Individual Entrepreneurial Exit and Earnings in Subsequent Paid Employment

Abstract

We study earnings of individuals who exit entrepreneurship for paid employment. We find mean (median) positive rewards from entrepreneurship in subsequent paid employment relative to matched employees. Rewards are higher for former entrepreneurs hired in highly innovative sectors. We also find that the performance of the exited firm is a strong predictor of the earnings premium for former entrepreneurs when the firm performed well, while we do not find median discounts for entrepreneurs exiting low performing firms. We use registry data that encompass the population of firms and individuals in the Norwegian economy.

A Careers Perspective on Entrepreneurship

“…Some introduce new conceptual ideas (Blumberg & Pfann, 2016;Hsieh, 2016;Thebaud, 2016), some incorporate insights from other fields such as gendered institutions (Thebaud) and opportunity costs (Berkhout et al, 2016). Some bring rigorous empirical evidence to long-standing questions in entrepreneurship research (Frederiksen et al, 2016) and some ask new questions (Luzzi & Sasson, 2016). But one unifying theme that runs through all the papers in this special issue is the compelling appreciation for the fact that the creation of new organizations is among the most important forces of social and economic March, 2016development.…”

“…Blumberg and Pfann (2016) examine what they term the "gestation period" of entrepreneurship comparing people from family business backgrounds with those from wage-earner family backgrounds. Luzzi and Sasson (2016) follow entrepreneurs into their postentrepreneurship jobs and find that future wages are positively associated with entrepreneurial firm performance.…”

Not All Are Equal: A Latent Profile Analysis of Well-Being Among the Self-Employed

“…Self-employed may also be particularly strongly affected by recent financial crises, such as the recession of 2008, which was associated with increasing mental health problems (Barr et al 2015). However, a study on entrepreneurial exit revealed that entrepreneurs who changed from being an entrepreneur to be in paid employment had gained an advantage in terms of earnings only if they moved from a high-performing venture (Luzzi and Sasson 2016). Thus, simply exiting the self-employment may not be a valid solution for individuals in the Unhappy profile.…”

Do Startup Employees Earn More in the Long Run?

“…Individuals who become entrepreneurs-who build firms that employ others, as opposed to simply being self-employed-earn more than similar peers who are employees (Braguinsky et al 2012, Manso 2016, Levine and Rubenstein 2017, Sorgner et al 2017. Even former entrepreneurs who return to paid employment climb faster up the corporate ladder and earn more than otherwise-equivalent peers who never became entrepreneurs (Kaiser and Malchow-Møller 2011, Baptista et al 2012, Luzzi and Sasson 2016.…”