Institutions and Entrepreneurship

Reference:
ERIM PhD 2018 ESE RT JH BH

Abstract

Entrepreneurship may be an important employment option for individuals who are disadvantaged in the labour market such as unemployed, the young and the old, or people with certain disabilities or health problems. Performance and wellbeing of such entrepreneurs may be enhanced when there is a good fit between their entrepreneurial activities and the institutional environment. This project investigates how different aspects of national institutional environments contribute to entry into entrepreneurship, goal orientation, performance and wellbeing of these special target groups.

Important questions to address are: What formal and informal institutions enhance a good environment-fit for entrepreneurship for such special groups? To what extent does a good environment- fit enhance goal completion, performance, survival and well being for special groups of entrepreneurs? Is there a link between institutions, type of special group and the type of business such as in terms of societal goals and relevance?

Keywords

Occupational choice, institutions, entrepreneurship economics, person-environment fit

Topic

The research focuses on self-employment as an occupation. Self-employment is an important and growing labour market category accounting for approximately 16% of the labour force in Europe (Eurostat, 2015). Special groups such as the unemployed, the young, the old, and those with a disability or health problems may end up being self-employed for several reasons such as because of it is difficult for them to find a job in wage work or because the flexibility and autonomy of self-employment makes it a good career choice for them. In many countries, governments have developed policies to support special target groups such as the unemployed in becoming self-employed, for instance by providing start-up subsidies for unemployed individuals to create their own ventures or by providing them with other types of support such as business advice. Self-employment warrants scholarly attention as an important labour market option for such special groups.

The goal of this PhD project is to investigate and understand the impact of institutions on entry of special target groups into self-employment as well as on their focus, performance and wellbeing. The thesis will build upon prior research in our group that investigates the link between institutions (such as social security arrangements, business start-up regulations, taxes, support for entrepreneurs, corruption, culture) and entrepreneurship.

Regarding self-employment entry, this research will make use of the occupational choice framework to understand its link with special target groups such as older individuals close to or beyond retirement. According to occupational choice theory individual's choice between self-employment and wage employment depends on the expected utility of both alternatives as well as on the opportunity costs (e.g., the wage that an employee has to give up). This theory assumes individuals act rationally (rationality assumption) and only become self-employed if the utility (net of opportunity costs) they expect to derive from self-employment exceeds that from wage employment. Individuals not only derive utility from earnings but also from non-monetary aspects. Occupational choice theory has been used in prior studies to predict entry into self-employment, either by labour force participants in general or by wage workers. However, using the insights from the occupational choice theory to understand what drives the behaviour of special target groups in terms of entry into self-employment is still warranted.

Regarding entrepreneurial outcomes in terms of performance, wellbeing and satisfaction, this thesis will apply person-environment fit theory. This theory argues that the extent to which an entrepreneur’s characteristics match the characteristics of an environment, in other words, the extent of person-environment fit, may affect entrepreneurial outcomes. The performance and satisfaction of these entrepreneurs is likely to increase if the extent to which their needs are met by the environment is higher, or the better they meet the demands of the environment, so that both entrepreneur and environment share fundamental interests and goals.

This thesis will draw upon institutional theory to assess what environmental characteristics enhance or reduce the choice for entrepreneurial involvement for special target groups and to what extent this subsequently affects their performance and wellbeing. Formal (e.g., rules, laws, regulations) and informal (norms, values, habits) institutions form the setting that determines the degree to which special target groups can derive utility from entrepreneurship.

Relevant questions to consider in this research are:

  • Which institutions form an incentive (or barrier) for entry into self-employment among special target groups such as the unemployed, the young, and the old?
  • To what extend are these institutions subject to policy measures?
  • To what extent do institutions that create a good environment match for these special groups to be an entrepreneur affect entrepreneurial outcomes (e.g., performance, wellbeing)?

Although the pressure to become self-employed may be strong for these special groups, there is no clear encompassing view yet regarding the types, e.g., in terms of health characteristics, who are especially likely to actually become self-employed nor on the impact of institutions on their performance, survival and wellbeing in self-employment. This study makes several important contributions to the literature. First, there is an extensive literature on determinants of self-employment entry, exit and performance, but so far little is known about special and in particular disadvantaged groups and self-employment. This means a move away from studying entry and performance of self-employment in general to studying entrepreneurial career decisions and outcomes based on individual's special characteristics. Second, by combining characteristics and circumstances at the individual level (e.g. age and health conditions) with institutional aspects at the country level, we obtain a better understanding of the behavior of specific groups of entrepreneurs than would be possible by investigating these aspects separately or by studying a single country.

Approach

The candidate will analyse what the role of different institutions are regarding entry into and performance in self-employment for special groups such as the unemployed, the young, the old, disabled. Institutional aspects to consider are, for example, formal aspects such as retirement and unemployment benefits and informal aspects such as social desirability of entrepreneurship and dominant logic of action. Self-employment performance will be assessed by a broad range of measures which includes monetary (e.g., earnings, sales), and non-monetary (e.g., life satisfaction, work satisfaction) rewards. The candidate will also analyse how institutions impact self-employment entry, exit and performance using cross-country data like Global Entrepreneurship Monitor and Gallup.

PhD candidate profile

Candidates should have a recently/almost completed Master’s degree in economics, or econometrics, or another field that provides a sufficient background in statistics. Furthermore, curiosity and an interest to work in an interdisciplinary environment are regarded as assets. The necessary skills for using the appropriate statistical methods can be learned during the first year of employment.

Expected output

The outcome of the project will consist in a number of research papers that will form the contents of the PhD dissertation. The project is designed to result in publications in leading academic journals in economics and business.

Cooperation

The candidate will collaborate with several other professors and their research groups in the field of the Economics of Entrepreneurship, Joern Block (University of Trier), Andrew Burke (Trinity Business School), and Ute Stephan (Aston Business School).

Societal relevance

Stimulation of self-employment for special target groups is an important concern for policy makers as entrepreneurship may provide opportunities for social inclusion of individuals with a distance to the labour market. For example, the European Union and the OECD aim to stimulate senior entrepreneurship as a transitional employment option for individuals between their career employment (until 60-65 years of age) and complete withdrawal from the labour market (European Union/OECD 2012)*. The current research will provide insight into the extent to which different institutions form a motivation to entry into self-employment among special target groups and hence may have consequences for the design of policies for the stimulation of entry into self-employment among such special groups. The findings of this research are also expected to have relevance for social security policies.

* European Union/OECD (2012). Policy brief on senior entrepreneurship. Entrepreneurial Activities in Europe. Publication Office of the European Union, Luxembourg.

Scientific relevance

Knowledge of the relation between self-employment entry of special target groups and subsequent entrepreneurial unemployment, health and self-employment outcomes will have several important impacts, including the following:

  • Gaining better insight into the relationship between institutions and entry and performance of special groups of self-employed.
  • Distinguishing different target groups in self-employment can help scholars to better understand specific determinants of entry, performance and wellbeing in self-employment.
  • Substantiating the value of entrepreneurship in creating opportunities for social inclusion of individuals with a distance to the labour market including an increased understanding of supportive and obstructive institutional arrangements.

Contact information

For academic questions only. For procedural questions, contact the Doctoral Office.

Deadline

Sunday, 1 April 2018

Literature references

Some selected literature references (restricted to that of our group):

  • Acs, Z.J., Desai, S. & Hessels J. 2008. Entrepreneurship, economic development and institutions, Small Business Economics, 31(3), 219-234.
  • Millán, J.M., Hessels, J., Thurik, R. & Aguado, R. 2013. Determinants of job satisfaction across the EU-15: A comparison of self-employed and paid employees, Small Business Economics, 40(1), 651-670.
  • Rietveld, C.A., Van Kippersluis, H., & Thurik, A.R., 2015. Self-employment and health: Barriers or benefits? Health Economics 24, 1302-1313
  • Hoogendoorn, B. 2016. The prevalence and determinants of social entrepreneurship at the macro level. Journal of Small Business Management, 54(S1), 278-296
  • Hoogendoorn, B., van der Zwan, P., & Thurik, R. Sustainable entrepreneurship: The role of perceived barriers and risk. Journal of Business Ethics, 1-22, Forthcoming
  • Verheul, I., W.J.R. Rietdijk, W.J.R., J. Block, H. Larsson, I.H.A. Franken and A.R. Thurik 2016, The association between attention-deficit/hyperactivity (ADHD) symptoms and self-employment, European Journal of Epidemiology, 31(8), 793-801

Supervisory Team

Roy Thurik
Professor of Economics and Entrepreneurship
  • Promotor
Jolanda Hessels
Associate Professor of Economics and Entrepreneurship
  • Daily Supervisor