When Less is More: Distinguishing Between Entrepreneurial Choice and Performance

(2000) - Andrew E. Burke, Felix R. FitzRoy, Michael A. Nolan

Journal: Oxford Bulletin of Economics and Statistics
Link:: https://onlinelibrary.wiley.com/doi/10.1111/1468-0084.00190
DOI:: 10.1111/1468-0084.00190
Links::
Tags:: #paper #NCDS #LabourMarket
Cite Key:: [@Burke2000]

Abstract

A signiÆcant feature of the small Ærm and self-employment literature has been the focus on the extent to which access to resources affects Ærm performance. Particular attention has been devoted to the role played by liquidity constraints ± e.g. Evans and Jovanovic (1989), Evans and Leighton (1989), Black et al. (1996) and Holtz-Eakin et al. (1994). In this literature, the self-employment decision and subsequent growth and income can be constrained by a lack of Ænance. Human capital may also affect self-employment income through its impact on the skill of the selfemployed. However, it may also have an indirect effect in that more skilled and able self-employed are likely to Ænd it easier to raise external Ænance (such as equity and loans) for their business. In fact, Cressy (1996) has argued that this indirect effect totally explains access to Ænance and, therefore, human capital and not Ænance is the main constraint on selfemployment income

Notes

“Our conclusions differ from those of previous work on self-employment choice alone ± such as the claims by Cressy (1996) that liquidity constraints do not retard entry into self-employment.” (Burke et al., 2000, p. 585)

“Thus, university education reduces the probability of self-employment, but improves both our measures of performance ± and, in particular, a net positive effect on job creation is generated.” (Burke et al., 2000, p. 585)