Shooting Stars?: Prior Wage & Returns to Entrepreneurship

Jeroen Mahieu, Francesca Melillo, Toke Reichstein

Research output: Contribution to conferenceConference abstract for conferenceResearchpeer-review

Abstract

What happens to top performing employees when they fail as entrepreneurs? Using a novel dataset of matched entrepreneurs and employees from Belgium, we document that, on average, entrepreneurs returning to wage work are penalized. However, the penalty is most pronounced for workers in the upper tail of the wage distribution - i.e. the stars - and absent for those who earned relatively little
before entrepreneurship. Moreover, the wage loss is only present for entrepreneurs who exit quickly, suggesting a penalty for failure. Finally, moving to a large employer appears to mitigate the wage loss for stars. We propose that entrepreneurial failure signals increased uncertainty around stars' future productivity. Employers respond to this higher hiring risk by discounting the offered wage.
What happens to top performing employees when they fail as entrepreneurs? Using a novel dataset of matched entrepreneurs and employees from Belgium, we document that, on average, entrepreneurs returning to wage work are penalized. However, the penalty is most pronounced for workers in the upper tail of the wage distribution - i.e. the stars - and absent for those who earned relatively little
before entrepreneurship. Moreover, the wage loss is only present for entrepreneurs who exit quickly, suggesting a penalty for failure. Finally, moving to a large employer appears to mitigate the wage loss for stars. We propose that entrepreneurial failure signals increased uncertainty around stars' future productivity. Employers respond to this higher hiring risk by discounting the offered wage.

Conference

ConferenceDRUID18 Conference
Number40
LocationCopenhagen Business School
CountryDenmark
CityFrederiksberg
Period11/06/201813/06/2018
Internet address

Cite this

Mahieu, J., Melillo, F., & Reichstein, T. (2018). Shooting Stars? Prior Wage & Returns to Entrepreneurship. Abstract from DRUID18 Conference, Frederiksberg, Denmark.
Mahieu, Jeroen ; Melillo, Francesca ; Reichstein, Toke. / Shooting Stars? Prior Wage & Returns to Entrepreneurship. Abstract from DRUID18 Conference, Frederiksberg, Denmark.2 p.
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title = "Shooting Stars?: Prior Wage & Returns to Entrepreneurship",
abstract = "What happens to top performing employees when they fail as entrepreneurs? Using a novel dataset of matched entrepreneurs and employees from Belgium, we document that, on average, entrepreneurs returning to wage work are penalized. However, the penalty is most pronounced for workers in the upper tail of the wage distribution - i.e. the stars - and absent for those who earned relatively littlebefore entrepreneurship. Moreover, the wage loss is only present for entrepreneurs who exit quickly, suggesting a penalty for failure. Finally, moving to a large employer appears to mitigate the wage loss for stars. We propose that entrepreneurial failure signals increased uncertainty around stars' future productivity. Employers respond to this higher hiring risk by discounting the offered wage.",
author = "Jeroen Mahieu and Francesca Melillo and Toke Reichstein",
year = "2018",
language = "English",
note = "null ; Conference date: 11-06-2018 Through 13-06-2018",
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Mahieu, J, Melillo, F & Reichstein, T 2018, 'Shooting Stars? Prior Wage & Returns to Entrepreneurship', Frederiksberg, Denmark, 11/06/2018 - 13/06/2018, .

Shooting Stars? Prior Wage & Returns to Entrepreneurship. / Mahieu, Jeroen; Melillo, Francesca; Reichstein, Toke.

2018. Abstract from DRUID18 Conference, Frederiksberg, Denmark.

Research output: Contribution to conferenceConference abstract for conferenceResearchpeer-review

TY - ABST

T1 - Shooting Stars?

T2 - Prior Wage & Returns to Entrepreneurship

AU - Mahieu,Jeroen

AU - Melillo,Francesca

AU - Reichstein,Toke

PY - 2018

Y1 - 2018

N2 - What happens to top performing employees when they fail as entrepreneurs? Using a novel dataset of matched entrepreneurs and employees from Belgium, we document that, on average, entrepreneurs returning to wage work are penalized. However, the penalty is most pronounced for workers in the upper tail of the wage distribution - i.e. the stars - and absent for those who earned relatively littlebefore entrepreneurship. Moreover, the wage loss is only present for entrepreneurs who exit quickly, suggesting a penalty for failure. Finally, moving to a large employer appears to mitigate the wage loss for stars. We propose that entrepreneurial failure signals increased uncertainty around stars' future productivity. Employers respond to this higher hiring risk by discounting the offered wage.

AB - What happens to top performing employees when they fail as entrepreneurs? Using a novel dataset of matched entrepreneurs and employees from Belgium, we document that, on average, entrepreneurs returning to wage work are penalized. However, the penalty is most pronounced for workers in the upper tail of the wage distribution - i.e. the stars - and absent for those who earned relatively littlebefore entrepreneurship. Moreover, the wage loss is only present for entrepreneurs who exit quickly, suggesting a penalty for failure. Finally, moving to a large employer appears to mitigate the wage loss for stars. We propose that entrepreneurial failure signals increased uncertainty around stars' future productivity. Employers respond to this higher hiring risk by discounting the offered wage.

M3 - Conference abstract for conference

ER -

Mahieu J, Melillo F, Reichstein T. Shooting Stars? Prior Wage & Returns to Entrepreneurship. 2018. Abstract from DRUID18 Conference, Frederiksberg, Denmark.