. "Determinants of self-employment survival in Europe," Small Business Economics, Springer, vol. 38(2), pages 231-258, February.
    45. Congregado, Emilio & Golpe, Antonio A. & Carmona, Mónica, 2010. "Is it a good policy to promote self-employment for job creation? Evidence from Spain," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 828-842, November.
    46. Roope Uusitalo, 2001. "Homo entreprenaurus?," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1631-1638.
    47. Dirk Oberschachtsiek, 2012. "The experience of the founder and self-employment duration: a comparative advantage approach," Small Business Economics, Springer, vol. 39(1), pages 1-17, July.
    48. Pernilla Andersson & Eskil Wadensjö, 2007. "Do the unemployed become successful entrepreneurs?," International Journal of Manpower, Emerald Group Publishing, vol. 28(7), pages 604-626, November.
    49. Tarola, Ornella, 2013. "Acquisition vsus de novo entry: A theoretical appraisal," Research in Economics, Elsevier, vol. 67(2), pages 179-188.
    50. A. Bhattacharjee & C. Higson & S. Holly & P. Kattuman, 2009. "Macroeconomic Instability and Business Exit: Determinants of Failures and Acquisitions of UK Firms," Economica, London School of Economics and Political Science, vol. 76(301), pages 108-131, February.
    51. Nziramasanga, Mudziviri & Lee, Minsoo, 2001. "Duration of Self-Employment in Developing Countries: Evidence from Small Enterprises in Zimbabwe," Small Business Economics, Springer, vol. 17(4), pages 239-253, December.
    52. Simon C. Parker & Yacine Belghitar, 2006. "What Happens to Nascent Entrepreneurs? An Econometric Analysis of the PSED," Small Business Economics, Springer, vol. 27(1), pages 81-101, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rocha, Vera & Carneiro, Anabela & Amorim Varum, Celeste, 2015. "Serial entrepreneurship, learning by doing and self-selection," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 91-106.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Millán, José María & Congregado, Emilio & Román, Concepción, 2014. "Persistence in entrepreneurship and its implications for the European entrepreneurial promotion policy," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 83-106.
    3. José María Millán & Emilio Congregado & Concepción Román, 2010. "Determinants of Self-Employment Dynamics and their Implications on Entrepreneurial Policy Effectiveness," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 72, pages 45-76.
    4. Román, Concepción & Congregado, Emilio & Millán, José María, 2013. "Start-up incentives: Entrepreneurship policy or active labour market programme?," Journal of Business Venturing, Elsevier, vol. 28(1), pages 151-175.
    5. André Stel & Ana Millán & José María Millán & Concepción Román, 2018. "The relationship between start-up motive and earnings over the course of the entrepreneur’s business tenure," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 101-123, January.
    6. Begoña Cueto & Patricia Suárez & Matías Mayor, 2021. "Effects of human capital and regional context on entrepreneurial survival," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(2), pages 331-357, April.
    7. José Millán & Emilio Congregado & Concepción Román, 2012. "Determinants of self-employment survival in Europe," Small Business Economics, Springer, vol. 38(2), pages 231-258, February.
    8. Juan Sanchis Llopis & José María Millán & Rui Baptista & Andrew Burke & Simon Parker & Roy Thurik, 2015. "Good times, bad times: entrepreneurship and the business cycle," Post-Print hal-02013660, HAL.
    9. Jonas Debrulle, 2016. "The Role of Entrepreneurship in the Context of Career Trajectories: Moving Back into Wage Employment or into Unemployment?," LABOUR, CEIS, vol. 30(2), pages 180-197, June.
    10. Jose Maria Millan & Emilio Congregado & Concepcion Roman & Mirjam van Praag & Andre van Stel, 2011. "The Value of an Educated Population for an Individual's Entrepreneurship Success," Tinbergen Institute Discussion Papers 11-066/3, Tinbergen Institute, revised 06 May 2014.
    11. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.
    12. Sanguineti, Francesca & Majocchi, Antonio & Cavusgil, S. Tamer, 2022. "Founding entrepreneur’s dilemma: Stay or exit the firm following an acquisition? An international comparison," International Business Review, Elsevier, vol. 31(1).
    13. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press, vol. 22(6), pages 1453-1495, December.
    14. Xi, Guoqian & Block, Jörn & Lasch, Frank & Robert, Frank & Thurik, Roy, 2017. "How Does Firm Survival Differ between Business Takeovers and New Venture Start-ups?," IZA Discussion Papers 11155, Institute of Labor Economics (IZA).
    15. Millán, Ana & Millán, José María & Román, Concepción & van Stel, André, 2013. "How does employment protection legislation influence hiring and firing decisions by the smallest firms?," Economics Letters, Elsevier, vol. 121(3), pages 444-448.
    16. Ana Millán & José María Millán & Concepción Román, 2016. "The Role of Start-up Incentives on Entrepreneurship Dynamics in a Post-Crisis Era: Evidence from European Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(03), pages 29-35, October.
    17. Renaud Bourlès & Anastasia Cozarenco, 2018. "Entrepreneurial motivation and business performance: evidence from a French Microfinance Institution," Small Business Economics, Springer, vol. 51(4), pages 943-963, December.
    18. Joern Block & Roy Thurik & Haibo Zhou, 2013. "What turns knowledge into innovative products? The role of entrepreneurship and knowledge spillovers," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 693-718, September.
    19. Nyström, Kristina, 2015. "Pre- and post-entrepreneurship labor mobility of entrepreneurs and employees in entrepreneurial firms," Working Paper Series in Economics and Institutions of Innovation 420, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    20. 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).

    More about this item

    Keywords

    Entrepreneurship; Business Ownership; Entry; Exit;
    All these keywords.

    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
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:por:cetedp:1310. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ana Bonanca (email available below). General contact details of provider: https://edirc.repec.org/data/fepuppt.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.