On the nature of micro-entrepreneurship: evidence from Argentina

Abstract

We analyse the nature of micro-entrepreneurship in Argentina. We focus on whether the sector resembles its counterpart in industrialized countries, characterized by the risk-taking nature of the entrepreneurial activity, or if it is the result of labour market distortions and disguised unemployment, as in the dual economy hypothesis. Our results suggest a segmentation of the micro-entrepreneur sector. Both young uneducated and middle aged highly educated salaried workers have the highest likelihood of becoming entrepreneurs. However, the first segment has a high probability of becoming own-account workers, while the probability of becoming micro-entrepreneurs with employees is strictly increasing in both age and education. Moreover, the probability of entrepreneur failure (as measured by the transition to the salaried sector) has an inverted U shape, implying that both high and low skill individuals are more likely to remain entrepreneurs.

Innovation and entrepreneurship in Latin America: What do we know? What would we like to know?

“…Another interesting finding is that a prior experience of business failure increases risk aversion, and thus reduces the probability of becoming an entrepreneur. One study by Montes-Rojas and Siga (2009) shows that determinants of entrepreneurship vary by type: own-account workers and micro-entrepreneurs (eg. those who have some employees).…”

The Influence of Institutional Context on Entrepreneurship in Latin America

“…Despite the relevance of the issue in emerging countries, the great majority of research relating the macroeconomic environment and entrepreneurship are directed to the reality of developed countries (Rojas & Siga, 2009;Mota et al, 2017). According to Rojas and Siga (2009), despite this, even in the context of countries in a more advanced economic stage, studies have shown that precarious economic conditions can lead individuals to endeavor as the only alternative for survival. Amorós et al (2016) have been developed for some time researches in the area of entrepreneurship in Latin American countries.…”

“…Along the lines of proponents of the role of education in entrepreneurship levels, Rojas and Siga (2009) mention that previous research in developed countries has found evidence that formal education has a positive effect on the likelihood of an individual becoming an entrepreneur and that the ventures initiated by such individuals, due to their qualification and, consequently, level of perception have a greater chance of survival. They add that the educational level of the individual can be considered a predictor of the firm's success and mention that poor national education systems compel individuals to accumulate know-how and skills in the private sector to only then be able to embark on their own business.…”

“…Research on entrepreneurship in developing countries is still rare (Rojas & Siga, 2009), especially in Latin America. Some efforts in deepening research have been developed by certain authors, however, in quantitative terms, the production is still restricted.…”

“…In addition to limited production, most of the research was restricted to case studies (Sepúlveda & Bonilla, 2014) or was developed with a focus on the functioning of entrepreneurship and its effects, rather than considering what triggers or activates it (Kalantaridis & Fletcher, 2012). Furthermore, the understanding of the institutional perspective in relation to entrepreneurship has very important implications, since the low productivity found in the developing countries can be related to the lack of entrepreneurial capacity and the very lack of renewal of the economy (Rojas & Siga, 2009).…”