Prior Wage and the Returns to Entrepreneurship

Jeroen Mahieu, Francesca Melillo, Toke Reichstein

Research output: Chapter in Book/Report/Conference proceedingConference abstract in proceedingsResearchpeer-review


Are failed entrepreneurs penalized in the labour market? The answer is yes under certain conditions. Using a novel dataset of matched entrepreneurs and employees in Belgium, we show that: (i) on average, entrepreneurs returning to the labour market after a business failure are penalized, but this effect is most pronounced for those coming from the higher echelons of the wage distribution, and absent for those who earned relatively little before entering self-employment. (ii) the penalty is only present for entrepreneurs who fail quickly: entrepreneurs returning to the labour market after 5 or more years do not get penalized. (iii) entrepreneurs who fail fast and move to a new employer limit the wage penalty by changing industry compared to the industry they were venturing in. These results are consistent with theories of adverse selection in the labour market.
Original languageEnglish
Title of host publicationProceedings of the Seventy-eighth Annual Meeting of the Academy of Management
EditorsGuclu Atinc
Number of pages6
Place of PublicationBriar Cliff Manor, NY
PublisherAcademy of Management
Publication date2018
Article number110
Publication statusPublished - 2018
EventThe Academy of Management Annual Meeting 2018: Improving Lives - Chicago, United States
Duration: 10 Aug 201814 Aug 2018
Conference number: 78


ConferenceThe Academy of Management Annual Meeting 2018
Country/TerritoryUnited States
Internet address
SeriesAcademy of Management Proceedings

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