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Opportunity versus necessity : understanding the heterogeneity of female micro-entrepreneurs

Author

Listed:
  • Montenegro Calderon,Gabriela
  • Iacovone,Leonardo
  • Juarez,Laura

Abstract

Entrepreneurs that voluntarily choose to start a business because they are able to identify a good business opportunity and act on it -- opportunity entrepreneurs -- might be different along various dimensions from those who are forced to become entrepreneurs because of lack of other alternatives -- necessity entrepreneurs. To provide evidence on these differences, this paper exploits a unique data set covering a wide array of characteristics, including cognitive skills, non-cognitive skills and managerial practices, for a large sample of female entrepreneurs in Mexico. Descriptive results show that on average opportunity entrepreneurs have better performance and higher skills than necessity entrepreneurs. A discriminant analysis reveals that discrimination is difficult to achieve based on these observables, which suggests the existence of unobservables driving both the decision to become an opportunity entrepreneur and performance. Thus, an instrumental variables estimation is conducted, using state economic growth in the year the business was set up as an instrument for opportunity, to confirm that opportunity entrepreneurs have higher performance and better management practices.

Suggested Citation

  • Montenegro Calderon,Gabriela & Iacovone,Leonardo & Juarez,Laura, 2016. "Opportunity versus necessity : understanding the heterogeneity of female micro-entrepreneurs," Policy Research Working Paper Series 7636, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7636
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    References listed on IDEAS

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    1. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, vol. 106(C), pages 211-226.
    2. Angrist, Joshua & Krueger, Alan B, 1994. "Why Do World War II Veterans Earn More Than Nonveterans?," Journal of Labor Economics, University of Chicago Press, vol. 12(1), pages 74-97, January.
    3. Bruhn, Miriam, 2013. "A tale of two species: Revisiting the effect of registration reform on informal business owners in Mexico," Journal of Development Economics, Elsevier, vol. 103(C), pages 275-283.
    4. Gabriela Calderón & Jesse M. Cunha & Giacomo De Giorgi, 2013. "Business Literacy and Development: Evidence From a Randomized Controlled Trial in Rural Mexico," Working Papers 742, Barcelona Graduate School of Economics.
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    Citations

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    Cited by:

    1. David McKenzie & Christopher Woodruff, 2015. "Business Practices in Small Firms in Developing Countries," NBER Working Papers 21505, National Bureau of Economic Research, Inc.
    2. Kasper Brandt & Longinus Rutasitara & Onesmo Selejio & Neda Trifkovic, 2017. "Entrepreneurship and human capital development in children," WIDER Working Paper Series 198, World Institute for Development Economic Research (UNU-WIDER).
    3. Mayra Buvinic & Megan O’Donnell, 2017. "Gender Matters in Economic Empowerment Interventions: A Research Review," Working Papers id:11926, eSocialSciences.
    4. Cyn-Young Park & Rogelio Mercado Jr., 2018. "Financial Inclusion: New Measurement and Cross-Country Impact Assessment," Working Papers wp29, South East Asian Central Banks (SEACEN) Research and Training Centre.
    5. Mayra Buvinic & Megan O’Donnell, 2017. "Gender Matters in Economic Empowerment Interventions: A Research Review - Working Paper 456," Working Papers 456, Center for Global Development.
    6. repec:gam:jsusta:v:11:y:2019:i:3:p:747-:d:202366 is not listed on IDEAS
    7. Fairlie, Robert W. & Fossen, Frank M., 2018. "Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation," IZA Discussion Papers 11258, Institute of Labor Economics (IZA).
    8. Pérez-Centeno, Víctor, 2017. ""It takes three to tango": Brain, cognition and entrepreneurial enhancement," Working Papers 02/17, Institut für Mittelstandsforschung (IfM) Bonn.

    More about this item

    Keywords

    Gender and Economic Policy; Gender and Poverty; Gender and Economics; Economics and Gender;

    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
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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