Early Work Experience and the Transition into Entrepreneurship

Abstract

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We use a simple model to analyze the founding stage of new firms. Our goal is to characterize the directional causality between the expected rewards from entrepreneurship and the length of prior labor market experience that entrepreneurs possess. We test predictions about the timing of the formation of new firms on a sample of Italian entrepreneurs. We obtain three main results. First, the timing of the foundation of new firms is determined primarily by the expectation of higher income and not so much by the perception of risk. Second earlier experience of entrepreneurs in full time employment has a positive impact on the size of newly founded firms. Third, founders who work with family partners establish and control larger firms.  We are indebted to Lino Agrosi, Marcello Camagni, Andrea Pininfarina and Mario Santoro for providing us with a "roadmap" on what it takes to switch from the status of an employee to the status of an owner of business. We also thank our colleagues Bruno Contini, Marco Da Rin, Alessandro Nova and Pietro Terena for insightful comments and valuable suggestions. We are especially grateful to Chiara Monticone for outstanding research assistance. We are responsible for the remaining errors.