Prior Wage and the Returns to Entrepreneurship

Jeroen Mahieu, Francesca Melillo, Toke Reichstein

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

Abstract

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.
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.
LanguageEnglish
Title of host publicationProceedings of the Seventy-eight Annual Meeting of the Academy of Management
EditorsGuclu Atinc
Number of pages6
Place of PublicationBriar Cliff Manor, NY
PublisherAcademy of Management
Date2018
Article number110
DOIs
StatePublished - 2018
Event78th Annual Meeting of The Academy of Management : Improving Lives - Chicago, United States
Duration: 10 Aug 201814 Aug 2018
Conference number: 78
http://aom.org/annualmeeting/

Conference

Conference78th Annual Meeting of The Academy of Management
Number78
CountryUnited States
CityChicago
Period10/08/201814/08/2018
Internet address
SeriesAcademy of Management Proceedings
ISSN2151-6561

Cite this

Mahieu, J., Melillo, F., & Reichstein, T. (2018). Prior Wage and the Returns to Entrepreneurship. In G. Atinc (Ed.), Proceedings of the Seventy-eight Annual Meeting of the Academy of Management [110] Briar Cliff Manor, NY: Academy of Management. Academy of Management Proceedings, DOI: 10.5465/AMBPP.2018.110
Mahieu, Jeroen ; Melillo, Francesca ; Reichstein, Toke. / Prior Wage and the Returns to Entrepreneurship. Proceedings of the Seventy-eight Annual Meeting of the Academy of Management. editor / Guclu Atinc. Briar Cliff Manor, NY : Academy of Management, 2018. (Academy of Management Proceedings).
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Mahieu, J, Melillo, F & Reichstein, T 2018, Prior Wage and the Returns to Entrepreneurship. in G Atinc (ed.), Proceedings of the Seventy-eight Annual Meeting of the Academy of Management., 110, Academy of Management, Briar Cliff Manor, NY, Academy of Management Proceedings, Chicago, United States, 10/08/2018. DOI: 10.5465/AMBPP.2018.110

Prior Wage and the Returns to Entrepreneurship. / Mahieu, Jeroen; Melillo, Francesca; Reichstein, Toke.

Proceedings of the Seventy-eight Annual Meeting of the Academy of Management. ed. / Guclu Atinc. Briar Cliff Manor, NY : Academy of Management, 2018. 110.

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

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Mahieu J, Melillo F, Reichstein T. Prior Wage and the Returns to Entrepreneurship. In Atinc G, editor, Proceedings of the Seventy-eight Annual Meeting of the Academy of Management. Briar Cliff Manor, NY: Academy of Management. 2018. 110. (Academy of Management Proceedings). Available from, DOI: 10.5465/AMBPP.2018.110